Shale oil, liquids drilling pumps up Helmerich & Payne profits, rig utilization

Source: Helmerich & Payne

Helmerich & Payne, Inc. (NYSE:HP) reported income from continuing operations of $104,365,000 ($0.96 per diluted share) from operating revenues of $594,642,000 for its first fiscal quarter ended December 31, 2010, compared to income from continuing operations of $63,802,000 ($0.60 per diluted share) from operating revenues of $396,242,000 during last year’s first fiscal quarter ended December 31, 2009. Included in this year’s and last year’s first fiscal quarter income from continuing operations are after-tax gains of $0.02 and $0.01 per share, respectively, related to the sale of tubulars and miscellaneous drilling equipment. Net income for the first fiscal quarter of 2011 was $104,150,000 ($0.96 per diluted share), compared to net income of $63,235,000 ($0.59 per diluted share) during last year’s first fiscal quarter. 

Segment operating income for U.S. land operations was $158,361,000 for the first fiscal quarter of 2011, compared with $91,523,000 for last year’s first fiscal quarter and $118,894,000 for last year’s fourth fiscal quarter. The sequential increase in segment operating income was primarily attributable to the continuing recovery of the U.S. land drilling market, as the Company’s quarterly revenue days for the segment increased by approximately six percent to 17,249 revenue days from the fourth quarter of fiscal 2010 to the first fiscal quarter of 2011. The corresponding average rig revenue per day also increased by $567 to $24,952 during the first fiscal quarter of 2011. The $567 increase in average rig revenue per day combined with a $1,122 decrease in average rig expense per day generated a sequential increase of $1,689 in average rig margin per day, from $11,331 during last year’s fourth fiscal quarter to $13,020 during this year’s first fiscal quarter. 

Rig utilization for the Company’s U.S. land segment was 84% for this year’s first fiscal quarter, compared with 62% for last year’s first fiscal quarter and 82% for last year’s fourth fiscal quarter. At December 31, 2010, the Company’s U.S. land segment had 193 contracted rigs and 37 idle rigs. The 193 contracted rigs included 130 rigs under term contracts. 

Helmerich & Payne, Inc. also announced today that it signed contracts to build and operate eight additional FlexRigs. These rigs will be built and operated in the U.S. under multi-year term contracts that provide attractive dayrates and economic returns. Since March 2010, the Company has announced contracts for the construction of 31 new build FlexRigs, 17 of which have been completed. The remaining 14 rigs are expected to be delivered during calendar 2011. 

President and CEO Hans Helmerich commented, “As the industry continues to shift its focus to oil and liquids-rich targets that require increasingly complex well designs, modern AC-Driven rigs remain in high demand. The continued interest in new build FlexRigs should allow us to continue to gain market share and add value for our shareholders and customers. Over the past decade, we have organically grown our fleet through our internal design and manufacturing efforts. We believe we are building a better rig for less, providing us a competitive advantage that is difficult for our peers to match.” 

Segment operating income for the Company’s offshore operations was $9,000,000 for the first fiscal quarter of 2011, compared with $15,106,000 for last year’s first fiscal quarter and $13,107,000 for last year’s fourth fiscal quarter. The sequential decrease in segment operating income was primarily a function of a lower average rig margin per day, which was reported at $18,065 for this year’s first fiscal quarter as compared to $22,581 for last year’s fourth fiscal quarter. The decline in average rig margins included an impact of approximately $2,000 per day related to a reduction of certain expenses during last year’s fourth quarter that favorably impacted that quarter and that did not recur in this year’s first quarter. The number of revenue days decreased during the first fiscal quarter of 2011 to 587 from 644 in the fourth quarter of 2010 as one of the Company’s active rigs was being moved to a new project. 

The Company’s international land operations reported segment operating income of $14,367,000 for this year’s first fiscal quarter, compared with $11,109,000 for last year’s first fiscal quarter and $15,485,000 for last year’s fourth fiscal quarter. The number of revenue days for this year’s first fiscal quarter decreased by approximately three percent as compared to last year’s fourth fiscal quarter, as three rigs previously assigned to the Company’s operations in Mexico returned to the U.S. during the first fiscal quarter of 2011. Average rig margin per day decreased to $11,625 in the first fiscal quarter of 2011 from $12,573 in the fourth fiscal quarter of 2010. Excluding the favorable impact to the average daily rig margins corresponding to early contract terminations during both quarters, the average rig margin per day for the first fiscal quarter of 2011 declined to $8,949 from $9,528 in the fourth fiscal quarter of 2010. 

Helmerich & Payne, Inc. is primarily a contract drilling company. As of January 27, 2011, the Company’s existing fleet included 234 land rigs in the U.S., 24 international land rigs and nine offshore platform rigs. In addition, the Company is scheduled to complete during calendar 2011 another 14 new H&P-designed and operated FlexRigs under long-term contracts with customers. Upon completion of these commitments, the Company’s global land fleet is expected to include a total of 221 FlexRigs.



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