Helmerich & Payne, Inc. (NYSE:HP) Q2 2019 Earnings Conference Call Transcript

Apr 25, 2019 • 11:00 am ET


Helmerich & Payne, Inc. (NYSE:HP) Q2 2019 Earnings Conference Call Transcript


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Good day, everyone, and welcome to today's Fiscal Second Quarter 2019 Earnings Conference Call for Helmerich & Payne. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions) Please note, this call is being recorded.

It is now my pleasure to turn today's program over to Dave Wilson, Director of Investor Relations. Please go ahead.

Dave Wilson

Thank you, Priscilla, and welcome everyone to Helmerich & Payne's conference call and webcast for the second quarter of fiscal year 2019.

With us today are John Lindsay, President and CEO; and Mark Smith, Vice President and CFO. John and Mark will be sharing some comments with us, after which, we'll open the call for questions.

Before we begin our prepared remarks, I'll remind everyone that this call will include forward-looking statements as defined under the securities laws. Such statements are based on current information and management's expectations as of this date, and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially.

You can learn more about these risks in our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, and our other SEC filings. You should not place undue reliance on forward-looking statements. And we undertake no obligation to publicly update these forward-looking statements. We will also make reference to certain non-GAAP financial measures such as segment operating income and operating statistics. You will find the GAAP reconciliation comments and calculations in yesterday's press release.

With that said, I'll now turn the call over to John Lindsay.

John W. Lindsay

Thank you, Dave, and good morning, everyone.

From the outset, this quarter was challenged with industry uncertainty. So, I am pleased to report that the Company not only stayed on target and delivered sequentially improved net income, but also achieved two significant milestones. Concern over crude oil prices persisted from the prior quarter, which softened demand for incremental super-spec rigs. However, H&P completed the planned upgrades already in the pipeline.

With those rigs, we added significant term backlog at attractive rates and margins, and our total number of super-spec FlexRigs increased to 230 at quarter end, representing more than 40% of the industry's US super-spec capacity. Our current US rig count is approximately 220 FlexRigs.

Considering the trends we are seeing in rig releases, the higher levels of churn across certain basins and the current demand, we believe the Company's rig count will bottom out early during this third fiscal quarter, and FlexRig super-spec utilization will remain in the 90% plus range. Importantly, this level of utilization should be supportive of the current pricing environment.

Another factor that is supporting super-spec pricing is the top five US land drillers own approximately 80% of the active super-spec fleet. With the industry super-spec fleet already over 90% utilized, this degree of supply concentration also promotes a sturdier pricing environment going forward.

The oil