H&P Posts Record Net Income
Included in this year's first quarter net income are after-tax gains from the sale of portfolio securities of $16,184,000 ($0.15 per diluted share). Last year's first quarter net income included $1,721,000 ($0.02 per diluted share) of gains from the sale of portfolio securities.
The Company reported operating income of $146,654,000 for the first quarter of fiscal 2007, which represents an increase of over 80% as compared to operating income of $80,904,000 for the first quarter of fiscal 2006, and a sequential quarterly increase of over 20% as compared to operating income of $121,994,000 for the quarter ended September 30, 2006. The most recent quarter-to-quarter growth in operating income was mostly a result of increased activity in the Company's U.S. land operations and increased margins in its international operations.
Segment operating income in the Company's U.S. land operations increased for the 11th consecutive quarter to $118,408,000 for the first quarter of fiscal 2007, from $70,991,000 for the same period last year and from $103,679,000 for last year's fourth fiscal quarter. The average rig margin per day was up slightly compared to the previous quarter as a result of a lower average rig expense per day. Total activity days in U.S. land operations during the quarter increased to 10,548, compared with 8,035 activity days during the same period last year and 9,577 activity days during the fourth quarter of fiscal 2006. Additional rig activity days associated with the Company's new FlexRig construction program are estimated to continue at 900 to 1,100 per quarter during this fiscal year as three to four rigs per month are completed and sent to the field.
The average U.S. land rig revenue per day for the first quarter of fiscal 2007 was $24,231, compared with $24,343 per rig day during the previous quarter. Average rig expense per day for the quarter fell slightly to $10,717, compared with $11,055 per rig day during the previous quarter. The average U.S. land rig margin per day for the quarter was $13,514, a slight increase from the previous quarter average of $13,288 per rig day. Rig utilization during the quarter averaged 98%, compared with 97% during the same period last year and 99% during the fourth quarter of fiscal 2006.
Since March 2005 and as previously announced, the Company has signed term contracts for three years or more with a number of exploration and production companies to build and operate 73 new FlexRigs with favorable financial returns. The Company announced Thursday that 38 of the 73 rigs have been completed and are now operating in (or in transit to) the field.
Company President and C.E.O., Hans Helmerich commented, "We continue to experience strong demand for the H&P brand, which is based on delivering savings to our customers through high efficiency rigs and an organization focused on safety and field execution. Although the U.S. land market has recently experienced a softening in dayrates and lower utilization rates, we expect our customers' strong preference for FlexRigs to sustain better margins and utilization rates for our fleet as compared to our competition. Whereas much of the industry's new builds and rig refurbishments will actually go to replace aging and less capable equipment, our current new build program drives an 80% expansion to our fleet. The incremental number of fully contracted new FlexRigs that we are scheduled to deliver this year will significantly contribute to earnings going forward."
The Company's U.S. offshore operations reported segment operating income of $5,691,000 for the first quarter of fiscal 2007, compared with $5,111,000 for the first quarter of fiscal 2006, and $6,892,000 for the fourth quarter of fiscal 2006. Total activity days in U.S. offshore operations during the quarter decreased to 588, compared with 644 activity days during the same period last year and 672 activity days during the fourth quarter of fiscal 2006. During January 2007 the Company finalized an agreement to sell two of its offshore platform rigs. The sale is expected to close in February 2007. After completing the sale, the Company will own nine offshore platform rigs, three of which are currently fully active, three are on standby rates, one is waiting on location and two are stacked.
The Company's international operations reported that segment operating income for the first quarter of fiscal 2007 was up substantially to $25,763,000, compared with $9,302,000 for last fiscal year's first quarter, and $17,077,000 for last fiscal year's fourth quarter. The average rig margin per rig day for the first quarter of fiscal 2007 rose to $12,812, compared with $6,773 per day during last fiscal year's first quarter and $9,777 per day during last fiscal year's fourth quarter. Rig utilization for international operations was 96% for the quarter, compared with 83% during last fiscal year's first quarter and 95% for last fiscal year's fourth quarter. The Company experienced improved rig margins per day in all of its major international operations during the quarter.
Helmerich & Payne, Inc. is a contract drilling company with a rig fleet that currently includes 127 U.S. land rigs, nine U.S. platform rigs located in the Gulf of Mexico and 27 international land rigs. In addition, the Company expects to complete another 35 new H&P-designed and operated FlexRigs during calendar 2007, expanding its total number of FlexRigs to 123 and its total number of U.S. land rigs to 162.