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Oil and gas drilling contractor Helmerich & Payne Inc. (HP - Analyst Report) reported an impressive second quarter of fiscal 2013 (three months ended Mar 31, 2013), 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 $1.28. Compared with the year-ago adjusted profit, the results increased 20.3% from $1.13.

Revenues in the quarter were $838.3 million, up 8.9% from the second quarter of fiscal 2012 and ahead of our $823.0 million projection.

Segment Performance

U.S. Land Operations: During the quarter, operating revenues totaled $685.7 million (81.8% of total revenue), up 4.1% year over year. Average rig revenue per operating day was $28,255, up 2.3%, while average rig margin per day increased 9.9% to $15,170, on a year-over-year basis. Utilization levels dropped to 82% (from 91% in the second quarter of fiscal 2012). The segment’s operating income improved (by 7.6%) from the year-earlier quarter to $226.0 million.

Offshore Operations: Helmerich & Payne’s offshore revenues were up 28.1% year over year at $55.6 million. Daily average rig revenue increased 22.3% to $60,536, while average rig margin per day climbed 20.8% to $24,838. This aided the segment’s operating income to rise 39.0% from the prior-year quarter to $13.6 million. Quarterly rig utilization was 89%, up from 74% recorded a year ago.

International Land Operations: International land operations recorded revenues of $94.1 million, up from $64.1 million in the prior-year quarter. Average daily rig revenue was $40,677, up 29.5%, while rig margin per day was $11,053, up from $4,884 recorded in the year-ago period. With better activity, the segment generated operating profit of $13.2 million, compared with a loss $1.0 million in the second quarter of fiscal 2012. Utilization level was 78%, up from 75% in the corresponding quarter last year.

Capital Expenditure & Balance Sheet

In the quarter under review, Helmerich & Payne spent $219.0 million on capital programs. As of Mar 31, 2013, the company had approximately $173.0 million in cash, while long-term debt was $195.0 million (debt-to-capitalization ratio of 4.5%).

Zacks Rating

Helmerich & Payne currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

But there are certain other companies in the contract drilling service industry that are expected to perform better over the short term. These include Tesco Corporation (TESO - Snapshot Report) with Zacks Rank #1 (Strong Buy), and Hercules Offshore Inc. (HERO - Snapshot Report) and Vantage Drilling Company (VTG - Snapshot Report) with Zacks Rank #2 (Buy).
 

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