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Helmerich & Payne (HP) Posts Q3 Loss on Offshore Weakness

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Helmerich & Payne Inc. (HP - Free Report) recently reported third-quarter fiscal 2018 adjusted operating loss of a penny, lagging the Zacks Consensus Estimate of a profit of 3 cents per share. However, the bottom line compared favorably with the year-ago adjusted loss of 18 cents.

Lower-than-expected average rig margin in the offshore segment resulted in weaker-than anticipated results. Average rig margin in the offshore segment came in at $4,686, lagging the Zacks Consensus Estimate of $10,360.

Revenues of $648.8 million topped the Zacks Consensus Estimate of $619 million. Further, the top line increased more than 42.5% from the year-ago figure of $498.5 million.The improved year-over-year results were primarily driven by higher drilling activity at its biggest segment, U.S. Land.

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

 

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

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $536.6 million (82.7% of the total revenues), up 32.3% year over year. While average rig revenue per operating day was $23,698, — 7.8% higher than the year-ago period — average rig margin per day was up 13.4% to $8,764. Moreover, utilization levels of 63% in the quarter under review (versus 52% in third-quarter fiscal 2017) resulted in an operating income of 34.3 million at the segment, marking a turnaround from the year-ago loss of $7.9 million.

Offshore: Helmerich & Payne’s Offshore revenues came in at around $37.7 million compared with $33.7 million in the prior-year quarter. Daily average rig revenues fell 1% to $35,293 and average rig margin per day plunged 59.3% to $4,686. Owing to this, the segment’s operating income decreased 41.4% to $3.8 million. However, rig utilization was up from the year-ago level of 75-79%.

International Land: Helmerich & Payne’s International Land operations generated revenues of $63.3 million, up from $55.1 million in the prior-year quarter. Average daily rig revenues were $33,941, up 3.8% from the corresponding period last year and rig margin per day was $9,994, down from the year-ago figure of $13,063.

Additionally, average rig expense per day increased 21.9% year over year, while activity levels increased to 50% from 47% a year ago. The segment’s operating profit came in at $4.3 million compared with the year-ago quarter’s income of $4.9 million.

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $332.6 million on capital programs. As of Jun 30, 2018, the company had approximately $306.4 million in cash, while long-term debt totaled $493.7 million (debt-to-capitalization ratio of 10%).

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise 6% sequentially during the fourth quarter of fiscal 2018. While average rig revenue per day is likely to be around $24,000, daily average rig cost is expected to be roughly $14,700 during the said quarter.

As of the offshore segment, Helmerich & Payne expects average rig margin per day to be around $13,000 during fourth-quarter fiscal 2018 and revenue days to increase 4% sequentially.

The international land segment will likely increase 3% sequentially in revenue days during the quarter, while average rig margin per day is expected to be around $9,000.

For fiscal 2018, Helmerich & Payne projects a capital budget of $450 million.

Zacks Rank & Stocks to Consider

Currently, Helmerich & Payne carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are ConocoPhillips (COP - Free Report) , China Petroleum and Chemical Corporation (SNP - Free Report) , also known as Sinopec, and CVR Refining, LP , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ConocoPhillips, based in Houston, TX, is a major global exploration and production (E&P) company. It pulled off an average positive earnings surprise of 226.9% in the last four quarters.

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company delivered an average positive earnings surprise of 492.8% in the trailing four quarters.

Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.

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