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Helmerich & Payne (HP) Incurs Narrower-Than-Expected Q4 Loss

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Helmerich & Payne Inc. (HP - Free Report) recently released fourth-quarter fiscal 2020 results. The company posted adjusted quarterly loss of 74 cents per share narrower than the Zacks Consensus Estimate of a loss of 80 cents per share owing to better-than-expected revenues from International Solutions segment. Precisely, the unit generated operating revenues of $24 million beating the Zacks Consensus Estimate of $17.13 million. However, the bottom line came against the year-ago earnings of 39 cents per share. This underperformance can be attributed to steep decline in rig activity as a result of coronavirus-induced lower crude prices.

Meanwhile, operating revenues of $208.27 million missed the Zacks Consensus Estimate of $212 million and decreased 67.9% from the year-ago level of $649.05 million.

Segmental Performance

North America Solutions: During the quarter, operating revenues of $149.3 million were down 73.3% year over year as revenue days fell 68.3% to 5,945.

Rig utilization dropped to 25% from the prior-year’s 68%. The segment’s operating loss came in at $78.2 million against the year-earlier profit of $60.4 million. Moreover, the average rig margin per day declined 39% from the prior-year quarter to $6,603. Further, rig revenue per day was down in the quarter under review.

Offshore Gulf of Mexico: Revenues of $32.3 million were down from the year-ago quarter’s $38.5 million as revenue days declined 16.6% to 460. Rig utilization plummeted to 63% from the prior-year’s 75%. Moreover, higher average rig expenses per day and increased depreciation expenses resulted in the segment’s operating income of $1. 5 million, lower than the profit of $2.8 million in the prior-year quarter.

Although daily average rig revenues rose 8.9% from the year-ago figure, rig expense per day climbed 5.6%. Meanwhile, the segment recorded average rig margin per day of $7,663 in the quarter under review compared to $7,460 in the year-ago quarter.

International Solutions: Operations generated revenues of $24 million, down from $48.4 million in the prior-year quarter.

While rig utilization decreased to 15% from 56% in the prior-year quarter, average rig revenue per day increased from the year-ago quarter to $45,986. The average rig margin per day decreased 42.1% from the year-ago quarter to $3,170. The segment’s bottom line induced an operating loss of $3.47 million, narrower than the loss of $4.2 million a year ago.

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise

Helmerich & Payne, Inc. Price, Consensus and EPS Surprise

Helmerich & Payne, Inc. price-consensus-eps-surprise-chart | Helmerich & Payne, Inc. Quote

Capital Expenditure & Balance Sheet

In the reported quarter, Helmerich & Payne spent $19.8 million on capital programs. As of Sep 30, 2020, the company had $487.9 million in cash and cash equivalents while net long-term debt was $480.7 million (debt-to-capitalization of 12.7%).

Guidance

This Tulsa, OK-based company anticipates operating gross margins in the North America Solutions segment in the first quarter of fiscal 2021 to be between $40 million and $50 million.

Coming to the offshore Gulf of Mexico segment, Helmerich & Payne envisions operating gross margins within $5-7 million for the fiscal first quarter and operating income in the $1-$2 million range.

Additionally, international Solutions operating gross margins are forecast in a negative $5-$7 million range for the current quarter.

For the next fiscal year, Helmerich & Payne estimates capital outlay within $85-$105 million.

Helmerich & Payne expects its North America Solutions contracted rigs to increase by 30% during fiscal first quarter of 2021, exiting at approximately 90 rigs.

Zacks Rank & Key Picks

Helmerich & Payne currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are CNOOC Limited (CEO - Free Report) , Antero Resources Corporation (AR - Free Report) and Noble Corporation (NE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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