Helmerich & Payne Inc. (NYSE:HP) recently released fiscal first-quarter 2019 results, wherein it delivered a comprehensive beat on the back of better-than-expected revenues from the U.S. Land business along with greater-than anticipated profits from the International Land segment.
The company posted quarterly earnings of 32 cents a share, surpassing the Zacks Consensus Estimate of 28 cents. Importantly, profits from the international segment totaled $6.6 million in the quarter under review vis-à-vis the consensus estimate of $3 million. Markedly, the bottom line also witnessed a massive turnaround from the year-ago loss of 2 cents a share. Improved performance at its largest segment — U.S. Land — backed by higher revenues and margins led to the robust results.
Revenues of $740.6 million outpaced the Zacks Consensus Estimate of $716 million. Operating revenues from the U.S. Land unit came in at $624.3 million, surpassing the Zacks Consensus Estimate of $613 million. The top line also surged around 31% from the year-ago level.
Helmerich & Payne, Inc. Price, Consensus and EPS Surprise
Segmental Performance
U.S. Land: During the quarter, operating revenues totaled $624.2 million (accounting for 84.3% of the total revenues), up 35.2% year over year. The average rig revenue per operating day was $25,265, up 12.8% from the year-ago period and the average rig margin per day also increased 10.9% to $9,822. Moreover, utilization levels of 68% in the quarter under review (versus 57% in first-quarter fiscal 2018) resulted in an operating income of $79.7 million at the segment, reflecting a massive jump from the year-ago profit of $24.7 million.
Offshore: Helmerich & Payne’s offshore revenues came in at around $36.9 million compared with $33.4 million in the prior-year quarter, on the back of increased activity levels. Notably, rig utilization was 71%, up from the year-ago level of 63%. However, daily average rig revenues came in at $35,635, a tad lower than the year-ago figure. The average rig margin per day moved down 19.2% from a year ago, as a result of which, the segmental profits decreased to $7.2 million from $8.7 million in the prior-year quarter.
International Land: Helmerich & Payne’s International Land operations generated revenues of $66.3 million, up from $63.2 million in the prior-year quarter on increased revenue days and higher activity levels. Rig utilization rose to 60% from 45% a year ago. However, the average daily rig revenues in the quarter under review were $35,575, down 6.4% from the corresponding period last year. Nonetheless, average rig expense per day reduced 15.6% from the year-ago quarter. Further, rig margin per day was $12,871, higher than the year-ago figure of $11,351. As a result, the segment’s operating earnings totaled $6.6 million, higher than the year-ago quarter’s $3.5 million. Further, the bottom line of the segment significantly turned around from the last reported quarter’s loss of $7.8 million on the back of higher revenues and rig margins.
H&P Technologies: In late November 2018, Helmerich & Payne announced the creation of its new segment ‘H&P Technologies’ for the purpose of boosting the development of advanced technologies and directional drilling solutions. While technological advancement has always been a priority for the company, the creation of the new entity further accentuated its focus in this direction. The unit comprises two rig technology companies, namely MagVar and Motive Drilling, along with Angus Jamieson Consulting, which is an industry leader in wellbore positioning. The segment witnessed higher demand during the quarter, leading to revenues of $9.9 million, which reflected a skyrocketing increase of 248% from the year-ago figure. Nonetheless, higher revenues were more than offset by increasing costs (related to depreciation, R&D and G&A expenses), resulting in segmental loss of $10.3 million, wider than the year-ago figure of $8.8 million.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent approximately $196.1 million on capital programs. As of Dec 31, 2018, the company had approximately $228.5 million in cash, and a long-term debt amounting to $490.8 million (debt-to-capitalization ratio of 10.2%).
Guidance
The Tulsa, OK-based company expects activity in the U.S. land segment to increase 3-5% sequentially during the second quarter of fiscal 2019. While average rig revenues per day are likely to be in the band of $25,500-$26,000, daily average rig cost is expected within $14,700-$15,100 during the said quarter.
Coming to the offshore segment, Helmerich & Payne expects average rig margin per day within $6,000-$7,000 in second-quarter fiscal 2019 and revenue days to increase 3% sequentially.
However, international land segment revenue days will likely decrease 10% sequentially during the quarter amid lower activities in Columbia. Average rig margin per day is expected within $10,500-$11,500.
For fiscal 2019, Helmerich & Payne has revised down its capex by more than 20% from its prior projection. The company now expects its outlay in the band of $500-$530 million versus the prior guided range of $650-$680 million.
Zacks Rank and Key Picks
Currently, Helmerich & Payne carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space include TransCanada Corporation (TO:TRP) , RGC Resources Inc. (NASDAQ:RGCO) and Sunoco LP (NYSE:SUN) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TransCanada surpassed earnings estimates in each of the trailing four quarters, with average of 19.14%.
RGC Resources delivered average positive earnings surprise of 87.64% in the preceding four quarters.
Sunoco LP pulled off average positive earnings surprise of 18.39% in the trailing four quarters.
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