Service & Supply | Quarterly / Earnings Reports | Oilfield Services | Second Quarter (2Q) Update
Helmerich & Payne Touts 'Strong' 2Q Operating Results
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Helmerich & Payne, Inc. reported net income of $174.6 million ($1.59 per diluted share) from operating revenues of $893.4 million for the second quarter of fiscal 2014, compared to net income of $151.1 million ($1.39 per diluted share) from operating revenues of $838.3 million during the second fiscal quarter of 2013, and net income of $173.2 million ($1.59 per diluted share) from operating revenues of $889.2 million during the first fiscal quarter of 2014. Included in net income corresponding to this year's second fiscal quarter are approximately $0.02 per diluted share of after-tax gains related to the sale of used drilling equipment and approximately $0.12 per diluted share of after-tax gains on the sale of investment securities. Included in both this year's first fiscal quarter and last year's second fiscal quarter were approximately $0.03 per diluted share of after-tax gains related to the sale of used drilling equipment.
President and CEO John Lindsay commented, "We are pleased to report yet another quarter with strong operating results, including an all-time record level of quarterly revenue and rig activity. The demand for new FlexRigs remains strong, and our U.S. land segment continues to benefit from increasing activity and recovering spot pricing levels. We have entered into agreements with five exploration and production companies to build and operate nine additional FlexRigs®* to drill unconventional resource plays in the U.S. All of these rigs were ordered under multi-year term contracts and are expected to generate attractive economic returns for the Company. The new contracts bring the total number of new build commitments announced in fiscal 2014 to 44 FlexRigs. We will continue to focus on making investments that provide attractive returns for our shareholders while at the same time creating value for our customers by striving to provide even safer and more cost-effective drilling operations."
Operating Segment Results
Segment operating income for the Company's U.S. land operations was $245.1 million for the second quarter of fiscal 2014, compared with $226.0 million for last year's second fiscal quarter and $251.0 million for this year's first fiscal quarter. As compared to the first fiscal quarter, the number of revenue days for the segment increased by 836 (3.6%) to 24,300 during the second fiscal quarter of 2014. Nevertheless, segment operating income declined sequentially primarily as a result of approximately $10 million in early termination fees included in the first fiscal quarter (and no early termination fees during the second fiscal quarter). Excluding early termination fees, the average rig revenue per day decreased by only $9 to $28,037 and the average rig margin per day decreased by $155 to $14,957 during the second fiscal quarter as compared to this year's first fiscal quarter. Also as compared to the first fiscal quarter, average rig expense per day for the segment increased by $146 to $13,080 during the second fiscal quarter. Rig utilization for the Company's U.S. land segment was 86% for this year's second fiscal quarter, compared with 82% for last year's second fiscal quarter and 84% for this year's first fiscal quarter. At March 31, 2014, the Company's U.S. land segment had 282 contracted rigs (including 159 under term contracts) and 40 idle rigs.
Segment operating income for the Company's offshore operations was $19.3 million for the second quarter of fiscal 2014, compared with $13.7 million for last year's second fiscal quarter and $18.5 million for this year's first fiscal quarter. The sequential increase in operating income was attributable to a higher average rig margin per day in the second quarter of fiscal 2014. Rig utilization in the segment was reported at 89% for both the first and second quarters of fiscal 2014 and also for the second quarter of fiscal 2013.
The Company's international land operations reported segment operating income of $11.2 million for this year's second fiscal quarter, compared with $13.2 million for the second fiscal quarter of 2013 and $12.8 million for this year's first fiscal quarter. The decrease in segment operating income as compared to the first fiscal quarter was mostly attributable to a lower number of revenue days during the second fiscal quarter. The reduced number of revenue days was partly offset by an increase of $576 to $10,918 in the segment's average rig margin per day during the second fiscal quarter as compared to the first fiscal quarter of 2014.
Drilling Operations Outlook for the Third Quarter
In the U.S. land segment, the Company expects revenue days (activity) to increase by approximately seven percent during the third fiscal quarter as compared to the second fiscal quarter of 2014. The average rig revenue per day is expected to remain at approximately $28,000 and the average rig expense per day is expected to remain at roughly$13,000 during the third fiscal quarter. As of today, the U.S. land segment has 287 contracted rigs, including 161 under term contracts.
In the offshore segment, the Company expects the average rig margin per day to be approximately $25,000 during the third fiscal quarter and revenue days to increase by approximately one percent as compared to the second fiscal quarter of 2014.
In the international land segment, the Company expects total revenue days during the third fiscal quarter to be relatively flat and the average rig margin per day to decline by approximately five percent as compared to the second fiscal quarter of 2014.
Capital Expenditures and Other Estimates for Fiscal 2014
Given today's new build announcements, other previously announced contracts and ongoing conversations with customers regarding new FlexRig deliveries in early fiscal 2015, the Company is increasing its fiscal 2014 capital expenditures estimate from $950 million to $1.1 billion.
Including changes in income tax estimates that increased the second fiscal quarter's effective income tax rate, the Company expects the effective income tax rate for all of fiscal 2014 to be approximately 35%.