November 24, 2020

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Helmerich & Payne, Inc. Announces Fiscal Fourth Quarter & Fiscal Year Results

The Company ended the quarter with $577 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility culminating in over $1.3 billion in liquidity H&P expects its first quarter of fiscal 2021 North America Solutions rig count to exit at approximately 90 rigs up over 30% during the quarter Reported a fiscal fourth quarter net loss of $(0.55) per diluted share; including select items(1) of $0.19 per diluted share Quarterly North America Solutions operating gross margins(2) decreased $63 million to $39 million sequentially, as revenues decreased by $105 million to $149 million and expenses decreased by $43 million to $110 million H&P's leadership position in automated directional drilling technology continues as AutoSlide® commercial deployments accelerated despite a significantly declining rig market with some notable operators implementing this technology on 100% of their wells in multiple basins On September 9, 2020, Directors of the Company declared a quarterly cash dividend of $0.25 per share payable on December 1, 2020 to stockholders of record at the close of business on November 13, 2020 TULSA, Okla.--(BUSINESS WIRE)--Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $59 million, or $(0.55) per diluted share, from operating revenues of $208 million for the quarter ended September 30, 2020, compared to a net loss of $46 million, or $(0.43) per diluted share, on revenues of $317 million for the quarter ended June 30, 2020. The net losses per diluted share for the fourth and third quarters of fiscal year 2020 include $0.19 and $(0.09) of after-tax gains and losses, respectively, comprised of select items(1). For the fourth quarter of fiscal year 2020, select items(1) were comprised of: $0.20 of after-tax gains pertaining to the sale of industrial real estate property $(0.01) of after-tax losses pertaining to a non-cash fair market adjustment to our equity investment and restructuring charges Net cash provided by operating activities was $93 million for the fourth quarter of fiscal year 2020 compared to $214 million for the third quarter of fiscal year 2020. For fiscal year 2020, the Company reported a net loss of $494 million, or $(4.60) per diluted share, from operating revenues of $1.8 billion. The net loss per diluted share includes $(3.74) of after-tax losses comprised of select items(1), the most significant of which are non-cash losses of $563 million related to impairments of goodwill, less capable rigs, predominantly consisting of U.S. non-super-spec rigs, and excess related drilling equipment, and inventory and $16 million related to restructuring charges. Net cash provided by operating activities was $539 million in fiscal year 2020 compared to $856 million in fiscal year 2019. President and CEO John Lindsay commented, “In terms of activity, this past fourth fiscal quarter was one of the most challenging in the Company's history. Our strong financial position together with our long-term vision for the future of the business enabled us to focus on introducing new commercial models and expanding our drilling and digital technology solutions to customers. These efforts are making good progress in this difficult environment and will serve as the foundation from which the Company will build as the market begins to recover. "Our embedded customer centric approach is one that focuses on providing customized solutions, employing a combination of people, rigs and automation technology to provide more value and lower risk. This approach is distinctive in the industry, resonating well across our customer base, and is a driver for the recent increased activity levels with further improvements on the horizon. We expect our contracted rigs to increase by one-third during the first fiscal quarter of 2021, exiting at approximately 90 rigs, almost doubling the number of rigs turning to the right compared to our fourth fiscal quarter trough rig count. "Concurrent with the expected increase in near-term activity, we are also experiencing increased customer utilization of our performance-based contracts and rig automation software, AutoSlide, and we expect adoption to increase and become more prevalent in the industry. H&P's 'touch of a button' autonomous drilling approach optimizes every major facet of the operation, from real-time automated geosteering, to rotary and sliding execution, to wellbore quality and placement. The uniqueness of our automated solutions is backed by a patented economic-driven approach where the software not only makes optimal cost/benefit decisions, but also directs the rig to execute those decisions without the need of an on-site directional driller, which improves reliability, enhances value and reduces risk for our customers. "While we are encouraged by these developments, we are also cognizant that there remains a substantial amount of uncertainty in the market and that it may take several quarters to realize what the 'new normal' activity environment will look like given the uncertain timeline and lasting impacts of the COVID-19 pandemic." Senior Vice President and CFO Mark Smith also commented, "The Company's financial strength continues to be a bright spot in this very challenging environment. Our strong capital stewardship continues looking out into fiscal 2021 as well with our anticipated capex spend to range between $85 and $105 million. "Additionally during the fourth fiscal quarter, we completed the sale of the Company's industrial real estate assets. The decision to divest these legacy, non-core assets was considered as we entered 2020, but the close of the sale was delayed by several months due to the COVID-19 pandemic. The proceeds from the sale serve to further bolster our cash position, which together with short-term investments was $577 million at our fiscal year-end, resulting in cash in excess of debt of $90 million." John Lindsay concluded, “Looking back at an unprecedented and demanding 2020 fiscal year, we remain steadfast in our commitment to reshape our business and the industry during this challenging time. Our teams are doing great work to accelerate long-term strategic priorities, including driving efficiency across the company and evolving our digital technology and data platforms to deliver value-added solutions and services to our customers and partners." Operating Segment Results for the Fourth Quarter of Fiscal Year 2020 North America Solutions: This segment had an operating loss of $78 million compared to an operating loss of $25 million during the previous quarter. The increase in the operating loss was driven by the continued decline in rig activity due to significantly lower crude oil prices resulting from a global supply and demand imbalance caused by the pandemic. Operating gross margins(2) declined by $62.5 million to $39.3 million as both revenues and expenses declined sequentially. Revenues during the current quarter benefited from $11.7 million in early contract termination revenue compared to $50.2 million in the prior quarter. Expenses during the quarter were adversely impacted by higher than expected self-insurance expenses. Our technology solutions were in-line with expectations and had a positive, albeit small, contribution to the total North America Solutions operating gross margins(2). International Solutions: This segment had an operating loss of $3.5 million compared to an operating loss of $9.5 million during the previous quarter. Despite a decline in revenue days, operating gross margins(2) improved $4.0 million to a negative $1.2 million due to certain revenue reimbursements received during the quarter. This segment continues to carry a higher level of expenses relative to activity levels resulting from compliance with local jurisdictional requirements surrounding COVID-19. The Company continues to explore opportunities to mitigate these expenses, while maintaining strict adherence to local regulations. Current quarter results included a $2.6 million foreign currency loss related to our South American operations compared to an approximate $3.2 million foreign currency loss in the third quarter of fiscal year 2020. Offshore Gulf of Mexico: This segment had operating income of $1.5 million compared to operating income of $3.0 million during the previous quarter. Operating gross margins(2) declined by $3.9 million to $4.6 million due to unfavorable adjustments to self-insurance expenses related to a prior period claim. Segment operating income from management contracts on customer-owned platform rigs contributed approximately $1.1 million of the total, compared to approximately $1.7 million during the prior quarter. Operational Outlook for the First Quarter of Fiscal Year 2021 North America Solutions: We expect North America Solutions operating gross margins(2) to be between $40-$50 million, inclusive of approximately $1 million of contract early termination compensation We expect to exit the quarter at between 88-93 contracted rigs, inclusive of approximately 0-2 contracted rigs generating revenue that could remain idle International Solutions: We expect International Solutions operating gross margins(2) to be between $(5)-$(7) million, exclusive of any foreign exchange gains or loses Offshore Gulf of Mexico: We expect Offshore Gulf of Mexico rig operating gross margins(2) to be between $5-$7 million Management contracts are also expected to generate approximately $1-2 million in operating income Other Estimates for Fiscal Year 2021 Gross capital expenditures are expected to be approximately $85 to $105 million; roughly one-third expected for maintenance, roughly one-third expected for skidding to walking conversions and roughly one-third for corporate and information technology. Asset sales include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are expected to total approximately $20 million in fiscal year 2021. Depreciation is expected to be approximately $430 million Research and development expenses for fiscal year 2021 are expected to be roughly $30 million General and administrative expenses for fiscal year 2021 are expected to be approximately $160 million COVID-19 Update The COVID-19 pandemic continues to have a significant impact around the world and on our Company. After falling dramatically, crude oil prices and industry activity appear to have stabilized, albeit at much lower levels. The environment in which we operate is still uncertain; however, upon the onset of COVID-19's rapid spread across the United States in early March 2020, we responded quickly and took several actions to maintain the health and safety of H&P employees, customers and stakeholders and to preserve our financial strength. We discussed these actions in our press releases dated April 30, 2020 and July 28, 2020 and in our quarterly reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and will provide updates in our annual report on Form 10-K for the fiscal year ended September 30, 2020 when filed. Select Items Included in Net Income per Diluted Share Fourth quarter of fiscal year 2020 net loss of $(0.55) per diluted share included $0.19 in after-tax gains comprised of the following: $0.20 of after-tax gains pertaining to the sale of industrial real estate property $(0.00) of after-tax losses related to restructuring charges $(0.01) of non-cash after-tax losses related to fair market value adjustments to equity investments Third quarter of fiscal year 2020 net loss of $(0.43) per diluted share included $(0.09) in after-tax losses comprised of the following: $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments $(0.11) of after-tax losses related to restructuring charges Fiscal year 2020 net loss of $(4.60) per diluted share included $(3.74) in after-tax losses comprised of the following: $0.03 of after-tax gains related to the change in fair value of a contingent liability $0.10 of after-tax gains related to the sale of a subsidiary $0.13 of after-tax benefits from the reversal of accrued compensation $0.20 of after-tax gains pertaining to the sale of industrial real estate property $(0.06) of non-cash after-tax losses related to fair market value adjustments to equity investments $(0.11) of after-tax losses related to restructuring charges $(4.03) of non-cash after-tax losses related to the impairment of goodwill, less capable rigs, predominantly consisting of U.S. non-super-spec rigs, and excess related equipment and inventory Conference Call A conference call will be held on Friday, November 20, 2020 at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company’s fourth quarter fiscal year 2020 results. Dial-in information for the conference call is (866) 342-8591 for domestic callers or (203) 518-9713 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on “INVESTORS” and then clicking on “Event Calendar” to find the event and the link to the webcast. About Helmerich & Payne, Inc. Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At September 30, 2020, H&P's fleet included 262 land rigs in the United States, 32 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com. Forward-Looking Statements This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s future financial position, operations outlook, business strategy, dividends, budgets, projected costs and plans and objectives of management for future operations, and the impact or duration of the COVID-19 pandemic and any subsequent recovery, are forward-looking statements. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s SEC filings, including but not limited to its annual report on Form 10-K and quarterly reports on Form 10-Q. As a result of these factors, Helmerich & Payne, Inc.’s actual results may differ materially from those indicated or implied by such forward-looking statements. We undertake no duty to update or revise our forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law. We use our Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on our Investor Relations website at www.hpinc.com. Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig and AutoSlide, which may be registered or trademarked in the United States and other jurisdictions. (1) See the corresponding section of this release for details regarding the select items. The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside of the Company's core business operations. (2) Operating gross margin is defined as operating revenues less direct operating expenses. HELMERICH & PAYNE, INC. (Unaudited) (in thousands, except per share data) Three Months Ended Year Ended September 30, June 30, September 30, September 30, CONSOLIDATED STATEMENTS OF OPERATIONS 2020 2020 2019 2020 2019 Operating revenues Drilling services $ 205,621 $ 314,405 $ 645,759 $ 1,761,714 $ 2,785,557 Other 2,646 2,959 3,291 12,213 12,933 208,267 317,364 649,050 1,773,927 2,798,490 Operating costs and expenses Drilling services operating expenses, excluding depreciation and amortization 162,518 205,198 430,778 1,184,788 1,803,204 Other operating expenses 1,491 1,549 1,072 5,777 5,382 Depreciation and amortization 109,587 110,161 134,887 481,885 562,803 Research and development 4,915 3,638 6,121 21,645 27,467 Selling, general and administrative 32,619 43,108 49,812 167,513 194,416 Asset impairment charge — — — 563,234 224,327 Restructuring charges 552 15,495 — 16,047 — Gain on sale of assets (27,985 ) (4,201 ) (12,641 ) (46,775 ) (39,691 ) 283,697 374,948 610,029 2,394,114 2,777,908 Operating income (loss) from continuing operations (75,430 ) (57,584 ) 39,021 (620,187 ) 20,582 Other income (expense) Interest and dividend income 753 771 2,607 7,304 9,468 Interest expense (6,154 ) (6,125 ) (8,043 ) (24,474 ) (25,188 ) Gain (loss) on investment securities (1,395 ) 2,267 (4,260 ) (8,720 ) (54,488 ) Gain on sale of subsidiary — — — 14,963 — Other (1,673 ) (2,914 ) (546 ) (5,384 ) (1,596 ) (8,469 ) (6,001 ) (10,242 ) (16,311 ) (71,804 ) Income (loss) from continuing operations before income taxes (83,899 ) (63,585 ) 28,779 (636,498 ) (51,222 ) Income tax benefit (23,253 ) (17,578 ) (13,110 ) (140,106 ) (18,712 ) Income (loss) from continuing operations (60,646 ) (46,007 ) 41,889 (496,392 ) (32,510 ) Income from discontinued operations before income taxes 7,905 9,151 10,050 30,580 32,848 Income tax provision 6,222 8,743 10,763 28,685 33,994 Income (loss) from discontinued operations 1,683 408 (713 ) 1,895 (1,146 ) Net income (loss) $ (58,963 ) $ (45,599 ) $ 41,176 $ (494,497 ) $ (33,656 ) Basic earnings (loss) per common share: Income (loss) from continuing operations $ (0.57 ) $ (0.43 ) $ 0.38 $ (4.62 ) $ (0.33 ) Income (loss) from discontinued operations 0.02 — (0.01 ) 0.02 (0.01 ) Net income (loss) $ (0.55 ) $ (0.43 ) $ 0.37 $ (4.60 ) $ (0.34 ) Diluted earnings (loss) per common share: Income (loss) from continuing operations $ (0.57 ) $ (0.43 ) $ 0.38 $ (4.62 ) $ (0.33 ) Income (loss) from discontinued operations 0.02 — (0.01 ) 0.02 (0.01 ) Net income (loss) $ (0.55 ) $ (0.43 ) $ 0.37 $ (4.60 ) $ (0.34 ) Weighted average shares outstanding (in thousands): Basic 107,484 107,439 108,896 108,009 109,216 Diluted 107,484 107,439 108,950 108,009 109,216 HELMERICH & PAYNE, INC. (Unaudited) (in thousands) September 30, September 30, CONSOLIDATED BALANCE SHEETS 2020 2019 Assets Cash and cash equivalents $ 487,884 $ 347,943 Short-term investments 89,335 52,960 Other current assets 386,108 714,183 Total current assets 963,327 1,115,086 Investments 31,585 31,991 Property, plant and equipment, net 3,646,341 4,502,084 Other noncurrent assets 188,368 190,354 Total Assets $ 4,829,621 $ 5,839,515 Liabilities and Shareholders' Equity Current liabilities $ 219,136 $ 410,238 Long-term debt, net 480,727 479,356 Other noncurrent liabilities 797,855 922,357 Noncurrent liabilities - discontinued operations 13,389 15,341 Total shareholders’ equity 3,318,514 4,012,223 Total Liabilities and Shareholders' Equity $ 4,829,621 $ 5,839,515 HELMERICH & PAYNE, INC. (Unaudited) (in thousands) Year Ended September 30, CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 2020 2019 OPERATING ACTIVITIES: Net loss $ (494,497 ) $ (33,656 ) Adjustment for (income) loss from discontinued operations (1,895 ) 1,146 Loss from continuing operations (496,392 ) (32,510 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 481,885 562,803 Asset impairment charge 563,234 224,327 Restructuring charges — — Amortization of debt discount and debt issuance costs 1,817 1,732 Provision for bad debt 2,203 2,321 Stock-based compensation 36,329 34,292 Loss on investment securities 8,720 54,488 Gain on sale of assets (46,775 ) (39,691 ) Gain on sale of subsidiary (14,963 ) — Deferred income tax benefit (157,555 ) (44,554 ) Other (200 ) (3,295 ) Changes in assets and liabilities 160,625 95,900 Net cash provided by operating activities from continuing operations 538,928 855,813 Net cash used in operating activities from discontinued operations (47 ) (62 ) Net cash provided by operating activities 538,881 855,751 INVESTING ACTIVITIES: Capital expenditures (140,795 ) (458,402 ) Purchase of short-term investments (134,641 ) (97,652 ) Payment for acquisition of business, net of cash acquired — (16,163 ) Proceeds from sale of short-term investments 94,646 86,765 Proceeds from sale of subsidiary 15,056 — Proceeds from sale of marketable securities — 11,999 Proceeds from asset sales 78,399 50,817 Other (550 ) — Net cash used in investing activities (87,885 ) (422,636 ) FINANCING ACTIVITIES: Dividends paid (260,335 ) (313,421 ) Debt issuance costs paid — (3,912 ) Proceeds from stock option exercises 4,100 3,053 Payments for employee taxes on net settlement of equity awards (3,784 ) (6,418 ) Payment of contingent consideration from acquisition of business (8,250 ) — Payments for early extinguishment of long term debt — (12,852 ) Share repurchase (28,505 ) (42,779 ) Other (446 ) — Net cash used in financing activities (297,220 ) (376,329 ) Net increase in cash and cash equivalents and restricted cash 153,776 56,786 Cash and cash equivalents and restricted cash, beginning of period 382,971 326,185 Cash and cash equivalents and restricted cash, end of period $ 536,747 $ 382,971 Three Months Ended Year Ended SEGMENT REPORTING (in thousands, except operating statistics) September 30, June 30, September 30, September 30, 2020 2020 2019 (1) 2020 2019 (1) NORTH AMERICA SOLUTIONS Operating revenues $ 149,304 $ 254,434 $ 558,938 $ 1,474,380 $ 2,426,191 Direct operating expenses 110,048 152,663 355,830 942,277 1,532,576 Research and development 4,828 3,459 5,918 20,699 25,164 Selling, general and administrative expense 10,916 13,533 15,818 53,714 66,179 Depreciation 101,941 102,699 120,988 438,039 504,466 Asset impairment charge — — — 406,548 216,908 Restructuring charges (232 ) 7,237 — 7,005 — Segment operating income (loss) $ (78,197 ) $ (25,157 ) $ 60,384 $ (393,902 ) $ 80,898 Revenue days 5,945 8,101 18,765 49,003 81,805 Average rig revenue per day $ 23,951 $ 27,975 $ 26,218 $ 26,589 $ 26,167 Average rig expense per day 17,348 15,412 15,394 15,730 15,243 Average rig margin per day $ 6,603 $ 12,563 $ 10,824 $ 10,859 $ 10,924 Rig utilization 25 % 32 % 68 % 47 % 67 % INTERNATIONAL SOLUTIONS Operating revenues $ 23,996 $ 22,477 $ 48,353 $ 144,185 $ 211,731 Direct operating expenses 25,157 27,595 43,119 124,791 157,856 Selling, general and administrative expense 733 1,129 1,399 4,565 5,624 Depreciation 897 996 8,042 17,531 35,466 Asset impairment charge — — — 156,686 7,419 Restructuring charges 683 2,297 — 2,980 — Segment operating income (loss) $ (3,474 ) $ (9,540 ) $ (4,207 ) $ (162,368 ) $ 5,366 Revenue days 452 988 1,598 4,605 6,426 Average rig revenue per day $ 45,986 $ 19,642 $ 28,199 $ 29,116 $ 31,269 Average rig expense per day 42,816 21,589 22,722 23,066 21,626 Average rig margin per day $ 3,170 $ (1,947 ) $ 5,477 $ 6,050 $ 9,643 Rig utilization 15 % 34 % 56 % 40 % 55 % OFFSHORE GULF OF MEXICO Operating revenues $ 32,321 $ 37,494 $ 38,468 $ 143,149 $ 147,635 Direct operating expenses 27,711 28,967 32,148 119,371 114,306 Selling, general and administrative expense 72 1,248 1,004 3,365 3,725 Depreciation 3,090 3,004 2,499 11,681 10,010 Restructuring charges (8 ) 1,262 — 1,254 — Segment operating income $ 1,456 $ 3,013 $ 2,817 $ 7,478 $ 19,594 Revenue days 460 455 552 1,922 2,163 Average rig revenue per day $ 45,254 $ 49,654 $ 43,072 $ 45,145 $ 37,478 Average rig expense per day 37,591 34,702 35,612 37,410 28,663 Average rig margin per day $ 7,663 $ 14,952 $ 7,460 $ 7,735 $ 8,815 Rig utilization 63 % 63 % 75 % 66 % 74 % Contacts Dave Wilson, Director of Investor [email protected](918) 588‑5190 Read full story here
  • The Company ended the quarter with $577 million in cash and short-term investments and no amounts drawn on its $750 million revolving credit facility culminating in over $1.3 billion in liquidity
  • H&P expects its first quarter of fiscal 2021 North America Solutions rig count to exit at approximately 90 rigs up over 30% during the quarter
  • Reported a fiscal fourth quarter net loss of $(0.55) per diluted share; including select items(1) of $0.19 per diluted share
  • Quarterly North America Solutions operating gross margins(2) decreased $63 million to $39 million sequentially, as revenues decreased by $105 million to $149 million and expenses decreased by $43 million to $110 million
  • H&P's leadership position in automated directional drilling technology continues as AutoSlide® commercial deployments accelerated despite a significantly declining rig market with some notable operators implementing this technology on 100% of their wells in multiple basins
  • On September 9, 2020, Directors of the Company declared a quarterly cash dividend of $0.25 per share payable on December 1, 2020 to stockholders of record at the close of business on November 13, 2020

TULSA, Okla.–(BUSINESS WIRE)–Helmerich & Payne, Inc. (NYSE: HP) reported a net loss of $59 million, or $(0.55) per diluted share, from operating revenues of $208 million for the quarter ended September 30, 2020, compared to a net loss of $46 million, or $(0.43) per diluted share, on revenues of $317 million for the quarter ended June 30, 2020. The net losses per diluted share for the fourth and third quarters of fiscal year 2020 include $0.19 and $(0.09) of after-tax gains and losses, respectively, comprised of select items(1). For the fourth quarter of fiscal year 2020, select items(1) were comprised of:

  • $0.20 of after-tax gains pertaining to the sale of industrial real estate property
  • $(0.01) of after-tax losses pertaining to a non-cash fair market adjustment to our equity investment and restructuring charges

Net cash provided by operating activities was $93 million for the fourth quarter of fiscal year 2020 compared to $214 million for the third quarter of fiscal year 2020.

For fiscal year 2020, the Company reported a net loss of $494 million, or $(4.60) per diluted share, from operating revenues of $1.8 billion. The net loss per diluted share includes $(3.74) of after-tax losses comprised of select items(1), the most significant of which are non-cash losses of $563 million related to impairments of goodwill, less capable rigs, predominantly consisting of U.S. non-super-spec rigs, and excess related drilling equipment, and inventory and $16 million related to restructuring charges. Net cash provided by operating activities was $539 million in fiscal year 2020 compared to $856 million in fiscal year 2019.

President and CEO John Lindsay commented, “In terms of activity, this past fourth fiscal quarter was one of the most challenging in the Company's history. Our strong financial position together with our long-term vision for the future of the business enabled us to focus on introducing new commercial models and expanding our drilling and digital technology solutions to customers. These efforts are making good progress in this difficult environment and will serve as the foundation from which the Company will build as the market begins to recover.

"Our embedded customer centric approach is one that focuses on providing customized solutions, employing a combination of people, rigs and automation technology to provide more value and lower risk. This approach is distinctive in the industry, resonating well across our customer base, and is a driver for the recent increased activity levels with further improvements on the horizon. We expect our contracted rigs to increase by one-third during the first fiscal quarter of 2021, exiting at approximately 90 rigs, almost doubling the number of rigs turning to the right compared to our fourth fiscal quarter trough rig count.

"Concurrent with the expected increase in near-term activity, we are also experiencing increased customer utilization of our performance-based contracts and rig automation software, AutoSlide, and we expect adoption to increase and become more prevalent in the industry. H&P's 'touch of a button' autonomous drilling approach optimizes every major facet of the operation, from real-time automated geosteering, to rotary and sliding execution, to wellbore quality and placement. The uniqueness of our automated solutions is backed by a patented economic-driven approach where the software not only makes optimal cost/benefit decisions, but also directs the rig to execute those decisions without the need of an on-site directional driller, which improves reliability, enhances value and reduces risk for our customers.

"While we are encouraged by these developments, we are also cognizant that there remains a substantial amount of uncertainty in the market and that it may take several quarters to realize what the 'new normal' activity environment will look like given the uncertain timeline and lasting impacts of the COVID-19 pandemic."

Senior Vice President and CFO Mark Smith also commented, "The Company's financial strength continues to be a bright spot in this very challenging environment. Our strong capital stewardship continues looking out into fiscal 2021 as well with our anticipated capex spend to range between $85 and $105 million.

"Additionally during the fourth fiscal quarter, we completed the sale of the Company's industrial real estate assets. The decision to divest these legacy, non-core assets was considered as we entered 2020, but the close of the sale was delayed by several months due to the COVID-19 pandemic. The proceeds from the sale serve to further bolster our cash position, which together with short-term investments was $577 million at our fiscal year-end, resulting in cash in excess of debt of $90 million."

John Lindsay concluded, “Looking back at an unprecedented and demanding 2020 fiscal year, we remain steadfast in our commitment to reshape our business and the industry during this challenging time. Our teams are doing great work to accelerate long-term strategic priorities, including driving efficiency across the company and evolving our digital technology and data platforms to deliver value-added solutions and services to our customers and partners."

Operating Segment Results for the Fourth Quarter of Fiscal Year 2020

North America Solutions:

This segment had an operating loss of $78 million compared to an operating loss of $25 million during the previous quarter. The increase in the operating loss was driven by the continued decline in rig activity due to significantly lower crude oil prices resulting from a global supply and demand imbalance caused by the pandemic.

Operating gross margins(2) declined by $62.5 million to $39.3 million as both revenues and expenses declined sequentially. Revenues during the current quarter benefited from $11.7 million in early contract termination revenue compared to $50.2 million in the prior quarter. Expenses during the quarter were adversely impacted by higher than expected self-insurance expenses. Our technology solutions were in-line with expectations and had a positive, albeit small, contribution to the total North America Solutions operating gross margins(2).

International Solutions:

This segment had an operating loss of $3.5 million compared to an operating loss of $9.5 million during the previous quarter. Despite a decline in revenue days, operating gross margins(2) improved $4.0 million to a negative $1.2 million due to certain revenue reimbursements received during the quarter. This segment continues to carry a higher level of expenses relative to activity levels resulting from compliance with local jurisdictional requirements surrounding COVID-19. The Company continues to explore opportunities to mitigate these expenses, while maintaining strict adherence to local regulations. Current quarter results included a $2.6 million foreign currency loss related to our South American operations compared to an approximate $3.2 million foreign currency loss in the third quarter of fiscal year 2020.

Offshore Gulf of Mexico:

This segment had operating income of $1.5 million compared to operating income of $3.0 million during the previous quarter. Operating gross margins(2) declined by $3.9 million to $4.6 million due to unfavorable adjustments to self-insurance expenses related to a prior period claim. Segment operating income from management contracts on customer-owned platform rigs contributed approximately $1.1 million of the total, compared to approximately $1.7 million during the prior quarter.

Operational Outlook for the First Quarter of Fiscal Year 2021

North America Solutions:

  • We expect North America Solutions operating gross margins(2) to be between $40-$50 million, inclusive of approximately $1 million of contract early termination compensation
  • We expect to exit the quarter at between 88-93 contracted rigs, inclusive of approximately 0-2 contracted rigs generating revenue that could remain idle

International Solutions:

  • We expect International Solutions operating gross margins(2) to be between $(5)-$(7) million, exclusive of any foreign exchange gains or loses

Offshore Gulf of Mexico:

  • We expect Offshore Gulf of Mexico rig operating gross margins(2) to be between $5-$7 million
  • Management contracts are also expected to generate approximately $1-2 million in operating income

Other Estimates for Fiscal Year 2021

  • Gross capital expenditures are expected to be approximately $85 to $105 million; roughly one-third expected for maintenance, roughly one-third expected for skidding to walking conversions and roughly one-third for corporate and information technology. Asset sales include reimbursements for lost and damaged tubulars and sales of other used drilling equipment that offset a portion of the gross capital expenditures and are expected to total approximately $20 million in fiscal year 2021.
  • Depreciation is expected to be approximately $430 million
  • Research and development expenses for fiscal year 2021 are expected to be roughly $30 million
  • General and administrative expenses for fiscal year 2021 are expected to be approximately $160 million

COVID-19 Update

The COVID-19 pandemic continues to have a significant impact around the world and on our Company. After falling dramatically, crude oil prices and industry activity appear to have stabilized, albeit at much lower levels. The environment in which we operate is still uncertain; however, upon the onset of COVID-19's rapid spread across the United States in early March 2020, we responded quickly and took several actions to maintain the health and safety of H&P employees, customers and stakeholders and to preserve our financial strength. We discussed these actions in our press releases dated April 30, 2020 and July 28, 2020 and in our quarterly reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and will provide updates in our annual report on Form 10-K for the fiscal year ended September 30, 2020 when filed.

Select Items Included in Net Income per Diluted Share

Fourth quarter of fiscal year 2020 net loss of $(0.55) per diluted share included $0.19 in after-tax gains comprised of the following:

  • $0.20 of after-tax gains pertaining to the sale of industrial real estate property
  • $(0.00) of after-tax losses related to restructuring charges
  • $(0.01) of non-cash after-tax losses related to fair market value adjustments to equity investments

Third quarter of fiscal year 2020 net loss of $(0.43) per diluted share included $(0.09) in after-tax losses comprised of the following:

  • $0.02 of non-cash after-tax gains related to fair market value adjustments to equity investments
  • $(0.11) of after-tax losses related to restructuring charges

Fiscal year 2020 net loss of $(4.60) per diluted share included $(3.74) in after-tax losses comprised of the following:

  • $0.03 of after-tax gains related to the change in fair value of a contingent liability
  • $0.10 of after-tax gains related to the sale of a subsidiary
  • $0.13 of after-tax benefits from the reversal of accrued compensation
  • $0.20 of after-tax gains pertaining to the sale of industrial real estate property
  • $(0.06) of non-cash after-tax losses related to fair market value adjustments to equity investments
  • $(0.11) of after-tax losses related to restructuring charges
  • $(4.03) of non-cash after-tax losses related to the impairment of goodwill, less capable rigs, predominantly consisting of U.S. non-super-spec rigs, and excess related equipment and inventory

Conference Call

A conference call will be held on Friday, November 20, 2020 at 11:00 a.m. (ET) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Director of Investor Relations to discuss the Company’s fourth quarter fiscal year 2020 results. Dial-in information for the conference call is (866) 342-8591 for domestic callers or (203) 518-9713 for international callers. The call access code is ‘Helmerich’. You may also listen to the conference call that will be broadcast live over the Internet by logging on to the Company’s website at http://www.hpinc.com and accessing the corresponding link through the Investor Relations section by clicking on “INVESTORS” and then clicking on “Event Calendar” to find the event and the link to the webcast.

About Helmerich & Payne, Inc.

Founded in 1920, Helmerich & Payne, Inc. (H&P) (NYSE: HP) is committed to delivering industry leading levels of drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for its customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. At September 30, 2020, H&P's fleet included 262 land rigs in the United States, 32 international land rigs and eight offshore platform rigs. For more information, see H&P online at www.hpinc.com.

Forward-Looking Statements

This release includes “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and such statements are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of historical facts included in this release, including, without limitation, statements regarding the registrant’s future financial position, operations outlook, business strategy, dividends, budgets, projected costs and plans and objectives of management for future operations, and the impact or duration of the COVID-19 pandemic and any subsequent recovery, are forward-looking statements. For information regarding risks and uncertainties associated with the Company’s business, please refer to the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s SEC filings, including but not limited to its annual report on Form 10-K and quarterly reports on Form 10-Q. As a result of these factors, Helmerich & Payne, Inc.’s actual results may differ materially from those indicated or implied by such forward-looking statements. We undertake no duty to update or revise our forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law.

We use our Investor Relations website as a channel of distribution for material company information. Such information is routinely posted and accessible on our Investor Relations website at www.hpinc.com.

Note Regarding Trademarks. Helmerich & Payne, Inc. owns or has rights to the use of trademarks, service marks and trade names that it uses in conjunction with the operation of its business. Some of the trademarks that appear in this release or otherwise used by H&P include FlexRig and AutoSlide, which may be registered or trademarked in the United States and other jurisdictions.

(1) See the corresponding section of this release for details regarding the select items. The Company believes identifying and excluding select items is useful in assessing and understanding current operational performance, especially in making comparisons over time involving previous and subsequent periods and/or forecasting future periods results. Select items are excluded as they are deemed to be outside of the Company's core business operations.

(2) Operating gross margin is defined as operating revenues less direct operating expenses.

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands, except per share data)

Three Months Ended

Year Ended

September 30,

June 30,

September 30,

September 30,

CONSOLIDATED STATEMENTS OF OPERATIONS

2020

2020

2019

2020

2019

Operating revenues

Drilling services

$

205,621

$

314,405

$

645,759

$

1,761,714

$

2,785,557

Other

2,646

2,959

3,291

12,213

12,933

208,267

317,364

649,050

1,773,927

2,798,490

Operating costs and expenses

Drilling services operating expenses, excluding depreciation and amortization

162,518

205,198

430,778

1,184,788

1,803,204

Other operating expenses

1,491

1,549

1,072

5,777

5,382

Depreciation and amortization

109,587

110,161

134,887

481,885

562,803

Research and development

4,915

3,638

6,121

21,645

27,467

Selling, general and administrative

32,619

43,108

49,812

167,513

194,416

Asset impairment charge

563,234

224,327

Restructuring charges

552

15,495

16,047

Gain on sale of assets

(27,985

)

(4,201

)

(12,641

)

(46,775

)

(39,691

)

283,697

374,948

610,029

2,394,114

2,777,908

Operating income (loss) from continuing operations

(75,430

)

(57,584

)

39,021

(620,187

)

20,582

Other income (expense)

Interest and dividend income

753

771

2,607

7,304

9,468

Interest expense

(6,154

)

(6,125

)

(8,043

)

(24,474

)

(25,188

)

Gain (loss) on investment securities

(1,395

)

2,267

(4,260

)

(8,720

)

(54,488

)

Gain on sale of subsidiary

14,963

Other

(1,673

)

(2,914

)

(546

)

(5,384

)

(1,596

)

(8,469

)

(6,001

)

(10,242

)

(16,311

)

(71,804

)

Income (loss) from continuing operations before income taxes

(83,899

)

(63,585

)

28,779

(636,498

)

(51,222

)

Income tax benefit

(23,253

)

(17,578

)

(13,110

)

(140,106

)

(18,712

)

Income (loss) from continuing operations

(60,646

)

(46,007

)

41,889

(496,392

)

(32,510

)

Income from discontinued operations before income taxes

7,905

9,151

10,050

30,580

32,848

Income tax provision

6,222

8,743

10,763

28,685

33,994

Income (loss) from discontinued operations

1,683

408

(713

)

1,895

(1,146

)

Net income (loss)

$

(58,963

)

$

(45,599

)

$

41,176

$

(494,497

)

$

(33,656

)

Basic earnings (loss) per common share:

Income (loss) from continuing operations

$

(0.57

)

$

(0.43

)

$

0.38

$

(4.62

)

$

(0.33

)

Income (loss) from discontinued operations

0.02

(0.01

)

0.02

(0.01

)

Net income (loss)

$

(0.55

)

$

(0.43

)

$

0.37

$

(4.60

)

$

(0.34

)

Diluted earnings (loss) per common share:

Income (loss) from continuing operations

$

(0.57

)

$

(0.43

)

$

0.38

$

(4.62

)

$

(0.33

)

Income (loss) from discontinued operations

0.02

(0.01

)

0.02

(0.01

)

Net income (loss)

$

(0.55

)

$

(0.43

)

$

0.37

$

(4.60

)

$

(0.34

)

Weighted average shares outstanding (in thousands):

Basic

107,484

107,439

108,896

108,009

109,216

Diluted

107,484

107,439

108,950

108,009

109,216

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

September 30,

September 30,

CONSOLIDATED BALANCE SHEETS

2020

2019

Assets

Cash and cash equivalents

$

487,884

$

347,943

Short-term investments

89,335

52,960

Other current assets

386,108

714,183

Total current assets

963,327

1,115,086

Investments

31,585

31,991

Property, plant and equipment, net

3,646,341

4,502,084

Other noncurrent assets

188,368

190,354

Total Assets

$

4,829,621

$

5,839,515

Liabilities and Shareholders' Equity

Current liabilities

$

219,136

$

410,238

Long-term debt, net

480,727

479,356

Other noncurrent liabilities

797,855

922,357

Noncurrent liabilities – discontinued operations

13,389

15,341

Total shareholders’ equity

3,318,514

4,012,223

Total Liabilities and Shareholders' Equity

$

4,829,621

$

5,839,515

HELMERICH & PAYNE, INC.

(Unaudited)

(in thousands)

Year Ended September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

2020

2019

OPERATING ACTIVITIES:

Net loss

$

(494,497

)

$

(33,656

)

Adjustment for (income) loss from discontinued operations

(1,895

)

1,146

Loss from continuing operations

(496,392

)

(32,510

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

481,885

562,803

Asset impairment charge

563,234

224,327

Restructuring charges

Amortization of debt discount and debt issuance costs

1,817

1,732

Provision for bad debt

2,203

2,321

Stock-based compensation

36,329

34,292

Loss on investment securities

8,720

54,488

Gain on sale of assets

(46,775

)

(39,691

)

Gain on sale of subsidiary

(14,963

)

Deferred income tax benefit

(157,555

)

(44,554

)

Other

(200

)

(3,295

)

Changes in assets and liabilities

160,625

95,900

Net cash provided by operating activities from continuing operations

538,928

855,813

Net cash used in operating activities from discontinued operations

(47

)

(62

)

Net cash provided by operating activities

538,881

855,751

INVESTING ACTIVITIES:

Capital expenditures

(140,795

)

(458,402

)

Purchase of short-term investments

(134,641

)

(97,652

)

Payment for acquisition of business, net of cash acquired

(16,163

)

Proceeds from sale of short-term investments

94,646

86,765

Proceeds from sale of subsidiary

15,056

Proceeds from sale of marketable securities

11,999

Proceeds from asset sales

78,399

50,817

Other

(550

)

Net cash used in investing activities

(87,885

)

(422,636

)

FINANCING ACTIVITIES:

Dividends paid

(260,335

)

(313,421

)

Debt issuance costs paid

(3,912

)

Proceeds from stock option exercises

4,100

3,053

Payments for employee taxes on net settlement of equity awards

(3,784

)

(6,418

)

Payment of contingent consideration from acquisition of business

(8,250

)

Payments for early extinguishment of long term debt

(12,852

)

Share repurchase

(28,505

)

(42,779

)

Other

(446

)

Net cash used in financing activities

(297,220

)

(376,329

)

Net increase in cash and cash equivalents and restricted cash

153,776

56,786

Cash and cash equivalents and restricted cash, beginning of period

382,971

326,185

Cash and cash equivalents and restricted cash, end of period

$

536,747

$

382,971

Three Months Ended

Year Ended

SEGMENT REPORTING

(in thousands, except operating statistics)

September 30,

June 30,

September 30,

September 30,

2020

2020

2019 (1)

2020

2019 (1)

NORTH AMERICA SOLUTIONS

Operating revenues

$

149,304

$

254,434

$

558,938

$

1,474,380

$

2,426,191

Direct operating expenses

110,048

152,663

355,830

942,277

1,532,576

Research and development

4,828

3,459

5,918

20,699

25,164

Selling, general and administrative expense

10,916

13,533

15,818

53,714

66,179

Depreciation

101,941

102,699

120,988

438,039

504,466

Asset impairment charge

406,548

216,908

Restructuring charges

(232

)

7,237

7,005

Segment operating income (loss)

$

(78,197

)

$

(25,157

)

$

60,384

$

(393,902

)

$

80,898

Revenue days

5,945

8,101

18,765

49,003

81,805

Average rig revenue per day

$

23,951

$

27,975

$

26,218

$

26,589

$

26,167

Average rig expense per day

17,348

15,412

15,394

15,730

15,243

Average rig margin per day

$

6,603

$

12,563

$

10,824

$

10,859

$

10,924

Rig utilization

25

%

32

%

68

%

47

%

67

%

INTERNATIONAL SOLUTIONS

Operating revenues

$

23,996

$

22,477

$

48,353

$

144,185

$

211,731

Direct operating expenses

25,157

27,595

43,119

124,791

157,856

Selling, general and administrative expense

733

1,129

1,399

4,565

5,624

Depreciation

897

996

8,042

17,531

35,466

Asset impairment charge

156,686

7,419

Restructuring charges

683

2,297

2,980

Segment operating income (loss)

$

(3,474

)

$

(9,540

)

$

(4,207

)

$

(162,368

)

$

5,366

Revenue days

452

988

1,598

4,605

6,426

Average rig revenue per day

$

45,986

$

19,642

$

28,199

$

29,116

$

31,269

Average rig expense per day

42,816

21,589

22,722

23,066

21,626

Average rig margin per day

$

3,170

$

(1,947

)

$

5,477

$

6,050

$

9,643

Rig utilization

15

%

34

%

56

%

40

%

55

%

OFFSHORE GULF OF MEXICO

Operating revenues

$

32,321

$

37,494

$

38,468

$

143,149

$

147,635

Direct operating expenses

27,711

28,967

32,148

119,371

114,306

Selling, general and administrative expense

72

1,248

1,004

3,365

3,725

Depreciation

3,090

3,004

2,499

11,681

10,010

Restructuring charges

(8

)

1,262

1,254

Segment operating income

$

1,456

$

3,013

$

2,817

$

7,478

$

19,594

Revenue days

460

455

552

1,922

2,163

Average rig revenue per day

$

45,254

$

49,654

$

43,072

$

45,145

$

37,478

Average rig expense per day

37,591

34,702

35,612

37,410

28,663

Average rig margin per day

$

7,663

$

14,952

$

7,460

$

7,735

$

8,815

Rig utilization

63

%

63

%

75

%

66

%

74

%

Contacts

Dave Wilson, Director of Investor Relations
[email protected]
(918) 588‑5190

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