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HELMERICH & PAYNE : Helmerich & Payne, Inc. Announces First Quarter Earnings

01/29/2009 | 08:45am US/Eastern

TULSA, Okla., Jan. 29 /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. (NYSE: HP) reported record net income of $145,275,000 ($1.36 per diluted share) from operating revenues of $623,754,000 for its first fiscal quarter ended December 31, 2008, compared with net income of $107,830,000 ($1.02 per diluted share) from operating revenues of $456,663,000 during last year's first fiscal quarter ended December 31, 2007. Included in this year's first quarter net income are after-tax gains from insurance proceeds and the sale of drilling equipment of $753,000 ($.01 per diluted share). Last year's first quarter net income included $3,714,000 ($.03 per diluted share) of gains from the sale of portfolio securities, insurance proceeds and drilling equipment.

Segment operating income for U.S. land operations was $194,048,000 for this year's first quarter, compared with $143,841,000 for last year's first quarter and $158,724,000 for last year's fourth quarter. The significant increase as compared to the prior quarter was mostly driven by higher average revenue and margins per rig day during this year's first quarter. Average revenue per day rose by $2,032 over the previous quarter to $27,066, and average rig margin per day rose by $1,657 over the previous quarter to $14,820. Approximately $1,100 per day of the average rig revenue and margin per day was primarily a result of early contract termination payments earned during this year's first quarter. Rig utilization was 95% for this year's first quarter, compared with 95% for last year's first quarter and 98% for last year's fourth quarter. The Company had 24 rigs stacked by the end of the first fiscal quarter. As a result of continued reduction in customers' spending, the Company has approximately 42 rigs stacked as of January 29, 2009.

During the quarter, the Company completed the construction of nine FlexRigs(R)* under long-term contracts. At the pace of approximately three rigs per month, the Company is scheduled to continue to complete the construction of rigs that are under previously announced long-term contracts. In the U.S. Land segment, approximately 56% of the Company's potential revenue days for the remainder of fiscal 2009 are committed to work for customers under term contracts, and approximately 42% are committed during fiscal 2010.

President and C.E.O. Hans Helmerich commented, "Exploration and production companies are currently being very aggressive about reducing their drilling plans in the near term, responding to the double blow of depressed energy prices and dysfunctional credit markets. Given the speed and severity of the current pullback, it is difficult to predict when supply and demand will return to a better balance. Until then, customers seem to be waiting to see where commodity prices stabilize before making final determinations concerning this year's spending plans."

Segment operating income for the Company's offshore operations was $14,710,000 for this year's first quarter, compared with $4,114,000 for last year's first quarter and $13,664,000 for last year's fourth quarter. Rig utilization in the offshore segment was 89% during this year's first quarter, compared with 56% during last year's first quarter and 89% during last year's fourth quarter. As compared to the preceding quarter, average rig margins per day during this year's first quarter increased by $1,191 to $23,589. Eight of the Company's nine offshore platform rigs were active in the first quarter, and the ninth rig began receiving stand-by revenue in January 2009 and is expected to commence drilling operations in the third fiscal quarter.

Segment operating income for the Company's international land operations was $22,628,000 for this year's first quarter, compared with $21,156,000 for last year's first quarter and $18,573,000 for last year's fourth quarter. Rig utilization in this segment was 98% during this year's first quarter, compared with 81% during last year's first quarter and 97% during last year's fourth quarter. Average rig margins per day during this year's first quarter increased by $1,173 to $12,417 in this segment as compared to the preceding quarter. International markets, however, have experienced reduced drilling activity, and seven of the Company's international land rigs are idle as of January 29, 2009. The Company expects additional rigs to become idle during the second fiscal quarter, especially in Venezuela. All eleven of the Company's rigs in Venezuela were active during the first fiscal quarter. However, accounts receivable collections from the Company's customer, PDVSA, have slowed considerably over the last few months. The receivable balance from PDVSA is approaching $100 million. Accordingly, the Company is ceasing operations on rigs as their drilling contracts expire. Two of the Company's eleven rigs in Venezuela have recently ceased operations, and it is expected that further cessations will idle a total of five rigs in that country by the end of February 2009. Absent any improvement of receivable collections, the remaining rigs would probably become idle by the end of July of this year. A more detailed discussion of Venezuelan risks is contained in the "Risk Factors" and "Management's Discussion & Analysis of Financial Condition and Results of Operations" sections of the Form 10-K filed with the Securities and Exchange Commission on November 26, 2008.

On January 22, 2009, the Company reported the closing of a 364-day bank credit facility totaling $105,000,000. This closing represents an increase in the Company's available credit facilities from $400 million to $505 million, over thirty percent of which is currently undrawn. It is anticipated that these credit facilities, along with internally generated cash flow, will fully fund the Company's capital spending program for fiscal 2009 which is now projected to be approximately $850 million. About $250 million of the $850 million has already been spent during the first quarter. Most of the capital spending for this year is related to the completion of the new FlexRigs scheduled for operations under long-term commitments with attractive returns for the Company. After the new $105 million credit facility expires early in calendar 2010, the $400 million credit facility will remain in effect until November 2011.

Helmerich & Payne, Inc. is primarily a contract drilling company. As of January 29, 2009, the Company's existing fleet included 194 U.S. land rigs, 32 international land rigs and nine offshore platform rigs. In addition, the Company is scheduled to complete another 27 new H&P-designed and operated FlexRigs, all of which correspond to previously announced commitments with customers. Upon completion of these commitments, the Company's global land fleet will include a total of 190 FlexRigs.

Helmerich & Payne, Inc.'s conference call/webcast is scheduled to begin this morning at 11:00 a.m. ET (10:00 a.m. CT) and can be accessed at http://www.hpinc.com under Investors. If you are unable to participate during the live webcast, the call will be archived for a year on H&P's website indicated above.

Statements in this release and information disclosed in the conference call and webcast that are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 are based on current expectations and assumptions that are subject to risks and uncertainties. For information regarding risks and uncertainties associated with the Company's business, please refer to the "Risk Factors" and "Management's Discussion & Analysis of Results of Operations and Financial Condition" 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.

*FlexRig(R) is a registered trademark of Helmerich & Payne, Inc.

                               HELMERICH & PAYNE, INC.
                                     Unaudited
                        (in thousands, except per share data)


                                            Three Months Ended
                                      September 30        December 31
    CONSOLIDATED STATEMENTS OF INCOME    2008           2008       2007
    Operating revenues:
      Drilling - U.S. Land            $437,376      $475,204   $347,644
      Drilling - Offshore               50,084        50,488     27,281
      Drilling - International          93,300        95,178     78,602
      Other                              2,959         2,884      3,136
                                       583,719       623,754    456,663

    Operating costs and expenses:
      Operating costs, excluding
       depreciation                    322,745       330,928    235,795
      Depreciation                      63,700        54,772     43,984
      General and administrative        14,343        15,148     13,903
      Research and development           1,311         1,677          -
      Gain from involuntary conversion
       of long-lived assets                  -          (277)    (4,810)
      Income from asset sales           (9,086)         (914)      (842)
                                       393,013       401,334    288,030

    Operating income                   190,706       222,420    168,633

    Other income (expense):
      Interest and dividend income       1,669         1,786      1,115
      Interest expense                  (4,434)       (3,700)    (4,831)
      Gain on sale of investment
       securities                            -             -        130
      Other                               (860)          128       (616)
                                        (3,625)       (1,786)    (4,202)

    Income before income
     taxes and equity in income
     of affiliates                     187,081       220,634    164,431

    Income tax provision                66,440        81,248     60,146

    Equity in income of affiliates
     net of income taxes                 5,844         5,889      3,545
    NET INCOME                        $126,485      $145,275   $107,830

    Earnings per common share:
        Basic                            $1.20         $1.38      $1.04
        Diluted                          $1.18         $1.36      $1.02
    Average common shares outstanding:
        Basic                          105,211       105,249    103,509
        Diluted                        107,300       106,431    105,615



                               HELMERICH & PAYNE, INC.
                                      Unaudited
                                    (in thousands)

    CONSOLIDATED CONDENSED BALANCE SHEETS              12/31/08     9/30/08

    ASSETS
       Cash and cash equivalents                       $138,024    $121,513
       Other current assets                             578,317     569,134
          Total current assets                          716,341     690,647
       Investments                                      173,549     199,266
       Net property, plant, and equipment             2,885,454   2,682,251
       Other assets                                      12,667      15,881
    TOTAL ASSETS                                     $3,788,011  $3,588,045


    LIABILITIES AND SHAREHOLDERS' EQUITY
       Total current liabilities                       $360,073    $308,957
       Total noncurrent liabilities                     551,493     538,614
       Long-term notes payable                          490,000     475,000
       Total shareholders' equity                     2,386,445   2,265,474

    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $3,788,011  $3,588,045



                               HELMERICH & PAYNE, INC.
                                     Unaudited
                                   (in thousands)

                                                        Three Months Ended
                                                            December 31
    CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS       2008      2007

    OPERATING ACTIVITIES:
          Net income                                   $145,275    $107,830
            Depreciation                                 54,772      43,984
            Changes in assets and liabilities            63,014     (32,292)
            Gain from involuntary conversion of
             long-lived assets                             (277)     (4,810)
            Gain on sale of assets and investment
             securities                                    (914)       (842)
            Other                                        (7,291)     (2,979)
             Net cash provided by operating activities  254,579     110,891

    INVESTING ACTIVITIES:
            Capital expenditures                       (250,381)   (149,844)
            Insurance proceeds from involuntary
             conversion of long-lived assets                277       8,500
            Proceeds from sale of assets and
             investments                                  1,411       1,386
            Other                                           (16)          -
              Net cash used in investing activities    (248,709)   (139,958)

    FINANCING ACTIVITIES:
            Dividends paid                               (5,273)     (4,668)
            Net increase in bank overdraft                2,330           -
            Proceeds from exercise of stock options         300       1,365
            Net proceeds from short-term notes and
             long-term debt                              13,267      40,000
            Excess tax benefit from stock-based
             compensation                                    17         662
             Net cash provided by financing activities   10,641      37,359

    Net increase in cash and cash equivalents            16,511       8,292
    Cash and cash equivalents, beginning of period      121,513      89,215
    Cash and cash equivalents, end of period           $138,024     $97,507



    SEGMENT REPORTING                        Three Months Ended
                                     September 30       December 31
                                         2008       2008           2007
                            (in thousands except days and per day amounts)
    U.S. LAND OPERATIONS
    Revenues                           $437,376    $475,204     $347,644
    Direct operating expenses           221,735     233,306      165,565
    General and administrative expense    4,147       4,427        4,394
    Depreciation                         52,770      43,423       33,844
    Segment operating income           $158,724    $194,048     $143,841

    Revenue days                         16,382      16,322       13,877
    Average rig revenue per day         $25,034     $27,066      $24,006
    Average rig expense per day         $11,871     $12,246      $10,895
    Average rig margin per day          $13,163     $14,820      $13,111
    Rig utilization                          98%         95%          95%

    OFFSHORE OPERATIONS
    Revenues                            $50,084     $50,488      $27,281
    Direct operating expenses            32,159      31,762       19,211
    General and administrative expense      964       1,052        1,098
    Depreciation                          3,297       2,964        2,858
    Segment operating income            $13,664     $14,710       $4,114

    Revenue days                            736         735          460
    Average rig revenue per day         $52,452     $53,057      $41,833
    Average rig expense per day         $30,054     $29,468      $27,160
    Average rig margin per day          $22,398     $23,589      $14,673
    Rig utilization                          89%         89%          56%



    SEGMENT REPORTING                    Three Months Ended
                                  September 30        December 31
                                    2008         2008             2007
                            (in thousands except days and per day amounts)
    INTERNATIONAL LAND OPERATIONS
    Revenues                        $93,300     $95,178          $78,602
    Direct operating expenses        68,679      65,648           50,782
    General and administrative
     expense                            554         696              938
    Depreciation                      5,494       6,206            5,726
    Segment operating income        $18,573     $22,628          $21,156

    Revenue days                      2,299       2,383            1,981
    Average rig revenue per day     $37,691     $36,737          $34,522
    Average rig expense per day     $26,447     $24,320          $20,353
    Average rig margin per day      $11,244     $12,417          $14,169
    Rig utilization                      97%         98%              81%


    Operating statistics exclude the effects of offshore platform management
    contracts, gains and losses from translation of foreign currency
    transactions, and do not include reimbursements of "out-of-pocket"
    expenses in revenue per day, expense per day and margin calculations.



    Reimbursed amounts were as follows:

    U.S. Land Operations            $27,275     $33,435          $14,277
    Offshore Operations              $5,829      $5,466           $2,862
    International Land Operations    $6,647      $7,633          $10,213


    With the growth of the drilling segments, the previously reported Real
    Estate segment has become a smaller percentage of total segment operating
    income.  As a result, the Real Estate segment previously shown as a
    reportable segment, has been included with all other non-reportable
    business segments.  The amounts for the three months ended December 31,
    2007 have been restated to reflect this change.



    Segment operating income is a non-GAAP financial measure of the Company's
    performance, as it excludes general and administrative expenses, corporate
    depreciation, income from asset sales and other corporate income and
    expense.  The Company considers segment operating income to be an
    important supplemental measure of operating performance for presenting
    trends in the Company's core businesses.  This measure is used by the
    Company to facilitate period-to-period comparisons in operating
    performance of the Company's reportable segments in the aggregate by
    eliminating items that affect comparability between periods.  The Company
    believes that segment operating income is useful to investors because it
    provides a means to evaluate the operating performance of the segments and
    the Company on an ongoing basis using criteria that are used by our
    internal decision makers.  Additionally, it highlights operating trends
    and aids analytical comparisons.  However, segment operating income has
    limitations and should not be used as an alternative to operating income
    or loss, a performance measure determined in accordance with GAAP, as it
    excludes certain costs that may affect the Company's operating performance
    in future periods.

    The following table reconciles operating income per the information above
    to income before income taxes and equity in income of affiliates as
    reported on the Consolidated Statements of Income (in thousands).


                                                Three Months Ended
                                    September 30            December 31
                                        2008             2008          2007
    Operating income
    U.S. Land                         $158,724       $194,048       $143,841
    Offshore                            13,664         14,710          4,114
    International Land                  18,573         22,628         21,156
    Other                                 (400)          (861)         1,524
      Segment operating income        $190,561       $230,525       $170,635
     Corporate general &
      administrative                    (8,678)        (8,973)        (7,473)
     Other depreciation                 (1,137)        (1,197)          (929)
     Inter-segment elimination             874            874            748
     Gain from involuntary conversion
      of long-lived assets                   -            277          4,810
     Income from asset sales             9,086            914            842
      Operating income                $190,706       $222,420       $168,633

    Other income (expense):
     Interest and dividend income        1,669          1,786          1,115
     Interest expense                   (4,434)        (3,700)        (4,831)
     Gain on sale of investment
      securities                             -              -            130
     Other                                (860)           128           (616)
      Total other income (expense)      (3,625)        (1,786)        (4,202)

    Income before income taxes and
     equity in income of affiliates   $187,081       $220,634       $164,431

SOURCE Helmerich & Payne, Inc.

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