Helmerich & Payne Inc. HP recently released first-quarter fiscal 2020 results wherein it delivered a comprehensive earnings beat on the back of higher offshore rig margin and increase in revenues from the H&P Technologies segment. The company posted adjusted quarterly earnings of 13 cents a share, surpassing the Zacks Consensus Estimate of 7 cents. However, the bottom line plunged 59.37% from the year-ago figure of 32 cents. This underperformance can be attributed to weak contributions from the U.S. Land segment. Operating revenues of $614.66 million topped the Zacks Consensus Estimate of $603.16 million. However, the top line decreased 17% from the year-ago level of $740.60 million. Segmental Performance During the quarter, operating revenues of $508.8 million were down 17.85% year over year as revenue days declined 19.37% to 17,684. U.S. Land: Rig utilization dropped 64% from the prior-year’s 68%. The segment’s operating profit came in at $56.7 million compared with the year-earlier profit of $75.7 million. However, the average rig margin per day rose 8% from the prior-year quarter to $10,418. Moreover, rig revenue per day improved in the quarter under review. Revenues came in at $40.25 million, up 9.06% from the year-ago quarter’s $36.9 million. While rig utilization and revenue days rose from the year-ago level, higher average rig expenses per day and increased direct operating expenses diminished the segment’s operating profits by 12.5% to $6.3 million from $7.2 million in the prior-year quarter. Offshore: Although daily average rig revenues increased 23.02% from the year-ago figure, rig expense per day climbed 19.36%. Moreover, the average rig margin per day surged 32.39% year over year to $13,237, beating the Zacks Consensus Estimate of $12,230. Operations generated revenues of $46.5 million, down from $66.3 million in the prior-year quarter on lower average rig revenue per day. International Land: Moreover, rig utilization decreased to 57% while average rig revenue and rig margin per day decreased 22.09% and 44% each from the year-ago quarter to $27,714 and $7,208, respectively. The segment’s bottom line resulted in an operating income of $3.11 million, lower than $6.63 million a year ago. In late 2018, Helmerich & Payne had announced the creation of its new segment ‘H&P Technologies’ to highlight the addition of the then-acquired rig technology companies to its portfolio, namely MagVar and Motive Drilling along with Angus Jamieson Consulting, an industry leader in wellbore positioning. H&P Technologies: Courtesy of surging demand during the reported quarter, the segment recognized revenues worth $18.5 million, up 25.9% from the year-ago figure. Higher revenues partly offset the company’s increasing direct operating expenses and depreciation, leading to the segment’s narrower operating loss of $4.5 million from the year-ago loss of $6.4 million. In the reported quarter, Helmerich & Payne spent $46.02 million on capital programs. As of Dec 31, 2019, the company had $355.01 million in cash and cash equivalents while long-term debt was $479.3 million (debt-to-capitalization ratio of 10.8%). Guidance This Tulsa, OK-based company expects activity in the U.S. land segment to remain flat to up 1.5% sequentially for second-quarter fiscal 2020. While average rig revenue per day is projected in the band of $25,000-$25,500, daily average rig cost is anticipated within $14,650-$15,150. Coming to the offshore segment, Helmerich & Payne envisions average rig margin per day within $10,000-$11,000 for the fiscal second quarter and revenue days to plunge 30% sequentially. Additionally, international land segment revenue days are assumed to witness a 7% decrease sequentially. Average rig margin per day is forecast to decline to $6,000-$7,000. Revenues from HP Technologies are predicted in the $16-$19 million range. For the current fiscal year, Helmerich & Payne estimates capital outlay within $275-$300 million. Zacks Rank & Key Picks Helmerich & Payne currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the space are NuStar Energy L.P. ( energy NS Quick Quote NS - Free Report) , Equinor ASA EQNR and TC Energy Corporation TRP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
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