Helmerich & Payne, Inc.

HELMERICH & PAYNE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS

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.

On January 16, 2025 (the “Closing Date” or "Acquisition Date"), H&P completed its acquisition of the entire issued share capital (the "Acquisition") of KCA Deutag International Limited ("KCA Deutag") pursuant to the Sale and Purchase Agreement (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's existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees. The Company's results presented for the nine months ended June 30, 2025 reflect a full 273 days of legacy H&P operations and 166 days of KCA Deutag operations, as the Acquisition was completed on January 16, 2025.

KCA Deutag is a diverse global drilling company. The company derives a significant portion of its revenues and cash flow from its land operations and has a substantial land drilling presence in the Middle East with additional operations in South America, Europe, and Nothern Africa. In addition to its land operations, the company has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada. Management contract operations provide services to customer platforms where the customer owns the drilling rig. KCA Deutag’s Kenera business unit comprises manufacturing and engineering operations, including Bentec, with three facilities serving the energy industry.

For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination.

Segments of the Business

During the second quarter of fiscal year 2025, the naming convention forone of our reportable segments changed from Offshore Gulf of Mexico to Offshore Solutions. Beginning on the Closing Date, Offshore Solutions now includes the results from the acquired KCA Deutag offshore management contract operations. Similarly, our International Solutions segment now includes the results from the acquired KCA Deutag land operations. Operating results related to KCA Deutag's Kenera business unit are included in "Other" along with results from our real estate operations and our wholly-owned captive insurance companies. Our North America Solutions operating segment remains unchanged. Refer to Note 15—Business Segments and Geographic Information for further details on our reportable segments.

Our North America Solutions operations are primarily located in Texas, but also traditionally operate in other states, depending on demand. Our International Solutions operations are conducted in major international oil and gas markets, primarily in the Middle East and Latin America. Our Offshore Solutions operations is comprised of asset-light offshore management contracts and contracted rig platforms located in U.S. federal waters, the North Sea, Norwegian Sea, Caspian Sea and other international waters.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RELATED RISKS AND UNCERTAINTIES

Interim Financial Information

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by U.S. GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2024 Annual Report on Form 10-K and other current filings with the SEC. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

Principles of Consolidation

The Unaudited Condensed Consolidated Financial Statements include the accounts of H&P and its domestic and foreign subsidiaries. Consolidation of a subsidiary begins when the Company gains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income, expenses and other comprehensive income or loss of a subsidiary acquired or disposed of during the fiscal year are included in the Unaudited Condensed Consolidated Statements of Operations and Unaudited Condensed Consolidated Statements of Comprehensive Income from the date the Company gains control until the date when the Company ceases to control the subsidiary. The equity attributable to non-controlling interests in subsidiaries is shown separately in the accompanying Unaudited Condensed Consolidated Balance Sheets. All intercompany accounts and transactions have been eliminated upon consolidation.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents include cash on hand, demand deposits with banks and all highly liquid investments with original maturities of three months or less. Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits.

As of June 30, 2025 and September 30, 2024, restricted cash was $61.1 million and $1.3 billion, respectively. Of the total at June 30, 2025 and September 30, 2024, $59.4 million and $68.9 million, respectively, represents the amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies. Additionally, of the total at September 30, 2024, $1.2 billion represents net proceeds from senior notes issued in fiscal year 2024 to finance the purchase price of the Acquisition and to repay certain of KCA Deutag's outstanding indebtedness and was subsequently used during the nine months ended June 30, 2025 to fund the Acquisition. For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination. The restricted amounts are primarily invested in short-term money market securities.

Cash, cash equivalents, and restricted cash are reflected on the Unaudited Condensed Consolidated Balance Sheets as follows:

Related Party Transactions

In October 2022, we made a $14.1 million equity investment, representing 106.0 million common shares in Tamboran Resources Limited ("Tamboran Resources"). In December 2023, all shares of Tamboran Resources were transferred to Tamboran Corp. in exchange for depository interests in Tamboran Corp. Depository interests, referred to as CHESS Depository Interests, each representing beneficial interests of 1/200th of a share of Tamboran Corp. common stock, are listed on the Australian Stock Exchange under the ticker symbol "TBN." Tamboran Corp. is focused on developing a natural gas resource in Australia's Beetaloo Sub-basin.

On June 4, 2024, the Company entered into a convertible note agreement with Tamboran Corp. This note was utilized to relieve Tamboran's outstanding accounts receivable balance owed to the Company, and therefore no cash was exchanged as part of the transaction. The convertible note agreement provided that the notes converted into shares of common stock of Tamboran Corp. under certain circumstances in connection with an initial public offering in which its stock was listed on the New York Stock Exchange ("NYSE") or NASDAQ Stock Exchange. On June 26, 2024, Tamboran Corp. completed an initial public offering of its common stock on the NYSE and its common stock is listed on the NYSE, under the ticker "TBN". As a result of this offering, the convertible note of $9.4 million was converted into 0.5 million common shares of Tamboran Corp. Additionally and separately, one of our executive officers served as a director of Tamboran Corp until his resignation in July 2025. Refer to Note 12—Fair Value Measurement of Financial Instruments for additional information related to our investment.

Concurrent with the October 2022 investment agreement, we entered into a fixed-term drilling services agreement with Tamboran Resources. As of June 30, 2025, we recorded $0.9 million in receivables and $4.3 million in contract liabilities on our Unaudited Condensed Consolidated Balance Sheets. As of September 30, 2024, we recorded $5.0 million in receivables and $3.9 million in contract liabilities on our Consolidated Balance Sheets. We recognized $3.1 million and $11.3 million in revenue on our Unaudited Condensed Consolidated Statement of Operations during the three and nine months ended June 30, 2025, respectively, related to the drilling services agreement with Tamboran Resources, compared to $2.9 million and $9.9 million for the three and nine months ended June 30, 2024, respectively. We expect to earn $30.7 million in revenue over the remaining contract term, and, as such, this amount is included within our contract backlog as of June 30, 2025.

Change in Accounting Estimate

In accordance with its policy, the Company reviews the estimated useful lives of its fixed assets and intangible assets on an ongoing basis. As a result of this review, based on events occurring during the three months ended June 30, 2025, the Company adjusted the estimated useful life of the intangible assets arising from the Acquisition. The weighted average useful life for customer relationships decreased from 15 years to 9 years. This change was effective and accounted for prospectively beginning on April 1, 2025. The effects of this change in the estimated useful life for the three and nine months ended June 30, 2025, was an increase in amortization expense of $7.8 million, a decrease in net income of $6.2 million, and a decrease to basic and diluted earnings per share of $0.06.

Recently Issued Accounting Updates

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates ("ASUs") to the FASB Accounting Standards Codification ("ASC"). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company.

The following table provides a brief description of recent accounting pronouncements and our analysis of the effects on our financial statements:

Self-Insurance

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 property programs. Our operating subsidiaries are paying premiums to the Captives, typically on a monthly basis, for the estimated losses based on an external actuarial analysis. These premiums are currently held in a restricted cash account, resulting in a transfer of risk from our operating subsidiaries to the Captives. Direct operating costs primarily consisted of adjustments of $29.3 million and $5.3 million to accruals for estimated losses for the three months ended June 30, 2025 and 2024, respectively, and $43.5 million and $10.4 million for the nine months ended June 30, 2025 and 2024, respectively, and rig and casualty insurance premiums of $10.1 million and $9.5 million during the three months ended June 30, 2025 and 2024, respectively, and $31.8 million and $28.5 million for the nine months ended June 30, 2025 and 2024, respectively. These operating costs were recorded within Drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations. Intercompany premium revenues recorded by the Captives during the three months ended June 30, 2025 and 2024 amounted to $16.3 million and $14.7 million, respectively, and $50.8 million and $45.7 million for the nine months ended June 30, 2025 and 2024, respectively, which were eliminated upon consolidation. These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, International Solutions, and Offshore Solutions reportable operating segments and are reflected as intersegment sales within "Other." Our medical stop loss operating expenses for the three months ended June 30, 2025 and 2024 were $4.4 million and $4.1 million, respectively, and $14.8 million and $11.4 million for the nine months ended June 30, 2025 and 2024, respectively.

Foreign Currencies

The reporting and functional currency of the parent company, H&P, is the United States Dollar ("USD"). Our foreign subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the functional currency). For some of our foreign subsidiaries, functional currency is not measured in U.S. Dollars, and, instead, is equal to the local currency. On consolidation, the assets and liabilities of our non U.S. Dollar functional entities are translated at exchange rates in effect at the balance sheet date. Revenue and expenses are translated at the average exchange rates prevailing during the reporting period. Translation adjustments are recorded as a separate component of stockholders’ equity and are included in Other comprehensive income or loss on the Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss).

For foreign subsidiaries where the functional currency is the USD, monetary assets and liabilities are remeasured at the exchange rate in effect at the balance sheet date, while non-monetary items are remeasured at historical exchange rates. Revenues and expenses are remeasured at the average exchange rates prevailing during the reporting period. Gains and losses resulting from remeasurement are included within Foreign currency loss on the Unaudited Condensed Consolidated Statements of Operations.

Prior to the three months ended March 31, 2025, foreign currency exchange gains and losses were presented in the operating costs and expense line items to which they relate, namely within Drilling services operating expenses, on our Consolidated Statements of Operations. To conform with the current period presentation, we reclassified amounts previously presented in separate line items within operating costs and expenses to the Foreign currency exchange loss line on our Consolidated Statements of Operations for the three and nine months ended June 30, 2024. The impact of this change was not material to any period presented.

International Drilling Risks

International drilling operations may significantly contribute to our revenues and net operating income (loss). There can be no assurance that we will be able to successfully conduct such operations, and a failure to do so may have an adverse effect on our financial position, results of operations, and cash flows. Also, the success of our international operations will be subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, geopolitical developments and tensions, war and uncertainty in oil-producing countries, fluctuations in currency exchange rates, foreign currency exchange restrictions and other difficulties repatriating cash from foreign countries, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws. Additionally, in the event that extended labor strikes occur or a country experiences significant political, economic or social instability, we could experience shortages in labor and/or material and supplies necessary to operate some of our drilling rigs, thereby potentially causing an adverse material effect on our business, financial condition and results of operations.

Because of the impact of local laws, some of our current operations and potential future operations in certain areas may be conducted through entities in which local citizens own interests. Additionally, these operations might involve entities (including joint ventures) where we hold only a minority interest or where operations are carried out under contracts with local entities. While we believe that neither operating through such entities nor pursuant to such arrangements would have a material adverse effect on our operations or revenues, there can be no assurance that we will in all cases be able to structure or restructure our operations to conform to local law (or the administration thereof) on terms acceptable to us.

During thethree and nine months ended June 30, 2025, approximately 36.7 percent and 31.4 percent of our total consolidated operating revenues were generated from international locations compared to 7.0 percent and 7.4 percent during thethree and nine months ended June 30, 2024, respectively. Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during thethree and nine months ended June 30, 2025, approximately 16.1 percent and 13.2 percent of our total consolidated operating revenues were from operations in the Middle East compared to 1.0 percent and 1.1 percent during thethree and nine months ended June 30, 2024, respectively. The majority of our operating revenues in the Middle East were from operations in Saudi Arabia and Oman. During thethree and nine months ended June 30, 2025, a single customer in Saudi Arabia accounted for 10.0 percent and 7.4 percent of our total consolidated operating revenues, respectively. This customer has the ability to suspend rigs and a portion of our rigs with this customer are currently suspended. The Company's results presented for the nine months ended June 30, 2025 reflect a full 273 days of legacy H&P operations and 166 days of KCA Deutag operations, as the Acquisition was completed on January 16, 2025. The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations.

NOTE 3 BUSINESS COMBINATION

On January 16, 2025 (the “Closing Date” or "Acquisition Date"), H&P and certain of its wholly owned subsidiaries completed the previously announced agreement to acquire KCA Deutag. Upon closing, 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's existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees.

Of the $0.9 billion, approximately $80.0 million was deposited into a customary escrow on the Closing Date pending the resolution of certain potential tax obligations of KCA Deutag. In May 2025, these escrowed funds were subsequently released to the shareholders following a determination that KCA Deutag would not be liable for the identified obligations. As part of this release, H&P received approximately $5.2 million, primarily attributable to favorable movements in the euro foreign exchange rate since the Closing Date. This amount is reported within Foreign currency exchange loss in our Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2025.

To finance the purchase price and to pay related fees and expenses, we completed a private offering of $1.25 billion aggregate principal amount of senior notes, together with the proceeds of a term loan credit agreement, cash on hand, and monetization of our investment in ADNOC Drilling. Refer to Note 7—Debt for further details on the senior notes and term loan credit agreement.

The Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their Acquisition Date fair values. Determining the fair value of acquired assets and liabilities assumed requires the use of independent valuation specialists and the use of significant estimates and assumptions with respect to future rig counts, estimated economic useful lives, operating and capital cost estimates, and a weighted average discount rate reflecting the cost of capital for market participants of 11.0 percent. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, deferred income, contingent liabilities, and provisions and other payables approximate their fair values due to their nature. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The purchase price allocation presented below is preliminary, as certain data necessary to complete the purchase price allocation is not yet available, including, but not limited to, the final valuation of assets acquired and liabilities assumed, working capital adjustments, and valuation of deferred taxes. Management is also evaluating certain assumptions of assets acquired and liabilities assumed and may adjust the allocation in subsequent periods. The final valuation will be completed no later than one year from the Acquisition Date.

The following table summarizes the preliminary purchase price and the fair values of assets acquired and liabilities assumed at the Acquisition Date:

(1)The preliminary estimated fair value of accounts receivable is $367.2 million, with the gross contractual amount being $381.3 million. The Company estimates $14.1 million to be uncollectible.

Inventory

Inventory includes materials, supplies and spare parts used as part of contract drilling operations and was valued at fair value using a replacement cost approach.

During the three months ended June 30, 2025, we recorded a measurement period adjustment that increased the estimated fair value of inventory by $2.0 million.

Property, Plant and Equipment

Property, plant and equipment consists primarily of drilling rigs and equipment and will be depreciated on a straight-line basis over the estimated useful lives of the assets. These assets were valued using a combination of replacement cost and a market approach.

Intangible Assets

Intangible assets included in the Acquisition consist of developed technology, customer relationships, a trade name, and in-process research and development. The fair values were determined using a combination of the income and market approach. During the three months ended June 30, 2025, we recorded a measurement period adjustment that increased the estimated fair value of intangible assets by $2.0 million.

These assets will be amortized over their respective periods of expected benefit. Refer to Note 6—Goodwill and Intangible Assets for estimated amortization expense over the next five years. The preliminary values assigned to each intangible asset and the corresponding preliminary useful lives, as of the Acquisition Date, are as follows:

As of June 30, 2025, the acquired customer relationships had a weighted average remaining term of 2.7 years until their next contract renewal or extension.

Operating Lease Right-of-Use Assets

In connection with the Acquisition, we acquired operating lease right-of-use assets and a corresponding current and noncurrent liability as summarized below:

We measured the lease liability at the present value of the remaining lease payments, applying a weighted average discount rate of 5.6 percent, as if the acquired lease was a new lease of H&P at the Acquisition Date. The right-of-use asset was measured at the same amount as the lease liability and adjusted by $9.8 million to reflect unfavorable terms of the leases when compared to market terms. We have elected to apply the short-term lease measurement and recognition exemption to leases that have a remaining lease term of 12 months or less at the Acquisition Date. The weighted average remaining lease term for the acquired leases is approximately 10.8 years as of June 30, 2025 .

Goodwill

The amount of goodwill recognized in the Acquisition represents the excess of the gross consideration transferred and the amount of any non-controlling interest over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill is attributed to the assembled workforce, anticipated operational synergies, and the allocation of proceeds in excess of the fair value of net identifiable assets acquired. Goodwill arising from the Acquisition is not expected to be deductible for tax reporting purposes. During the three months ended June 30, 2025, certain measurement period adjustments were made to the fair value of inventory and intangible assets (as discussed above) resulting in a $4.0 million decrease in goodwill. Separately, during the same period, we recognized an impairment of a portion of the goodwill arising from the Acquisition. Refer to Note 6—Goodwill and Intangible Assets for additional details.

Long-Term Debt

As discussed above, we paid $1.1 billion to contemporaneously repay or redeem certain of KCA Deutag's existing debt upon consummation of the acquisition. As of the Closing Date, we assumed an aggregate $84.9 million in secured term loan borrowings comprised oftwo separate agreements as summarized in Note 7—Debt—2024 KCA Deutag Oman Facility and —2023 KCA Deutag Oman Facility.

End-of-Service Benefit Plans

As a result of the Acquisition, we assumed a liability of $39.6 million related to end-of-service benefit plans. This liability arises from KCA Deutag's compliance with local legislation in various Middle Eastern and South American countries, where end-of-service benefit plans are mandated. These plans require payments to employees upon the conclusion of their service, calculated based on their most recent salary and years of service. These plans are not pre-funded. A significant portion of this liability stems from operations in the Middle East for which we relied on independent actuaries to assess the value of these obligations. The primary costs associated with these plans include the present value of benefits accrued for an additional year of service and the interest on the obligation related to employee service in previous years. This liability is presented within Accrued liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Defined Benefit Pension Plans

As a result of the Acquisition, we now maintain pension plans in Germany and the United Kingdom "UK". Refer to Note 13—Employee Benefit Plans for additional details.

Non-controlling Interest

The non-controlling interests acquired represents the portion of certain consolidated subsidiaries that are owned by third-parties and are recorded at estimated fair market value. The non-controlling interests are presented as a separate component of equity in our Unaudited Condensed Consolidated Balance Sheets and the consolidated net income attributable to non-controlling interests is disclosed separately in the Unaudited Condensed Consolidated Statements of Operations.