Helmerich & Payne (HP) Q4 Loss Narrows on Higher Activity

Shares of Helmerich & Payne Inc. HP rose more than 2% in premarket trade after the contract drilling services provider reported fourth quarter fiscal 2017 adjusted operating loss of 13 cents per share, narrower than the Zacks Consensus Estimate for a loss of 21 cents.

The bottom line also compared favorably with the year-ago adjusted loss of 33 cents. The outperformance was driven by sharply higher drilling activity at its biggest segment – U.S. Land.

Revenues of $532.3 million was up 60.5% from the fourth fiscal quarter of 2016 and also came above the Zacks Consensus Estimate of $488 million.

Segment Performance

U.S. Land: During the quarter, operating revenues totaled $439.4 million (83% of total revenue), up 84.4% year over year. While average rig revenue per operating day was $21,944 - 22% below the year-ago period, average rig margin per day was down 32.4% to $8,039. But utilization levels more than doubled to 55% (from 25% in the fourth fiscal quarter of 2016), significantly narrowing the segment operating loss to $4.2 million. In the year-earlier quarter, loss from the unit was $69.7 million.

Offshore: Helmerich & Payne’s ‘Offshore’ revenues edged up 1.9% year over year to $32.5 million. Daily average rig revenue jumped 30.8% to $34,797 and average rig margin per day rose 45.3% to $12,088. This led to the steep increase in the segment operating income, which soared 97.7% from the previous year period to $5 million. However, rig utilization came down from the year-ago level of 78% to 67%.

International Land: Helmerich & Payne’s ‘International Land’ operations recorded revenues of $55.1 million, down slightly from $58.4 million in the previous-year quarter. Average daily rig revenue was $40,540, up 6.5% from the corresponding period last year and rig margin per day was $12,386, up from the $10,619 a year ago.

However, average rig expense per day increased 2.6%, while activity levels fell to 37% from 39% a year ago. As a result, the segment incurred operating losses of $2 million, wider than the $162,000 in the fourth fiscal quarter of 2016.

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

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

Capital Expenditure & Balance Sheet

During the quarter, Helmerich & Payne spent approximately $97.3 million on capital programs bringing the full-year figure to $397.6 million. As of Sep 30, 2017, the company had approximately $521.4 million in cash, while long-term debt stood at $492.9 million (debt-to-capitalization ratio of 10.6%).

Guidance

The Tulsa, OK-based company expects activity in the U.S. land segment to rise by 4%-5% sequentially during the first fiscal quarter of 2018. While the average rig revenue per day is likely to be around $21,700, daily average rig cost is expected at roughly $14,100 during next quarter.

As for the offshore segment, Helmerich & Payne sees the average rig margin per day to be around $13,000 during the first quarter of fiscal 2018 and revenue days to fall 6% sequentially.

Lastly, the international land segment will likely experience a 20% increase in revenue days during the next quarter, while average rig margin per day is expected to average roughly $8,000.

For fiscal 2018, Helmerich & Payne expects a capital budget between $250 million and $300 million.

Zacks Rank & Stock Picks

Helmerich & Payne currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked energy players like ExxonMobil Corp. XOM, ConocoPhillips COP and PBF Energy Inc. PBF. All are Zacks Rank #1 (Strong Buy) stocks. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Irving, TX-based ExxonMobil is the world’s largest publicly traded oil company, engaged in oil and natural gas exploration and production, petroleum products refining and marketing, chemicals manufacture, and other energy-related businesses. The company’s expected EPS growth rate for three to five years currently stands at 13.1%, comparing favorably with the industry's growth rate of 8.6%.

Houston, TX-based ConocoPhillips is a major global exploration and production (E&P) company with operations and activities in 21 countries that include the U.S., Canada, the U.K./Norway, China, Australia, offshore Timor-Leste, Indonesia, Libya, Nigeria, Algeria, Russia and Qatar. The 2017 Zacks Consensus Estimate for this company is 54 cents, representing some 120.4% earnings per share growth over 2017. Next year’s average forecast is $1.67, pointing to another 208.2% growth.

PBF Energy is a leading independent refiner, transporter and marketer of petroleum products with a combined crude processing capacity of roughly 900 thousand barrels per day. Over 30 days, the Parsippany, NJ-based firm has seen the Zacks Consensus Estimate for 2017 and 2018 increase 35.9% and 20.5%, to $1.59 and $2.88 per share, respectively.

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