Helmerich & Payne Inc. (HP - Free Report) recently released fiscal second-quarter 2019 results, wherein it delivered a comprehensive beat on the back of better-than-expected operating results from the U.S. Land business – the company’s largest segment. Investors should note that the unit represents 90% of its total fleet and makes up more than 85% of the contract drilling service provider’s revenues.
The company posted adjusted quarterly earnings of 66 cents a share, comfortably surpassing the Zacks Consensus Estimate of 38 cents and turning around from the year-ago adjusted loss of 5 cents.
Operating revenues of $720.9 million outpaced the Zacks Consensus Estimate of $714 million and surged around 25% from the year-ago level.
U.S. Land: During the quarter, operating revenues totaled $622.2 million, up 28.9% year over year as revenue days increased 13.9% and average rig revenue per day rose 12%. The Zacks Consensus Estimate for operating revenues at the company’s dominant unit in fiscal second quarter of 2019 was $606 million.
The average rig margin per day also increased 29.9% to $11,486. Moreover, utilization levels of 67% in the quarter under review (versus 59% in second-quarter fiscal 2018) resulted in an operating income of $106.1 million at the segment, reflecting a massive jump from the year-ago profit of $27.1 million and ahead of the Zacks Consensus Estimate of $89 million.
Offshore: Helmerich & Payne’s Offshore revenues came in at around $34.6 million compared with $33 million in the prior-year quarter primarily due to increase in the number of revenue days.
Notably, rig utilization was 75%, up from the year-ago level of 63%. However, daily average rig revenues came in lower than the year-ago figure, while rig expense per day rose 7.7%. Consequently, the average rig margin per day moved down 43% year over year and segmental profits decreased to $4.5 million from $5.4 million in the prior-year quarter.
International Land: Helmerich & Payne’s International Land operations generated revenues of $50.8 million, down slightly from $52.5 million in the prior-year quarter on lower average rig revenue per day.
Meanwhile, rig utilization rose to 54% from 45% a year ago. Average rig expense per day reduced 20.6% from the year-ago quarter. Further, rig margin per day was $11,861, higher than the year-ago figure of $8,533 and daily rig expenses fell more than 20%. As a result, the segment’s operating earnings totaled $8 million, turning around from the year-ago quarter’s loss of $695,000.
H&P Technologies: In late November 2018, Helmerich & Payne announced the creation of its new segment ‘H&P Technologies’ to reflect the recently acquired rig technology companies –MagVar and Motive Drilling – along with Angus Jamieson Consulting, which is an industry leader in wellbore positioning.
The segment witnessed strong demand during the quarter, leading to revenues of $10.1 million, up 61% from the year-ago figure. Higher revenues were partly offset by increasing operating expenses and depreciation. Overall, segmental loss of $7.9 million was slightly narrower than the year-ago loss of $8.5 million.
Capital Expenditure & Balance Sheet
During the quarter, Helmerich & Payne spent $133.9 million on capital programs. As of Mar 31, 2019, the company had $243.9 million in cash and cash equivalents, while long-term debt stood at $491.2 million (debt-to-capitalization ratio of 10.2%).
The Tulsa, OK-based company expects activity in the U.S. land segment to decrease 5-7% sequentially during the third quarter of fiscal 2019. While average rig revenues per day are likely to be in the band of $25,500-$26,000, daily average rig cost is expected within $14,250-$14,750 during the said quarter.
Coming to the offshore segment, Helmerich & Payne expects average rig margin per day within $9,500-$10,500 in third-quarter fiscal 2019 and revenue days to edge up 1% sequentially.
However, international land segment revenue days will likely decrease 1% sequentially. Average rig margin per day is expected within $9,000-$10,000.
For fiscal 2019, Helmerich & Payne still expects its capital outlay in the band of $500-$530 million.
Zacks Rank and Key Picks
Currently, Helmerich & Payne carries a Zacks Rank #2 (Buy).
Apart from Helmerich & Payne, one can also look at some other players in the energy space like ProPetro Holding Corp. (PUMP - Free Report) , Parsley Energy (PE - Free Report) and TransCanada Corporation (TRP - Free Report) that also sport a Zacks Rank #2.
The 2019 Zacks Consensus Estimate for Midland, TX-based ProPetro is $2.42, representing some 21% earnings per share growth over 2018. Next year’s average forecast is $2.70 pointing to another 11.5% growth.
TransCanada has a 100% track of outperforming estimates over the last four quarters at an average rate of 19%.
The 2019 Zacks Consensus Estimate for Austin, TX-based Parsley is $1,53, representing some 8.5% earnings per share growth over 2018. Next year’s average forecast is $2.47 pointing to another 61.8% growth.
(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)
Radical New Technology Creates $12.3 Trillion Opportunity
Imagine buying Microsoft stock in the early days of personal computers… or Motorola after it released the world’s first cell phone. These technologies changed our lives and created massive profits for investors.
Today, we’re on the brink of the next quantum leap in technology. 7 innovative companies are leading this “4th Industrial Revolution” - and early investors stand to earn the biggest profits.
See the 7 breakthrough stocks now>>