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Helmerich & Payne (HP) Posts Wider-Than-Expected Q1 Loss

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Contract drilling services provider Helmerich & Payne Inc. (HP - Free Report) reported net operating loss per share for the first fiscal quarter of 2017 (three months ended Dec 31, 2016) – excluding special items – of 41 cents, wider than the Zacks Consensus Estimate of a loss of 37 cents.

The underperformance could be tied to sharply lower drilling activity. The bottom line also compares unfavorably with the year-ago adjusted profit of 5 cents

Revenues of $368.6 million was down 24% from the first fiscal quarter of 2016 but came above the Zacks Consensus Estimate of $330.4 million amid greater operational efficiency.

 

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $263.6 million (72% of total revenue), down 29% year over year. While average rig revenue per operating day was $24,788 - 13% below the year-ago period, average rig margin per day was down 39% to $9,584. Moreover, utilization levels dropped to 31% (from 39% in the first fiscal quarter of 2016), plunging the segment to an operating loss of $30.9 million. In the year-earlier quarter, income from the unit was $55.5 million.

Offshore: Helmerich & Payne’s ‘Offshore’ revenues were down 19% year over year to $33.8 million. Daily average rig revenue rose 14% to $31,317 and average rig margin per day jumped 32% to $10,478. However, these positive factors could not stop the decline in the segment operating income, which fell 12% from the previous year period to $6.8 million. The underperformance was mainly on account of lower rig utilization - coming down from the year-ago level of 89% to 78%.

International Land: Helmerich & Payne’s ‘International Land’ operations recorded revenues of $68 million, down from $72.2 million in the previous-year quarter. Average daily rig revenue was $55,880, up 21% from the corresponding period last year, while rig margin per day was $12,969, better than the $11,811 earned a year ago. As a result, despite declining activity levels - 33% as against 40% a year ago - the segment reported a small operating profit of $825,000, turning around from the $6.7 million loss incurred in the first quarter of fiscal 2016.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $82.1 million on capital programs. As of Dec 31, 2016, the company had approximately $825.9 million in cash, while long-term debt stood at $492.1 million (debt-to-capitalization ratio of 9.9%).

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

 

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

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise by 30-35% sequentially during the second fiscal quarter of 2017. While the average rig revenue per day is likely to be around $22,400, daily average rig cost is expected to go down to roughly $14,900 during next quarter.

As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $12,000 during the second quarter of fiscal 2017 and revenue days to fall 10% sequentially.

Lastly, the international land segment will likely experience a decline in revenue days by 38% in the next quarter due to the premature termination of 5 rigs under long-term contracts, while average rig margin per day is expected to average roughly $5,000.

For fiscal 2017, Helmerich & Payne now expects a capital budget of $350 million. Up from the previous guidance of $200 million, the company cites U.S. land market demand improvement for the increased outlay.

Zacks Rank

Helmerich & Payne – whose peers include the likes of Patterson-UTI Energy Inc. (PTEN - Free Report) , Nabors Industries Ltd. (NBR - Free Report) and Transocean Ltd. (RIG - Free Report) – currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Share Performance

Shares have risen almost 5% year-to-date, while the Zacks categorized Oil & Gas - Drilling industry has gained over 12%. Over the last 12 months, Helmerich & Payne stock has risen 76%.

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