Helmerich & Payne Gaily Exits FY12

Contract drilling services provider Helmerich & Payne Inc. ( HP - Analyst Report ) reported bright results for the fourth quarter of fiscal 2012 (three months ended September 30, 2012), owing to better drilling activities and innovative technological applications.

Quarterly earnings per share from continuing operations (excluding special items) came in at $1.36, beating the Zacks Consensus Estimate of $1.24. Compared with the year-ago adjusted profit, the result increased 22.5% from $1.11.

Revenue in the quarter was $829.5 million, higher 18.4% from the fourth quarter of 2011 and also surpassed our projection of $817.0 million.

For fiscal year 2012, Helmerich & Payne generated earnings per share from continuing operations (excluding special items) of $5.16 (surpassing our projection of $5.03), on revenue of $3,151.8 million.

Segment Performance

U.S. Land Operations: During the quarter, operating revenues totaled $695.1 million (84% of total revenue), up 18.0% year over year. Average rig revenue per operating day was $28,325, up 6.7%, while average rig margin per day increased 15.4% to $15,705.

Utilization levels dropped to 85% (from 87% in the fourth quarter of fiscal 2011). The segment operating income improved significantly (by 23.2%) from the year-earlier quarter to $236.6 million.

Offshore Operations: Helmerich & Payne’s offshore revenues were up 3.7% year over year to $53.3 million. Daily average rig revenue increased 14.5% to $62,018, while average rig margin per day climbed 7.1% to $23,330. This aided the segment’s operating income to rise 1.4% from the prior-year quarter to $12.0 million. Quarterly rig utilization was 84%, down from 85% recorded a year ago.

International Land Operations: International land operations recorded revenues of $77.7 million, up from $57.2 million in the prior-year quarter. Average daily rig revenue was $35,732, up 19.1%, while rig margin per day was $8,210, against $7,690 recorded in the year-ago period. With better activity, the segment generated operating profit of $7.1 million, compared with $3.5 million in the fourth quarter of fiscal 2011. Utilization level was 79%, up from 74% in the corresponding period, last year.

Capital Expenditure & Balance Sheet

During the fiscal year 2012, Helmerich & Payne spent $1,097.7 million on capital programs. As of September 30, 2012, the company had approximately $96.1 million in cash, while long-term debt stood at $195.0 million (debt-to-capitalization ratio of 4.8%).

Recommendation

Barbados-based Nabors Industries Ltd. ( NBR - Analyst Report ) – the leading land-drilling contractor in the world – reported mixed third-quarter 2012 results, with earnings per share going ahead of the Zacks Consensus Estimate and revenue missing our projection.

Helmerich & Payne currently retains a Zacks #3 Rank (short-term Hold rating). Longer term, we are maintaining our Neutral recommendation on the stock.