Markets
RIG

Helmerich & Payne (HP) Posts Wider-Than-Expected Q1 Loss

Stock performance with laptop and calculator

Contract drilling services provider Helmerich & Payne Inc.HP reported net operating loss per share for the first fiscal quarter of 2017 (three months ended Dec 31, 2016) - excluding special items - of 41 cents, wider than the Zacks Consensus Estimate of a loss of 37 cents.

The underperformance could be tied to sharply lower drilling activity. The bottom line also compares unfavorably with the year-ago adjusted profit of 5 cents

Revenues of $368.6 million was down 24% from the first fiscal quarter of 2016 but came above the Zacks Consensus Estimate of $330.4 million amid greater operational efficiency.

FindTheCompany | Graphiq

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $263.6 million (72% of total revenue), down 29% year over year. While average rig revenue per operating day was $24,788 - 13% below the year-ago period, average rig margin per day was down 39% to $9,584. Moreover, utilization levels dropped to 31% (from 39% in the first fiscal quarter of 2016), plunging the segment to an operating loss of $30.9 million. In the year-earlier quarter, income from the unit was $55.5 million.

Offshore: Helmerich & Payne's 'Offshore' revenues were down 19% year over year to $33.8 million. Daily average rig revenue rose 14% to $31,317 and average rig margin per day jumped 32% to $10,478. However, these positive factors could not stop the decline in the segment operating income, which fell 12% from the previous year period to $6.8 million. The underperformance was mainly on account of lower rig utilization - coming down from the year-ago level of 89% to 78%.

International Land: Helmerich & Payne's 'International Land' operations recorded revenues of $68 million, down from $72.2 million in the previous-year quarter. Average daily rig revenue was $55,880, up 21% from the corresponding period last year, while rig margin per day was $12,969, better than the $11,811 earned a year ago. As a result, despite declining activity levels - 33% as against 40% a year ago - the segment reported a small operating profit of $825,000, turning around from the $6.7 million loss incurred in the first quarter of fiscal 2016.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $82.1 million on capital programs. As of Dec 31, 2016, the company had approximately $825.9 million in cash, while long-term debt stood at $492.1 million (debt-to-capitalization ratio of 9.9%).

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise | Helmerich & Payne, Inc. Quote

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise by 30-35% sequentially during the second fiscal quarter of 2017. While the average rig revenue per day is likely to be around $22,400, daily average rig cost is expected to go down to roughly $14,900 during next quarter.

As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $12,000 during the second quarter of fiscal 2017 and revenue days to fall 10% sequentially.

Lastly, the international land segment will likely experience a decline in revenue days by 38% in the next quarter due to the premature termination of 5 rigs under long-term contracts, while average rig margin per day is expected to average roughly $5,000.

For fiscal 2017, Helmerich & Payne now expects a capital budget of $350 million. Up from the previous guidance of $200 million, the company cites U.S. land market demand improvement for the increased outlay.

Zacks Rank

Helmerich & Payne - whose peers include the likes of Patterson-UTI Energy Inc. PTEN , Nabors Industries Ltd. NBR and Transocean Ltd. RIG - currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Share Performance

Shares have risen almost 5% year-to-date, while the Zacks categorized Oil & Gas - Drilling industry has gained over 12%. Over the last 12 months, Helmerich & Payne stock has risen 76%.

Zacks' Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Patterson-UTI Energy, Inc. (PTEN): Free Stock Analysis Report

Transocean Ltd. (RIG): Free Stock Analysis Report

Helmerich & Payne, Inc. (HP): Free Stock Analysis Report

Nabors Industries Ltd. (NBR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

RIG NBR HP PTEN

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More