Oil and gas drilling contractor
Helmerich & Payne Inc.
) reported lower-than-expected earnings for third quarter of fiscal
2014 (three months ended Jun 30, 2014), owing to higher operating
expenses and weak performance by the company's International Land
Operations business unit.
Quarterly earnings per share from continuing operations (excluding
special items) came in at $1.61, which failed to meet the Zacks
Consensus Estimate of $1.62.
However, compared with the year-ago adjusted profit, the results
improved 11.8% from $1.44 primarily on better performance by the
company's U.S. Land Operations and Offshore Operations
Helmerich & Payne, Inc - Earnings Surprise
U.S. Land Operations:
Quarterly revenues of $952.1 million were up 13.3% from the third
quarter of fiscal 2013 and surpassed the Zacks Consensus Estimate
of $941 million.
During the quarter, operating revenues totaled $802.3 million
(84.3% of total revenue), up 15.3% year over year. Average rig
revenue per operating day was $28,126, down marginally from
$28,160, while average rig margin per day decreased 2.1% to
$15,091, all on a year-over-year basis.
Utilization levels increased to 88% from 83% in the third quarter
of fiscal 2013. The segment's operating income improved 14.7% from
the year-earlier quarter to $271.1 million.
Helmerich & Payne's offshore revenues were up about 20% year
over year to $64.6 million. Daily average rig revenue increased
4.3% to $64,019, while average rig margin per day fell 3.2% to
Segment's operating income increased over 20% year over year to
approximately $17 million. Quarterly rig utilization was 89%, flat
year over year
International Land Operations:
International land operations recorded revenues of $81.3 million,
down from about $87 million in the prior-year quarter. Average
daily rig revenue was $35,454, down 1.4% year over year, while rig
margin per day was $9,324, up from $8,591 recorded in the year-ago
The segment generated operating profit of $6.6 million,
substantially lower than the $8.5 million in the third quarter of
fiscal 2013. Utilization levels were 74%, lower than the year-ago
level of 80%.
The company reported total operating costs of $680.2 million for
the third quarter of fiscal 2014, marking an increase of roughly
13.3% from the year-ago quarter.
Capital Expenditure & Balance Sheet
During the third quarter of fiscal 2014, Helmerich & Payne
spent $265.3 million on capital programs. As of Jun 30, 2014, the
company had approximately $550 million in cash, while long-term
debt stood at $80.0 million (debt-to-capitalization ratio of
Helmerich & Payne revealed that it had inked deals with six
upstream firms since its last update. Per the agreements, the
company is expected to construct 13 extra FlexRigs. Helmerich &
Payne will act as the operator of these FlexRigs, which would be
used to drill unconventional US resource plays. The company added
that since these newbuilds have been ordered after securing
multi-year contracts, they should generate lucrative returns for
Helmerich & Payne now projects its capital spending for fiscal
2014 to be slightly lower than the earlier guidance of $1.1
For the next quarter, Helmerich & Payne anticipates U.S. Land
Operations business unit's rig revenue days to improve 2%-3%
sequentially. The company projects average rig revenues per day to
increase to about $28,300, while average rig expense per day to
remain flat at around $13,000.
Helmerich & Payne anticipates average rig margin per day of
about $22,000 for its offshore business segment in the fourth
quarter of fiscal 2014. The company also projects a 1% increase in
For its International land segment, Helmerich & Payne expects
total revenue days to increase about 2% in the next quarter,
whereas average rig margin per day is anticipated to decline about
Tulsa, OK-based Helmerich & Payne currently carries a Zacks
Rank #2 (Buy), implying that it is expected to outperform the
broader U.S. equity market over the next one to three months.
One can also consider other well-performing players from the same
industry like Nabors Industries Ltd. (
), Patterson-UTI Energy Inc. (
) New Source Energy Partners L.P. (
). All the stocks also have the same Zacks Rank as Helmerich &
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