H&P to Build, Operate 9 Additional Rigs; Posts 2Q Results
Helmerich & Payne reported income from continuing operations of $64,883,000 ($0.61 per diluted share) from operating revenues of $483,384,000 for its third fiscal quarter ended June 30, 2010, compared with income from continuing operations of $68,021,000 ($0.64 per diluted share) from operating revenues of $384,359,000 during last year's third fiscal quarter. As previously reported, on June 30, 2010, Venezuelan President Hugo Chavez signed a Decree authorizing the "forceful acquisition" of the Company's Venezuelan drilling assets. As a result, the corresponding operations, previously within the Company's International Land segment, have been reclassified as discontinued operations. Accordingly, the assets and liabilities corresponding to the Company's business in Venezuela, along with its results of operations, have been reclassified for all comparative periods presented. Considering an impairment charge of $102,721,000 related to the Venezuelan governmental action, the Company reported a third quarter loss from discontinued operations of $101,598,000 ($0.95 per diluted share). Including discontinued operations, the Company recorded a net loss of $36,715,000 for the third fiscal quarter of 2010 compared to net income of $53,044,000 for the third fiscal quarter of 2009. Included in both this year's and last year's third quarter income from continuing operations are gains of approximately $.01 per share from the sale of drilling equipment.
For the nine months ended June 30, 2010, the Company reported income from continuing operations of $202,790,000 ($1.89 per diluted share) from operating revenues of $1,316,205,000 compared with income from continuing operations of $325,570,000 ($3.05 per diluted share) from operating revenues of $1,485,464,000 during the nine months ended June 30, 2009. Including discontinued operations, total net income was $73,267,000 and $302,057,000 during the first nine months of fiscal 2010 and 2009, respectively. Included in the first nine months of both this year's and last year's income from continuing operations are gains of approximately $.03 per share from the sale of drilling equipment.
Segment operating income for U.S. land operations was $103,138,000 for this year's third fiscal quarter, compared with $96,593,000 for last year's third fiscal quarter and $90,723,000 for this year's second fiscal quarter. The sequential increase was primarily attributable to the continuing recovery in U.S. land drilling activity, as revenue days increased to 14,374 from 13,114 during this year's second fiscal quarter.
Approximately $700 per day of the average rig revenue and margin per day values, as reported in the attached tables corresponding to U.S. land operations for this year's third fiscal quarter ($23,690 and $11,151, respectively), was a result of early contract termination revenue and of revenue related to customer requested delivery delays for new builds under long-term contracts. This compares to approximately $800 per day included in the rig revenue and margin per day averages corresponding to this year's second fiscal quarter ($23,382 and $11,287, respectively) for the same type of revenue. Additional revenue of approximately $5 million corresponding to new build early terminations and to requested delivery delays is now expected to be recognized in the U.S. land segment during the fourth quarter of fiscal 2010.
Rig utilization for the Company's U.S. land segment was 76% for this year's third fiscal quarter, compared with 51% for last year's third fiscal quarter and 70% for this year's second fiscal quarter. At June 30, 2010, the Company's U.S. land segment had 170 contracted rigs and 45 idle and available rigs. The 170 contracted rigs included 116 rigs under term contracts, four of which were new FlexRigs waiting on customers that requested delivery delays. (Delayed FlexRigs do not generate revenue days and are not considered for purposes of calculating and reporting rig utilization rates.)
Helmerich & Payne has signed contracts to build and operate nine additional FlexRigs. These rigs will be built under multi-year term contracts with four exploration and production companies, and will operate in the U.S. with attractive dayrates and economic returns. The names of the customers and other terms were not disclosed. Considering these nine rigs, the Company has announced a total of 19 new build rigs during fiscal 2010, of which four have already been completed and 15 are under construction. The Company expects to continue to complete and deliver these new FlexRigs through early to mid calendar 2011.
President and CEO Hans Helmerich commented, "We are encouraged by improved activity for the Company's FlexRigs. It confirms our earlier expectations for a bifurcated market where high performing rigs, and our FlexRigs in particular, would command better utilization and margins compared to the industry rig fleet. Our recent new build announcements further reinforce our long-held conviction that a growing number of customers are increasingly shaping their efforts in the field around efficient, high-performing rigs. Demand for enhanced field performance favors the Company's strengths and capabilities and bodes well for additional opportunities ahead."
Segment operating income for the Company's offshore operations was $11,231,000 for the third fiscal quarter of 2010, compared with $12,723,000 for last year's third fiscal quarter and $13,625,000 for this year's second fiscal quarter. Average rig utilization of the Company's nine platform rigs in the offshore segment was 78% for this year's third fiscal quarter, compared with 93% during last year's third fiscal quarter and 81% during this year's second fiscal quarter. Average rig margins per day declined to $20,782 during this year's third fiscal quarter from $23,023 during this year's second fiscal quarter. The Company estimates that third quarter segment operating income was negatively impacted by approximately 3% due to lower standby rates received as a result of the government imposed deepwater drilling moratorium.
The Company's international land operations reported segment operating income of $9,893,000 for this year's third fiscal quarter, compared with $6,492,000 for last year's third fiscal quarter and $11,784,000 for the second fiscal quarter of 2010. Although rig utilization corresponding to continuing operations in the segment sequentially increased to 76% from 73%, the average rig margin per day declined to $10,192 during the third quarter from $11,167 during the second quarter of 2010.
Helmerich & Payne, Inc. is primarily a contract drilling company. As of July 29, 2010, the Company's existing fleet included 217 land rigs in the U.S., 28 international land rigs and nine offshore platform rigs. In addition, the Company is scheduled to complete another 15 new H&P-designed and operated FlexRigs under long-term contracts with customers. Upon completion of these commitments in fiscal 2011, the Company's global land fleet is expected to include a total of 209 FlexRigs.