Helmerich Payne Inc
For the period ended Dec 31, 2024. Filed Feb 5, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 5, 2025
HP$35.22+1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-25.
0000046765-24-000045
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-05.
0000046765-25-000008
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 164 previous paragraphs and 130 current paragraphs.
59 unchanged; 40 reworded; 30 added; 53 removed; 12 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (30)
Current report
Our revenues are primarily derived from the capital expenditures of companies involved in the exploration, development and production of crude oil and natural gas (“E&Ps”). Generally, the level of capital expenditures is dictated by capital budgets set to achieve respective production targets in relation to current and expected future prices of crude oil and natural gas, which are determined by various supply and demand factors and have historically been volatile. Furthermore, E&Ps have become more fiscally disciplined in their level of capital expenditures relative to commodity price fluctuations, which has resulted in less volatility within the oilfield service businesses, including our operations.
Current report
With regard to our North America Solutions segment, we believe the supply and demand dynamics surrounding our North America Solutions segment remain constructive for future activity and pricing levels. As such, during fiscal year 2025, we expect our rig activity to remain relatively stable absent any significant changes to commodity prices. The Company also intends to maintain its strategy around employing a fiscally prudent approach to deploying capital and prioritizing economic margins over rig utilization to remain intact.
Current report
Collectively, our other business segments, Offshore Gulf of Mexico and International Solutions, are exposed to the same macro commodity price environment affecting our North America Solutions segment; however, activity levels in the International Solutions segment are also subject to other various geopolitical and financial factors specific to the countries of our operations. During fiscal 2025, our operational presence in certain international markets, primarily the Middle East and the offshore management contract business, is expected to increase substantially due to the completion of the Acquisition. With the closing of the Acquisition, the Company's International Solutions segment contracted rig count is expected to increase to approximately 89 rigs from 20 contracted rigs as of December 31, 2024. Included in the contracted rigs acquired as part of the Acquisition are 12 rigs that have either temporarily suspended operations or been notified to suspend operations in Saudi Arabia due to a customer's desire to reduce their level of capital expenditures. The suspension of the operations of these rigs is expected to have an adverse impact on our International Solutions segment's operating results during fiscal 2025. Given the nature of these suspensions, we expect these rigs to re-commence operations during fiscal 2026, however, we have no assurances that such activity will occur on the anniversaries of the notices to suspend. Similarly, our Offshore Gulf of Mexico reportable segment, to be re-named Offshore Solutions subsequent to the Acquisition, is expected to increase its active management contract and rig count to approximately 37 from six as of December 31 ,2024. Current expectations are for activity and pricing in the International Solutions and Offshore Gulf of Mexico (Offshore Solutions) reportable segments to remain relatively stable post the completion of the Acquisition.
Current report
On January 16, 2025 (the “Closing Date”), H&P completed the Acquisition of KCA Deutag pursuant to the Purchase Agreement. H&P paid aggregate cash consideration of approximately $2.0 billion, which consisted of the share purchase price of $0.9 billion and $1.1 billion which was used to contemporaneously repay or redeem certain of KCA Deutag existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees. The cash consideration was funded through a combination of net proceeds from the Company’s September 2024 senior notes offering, net proceeds from the funding of the Company’s Term Loan Credit Agreement, cash on hand, and monetization of our investment in ADNOC Drilling.
Current report
KCA Deutag is a diverse global drilling company. The company has a significant land drilling presence in the Middle East, which represents approximately two-thirds of the company’s calendar year 2023 Operating EBITDA, with additional operations in South America, Europe and Africa. In addition to its land operations, KCA Deutag has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada, with super major customers and long-term earnings visibility through a robust backlog. KCA Deutag’s Kenera segment comprises manufacturing and engineering businesses, including Bentec, with three facilities serving the energy industry, representing a longer-term growth opportunity.
Current report
Acquisition Transaction Costs During the three months ended December 31, 2024, we recognized approximately $10.5 million in acquisition transaction costs associated with the acquisition of KCA Deutag. These non-recurring costs are primarily related to third-party legal, consulting and advisory services. See Note 9—Acquisition Transaction Costs for additional details related to the Acquisition.
Current report
Interest Expense Interest expenses were $22.3 million and $4.4 million for the three months ended December 31, 2024 and 2023, respectively. The increase was primarily driven by accrued interest associated with our September 2024 senior notes offering. See Note 5—Debt for additional details related to our debt agreements.
Current report
(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 92 days).
Current report
Operating Revenues Operating revenues were $598.1 million and $594.3 million in the three months ended December 31, 2024 and 2023, respectively. The increase in operating revenue was primarily due to higher average pricing levels.
Current report
(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 92 days).
Current report
Operating Revenues Operating revenues were $47.5 million and $54.8 million in the three months ended December 31, 2024 and 2023, respectively. The $7.3 million decrease in operating revenues was primarily due to no revenue producing activities in Colombia and United Arab Emirates partially offset by the commencement of operations in Saudi Arabia during three months ended December 31, 2024.
Current report
(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 92 days).
Current report
Operating Revenues Operating revenues were $29.2 million and $25.5 million in the three months ended December 31, 2024 and 2023, respectively. The $3.7 million increase in operating revenue was primarily due to higher pricing levels.
Current report
Net working capital (defined as current assets less current liabilities) was $789.1 million and $745.1 million as of December 31, 2024 and September 30, 2024, respectively.
Current report
Senior Notes Issued in Fiscal Year 2024
Current report
On September 17, 2024, we completed a private offering of $1.25 billion aggregate principal amount of senior notes, comprised of the following tranches (collectively, the "Notes"): $350.0 million aggregate principal amount of 4.65 percent senior notes due 2027 issued at a price equal to 99.958 percent of their face value, $350.0 million aggregate principal amount of 4.85 percent senior notes due 2029 issued at a price equal to 99.883 percent of their face value and $550.0 million aggregate principal amount of 5.50 percent senior notes due 2034 issued at a price equal to 99.670 percent of their face value. Interest on the Notes is payable semi-annually on June 1 and December 1 of each year, commencing on June 1, 2025.
Current report
On January 16, 2025, H&P completed the Acquisition, and the Company used the net proceeds of the Notes, together with the proceeds of its term loan credit agreement (discussed below) and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag’s outstanding indebtedness, and to pay related fees and expenses. For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events. The net proceeds reduced the commitments under the Company’s Bridge Loan Facility (discussed herein) for purposes of financing the Acquisition.
Current report
In connection with the issuance of the Notes, the Company also entered into a registration rights agreement, dated as of September 17, 2024 (the "Registration Rights Agreement'), with the initial purchasers of the Notes named therein. Under the Registration Rights Agreement, the Company agreed, among other things, to: (i) file a registration statement (the “Exchange Offer Registration Statement”) with the SEC to register an offer to exchange each series of the Notes for freely tradable notes having terms identical in all material respects to each such series of Notes (the “Registered Exchange Offer”); (ii) use commercially reasonable efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act not later than the later of (x) the 30th day following the Company’s filing of a Current Report on Form 8-K or an amendment thereto including the financial statements of KCA Deutag and pro forma financial information related to the Company’s acquisition of KCA Deutag required by Items 9.01(a) and 9.01(b) of Form 8-K (the “KCA Deutag Financials Form 8-K”) and (y) June 16, 2025; and (iii) use commercially reasonable efforts to cause the Registered Exchange Offer to be completed not later than the later of (x) the 60th day following the Company’s filing of the KCA Deutag Financials Form 8-K and (y) July 14, 2025 (the “Exchange Offer Closing Deadline”), subject to certain limitations.
Current report
If, among other events, the Registered Exchange Offer is not completed by the Exchange Offer Closing Deadline, then special additional interest will accrue in an amount equal to 0.25 percent per annum of the principal amount of the Notes, from and including the date on which such default shall occur to but excluding the date on which such default is cured.
Current report
Senior Notes Issued in Fiscal Year 2021
Current report
Term Loan Credit Agreement
Current report
On August 14, 2024, the Company entered into a unsecured term loan credit agreement (the "Term Loan Credit Agreement"), dated as of August 14, 2024, among the Company, Morgan Stanley Senior Funding, Inc. (“MSSF”) as administrative agent, and the other lenders party thereto. Under the Term Loan Credit Agreement, the Company may obtain unsecured term loans in a single delayed draw in an aggregate principal amount up to $400.0 million, which reduced the commitments under the Company's Bridge Loan Facility(discussed herein)for purposes of financing the Acquisition. The Term Loan Credit Agreement matures at thetwo-year anniversary of the funding of the term loans unless earlier terminated pursuant to the terms of the Term Loan Credit Agreement.
Current report
The benchmark rate is the Secured Overnight Financing Rate ("SOFR"). We can elect to borrow at either an adjusted SOFR rate or an adjusted base rate, plus an applicable margin. The adjusted SOFR rate is the forward-looking term rate based on SOFR for the applicable tenor of one, three, or six months, plus 0.10 percent per annum. The adjusted base rate is a fluctuating rate per annum equal to the highest of (i) the administrative agent's prime rate, (ii) the federal funds effective rate plus 0.50 percent, or (iii) the one-month adjusted SOFR rate plus 1.0 percent. We also pay a commitment fee on the unused balance of the facility. Borrowing spreads as well as commitment fees are determined based on the debt rating for senior unsecured debt of the Company, as determined by Moody’s and Standard & Poor’s. The applicable margin for SOFR borrowings and adjusted base rate borrowings ranges from 1.0 percent to 1.625 percent per annum and zero to 0.625 percent per annum, respectively. Commitment fees for both rates range from 0.10 percent to 0.250 percent per annum. Based on the unsecured debt rating of the Company on December 31, 2024, the spread over SOFR would have been 1.375 percent had borrowings been outstanding under the Term Loan Credit Agreement and commitment fees would have been 0.175 percent.
Current report
The funding of the term loans had not occurred as of December 31, 2024. On January 16, 2025, H&P completed the Acquisition, and the Company used the proceeds from the Term Loan Credit Agreement, together with the net proceeds from the sale of the Notes and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag's outstanding indebtedness, and to pay related fees and expenses. For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events.
Current report
Revolving Credit Facility
Current report
On August 14, 2024, the Company entered into an Amended and Restated Credit Agreement (the "Amended Credit Facility") with the lenders party thereto (the "Revolving Credit Agreement Lenders"), the issuing lenders party thereto and Wells Fargo, National Association ("Wells Fargo") as administrative agent, swing line lender and issuing lender, which amended and restated the Credit Agreement, dated as of November 13, 2018 (as amended through Amendment No. 2 to the Credit Agreement dated as of March 8, 2022, the “Existing Credit Agreement”), among the Company, the lenders party thereto and Wells Fargo, as administrative agent, swing line lender and issuing lender.
Current report
Under the terms of the Amended Credit Facility, the Company may obtain unsecured revolving loans in an aggregate principal amount not to exceed $950.0 million outstanding at any time (the “Revolving Credit Facility”). $775.0 million of the revolving commitments under the Amended Credit Facility expire on November 12, 2028 and $175.0 million of the revolving commitments mature on November 10, 2027 (the “Stated Maturity Date”), but the Company may request two one-year extensions of the Stated Maturity Date, subject to satisfaction of certain conditions. Commitments under the Amended Credit Facility may be increased by up to $100.0 million, subject to the agreement of the Company and new or existing Revolving Credit Agreement Lenders.
Current report
The proceeds of the loans made under the Amended Credit Facility may be used by the Company for (i) working capital and other general corporate purposes, (ii) for the payment of fees and expenses related to the entering into of the Amended Credit Facility and the other credit documents and (iii) for the refinancing of the extensions of credit under the Existing Credit Agreement.
Current report
The benchmark rate is the SOFR. We can elect to borrow at either an adjusted SOFR rate or an adjusted base rate, plus an applicable margin. The adjusted SOFR rate is the forward-looking term rate based on SOFR for the applicable tenor of one, three, or six months, plus 0.10 percent per annum. The adjusted base rate is a fluctuating rate per annum equal to the highest of (i) the administrative agent's prime rate, (ii) the federal funds effective rate plus 0.50 percent, or (iii) the one-month adjusted SOFR rate plus 1.0 percent. We also pay a commitment fee on the unused balance of the facility. Borrowing spreads as well as commitment fees are determined based on the debt rating for senior unsecured debt of the Company, as determined by Moody’s and Standard & Poor’s. The applicable margin for SOFR borrowings and adjusted base rate borrowings ranges from 0.875 percent to 1.500 percent per annum and zero to 0.50 percent per annum, respectively. Commitment fees for both rates range from 0.075 percent to 0.200 percent per annum. Based on the unsecured debt rating of the Company on December 31, 2024, the spread over SOFR would have been 1.250 percent had borrowings been outstanding under the Amended Credit Facility and commitment fees would have been 0.150 percent. There is a financial covenant in the Amended Credit Facility that requires us to maintain a total funded debt to total capitalization ratio of less than or equal to 55.0 percent. The Amended Credit Facility contains additional terms, conditions, restrictions and covenants that we believe are usual and customary in unsecured debt arrangements for companies of similar size and credit quality, including a limitation that priority debt (as defined in the credit agreement) may not exceed 17.5 percent of the net worth of the Company. As of December 31, 2024, there were no borrowings or letters of credit outstanding, leaving $950.0 million available to borrow under the Amended Credit Facility.
Current report
Subsequent to December 31, 2024, we drew$400.0 million from the Term Loan Credit Agreement and the Company used the proceeds from the Term Loan Credit Agreement, together with the net proceeds from the sale of the Notes and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag's outstanding indebtedness, and to pay related fees and expenses. We utilized approximately $2.0 billion of cash, cash equivalents, and restricted cash to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag’s outstanding indebtedness, and to pay related fees and expenses. For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events..
Removed paragraphs (53)
Previous report
•our ability and the time required to consummate the Acquisition;
Previous report
•the risk that regulatory approvals for the Acquisition are not obtained or are obtained subject to conditions that are not anticipated;
Previous report
With regards to our North America Solutions segment, we believe the current crude oil pricing environment and the desire of many of our customers to at least maintain their present production levels are supportive of current rig activity. In contrast, the weakened natural gas pricing environment that began in calendar 2023 has persisted and caused some customers to keep their natural gas activity relatively low, and in some cases to further pull back on their planned activity levels in calendar 2024. While the Company does have some exposure to customers drilling for natural gas, we believe our exposure to be limited. In total, we expect the average level of capital spending by our customers in calendar year 2024 to remain flat to down by approximately 5.0 percent relative to calendar year 2023. As such, we do not expect much change in activity levels in calendar 2024 from where they are currently; we exited June 30, 2024 with 146 active rigs in our North America Solutions segment.
Previous report
During the past few quarters, there has been an increasing number of customer consolidations within the industry with larger E&P operators acquiring or merging with smaller E&P operators. We have seen this phenomenon having a near-term modestly negative affect on overall rig demand as the consolidated entity moves forward with fewer rigs than the two previous entities would have on a stand alone basis. We believe we are less impacted by these consolidations as it appears the demand for super-spec rigs is to a lesser extent affected by these consolidations than the demand for non-super-spec rigs. Furthermore, due to the make-up of our customer base, we typically have an incumbent position with customers that tend to be the acquirers in these transactions.
Previous report
Collectively, our other business segments, International Solutions and Offshore Gulf of Mexico, are exposed to the same macro commodity price environment affecting our North America Solutions segment; however, activity levels in the International Solutions segment are also subject to other various geopolitical and financial factors specific to the countries of our operations. At present, activity levels in the International Solutions and Offshore Gulf of Mexico business segments are expected to remain relatively steady at current levels for the remainder of fiscal year 2024. We are currently pursuing an international expansion strategy with the aim to provide growth and diversification for the Company with the understanding that such a strategy will take time and capital to execute. During the remainder of fiscal year 2024, we plan to continue to devote capital to our international expansion strategy and, in particular, to a recent contract award for seven super-spec rigs in the Kingdom of Saudi Arabia. We had contemplated the capital spending necessary to prepare these rigs for export as part of our fiscal year 2024 capital expenditure budget. A majority of these rigs are currently scheduled for delivery and customer acceptance during our first half of fiscal year 2025 and thus will have no revenue impact on fiscal year 2024 results. We currently have one rig in the Kingdom of Saudi Arabia related to a previous contract award; that rig is preparing to commence operations and is expected to do so prior to the end of fiscal 2024
Previous report
Over the past two years, the Company has experienced inflationary pressures related to labor and consumable inventory and more recently as a result of cost-acceleration related to running our rig fleet harder to achieve the well designs, lateral lengths and drilling efficiencies our customers demand. The inflationary forces have abated, and the financial impacts were partially mitigated by pass-through mechanisms in our contracts. However, the performance and efficiency gains we achieve require us to continue to push the service intensity of our rigs and equipment. Accordingly, we expect operational expenses to remain at elevated levels compared to recent years. Additionally, we are also experiencing inflationary pressures in our non-operational expenses particularly around labor and third-party services. As a consequence of these pressures, we continue to project an increase in our selling, general and administrative expenses during fiscal year 2024.
Previous report
On July 25, 2024, H&P entered into a Sale and Purchase Agreement (the “Purchase Agreement”), among the Majority Sellers named therein (the "Majority Sellers"), the Management Seller named therein (the "Management Seller"), Ocorian Limited, a private company limited by shares incorporated in Jersey (together with the Majority Sellers and the Management Seller, the "Lead Sellers"), HP Global Holdings Limited, a private company limited by shares incorporated in Jersey and a wholly owned subsidiary of H&P (the "Purchaser"), and, for certain purposes set forth therein, KCA Deutag International Limited, a private company limited by shares incorporated in Jersey (the "Target" or "KCA Deutag").
Previous report
Pursuant to the terms of the Purchase Agreement, we have agreed to acquire the entire issued share capital of KCA Deutag (such purchase and sale, together with the other transactions contemplated by the Purchase Agreement, the “Acquisition”) for an aggregate cash purchase price of approximately $946.4 million (the “Unadjusted Purchase Price”), which is subject to customary downward adjustments at the closing for certain items of leakage occurring from December 31, 2023 to the closing, transaction costs and transaction-related bonuses. In addition, to the extent certain German tax obligations of KCA Deutag remain outstanding prior to closing, a portion of the Unadjusted Purchase Price equal to EUR €75.4 million plus interest on such amount at an annual rate of 1.8 percent from October 1, 2024 until closing will be deposited into escrow at closing until such tax obligations are finally settled. The Majority Sellers collectively own approximately 60.581 percent of KCA Deutag's outstanding shares, and the Purchaser will acquire the remaining minority shares of KCA Deutag through the exercise of a drag-along right.
Previous report
The consummation of the Acquisition is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including, (i) the receipt of certain antitrust approvals necessary to consummate the Acquisition, (ii) the accuracy of the warranties set forth in the Purchase Agreement and that certain Deed of Warranty, dated as of July 25, 2024, among the warrantors named therein and the Purchaser, (iii) the absence of a material adverse change with respect to KCA Deutag and its wholly owned subsidiaries and (iv) the compliance by the Lead Sellers and KCA Deutag in all material respects of their obligations under the Purchase Agreement. Subject to the satisfaction of the conditions in the Purchase Agreement, the consummation of the Acquisition is expected to occur prior to the end of the 2024 calendar year.
Previous report
Gain (Loss) on Investment Securities During the three months ended June 30, 2024, we recognized an aggregate gain of $0.4 million on investment securities. The gain consisted of $5.6 million and $1.9 million gains on our equity investments in ADNOC Drilling and Tamboran Corp., respectively; both of which were a result of increases in the fair market value of the stocks. These gains were offset by a $7.1 million loss on investment recognized during the three months ended June 30, 2024 as a result of a Blue Chip Swap transaction that occurred during the period. See—Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks for additional information related to the Blue Chip Swap. During the three months ended June 30, 2023, we recognized an aggregate loss of $18.5 million on investment securities. The loss was primarily due to $17.0 million and $1.5 million losses on our equity investments in ADNOC Drilling and Tamboran Corp., respectively; both of which were a result of fluctuations in the fair market value of the stocks.
Previous report
(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).
Previous report
Operating Revenues Operating revenues were $620.0 million and $641.6 million in the three months ended June 30, 2024 and 2023, respectively. The $21.6 million decrease in operating revenue was primarily due to a 9.2 percent decrease in activity levels partially offset by higher average pricing levels.
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Selling, General and Administrative Expense Selling, general and administrative expense increased to $14.2 million during the three months ended June 30, 2024 as compared to $13.0 million during the three months ended June 30, 2023. The increase was primarily driven by a $0.9 million increase in labor and labor-related expenses.
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(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).
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Operating Revenues Operating revenues were $47.9 million and $48.7 million in the three months ended June 30, 2024 and 2023, respectively. The $0.8 million decrease in operating revenue was primarily due to a 12.2 percent decrease in activity levels partially offset by higher ancillary services revenue.
Previous report
(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).
Previous report
Operating Revenues Operating revenues were $27.2 million and $31.2 million in the three months ended June 30, 2024 and 2023, respectively. The $4.0 million decrease in operating revenue was primarily due to a 25.0 percent decrease in activity partially offset by higher pricing.
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Consolidated Results of Operations
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Operating Revenue Consolidated operating revenues were $2.1 billion and $2.2 billion for the nine months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by lower activity levels.
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Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $1.2 billion and $1.3 billion for the nine months ended June 30, 2024 and 2023, respectively. The decrease was primarily attributable to the aforementioned lower activity levels. Additionally, during the nine months ended June 30, 2024, we recognized $6.7 million in direct operating expenses associated with the fair value adjustment of contingent consideration related to potential earnout payments associated with our business acquisitions in fiscal year 2019, partially offset by a gain on involuntary conversion of a rig of approximately $5.5 million.
Previous report
Selling, General and Administrative Expense Selling, general and administrative expenses increased to $185.5 million during the nine months ended June 30, 2024 compared to $150.6 million during the nine months ended June 30, 2023. The increase was primarily due to a $16.6 million increase in labor and labor-related expenses; and a $14.7 million increase in professional services, consulting, and IT related expense.
Previous report
Asset Impairment Charges During the nine months ended June 30, 2023, we recorded $12.1 million in asset impairment charges as the Company initiated a plan to decommission, scrap and/or sell certain assets including four international FlexRig® drilling rigs and four international conventional drilling rigs, and assets previously classified as Assets held-for-sale and additional equipment were written down to scrap value. Refer to segment results below for further details.
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North America Solutions
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(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 274 days).
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Operating Revenues Operating revenues were $1.8 billion and $1.9 billion in the nine months ended June 30, 2024 and 2023, respectively. The $0.1 billion decrease in operating revenue was primarily due to a 13.8 percent decrease in activity levels partially offset by higher average pricing levels.
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Direct Operating Expenses Direct operating expenses decreased to $1.0 billion during the nine months ended June 30, 2024 as compared to $1.1 billion during the nine months ended June 30, 2023. This decrease was primarily driven by lower activity levels, partially offset by an increase in per revenue day labor and materials and supplies expense.
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Depreciation and Amortization Expense Depreciation and amortization expense increased to $273.8 million during the nine months ended June 30, 2024 as compared to $266.1 million during the nine months ended June 30, 2023. The increase was primarily driven by $10.9 million of accelerated depreciation recognized during the nine months ended June 30, 2024 for components on rigs that are scheduled for conversion in fiscal year 2024.
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Research and Development Expense Research and development expense increased to $32.3 million during the nine months ended June 30, 2024 as compared to $23.1 million during the nine months ended June 30, 2023. The increase was driven by an associated asset acquisition that occurred during the nine months ended June 30, 2024, as well as costs related to expanded project scopes.
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Asset Impairment Charges During the nine months ended June 30, 2023, assets that were previously classified as Assets held-for-sale were either sold or written down to scrap value. The aggregate net book value of these remaining assets was $3.0 million, which exceeded the estimated scrap value of $0.3 million, resulting in a non-cash impairment charge of $2.7 million during the nine months ended June 30, 2023. During the same period, we also identified additional equipment that met the asset held-for-sale criteria and were reclassified as Assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets. The aggregate net book value of the equipment of $1.4 million was written down to its estimated scrap value of $0.1 million, resulting in a non-cash impairment charge of $1.3 million during the nine months ended June 30, 2023.
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International Solutions
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(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 274 days).
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(5)Defined as the number of rigs generating revenue at the applicable end date of the time period
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Operating Revenues Operating revenues were $148.5 million and $159.4 million in the nine months ended June 30, 2024 and 2023, respectively. The $10.9 million decrease in operating revenue was primarily due to an 9.4 percent decrease in activity levels partially offset by higher average pricing levels and higher ancillary services revenue.
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Direct Operating Expenses Direct operating expenses decreased to $129.5 million during the nine months ended June 30, 2024 as compared to $133.6 million during the nine months ended June 30, 2023. This decrease was primarily driven by a 9.4 percent decrease in activity levels partially offset by higher per revenue day labor expenses.
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Asset Impairment Charges During the nine months ended June 30, 2023, the Company initiated a plan to decommission and scrap four international FlexRig® drilling rigs and four conventional drilling rigs located in Argentina that are not suitable for unconventional drilling. As a result, these rigs were reclassified to Assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023. The rigs’ aggregate net book value of $8.8 million was written down to the estimated scrap value of $0.7 million, which resulted in a non-cash impairment charge of $8.1 million during the nine months ended June 30, 2023.
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Offshore Gulf of Mexico
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(4)Active rigs generate revenue for the Company; accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 274 days).
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(5)Defined as the number of rigs generating revenue at the applicable end date of the time period
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Operating Revenues Operating revenues were $78.7 million and $101.4 million in the nine months ended June 30, 2024 and 2023, respectively. The $22.7 million decrease in operating revenue was primarily due to a 23.5 percent decrease in activity levels.
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Direct Operating Expenses Direct operating expenses decreased to $62.2 million during the nine months ended June 30, 2024 as compared to $75.3 million during the nine months ended June 30, 2023. This decrease was primarily driven by a decrease in activity levels as described above.
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Reworded paragraphs (40)
Previous wording
This Quarterly Report on Form 10‑Q (“Form 10‑Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this Form 10-Q are forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “continue,” or the negative thereof or similar terminology, and such include, but are not limited to, statements regarding the Acquisition (as defined herein) and the anticipated benefits, impact and timing of such transaction, our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. Forward-looking statements are based upon current plans, estimates, and expectations that are subject to risks, uncertainties, and assumptions, many of which are beyond our control and any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The inclusion of such statements should not be regarded as a representation that such plans, estimates, or expectations will be achieved.
Current wording
This Quarterly Report on Form 10‑Q (“Form 10‑Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this Form 10-Q are forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “continue,” or the negative thereof or similar terminology, and such statements include, but are not limited to, statements regarding the Acquisition (as defined herein) and the anticipated benefits; and impact of such transaction, the timing and terms of recommencement of suspended rigs related to the Acquisition, our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. Forward-looking statements are based upon current plans, estimates, and expectations that are subject to risks, uncertainties, and assumptions, many of which are beyond our control and any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The inclusion of such statements should not be regarded as a representation that such plans, estimates, or expectations will be achieved.
Previous wording
•our ability to achieve the strategic and other objectives relating to the proposed Acquisition;
Current wording
•our ability to achieve the strategic and other objectives relating to the Acquisition;
Previous wording
•the risk that we are unable to integrate KCA Deutag's operations in a successful manner and in the expected time period;
Current wording
•the risk that we are unable to integrate KCA Deutag International Limited's ("KCA Deutag") operations in a successful manner and in the expected time period;
Previous wording
•the impact of federal and state legislative and regulatory actions and policies, affecting our costs and increasing operating restrictions or delay and other adverse impacts on our business;
Current wording
•the impact of federal, state and foreign legislative and regulatory actions and policies, affecting our costs and increasing operating restrictions or delay and other adverse impacts on our business;
Previous wording
•the impact of geopolitical developments and tensions, war and uncertainty involving or in the geographic region of oil-producing countries (including the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas, and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy);
Current wording
•the impact of geopolitical developments and tensions, war and uncertainty involving or in the geographic region of oil-producing countries (including the ongoing armed conflicts between Russia and Ukraine and conflicts in Israel, and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy);
Previous wording
Additional factors that could cause actual results to differ materially from our expectations or results discussed in the forward‑looking statements are disclosed in our 2023 Annual Report on Form 10‑K, including under Part I, Item 1A— “Risk Factors” and Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” thereof, as updated by subsequent reports (including this Quarterly Report) we file with the Securities and Exchange Commission (the "SEC"). All forward-looking statements included in this Quarterly Report and all subsequent written and oral forward‑looking statements, express or implied, are expressly qualified in their entirety by these cautionary statements.
Current wording
Additional factors that could cause actual results to differ materially from our expectations or results discussed in the forward‑looking statements are disclosed in our 2024 Annual Report on Form 10‑K under Part I, Item 1A— “Risk Factors” and Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All subsequent written and oral forward‑looking statements, express or implied, are expressly qualified in their entirety by such cautionary statements.
Previous wording
Helmerich & Payne, Inc. (“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies. As of June 30, 2024, our drilling rig fleet included a total of 262 drilling rigs. Our reportable operating business segments consist of the North America Solutions segment with 232 rigs, the International Solutions segment with 23 rigs, and the Offshore Gulf of Mexico segment with seven offshore platform rigs as of June 30, 2024. At the close of the third quarter of fiscal year 2024, we had 161 active contracted rigs, of which 90 were under a fixed-term contract and 71 were working well-to-well, compared to 164 contracted rigs at September 30, 2023. Our long-term strategy remains focused on innovation, technology, safety, operational excellence, and reliability. As we move forward, we believe that our advanced uniform rig fleet, technology offerings, financial strength, contract backlog and strong customer and employee base position us very well to respond to continued cyclical and often times, volatile market conditions and to take advantage of future opportunities.
Current wording
H&P through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies. As of December 31, 2024, our drilling rig fleet included a total of 262 drilling rigs. Our reportable operating business segments consist of the North America Solutions segment with 225 rigs, the International Solutions segment with 30 rigs, and the Offshore Gulf of Mexico segment with seven offshore platform rigs as of December 31, 2024. At the close of the first quarter of fiscal year 2025, we had 171 active contracted rigs, of which 103 were under a fixed-term contract and 68 were working well-to-well, compared to 170 contracted rigs at September 30, 2024. Our long-term strategy remains focused on innovation, technology, safety, operational excellence, and reliability. As we move forward, we believe that our rig fleet, technology offerings, financial strength, contract backlog and strong customer and employee base position us very well to respond to continued cyclical and often times, volatile market conditions and to take advantage of future opportunities.
Previous wording
The overall demand for super-spec rigs in the U.S. remains relatively strong and while some readily available idle super-spec capacity exists in the market, we do not believe it is to a level that would have a significant impact on our rig pricing. We expect this supply-demand dynamic combined with the value proposition we provide our customers through our drilling expertise, high-quality FlexRig® fleet, and automation technology to result in our ability to maintain and possibly improve upon current contract economics.
Current wording
Based upon the current conducive pricing environment for crude oil and natural gas and the capital budgets established by our customers for calendar year 2025 and their desires to at least maintain current production levels, we expect the level of capital spending and activity in calendar year 2025 to be similar to that experienced in calendar year 2024. The overall demand for super-spec rigs in the U.S. remains relatively strong and while some readily available idle super-spec capacity exists in the market, it is not to a level that has materially impacted pricing as it could be quickly reabsorbed into the market. This supply-demand dynamic combined with the value proposition we provide our customers through our drilling expertise, high-quality FlexRig® fleet, and automation technology remains constructive for our underlying contract economics.
Previous wording
In February 2024, the Company finalized the contractual terms with Saudi Aramco for a seven super-spec FlexRig® tender award for work in the Kingdom of Saudi Arabia. These rigs are expected to commence operations shortly after delivery. The rigs are being sourced from our idle super-spec rigs in the U.S., converted to walking configurations, and further equipped to suit contractual specifications. Currently, we have a rig in country related to a previous contractual award that is preparing to commence operations.
Current wording
In February 2024, the Company finalized the contractual terms with Saudi Aramco for a seven super-spec FlexRig® tender award for work in the Kingdom of Saudi Arabia. The rigs are being sourced from our idle super-spec rigs in the U.S., converted to walking configurations, and further equipped to suit contractual specifications. During the year ended September 30, 2024, we began mobilizing five super-spec rigs to the Kingdom of Saudi Arabia, while the remaining rigs mobilized during the three months ended December 31, 2024. We commenced operations in the first quarter of fiscal 2025.
Previous wording
As of June 30, 2024 and September 30, 2023, our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $1.5 billion and $1.4 billion, respectively. The increase in backlog from September 30, 2023 to June 30, 2024 is primarily due to the Company finalizing contractual terms with Saudi Aramco for a seven super-spec FlexRig® tender award for work in the Kingdom of Saudi Arabia. These amounts do not include anticipated contract renewals or expected performance bonuses. Approximately 78.8 percent of the June 30, 2024 total backlog is reasonably expected to be fulfilled in fiscal year 2025 and thereafter.
Current wording
As of December 31, 2024 and September 30, 2024, our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $1.5 billion. These amounts do not include anticipated contract renewals or expected performance bonuses. Approximately 50.6 percent of the December 31, 2024 total backlog is reasonably expected to be fulfilled in fiscal year 2025.
Previous wording
The following table sets forth the total backlog by reportable segment as of June 30, 2024 and September 30, 2023, and the percentage of the June 30, 2024 backlog reasonably expected to be fulfilled in fiscal year 2025 and thereafter:
Current wording
The following table sets forth the total backlog by reportable segment as of December 31, 2024 and September 30, 2024, and the percentage of the December 31, 2024 backlog reasonably expected to be fulfilled in fiscal year 2025:
Previous wording
The early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows. In some limited circumstances, such as sustained unacceptable performance by us, no early termination payment would be paid to us. Early terminations could cause the actual amount of revenue earned to vary from the backlog reported. See Item 1A—"Risk Factors—Our current backlog of drilling services and solutions revenue may decline and may not be ultimately realized as fixed‑term contracts and may, in certain instances, be terminated without an early termination payment” within our 2023 Annual Report on Form 10-K filed with the SEC, regarding fixed term contract risk.
Current wording
The early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows. In some limited circumstances, such as sustained unacceptable performance by us, no early termination payment would be paid to us. Early terminations could cause the actual amount of revenue earned to vary from the backlog reported. See Item 1A—"Risk Factors—Our current backlog of drilling services and solutions revenue may decline and may not be ultimately realized as fixed‑term contracts and may, in certain instances, be terminated without an early termination payment” and Item 1A—Risk Factors—"The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations. within our 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), regarding fixed term contract risk.
Previous wording
Net Income We reported income of $88.7 million ($0.88 per diluted share) for the three months ended June 30, 2024 compared to income of $95.3 million ($0.93 per diluted share) for the three months ended June 30, 2023.
Current wording
Net Income We reported income of $54.8 million ($0.54 per diluted share) for the three months ended December 31, 2024 compared to income of $95.2 million ($0.94 per diluted share) for the three months ended December 31, 2023.
Previous wording
Operating Revenue Consolidated operating revenues were $697.7 million and $724.0 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by lower activity levels.
Current wording
Operating Revenue Consolidated operating revenues were $677.3 million and $677.1 million for the three months ended December 31, 2024 and 2023, respectively.
Previous wording
Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $418.2 million and $430.2 million for the three months ended June 30, 2024 and 2023, respectively. The decrease was primarily attributable to the aforementioned lower activity levels.
Current wording
Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $413.0 million and $404.4 million for the three months ended December 31, 2024 and 2023, respectively. The increase was primarily driven by start-up costs associated with our commencement of operations in Saudi Arabia.
Previous wording
Selling, General and Administrative Expense Selling, general and administrative expenses increased to $66.9 million during the three months ended June 30, 2024 compared to $49.3 million during the three months ended June 30, 2023. The increase was primarily due to a $12.1 million increase in professional services, consulting, and IT related expenses and $4.7 million increase in labor and labor-related expenses.
Current wording
Selling, General and Administrative Expense Selling, general and administrative expenses increased to $63.1 million during the three months ended December 31, 2024 compared to $56.6 million during the three months ended December 31, 2023. The increase was primarily due to a $3.3 million increase in labor and labor-related expenses and a $3.1 million increase in IT related expenses.
Previous wording
Gain on Investment Securities During the nine months ended June 30, 2024, we recognized an aggregate gain of $0.1 million on investment securities. The gain consisted of $3.7 million and $3.5 million gains on our equity investments in Tamboran Corp. and ADNOC Drilling; both of which were a result of increases in the fair market values of the stocks. The gains on our equity investments in Tamboran Corp. and ADNOC Drilling were offset by a $7.1 million loss on investment recognized during the nine months ended June 30, 2024 as a result of a Blue Chip Swap transaction that occurred during the period. See Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks for additional details related to the Blue Chip Swap. During the nine months ended June 30, 2023, we recognized an aggregate gain of $6.1 million on investment securities. The gain was primarily due to a $7.4 million gain on our equity investment in ADNOC Drilling, partially offset by a $1.5 million loss on our investment in Tamboran Corp.; both of which were a result of fluctuations in the fair market value of the stocks.
Current wording
Loss on Investment Securities During the three months ended December 31, 2024, we recognized an aggregate loss of $13.4 million on investment securities. The aggregate loss is mainly comprised of a $12.4 million loss on our sale of equity securities in ADNOC Drilling, of which $8.4 million is associated with the change in the fair value of the investment and $4.0 million relates to transaction fees associated with the sale of the securities. Additionally, during the three months ended December 31, 2024, we recognized a $1.1 million loss on our equity investment in Tamboran Corp. as a result of a decrease in the fair market value of the stock. During the three months ended December 31, 2023, we recognized an aggregate loss of $4.0 million on investment securities. The loss was mainly comprised of a $10.4 million loss on our equity investment in ADNOC Drilling, partially offset against a $6.3 million gain on our investment in Tamboran Corp.; both of which were a result of fluctuations in the fair market value of the stocks.
Previous wording
Income Taxes For the nine months ended June 30, 2024 we recorded income tax expense of $96.0 million (which includes a discrete tax benefit of $1.6 million primarily related to equity compensation and return to provision adjustments) compared to income tax expense of $124.2 million for the nine months ended June 30, 2023 (which includes a discrete tax expense of $2.3 million primarily related to an increase in our deferred state income tax rate and equity compensation). Our statutory federal income tax rate for fiscal year 2024 and 2023 is 21.0 percent (before incremental state and foreign taxes).
Current wording
Income Taxes We recorded income tax expense of $21.6 million for the three months ended December 31, 2024 (which includes a discrete tax expense of $0.7 million related to equity compensation) compared to income tax expense of $30.1 million (which includes a discrete tax benefit of $0.9 million related to equity compensation) for the three months ended December 31, 2023. Our statutory federal income tax rate for fiscal year 2025 is 21.0 percent (before incremental state and foreign taxes).
Previous wording
Direct Operating Expenses Direct operating expenses decreased to $342.6 million during the three months ended June 30, 2024 as compared to $364.7 million during the three months ended June 30, 2023. This decrease was primarily driven by lower activity levels, partially offset by an increase in per revenue day labor and materials and supplies expense.
Current wording
Direct Operating Expenses Direct operating expenses decreased to $332.6 million during the three months ended December 31, 2024 as compared to $338.2 million during the three months ended December 31, 2023. This decrease was primarily driven by a decrease in per revenue day labor and materials and supplies expense.
Previous wording
Depreciation and Amortization Expense Depreciation and amortization expense increased to $89.2 million during the three months ended June 30, 2024 as compared to $87.2 million during the three months ended June 30, 2023. The increase was primarily driven by $2.7 million of accelerated depreciation recognized during the three months ended June 30, 2024 for components on rigs that are scheduled for conversion in fiscal year 2024.
Current wording
Depreciation and Amortization Expense Depreciation and amortization expense increased $1.3 million to $88.3 million during the three months ended December 31, 2024 as compared to $87.0 million during the three months ended December 31, 2023. The increase is reflective of higher capital expenditures over the last several years.
Previous wording
Direct Operating Expenses Direct operating expenses increased to $47.4 million during the three months ended June 30, 2024 as compared to $45.4 million during the three months ended June 30, 2023. This increase was primarily driven by a $1.5 million increase in materials and supplies expense associated with the development of our Saudi Arabia operations.
Current wording
Direct Operating Expenses Direct operating expenses increased to $55.1 million during the three months ended December 31, 2024 as compared to $44.5 million during the three months ended December 31, 2023. This increase was primarily driven by start-up costs associated with our commencement of operations in Saudi Arabia.
Previous wording
Direct Operating Expenses Direct operating expenses decreased to $19.6 million during the three months ended June 30, 2024 as compared to $23.9 million during the three months ended June 30, 2023. This decrease was primarily driven by a decrease in activity levels as described above partially offset by a decrease in per revenue day materials and supplies expense.
Current wording
Direct Operating Expenses Direct operating expenses increased to $22.7 million during the three months ended December 31, 2024 as compared to $19.6 million during the three months ended December 31, 2023. This increase was primarily driven by a $3.1 million increase in labor and labor-related expenses.
Previous wording
Operating Revenues We continue to use our Captive insurance companies to insure the deductibles for our domestic workers’ compensation, general liability, automobile liability claims programs, and medical stop-loss program and to insure the deductibles from the Company's international casualty and rig property programs. Operating revenues of $17.3 million and $19.8 million during the three months ended June 30, 2024 and 2023, respectively, primarily consisted of $14.7 million and $17.4 million, respectively, in intercompany premium revenues recorded by the Captives. These revenues were eliminated upon consolidation.
Current wording
Operating Revenues We continue to use our Captive insurance companies to insure the deductibles for our domestic workers’ compensation, general liability, automobile liability claims programs, and medical stop-loss program and to insure the deductibles from the Company's international casualty and rig property programs. Operating revenues of $19.3 million and $17.8 million during the three months ended December 31, 2024 and 2023, respectively, primarily consisted of $16.6 million and $15.2 million, respectively, in intercompany premium revenues recorded by the Captives. These revenues were eliminated upon consolidation.
Previous wording
Direct Operating Expenses Direct operating expenses of $21.4 million and $16.8 million during the three months ended June 30, 2024 and 2023, respectively, primarily consisted of $5.3 million and $5.5 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $9.5 million and $9.7 million, respectively, and medical stop loss expenses of $4.1 million and $2.1 million, respectively. The change to accruals for estimated losses was primarily due to actuarial valuation adjustments by our third-party actuary.
Current wording
Direct Operating Expenses Direct operating expenses of $17.7 million and $17.1 million during the three months ended December 31, 2024 and 2023, respectively, primarily consisted of $3.9 million and $3.5 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $10.5 million and $9.1 million, respectively, and medical stop loss expenses of $5.2 million and $4.1 million, respectively. The change to accruals for estimated losses was primarily due to actuarial valuation adjustments by our third-party actuary.
Previous wording
Our sources of available liquidity include existing cash balances on hand, cash flows from operations, and availability under the 2018 Credit Facility. Our liquidity requirements include meeting ongoing working capital needs, funding our capital expenditure projects, paying dividends declared, and repaying our outstanding indebtedness. Historically, we have financed operations primarily through internally generated cash flows. During periods when internally generated cash flows are not sufficient to meet liquidity needs, we may utilize cash on hand, borrow from available credit sources, access capital markets or sell our investments. Likewise, if we are generating excess cash flows or have cash balances on hand beyond our near-term needs, we may return cash to shareholders through dividends or share repurchases, or we may invest in highly rated short‑term money market and debt securities. These investments can include U.S. Treasury securities, U.S. Agency issued debt securities, highly rated corporate bonds and commercial paper, certificates of deposit and money market funds. However, in some international locations we may make short-term investments that are less conservative, as equivalent highly rated investments are unavailable. See—Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks.
Current wording
Our sources of available liquidity include existing cash balances on hand, cash flows from operations, and availability under the Amended Credit Facility. Our liquidity requirements include meeting ongoing working capital needs, funding our capital expenditure projects, paying dividends declared, repaying our outstanding indebtedness, and funding the pending acquisition of KCA Deutag. Historically, we have financed operations primarily through internally generated cash flows. During periods when internally generated cash flows are not sufficient to meet liquidity needs, we may utilize cash on hand, borrow from available credit sources, access capital markets or sell our investments. Likewise, if we are generating excess cash flows or have cash balances on hand beyond our near-term needs, we may return cash to shareholders through dividends or share repurchases, or we may invest in highly rated short-term money market and debt securities. These investments can include U.S. Treasury securities, U.S. Agency issued debt securities, highly rated corporate bonds and commercial paper, certificates of deposit and money market funds. However, in some international locations we may make short-term investments that are less conservative, as equivalent highly rated investments are unavailable. See—Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks.
Previous wording
We may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity as necessary, fund our additional purchases, exchange or redeem senior notes, or repay any amounts under the 2018 Credit Facility. Our ability to access the debt and equity capital markets depends on a number of factors, including our credit rating, market and industry conditions and market perceptions of our industry, general economic conditions, our revenue backlog and our capital expenditure commitments.
Current wording
We may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity as necessary, fund our additional purchases, exchange or redeem senior notes, or repay any amounts under the Amended Credit Facility. Our ability to access the debt and equity capital markets depends on a number of factors, including our credit rating, market and industry conditions and market perceptions of our industry, general economic conditions, our revenue backlog and our capital expenditure commitments.
Previous wording
Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the revenue we receive under those contracts, the efficiency with which we operate our drilling rigs, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures. As our revenues increase, operating net working capital is typically a use of capital, while conversely, as our revenues decrease, operating net working capital is typically a source of capital.
Current wording
Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the revenue we receive under those contracts, the efficiency with which we operate our drilling rigs, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures. As our revenues increase, net working capital is typically a use of capital, while conversely, as our revenues decrease, net working capital is typically a source of capital.
Previous wording
As of June 30, 2024, we had cash and cash equivalents of $203.6 million, restricted cash of $78.4 million and short-term investments of $86.1 million. Our cash flows for the nine months ended June 30, 2024, and 2023 are presented below:
Current wording
As of December 31, 2024, we had cash and cash equivalents of $391.2 million, restricted cash of $1.3 billion and short-term investments of $135.3 million. Our cash flows for the three months ended December 31, 2024, and 2023 are presented below:
Previous wording
Cash flows provided by operating activities were approximately $515.9 million and $619.0 million for the nine months ended June 30, 2024 and 2023, respectively. The change in cash provided by operating activities is primarily driven by lower activity levels partially offset by higher average pricing levels and a reduced negative impact from increases in operating net working capital. For the purpose of understanding the impact on our cash flows from operating activities, operating net working capital is calculated as current assets, excluding cash and cash equivalents, short-term investments, assets held-for-sale, and prepaid property, plant and equipment, less current liabilities, excluding dividends payable.
Current wording
Cash flows provided by operating activities were approximately $158.4 million and $174.8 million for the three months ended December 31, 2024 and 2023, respectively. The change in cash provided by operating activities is primarily driven by start-up costs associated with our commencement of our operations in Saudi Arabia.
Previous wording
Capital Expenditures Our capital expenditures during the nine months ended June 30, 2024 were $389.1 million compared to $281.8 million during the nine months ended June 30, 2023. The increase in capital expenditures is driven by the timing of procurement associated with equipment overhauls and certain long-term projects including the procurement of long lead items for international expansion projects.
Current wording
Capital Expenditures Our capital expenditures during the three months ended December 31, 2024 were $106.5 million compared to $136.4 million during the three months ended December 31, 2023. The decrease in capital expenditures is driven by the timing of procurement associated with equipment overhauls and certain long-term projects including skidding to walking rig conversions.
Previous wording
Net Sales of Short-Term Investments Our net sales of short-term investments during the nine months ended June 30, 2024 were $3.6 million compared to net sales of $46.5 million during the nine months ended June 30, 2023. The change in activity is driven by our ongoing liquidity management. Additionally, the Central Bank of Argentina's currency controls continue to limit our ability to access U.S. dollars in Argentina and remit cash from our Argentine operations. The execution of certain trades known as Blue Chip Swaps effectively results in a parallel U.S. dollar exchange rate. During the nine months ended June 30, 2024, we entered into a Blue Chip Swap transaction, which resulted in a $7.1 million loss on investment recorded in Gain (loss) on investment securities within our Unaudited Condensed Consolidated Statements of Operations. As a result of the Blue Chip Swap transaction, $13.8 million of net cash was repatriated to the U.S. during the period.
Current wording
Net Sales of Short-Term Investments Our net sales of short-term investments during the three months ended December 31, 2024 were $147.0 million compared to net sales of $11.7 million during the three months ended December 31, 2023. The change in activity is primarily driven by $193.3 million of net proceeds received from the liquidation of shares in ADNOC Drilling and our ongoing liquidity management.
Previous wording
Sale of Assets Our proceeds from asset sales during the nine months ended June 30, 2024 were $35.1 million compared to proceeds of $63.0 million during the nine months ended June 30, 2023. The decrease in proceeds is mainly driven by lower rig activity which drives lower reimbursement from customers for lost or damaged drill pipe and other used drilling equipment.
Current wording
Sale of Assets Our proceeds from asset sales during the three months ended December 31, 2024 were $12.1 million compared to proceeds of $11.9 million during the three months ended December 31, 2023. The increase in proceeds is mainly driven by higher rig activity which drives higher reimbursement from customers for lost or damaged drill pipe and other used drilling equipment.
Previous wording
Dividends We paid dividends of $1.26 per share, comprised of a base cash dividend of $0.75 and a supplemental cash dividend of $0.51, during the nine months ended June 30, 2024. Comparatively, during the nine months ended June 30, 2023, we paid dividends of $1.46 per share, comprising of a base cash dividend of $0.75 and a supplemental cash dividend of $0.71. Total dividends paid were $126.4 million and $152.6 million during the nine months ended June 30, 2024 and 2023, respectively.
Current wording
Dividends We paid a cash dividend of $0.25 per share during the three months ended December 31, 2024. Comparatively, during the three months ended December 31, 2023, we paid cash dividends of $0.42 per share, comprising of a base cash dividend of $0.25 and a supplemental cash dividend of $0.17. Total dividends paid were $25.0 million and $42.3 million during the three months ended December 31, 2024 and 2023, respectively.
Previous wording
Repurchase of Shares The Company has an evergreen authorization from the Board of Directors for the repurchase of up to four million common shares in any calendar year. The repurchases are made using our cash and cash equivalents or other available sources. During the nine months ended June 30, 2024, we repurchased 1.4 million common shares at an aggregate cost of $51.6 million, including excise tax of $0.3 million. During the nine months ended June 30, 2023, we repurchased 6.5 million common shares at an aggregate cost of $249.0 million, including excise tax of $1.8 million.
Current wording
Repurchase of Shares The Company has an evergreen authorization from the Board of Directors for the repurchase of up to four million common shares in any calendar year. The repurchases are made using our cash and cash equivalents or other available sources and are held as treasury shares on our Unaudited Condensed Consolidated Balance Sheets. We did not make any share repurchases during the three months ended December 31, 2024. We repurchased 1.3 million common shares at an aggregate cost of $47.7 million, including excise tax of $0.3 million during the three months ended December 31, 2023.
Previous wording
2.90% Senior Notes due 2031 On September 29, 2021, we issued$550.0 million aggregate principal amount of the 2.90 percent 2031 Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act (“Rule 144A”) and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act (“Regulation S”). Interest on the 2031 Notes is payable semi-annually on March 29 and September 29 of each year, commencing on March 29, 2022.
Current wording
On September 29, 2021, we issued $550.0 million aggregate principal amount of the 2.90 percent senior notes due 2031 ("the 2031 Notes") in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in transactions outside the United States pursuant to Regulation S under the Securities Act. Interest on the 2031 Notes is payable semi-annually on March 29 and September 29 of each year, commencing on March 29, 2022.
Previous wording
In June 2022, we settled a registered exchange offer (the “Registered Exchange Offer”) to exchange the 2031 Notes for new, SEC-registered notes that are substantially identical to the terms of the 2031 Notes, except that the offer and issuance of the new notes have been registered under the Securities Act and certain transfer restrictions, registration rights and additional interest provisions relating to the 2031 Notes do not apply to the new notes. All of the 2031 Notes were exchanged in the Registered Exchange Offer.
Current wording
In June 2022, we settled a registered exchange offer (the “2022 Registered Exchange Offer”) to exchange the 2031 Notes for new, SEC-registered notes that are substantially identical to the terms of the 2031 Notes, except that the offer and issuance of the new notes have been registered under the Securities Act and certain transfer restrictions, registration rights and additional interest provisions relating to the 2031 Notes do not apply to the new notes. All of the 2031 Notes were exchanged in the Registered Exchange Offer.
Previous wording
As of June 30, 2024, we had $120.0 million in uncommitted bilateral credit facilities, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds. Of the $120.0 million, $41.7 million was outstanding as of June 30, 2024. Separately, we had $5.0 million in standby letters of credit and bank guarantees outstanding. In total, we had $46.7 million outstanding as of June 30, 2024.
Current wording
As of December 31, 2024, we had $160.0 million in uncommitted bilateral credit facilities, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds. Of the $160.0 million, $47.2 million was outstanding as of December 31, 2024. Separately, we had $5.0 million in standby letters of credit and bank guarantees outstanding. In total, we had $52.2 million outstanding as of December 31, 2024.
Previous wording
Our operating cash requirements, scheduled debt repayments, interest payments, any declared dividends, and estimated capital expenditures for fiscal year 2024 and 2025 are expected to be funded through current cash and cash to be provided from operating activities. However, there can be no assurance that we will continue to generate cash flows at current levels. If needed, we may decide to obtain additional funding from our $750.0 million 2018 Credit Facility. We currently do not anticipate the need to draw on the 2018 Credit Facility. Our indebtedness under our unsecured senior notes totaled $550.0 million at June 30, 2024 and matures on September 29, 2031.
Current wording
Our operating cash requirements, scheduled debt repayments, interest payments, any declared dividends, and estimated capital expenditures for fiscal year 2025 are expected to be funded through current cash and cash to be provided from operating activities. However, there can be no assurance that we will continue to generate cash flows at current levels. If needed, we may decide to obtain additional funding from our $950.0 million Amended Credit Facility. As of December 31, 2024, our indebtedness under our unsecured senior notes totaled $1.8 billion and comprised with the following maturities: $350.0 million due December 2027, $350.0 million due December 2029, $550.0 million due September 2031, and $550.0 million due December 2034.
Previous wording
As of June 30, 2024, we had a $494.4 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment. Our capital expenditures over the last several years have been subject to accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, enabling us to defer a portion of cash tax payments to future years. Future levels of capital expenditures and results of operations will determine the timing and amount of future cash tax payments. We expect to be able to meet any such obligations, other than those related to the Acquisition, utilizing cash and investments on hand, as well as cash generated from ongoing operations.
Current wording
As of December 31, 2024, we had a $485.7 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment. Our capital expenditures over the last several years have been subject to accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, enabling us to defer a portion of cash tax payments to future years. Future levels of capital expenditures and results of operations will determine the timing and amount of future cash tax payments. We expect to be able to meet any such obligations utilizing cash and investments on hand, as well as cash generated from ongoing operations.
Previous wording
As of June 30, 2024, we have recorded unrecognized tax benefits and related interest and penalties of approximately $0.7 million. During the three months ended June 30, 2024, $2.7 million of the unrecognized tax benefits, interest and penalties was recognized as a result of a lapse of the statute of limitations. Any further reversals or payments of the liability cannot be estimated at this time.
Current wording
As of December 31, 2024, we have recorded unrecognized tax benefits and related interest and penalties of approximately $0.6 million.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The indenture governing the Notes contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to incur certain liens; engage in sale and lease-back transactions; and consolidate, merge or transfer all or substantially all of the assets of the Company. The indenture governing the Notes also contains customary events of default with respect to the Notes.
Rearranged previous paragraphs (12)
Previous report — wording carried elsewhere
Income Taxes For the three months ended June 30, 2024, we recorded income tax expense of $33.7 million (which includes a discrete tax benefit of $0.8 million primarily related to provision to return adjustments) compared to income tax expense of $40.7 million (which includes discrete tax expense of $2.4 million primarily related to an increase in our deferred state income tax rate) for the three months ended June 30, 2023. Our statutory federal income tax rate for fiscal year 2024 and 2023 is 21.0 percent (before incremental state and foreign taxes).
Previous report — wording carried elsewhere
Results of Operations for the Nine Months Ended June 30, 2024 and 2023
Previous report — wording carried elsewhere
Net Income We reported income of $268.7 million ($2.67 per diluted share) for the nine months ended June 30, 2024 compared to income of $356.5 million ($3.39 per diluted share) for the nine months ended June 30, 2023.
Previous report — wording carried elsewhere
(1)These operating metrics and financial data, including average active rigs, are provided to allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.
Previous report — wording carried elsewhere
(2)Direct margin, which is considered a non-GAAP metric, is defined as operating revenues less direct operating expenses and is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.
Previous report — wording carried elsewhere
(1)These operating metrics and financial data, including average active rigs, are provided to allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.
Previous report — wording carried elsewhere
(2)Direct margin, which is considered a non-GAAP metric, is defined as operating revenues less direct operating expenses and is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.
Previous report — wording carried elsewhere
(1)These operating metrics and financial data, including average active rigs, are provided to allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results. Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.
Previous report — wording carried elsewhere
(2)Direct margin, which is considered a non-GAAP metric, is defined as operating revenues less direct operating expenses and is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time. See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.
Previous report — wording carried elsewhere
Results of our other operations, excluding corporate selling, general and administrative costs, and corporate depreciation, are as follows:
Previous report — wording carried elsewhere
Operating Revenues We continue to use our Captive insurance companies to insure the deductibles for our domestic workers’ compensation, general liability, automobile liability claims programs, and medical stop-loss program and to insure the deductibles from the Company's international casualty and rig property programs. Operating revenues of $53.6 million and $58.9 million during the nine months ended June 30, 2024 and 2023, respectively, primarily consisted of $45.7 million and $51.4 million, respectively, in intercompany premium revenues recorded by the Captives. These revenues were eliminated upon consolidation.
Previous report — wording carried elsewhere
Direct Operating Expenses Direct operating expenses of $53.4 million and $43.0 million during the nine months ended June 30, 2024 and 2023, respectively, primarily consisted of $10.4 million and $10.2 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $28.5 million and $30.6 million, respectively, and medical stop loss expenses of $11.4 million and $7.4 million, respectively. The change to accruals for estimated losses was primarily due to actuarial valuation adjustments by our third-party actuary.