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November 20, 2009
Share ThisContract drilling services provider Helmerich & Payne, Inc. (HP) reported solid fourth quarter results, buoyed by improving rig counts on the back of rebounding commodity prices. Earnings per share, excluding gains from non-operating items, came in at 47 cents, marginally better than the Zacks Consensus Estimate of 44 cents.
However, as has been the case with the other contract drillers that have already reported – Patterson-UTI Inc. (PTEN) and Nabors Industries (NBR) – earnings and revenue comparisons with the year-earlier period were quite ugly, severely hampered by lower rig utilization (especially in the U.S. land drilling market) amid weak demand for drilling services. Helmerich & Payne’s adjusted earnings per share slumped approximately 58.4%, while revenues declined 38.0% to $362.2 million.
U.S. Land Operations
During the quarter, operating revenues totaled $269.1 million (74% of total revenue), down 38.5% year-over-year. Average rig revenue per operating day was $25,895, up 3.4%, while average rig margin per day increased 10.5% to $14,551. However, segment operating income fell 43.2% from the year-earlier quarter to $90.1 million, mainly reflecting lower utilization levels, which were down to 55% (from 98% in the fourth quarter of 2008).
Offshore Operations
Helmerich & Payne’s offshore revenues declined 5.6% year-over-year to $47.3 million. Daily average rig revenue fell 9.4% to $47,547, while average rig margin per day was down 7.7% to $20,679. Segment operating income, at $12.0 million, decreased 12.0%. Rig utilization, which was 89% in the same period of 2008, came down to 78%.
International Land Operations
International land operations recorded revenues of $43.1 million, as against $93.3 million in the previous-year quarter. Average daily rig revenue was $29,406, down 22.0%, while rig margin per day nosedived 71.2% year-over-year to $3,244. The segment incurred a loss of $6.3 million during the quarter, compared to a profit of $18.6 million in the fourth quarter of 2008. Activity levels declined significantly, falling to 41% from 97% a year ago. The company's decision earlier this year to delay booking revenue in Venezuela also contributed to the dismal international results.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent approximately $142.3 million on capital programs. As of September 30, 2009, the company had more than $141.5 million in cash and long-term debt of $420 million (debt-to-capitalization ratio of 15.7%).
Outlook
Management indicated that drilling activity is picking up and hoped that the reported quarter represented the eventual bottoming of the North American natural gas driven land drilling operations. At the same time, it remained concerned about the current supply overhang in the natural gas market and noted an industry backlog of up to 1,500 uncompleted or deferred wells domestically.
Read the full analyst report on "HP"
Read the full analyst report on "PTEN"
Read the full analyst report on "NBR"
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