Helmerich & Payne Sees Record Second Quarter Results
For the six months ended March 31, 2006, the Company reported net income of $115,387,000 ($2.18 per diluted share) from operating revenues of $546,218,000, compared with net income of $61,660,000 ($1.20 per diluted share) from operating revenues of $360,129,000 during the six months ended March 31, 2005. Included in net income were gains from the sale of portfolio securities and drilling equipment of $0.08 per share for the first six months of fiscal 2006 and $0.44 per share for the first six months of fiscal 2005.
Worldwide demand for drilling services continued to put pressure on rig supply in each segment of the Company's operations. As a result, pre-tax operating income for all three of the Company's contract drilling segments were up sharply from both last year's second quarter and this year's first quarter. Operating profit for U.S. land rig operations rose to $82.9 million for this year's second quarter, compared with $35.8 million for last year's second quarter, and $71 million for this year's first quarter. Average revenue per rig day for U.S. land rigs rose to a record high of $22,593 for this year's second quarter, compared with $15,018 per rig day during last year's second quarter and $20,198 per rig day during this year's first quarter. Operating cost rose by 9% over the previous quarter, with increases coming from expense categories across the board, including labor, materials, supplies, insurance and rentals. In spite of higher operating costs, average margins per rig day rose to $12,567 per day for this year's second quarter, compared with $6,944 during last year's second quarter and $11,019 during this year's first quarter. Average U.S. land rig utilization was 98% during the second quarter, compared with 94% during last year's second quarter and 97% during this year's first quarter. During this year's second quarter, the Company sold its only idle U.S. land rig and is now operating at 100% utilization of its U.S. land rig fleet.
As demand for U.S. land rigs continued to push activity and dayrates during the quarter, the Company's offshore operations also recorded an increase in financial results. Pre-tax operating income for U.S. offshore platform operations rose to $7.4 million for this year's second quarter, from $4.2 million during last year's second quarter and $5.1 million from this year's first quarter. The increased income is a result of improved rig activity and increases in daily rig cash margins. Rig utilization for the U.S. offshore business improved to 71% during this year's quarter, compared with 45% during last year's second quarter and 64% for this year's first quarter.
Pre-tax operating profit from the Company's international contract drilling operations increased to $13.1 million during this year's second quarter from $3.6 million during last year's second quarter and $9.3 million during this year's first quarter. Venezuela and Ecuador continue to be the Company's most active operations with eleven of twelve rigs working in Venezuela and all eight rigs active in Ecuador. Utilization for the 27 international rigs rose during the quarter to 89%, compared with 71% during last year's second quarter and 83% during this year's first quarter.
The Company also announced today that the number of customer commitments for construction of new FlexRigs® has increased to 61. A total of 16 exploration and production companies have now committed to contracts for a minimum of three years of work for 13 new FlexRig3s and 48 new FlexRig4s.
Company President and C.E.O., Hans Helmerich commented, "We are pleased to announce another record quarter for the Company. Our U.S. land margins saw further expansion and we are encouraged by the continued strengthening of our U.S. offshore platform and international business segments. In terms of our new build program, the performance results of the four FlexRig4s that recently began work in the Piceance Basin have exceeded our expectations and are already adding value to our customer's operations. At the same time, manufacturing costs are moving higher than we anticipated. We underestimated the cost pressures associated with a strong upcycle and the impact of last year's hurricanes on labor availability and costs. We are now estimating up to an average of 13% higher than budgeted capital costs for the 30 rigs scheduled to be delivered this fiscal year. Financial returns remain very attractive in spite of these cost increases. We continue to receive inquiries about additional new build orders, and are confident about their ability to add shareholder value."