On the same day Helmerich & Payne announced a nearly $2 billion acquisition of a Scotland-based firm with a heavy presence of oil exploration in the Middle East, the Tulsa company reported quarterly net income of $89 million or 88 cents a share….an improvement over the first quarter of 2024.
It came as the company faced falling rig counts in the US and what a company leader called “macro headwinds” in the oil and gas industry.
The income was generated from $698 million in operating revenues and compared to $85 million net income and 84 cents a share from $688 million in operating revenues for the previous quarter of the year.
Net cash provided by operating activities was $197 million for the third quarter of fiscal year 2024 compared to net cash provided by operating activities of $144 million for the second quarter of fiscal year 2024. The company reported improved North American operations but a loss for the quarter in its International Solutions.
President and CEO John Lindsay commented, “Our financial results for the third fiscal quarter continue to demonstrate the resilience of our strategy in the North America Solutions segment. Once again, it was particularly notable, that despite a more sizeable decline in the overall industry rig count, our NAS active rig count remained relatively stable during the third fiscal quarter which is a reflection of H&P’s unyielding focus on providing value to our customers.”
But, Lindsay also cautioned that “macro headwinds” are affecting the industry and “causing a more cautionary outlook for the industry.” He’s hoping they subside and bring a more positive outlook in the coming quarters.
“Contractual churn remains prevalent in the U.S. market, but our people are doing a good job managing through this. We expect the churn to continue and as we have seen in recent summers, we also anticipate our active rig count to be flat with perhaps a modest incline heading into our fiscal year-end,” added Lindsay.
The company indicated it anticipates the first of the right Saudi Arabia rigs will start work in the fiscal fourth quarter and the preparation work for the remaining seven super-spec rigs is moving as planned for the remainder of 2024. The rigs are part of H&P’s working relationship with Saudi Aramco.
Helmerich & Payne also returned another $42 million to shareholders in the form of dividends during the quarter. The company has started working on its fiscal 2025 capital budget.
Senior Vice President and CFO Mark Smith anticipates thaty the projected maintenance and walking rig onversions capex will be similar to fiscal 2024 levels.
Below are the results as stated by H&P.
North America Solutions:
This segment had operating income of $163.4 million compared to operating income of $147.1 million during the previous quarter. The increase in operating income was primarily attributable to a higher direct margin and the prior quarter experiencing higher depreciation and research and development expenses. Direct margin(2) increased by $6.0 million to $277.4 million sequentially.
International Solutions:
This segment had an operating loss of $4.8 million compared to operating income of $3.6 million during the previous quarter. The decrease in operating income was mainly due to recommissioning expenses for rigs that will be exported to Saudi Arabia and related start-up costs. Direct margin(2) during the third fiscal quarter was $0.4 million compared to $8.4 million during the previous quarter. Current quarter results included a $2.1 million foreign currency loss compared to a $0.5 million foreign currency loss in the previous quarter.
Offshore Gulf of Mexico:
This segment had operating income of $5.0 million compared to operating income of $0.1 million during the previous quarter. Direct margin(2) for the quarter was $7.6 million compared to $2.9 million in the previous quarter. The increase in operating income was primarily attributable to rigs moving to full operating rates earlier than planned.
Operational Outlook for the Fourth Quarter of Fiscal Year 2024
North America Solutions:
- We expect North America Solutions direct margins(2) to be between $260-$280 million
- We expect to exit the quarter between approximately 147-153 contracted rigs
International Solutions:
- We expect International Solutions direct margins(2) to be between $(2)-$2 million, exclusive of any foreign exchange gains or losses
- Projected International Solutions direct margins(2) for the fourth fiscal quarter are inclusive of approximately $6-$8 million of rig preparation and start-up expense related to our Saudi Arabia operations, higher than previous guidance as some costs shifted from the third fiscal quarter into the fourth fiscal quarter
Offshore Gulf of Mexico:
- We expect Offshore Gulf of Mexico direct margins(2) to be between $6-$8 million
Other Estimates for Fiscal Year 2024
- Gross capital expenditures are still expected to be approximately $500 million;
- Ongoing asset sales that include reimbursements for lost and damaged tubulars and sales of other used drilling equipment offset a portion of the gross capital expenditures, and are now expected to total approximately $45 million in fiscal year 2024
- Depreciation for fiscal year 2024 is now expected to be approximately $400 million
- Research and development expenses for fiscal year 2024 are now expected to be roughly $40 million
- General and administrative expenses for fiscal year 2024 are now expected to be approximately $250 million
- Cash taxes to be paid in fiscal year 2024 are still expected to be approximately $150-$200 million
Select Items(1) Included in Net Income per Diluted Share
Third quarter of fiscal year 2024 net income of $0.88 per diluted share included a net impact $(0.04) per share in after-tax gains and losses comprised of the following: