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Helmerich & Payne (HP) Posts Wider-than-Expected Q3 Loss

Zacks Equity Research
Updated

Oil and gas drilling contractor Helmerich & Payne Inc. HP reported wider-than-expected loss for the third quarter of fiscal 2016 (three months ended Jun 30, 2016), owing to dismal performances by all its segments. The negatives were partially offset by lower operating expenses.

Quarterly loss per share from continuing operations (excluding special items) came in at 47 cents, wider than the Zacks Consensus Estimate of a loss of 42 cents. The company had reported adjusted profit of 27 cents per share in the year-ago quarter.
 

Helmerich & Payne Inc. (HP) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

Revenues in the quarter came at $366.5 million, down 44.6% from the third quarter of fiscal 2015. However, the top line surpassed the Zacks Consensus Estimate of $303 million.     

Segment Performance

U.S. Land Operations: During the quarter, operating revenues totaled $285 million (77.8% of total revenue), down 42.4% year over year. Average rig revenue per operating day was $35,474, up 11%, while average rig margin per day jumped 21.7% to $21,694 on a year-over-year basis.

Utilization levels decreased to 24% from 47% in the third quarter of fiscal 2015. The segment’s operating income fell 79% from the year-earlier quarter to $25.8 million.  

Offshore Operations: Helmerich & Payne’s offshore revenues were down by 46.6% year over year to $30.5 million. Daily average rig revenue decreased 33.3% to $25,568, while average rig margin per day plunged 52.7% to $6,745. This resulted in an 85.8% fall in the segment’s operating income from the prior-year quarter to $2.1 million. Quarterly rig utilization was 78% compared with 89% in the year-ago quarter.

International Land Operations: The segment recorded revenues of $47.9 million, down from $106.6 million in the prior-year quarter. Average daily rig revenue was $34,693, down almost 35% year over year. Moreover, rig margin per day was $8,537, down from $19,785 in the year-earlier quarter.

The segment incurred operating loss of $4.9 million against profits of $18.9 million in the third quarter of fiscal 2015. Utilization levels reached 37%, down from 50% in the year ago quarter.

Operating Expenses

The company reported total operating costs of $379.7 million for the third quarter of fiscal 2016, representing a decrease of roughly 27.9% from the year-ago quarter.

Capital Expenditure & Balance Sheet

During the third quarter of fiscal 2016, Helmerich & Payne spent $39.1 million on capital programs. As of Jun 30, 2016, the company had approximately $907.0 million in cash, while long-term debt was $493.2 million (debt-to-capitalization ratio of 9.5%).  

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to increase by 3–7% sequentially during the fourth quarter of fiscal 2016. While average rig revenue per day is likely to be around $24,000, daily average rig cost is anticipated to go down to approximately $13,300 next quarter.

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HELMERICH&PAYNE Price, Consensus and EPS Surprise

HELMERICH&PAYNE Price, Consensus and EPS Surprise | HELMERICH&PAYNE Quote

Zacks Rating

Helmerich & Payne currently carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the energy sector include Murphy USA Inc. MUSA, World Fuel Services Corp. INT and North Atlantic Drilling Ltd. NADL. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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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
 
MURPHY USA INC (MUSA): Free Stock Analysis Report
 
WORLD FUEL SVCS (INT): Free Stock Analysis Report
 
HELMERICH&PAYNE (HP): Free Stock Analysis Report
 
NORTH ATL DRILG (NADL): Free Stock Analysis Report
 
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