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Why Helmerich & Payne (HP) Has Stumbled Post Q4 Earnings

The stock of Helmerich & Payne Inc. HP has lost 9.2% since its fiscal fourth-quarter earnings announcement on Nov 16. The negative response could be attributed to a lack of positive surprise on the earnings front.

What Did Helmerich & Payne’s Earnings Unveil?

Helmerich & Payne reported fiscal fourth-quarter 2022 adjusted net income of 45 cents per share, matching the Zacks Consensus Estimate. In the year-ago period, the company had incurred a loss of 62 cents per share. The numbers reflect a significant uptick in activity.

Meanwhile, operating revenues of $631.3 million topped the Zacks Consensus Estimate of $597 million and increased 83.6% from the year-ago level on strong results from the key North America Solutions segment. Precisely, sales from the unit totaled $552.3 million, well ahead of the consensus mark of $509 million.

Segment Performance

North America Solutions: During the quarter, operating revenues of $552.3 million were up 88.3% year over year on higher activity levels, with the average number of active rigs rising from 124 to 176. The steep uptick in drilling works on the back of robust oil and gas prices, together with pricing improvements, meant that the segment turned around from the previous year’s operating loss of $60.7 million to a profit of $92.1 million.

Offshore Gulf of Mexico: Revenues of $34.3 million increased 8.9% from the year-ago quarter as activity remained robust. Moreover, margins during the July-September period of 2022 expanded 22.3% year over year, resulting in the segment’s operating profit surged 45.3% from the prior-year period to $9.4 million.

International Solutions: The segment’s operations generated revenues of $42.4 million, up from $17.3 million in the corresponding period of 2021 — again due to improved activity levels (primarily in Latin America), with the average number of active rigs jumping 83.3% from 6 to 11. The unit reported a loss of $789,000, significantly narrower than the loss of $5.7 million incurred in the corresponding period a year ago. Apart from increased drilling, the International Solutions segment benefited from lower selling, general and administrative expenses.

Financial Position

In the reported quarter, Helmerich & Payne spent $75.9 million on capital programs. As of Sep 30, 2022, the Zacks Rank #1 (Strong Buy) company had $232.1 million in cash and cash equivalents, while long-term debt was $542.6 million (debt-to-capitalization of 16.4%).

Guidance

This Tulsa, OK-based company anticipates operating gross margins in the North America Solutions segment between $250 million and $270 million in the fiscal first quarter. It sees around 181-186 contracted rigs by Dec 31, 2022.  

Coming to the Offshore Gulf of Mexico segment, Helmerich & Payne envisions operating gross margins within $8-$10 million for the fiscal first quarter.

Additionally, International Solutions operating gross margins are forecast between $7-$10 million for the current quarter.

For the current fiscal year, Helmerich & Payne still estimates capital outlay within $425-$475 million, while it hopes to shell out some $400 million as depreciation and $195 million in the form of general and administrative expenses.

Other Energy Picks

Apart from Helmerich & Payne, investors interested in the energy space might look at Nine Energy Service NINE, Patterson-UTI Energy PTEN and Halliburton HAL, each carrying a Zacks Rank #1, currently.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Nine Energy Service: Nine Energy Service is valued at some $300.7 million. The Zacks Consensus Estimate for NINE’s 2022 earnings has been revised 1,325% upward over the past 30 days.

Nine Energy Service, headquartered in Houston, TX, delivered a 137.5% beat in Q3. NINE shares have surged 660.5% in a year.

Patterson-UTI Energy: PTEN beat the Zacks Consensus Estimate for earnings in three of the last four quarters. The company has a trailing four-quarter earnings surprise of roughly 169.2%, on average.

Patterson-UTI is valued at around $3.5 billion. PTEN has seen its shares gain 112.4% in a year.

Halliburton: Halliburton is valued at some $33.4 billion. The Zacks Consensus Estimate for HAL’s 2022 earnings has been revised 4% upward over the past 60 days.

Halliburton, headquartered in Houston, TX, has a trailing four-quarter earnings surprise of roughly 5.5%, on average. HAL shares have gained 63% in a year.

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Halliburton Company (HAL) : Free Stock Analysis Report

PattersonUTI Energy, Inc. (PTEN) : Free Stock Analysis Report

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

Nine Energy Service, Inc. (NINE) : Free Stock Analysis Report

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