HELMERICH & PAYNE : Helmerich & Payne, Inc. Announces First Quarter Earnings
01/29/2009| 08:45am US/Eastern
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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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