Oil and gas drilling contractor
Helmerich & Payne Inc.
) reported an impressive first quarter of fiscal 2013 (three
months ended Dec 31, 2012), owing to better drilling activities
and innovative technological applications.
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Quarterly earnings per share from continuing operations
(excluding special items) came in at $1.40, beating the Zacks
Consensus Estimate of $1.28. Compared with the year-ago adjusted
profit, the results increased 8.5% from $1.29.
Revenue in the quarter was $844.6 million, up 15.3% from the
first quarter of fiscal 2012 and also surpassed our projection of
U.S. Land Operations
: During the quarter, operating revenues totaled $696.0 million
(82.4% of total revenue), up 12.7% year over year. Average rig
revenue per operating day was $28,040, up 4.4%, while average rig
margin per day increased 5.7% to $15,406, on a year-over-year
basis. Utilization levels dropped to 82% (from 91% in the first
quarter of fiscal 2012). The segment's operating income improved
(by 4.3%) from the year-earlier quarter to $234.4 million.
: Helmerich & Payne's offshore revenues were up 13.6% year
over year to $57.7 million. Daily average rig revenue increased
15.5% to $61,936, while average rig margin per day climbed 16.3%
to $25,782. This aided the segment's operating income to rise
23.0% from the prior-year quarter to $15.0 million. Quarterly rig
utilization was 89%, up from 84% recorded a year ago.
International Land Operations
: International land operations recorded revenues of $87.3
million, up from $60.7 million in the prior-year quarter. Average
daily rig revenue was $35,511, up 14.3%, while rig margin per day
was $8,400, down from $9,015 recorded in the year-ago period.
With better activity, the segment generated operating profit of
$9.1 million, compared with $7.9 million in the first quarter of
fiscal 2012. Utilization level was 85%, up from 78% in the
corresponding period, last year.
Capital Expenditure & Balance Sheet
During the first quarter of fiscal 2013, Helmerich & Payne
spent $219.4 million on capital programs. As of Dec 31, 2012, the
company had approximately $241.1 million in cash, while long-term
debt stood at $195.0 million (debt-to-capitalization ratio of
The company currently retains a Zacks Rank #3 (Hold), implying
that it is expected to perform in line with the broader U.S.
equity market over the next one to three months.
We believe Helmerich & Payne's technologically advanced
FlexRigs are the key to its success, helping to increase its
count of active rigs and maintain relatively strong daily-rate
margins even during times of market uncertainty. The company's
proprietary FlexRig design makes the rigs move faster than
conventional rigs, drill quicker and more efficiently, and allows
for a safer operating environment. As such, these are better
suited for the new demands of the exploration business and,
therefore, command higher dayrates and utilization than rigs from
other land drillers. The company also entered into a deal with 2
exploration and production companies to build and operate three
FlexRigs in the U.S.
However, the company's operations are subject to a number of
operational risks, including inclement weather, blowouts and well
fires. These hazards could adversely affect Helmerich &
Payne's drilling operations and seriously damage/destroy the
equipment involved, thereby reducing the company's revenues,
earnings and cash flows.
But there are certain other companies in the contract drilling
service industry that are expected to perform well in the coming
one to three months. These include
Seadrill Partners LLC
) with a Zacks Rank #1 (Strong Buy), and
Hercules Offshore Inc.
Vantage Drilling Company
) with Zacks Rank #2 (Buy).