Contract drilling services provider Helmerich & Payne Inc. (HP) reported better-than-expected earnings for the first quarter of fiscal 2015 (three months ended Dec 31, 2014), aided by strong results from its U.S. Land Operations and Offshore Operations segments.
Earnings per share from continuing operations (excluding special items) came in at $1.70, surpassing the Zacks Consensus Estimate of $1.57. The bottom line also showed improvement from the year-ago level of $1.56.
Revenues of $1,056.6 million were up 18.8% from the prior-year quarter and also came above the Zacks Consensus Estimate of $974 million.
Segment Performance
U.S. Land Operations: During the reported quarter, operating revenues totaled $890 million (84% of total revenue), up 21.6% year over year. Average rig revenue per operating day was $29,457, which was 3.5% above the year-ago period, while average rig margin per day increased 5.6% to $16,411.
Also, rig utilization levels rose to 89% (from 84% in the first quarter of fiscal 2014), increasing the segment operating income by 26.8% from the year-earlier quarter to $318.1 million.
Offshore Operations: Helmerich & Payne’s offshore revenues were up 17.6% year over year to $69.5 million. However, daily average rig revenue fell 11.2% to $55,341, while average rig margin per day decreased 24.5% to $20,732. Meanwhile, rig utilization was up 98% from the year-ago quarter level of 89%. This helped the segment operating income improve by 16.1% from the year-ago period to $21.5 million.
International Land Operations: Helmerich & Payne’s international land operations recorded revenues of about $93 million, down from $95.3 million in the previous-year quarter. Average daily rig revenue was $39,987, up 4.1% from the corresponding period last year, while rig margin per day was $10,770, higher than the $10,342 a year ago.
Rig utilization, however, plunged to 63% from the prior-year period level of 82%. Segment profitability took a downward trajectory, coming down to $12.2 million, from $12.8 million in the first quarter of fiscal 2014.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent approximately $369 million on capital programs. As of Dec 31, 2014, the company had approximately $251.6 million in cash, while long-term debt stood at $40 million (debt-to-capitalization ratio is below 1%).
Guidance
The company expects activity in the U.S. land segment to fall by 25% sequentially during the fiscal second quarter. Moreover, the average rig revenue per day is likely to fall to the $27,000–$27,500 range. Daily average rig cost is expected to rise to approximately $13,350 in the next quarter.
As for the offshore segment, Helmerich & Payne anticipates the average rig margin per day to be around $19,500 during the second quarter of fiscal 2015 while revenue days are expected to remain flat sequentially.
Lastly, the international land segment will likely experience a fall of 10–15% in revenue days and average rig margin per day is expected to decrease 25–30% in the next quarter.
Helmerich & Payne’s fiscal 2015 capital expenditures are targeted to be around $1.3 billion.
Zacks Rank & Other Stock Picks
Helmerich & Payne currently carries a Zacks Rank #3 (Hold).
Better-ranked players from the broader energy space include Transocean Partners LLC (RIGP), Cheniere Energy Partners LP. (CQP) and World Fuel Services Corp. (INT). All these stocks sport a Zacks Rank #1 (Strong Buy).
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