Helmerich & Payne, Inc. — Q2 FY2022 Form 10-Q
Reporting period: Quarter and six months ended March 31, 2022; fiscal Q2. The company provides drilling services and technology, principally through North America Solutions, Offshore Gulf of Mexico, and International Solutions.
Financial performance and position
Amounts below are in USD millions, except per-share data and rig counts.
| Metric | Q2 FY2022 | Q2 FY2021 | Six months FY2022 | Six months FY2021 |
|---|---|---|---|---|
| Revenue | 467.6 | 296.2 | 877.4 | 542.5 |
| Operating loss | (22.6) | (160.9) | (65.2) | (254.1) |
| Net loss | (5.0) | (121.0) | (56.3) | (191.4) |
| Diluted loss per share | (0.05) | (1.13) | (0.53) | (1.78) |
| Operating cash flow | Not separately presented | Not separately presented | 18.9 | 58.8 |
- Revenue growth reflected higher drilling activity and pricing, especially in North America. Average active North America rigs were 164 in Q2 versus 105 a year earlier; 171 were active at quarter-end.
- For Q2, North America direct margin, a non-GAAP measure, was $114.4 million versus $64.1 million; Offshore Gulf of Mexico was $8.3 million versus $6.2 million; and International Solutions was $2.3 million versus negative $1.9 million. North America still reported a segment operating loss of $27.6 million for the first half.
- First-half net loss includes a $60.1 million debt-extinguishment loss and a $70.0 million gain on investment securities. The latter principally reflects the fair-value increase in the ADNOC Drilling investment. Q2 included a $22.1 million investment gain.
- First-half operating cash flow fell to $18.9 million from $58.8 million, with working capital a use of cash. Capital expenditures were $104.5 million, compared with $30.7 million a year earlier.
- At March 31, cash and cash equivalents were $202.2 million and short-term investments were $148.4 million. Long-term debt was $542.0 million carrying value, representing $550.0 million face value of 2.90% notes due 2031. The $750 million revolving facility was undrawn, and the company reported compliance with debt covenants.
- Total assets were $4.33 billion, down from $5.03 billion at September 30, 2021, primarily reflecting the reduction in cash following redemption of the 2025 notes. Share repurchases were $77.0 million for the first half; dividends paid were $54.0 million.
Changes, outlook, and notable items
- Quarterly revenue increased 58% year over year, while net loss narrowed substantially. The prior-year quarter included a $54.3 million impairment charge; the current quarter had no impairment charge. First-half 2022 impairment charges were $4.4 million.
- Contract backlog was $727.7 million at March 31, up from $572.0 million at September 30, 2021. Approximately $437.8 million was expected to be recognized in the remainder of FY2022; backlog excludes anticipated renewals and remains subject to customer cancellation or modification.
- Management maintained its FY2022 capital expenditure budget of $250 million to $270 million and expected active-rig growth to moderate during the remaining quarters. Management said higher North American activity and improving contract economics should support results as more rigs reprice, while noting customer spending remained disciplined despite elevated oil prices.
- The company reported 181 contracted rigs at quarter-end, compared with 137 at September 30, 2021. Six-month revenue also included $16.4 million from settlement of a long-running YPF contract dispute.
- Management said it did not expect direct operational effects from Russia’s invasion of Ukraine but noted potential supply-chain inflation. COVID-19-related operating disruptions had diminished. Risks include commodity-price and customer-spending volatility, international political and currency risks, and restrictions on repatriating funds from Argentina; cash held in Argentina was $43.2 million.
- A jury returned a verdict of approximately $126 million, including interest, against the company and an employee in a fatal-accident lawsuit. The court entered judgment in March 2022; post-trial motions and a possible appeal were planned. The company had accrued $3.0 million and expected insurance to cover amounts above its deductible, but could not estimate the possible loss.
- After quarter-end, the company made a $33 million investment in a Galileo Technologies affiliate through a 5% convertible note due April 2027.
Key investor verification points
- Assess whether rig utilization, pricing, and contract repricing can improve operating profitability and convert the reported backlog into revenue and cash.
- Separate recurring operating performance from the ADNOC investment gains, YPF settlement, debt-extinguishment cost, and asset-sale or impairment items.
- Monitor working-capital demands, capital spending, shareholder returns, and available liquidity as activity expands.
- Review the $126 million jury judgment, insurance limits and recoveries, and the outcome of post-trial motions or any appeal.
- Evaluate the cancellation terms and timing assumptions embedded in backlog, and the foreign-exchange and repatriation exposure associated with Argentina.