Helmerich & Payne reports increase in US land operating income, rig count for Q2 2018

During Q2 2018, Helmerich & Payne (H&P) saw its contracted rig count increase by an estimated 4%, from 204 rigs on 31 December to 213 rigs as of 31 March, the company stated in a press release announcing its second quarter results. Since the beginning of fiscal year 2018, the contractor has upgraded 30 of its FlexRigs due to operator demand for super-spec rigs, bringing the company’s number of super-spec rigs up to 183. The upgraded rigs are AC rigs with 1,500-hp drawworks, a 750,000-lb hookload rating, a 7,500-psi mud system and are built for pad drilling.

“The demand for super-spec rigs continues to persist as the industry’s super-spec fleet remains nearly 100% utilized. H&P leads the way with more than 40% of the super-spec market in US land,” H&P President and CEO John Lindsay said. “We also have approximately 50% of the industry’s idle rig capacity not already at super-spec capability that can be readily upgraded to those specifications in the current pricing environment. Our robust financial position and the composition of our fleet continues to drive our ability to respond to current and future FlexRig demand. Given the tightening market conditions for FlexRigs and the value proposition we provide customers, we expect increases in average dayrates for our rigs in the US land spot market to accelerate during the next few months.”

H&P’s US land operating income increased by $2.3 million to $27.1 million sequentially. The number of quarterly revenue days increased sequentially by approximately 2%. Adjusted average rig revenue per day increased by $544 to $22,711 as pricing continued to improve throughout the quarter. The average rig expense per day increased sequentially by $540 to $14,086. The corresponding adjusted average rig margin per day was roughly flat at $8,625 for the second fiscal quarter.

The contractor’s international land operations segment had an operating loss this quarter. The $4.2 million sequential decrease in operating income was primarily attributable to favorable adjustments that benefited the prior quarter. Revenue days decreased during the quarter by 4% to $1,530. The average rig margin per day decreased by $2,818 to $8,533.

Operating income for the contractor’s offshore segment decreased by $3.3 million to $5.4 million sequentially. The number of quarterly revenue days for H&P-owned platform rigs decreased sequentially by approximately 2%, and the average margin per rig day decreased sequentially by $2,871 to $9,504 primarily due to unfavorable adjustments to self-insurance expenses. Management contracts on customer-owned platform rigs contributed approximately $5.1 million to the segment’s operating income, compared to approximately $6.5 million during the prior quarter.

Looking ahead to Q3, H&P expects quarterly revenue days to increase by 7% sequentially in US land. Average rig revenue per day is expected to reach roughly $23,000, while average rig expenses per day are expected to rise to $14,400.

H&P expects revenue days for international land operations to increase by between 5% and 10% sequentially, with average rig margins per day rising to $9,000 in Q3.

On the offshore side, H&P anticipates quarterly revenue days to increase by approximately 15% sequentially. The contractor also expects offshore rig margins to rise to $10,500 per day.

“The strengthening of crude oil prices has also been encouraging for our international and offshore businesses as we have seen a rise in the number of inquiries and opportunities in these segments,” Mr Lindsay said.