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Helmerich & Payne, Inc. (HP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 revenue was $677.3M and diluted EPS was $0.54; adjusted EBITDA was $198.9M. NAS remained resilient while International posted start-up losses; Offshore was steady .
  • NAS direct margin/day was $19,400 and revenue/day was $38,600; exit rig count was 148 (vs 151 in Q4). Management guides NAS Q2 direct margin to $240–$260M, modestly lower on fewer days and quarter-to-quarter variability .
  • International: eight FlexRigs delivered into Saudi (three spud); post-close integration of KCA Deutag adds ~$5.5B backlog and significant Middle East presence, but near‑term headwinds from Saudi rig suspensions temper margins in Q2 .
  • FY2025 outlook updated: gross capex raised to $360–$395M, G&A to ~$280M, cash taxes to $190–$240M; interest expense for Q2–Q4 ~$75M. Management prioritizes deleveraging while maintaining the base dividend .

What Went Well and What Went Wrong

  • What Went Well

    • “The Company executed at a high level… NAS segment maintained its industry leading position” and delivered strong margins despite churn; average active rigs were 149 and exit rigs 148 .
    • KCA Deutag acquisition completed, adding ~65 Middle East rigs by Mar 31, expanding offshore management contracts (~30) and ~$5.5B backlog with investment-grade customers .
    • CFO: robust cash generation from NAS, lower legacy capex vs FY2024, and added KCA cash flows should support free cash flow, near‑term debt reduction and competitive dividend .

  • What Went Wrong

    • International Solutions posted a $15.2M operating loss and $(7.6)M direct margin on Saudi start-up costs; FX also a minor headwind .
    • GAAP diluted EPS declined sequentially to $0.54, impacted by $(0.17) of select items (transaction/integration costs and equity fair value losses) .
    • Q2 NAS direct margin guidance ($240–$260M) implies a sequential dip due to fewer days and variability in performance-contract revenues; International legacy H&P margin guided to a loss of $(7)–$(3)M .

Financial Results

MetricQ1 FY2024 (Dec 31, 2023)Q4 FY2024 (Sep 30, 2024)Q1 FY2025 (Dec 31, 2024)
Revenues ($USD Millions)$677.1 $693.8 $677.3
Operating Income ($USD Millions)$123.5 $106.5 $90.0
Net Income ($USD Millions)$95.2 $75.5 $54.8
Diluted EPS ($USD)$0.94 $0.76 $0.54
Adjusted EBITDA ($USD Millions)$215.0 $217.4 $198.9
Cash from Operations ($USD Millions)$174.8 $169.0 $158.4
Margin MetricQ1 FY2024Q4 FY2024Q1 FY2025
Net Income Margin %14.1% (95.2/677.1) 10.9% (75.5/693.8) 8.1% (54.8/677.3)
Adjusted EBITDA Margin %31.8% (215.0/677.1) 31.3% (217.4/693.8) 29.4% (198.9/677.3)

Segment breakdown

SegmentMetricQ1 FY2024Q4 FY2024Q1 FY2025
North America SolutionsOperating Revenues ($M)$594.3 $618.3 $598.1
Segment Operating Income ($M)$144.5 $155.7 $152.0
Direct Margin ($M)$256.1 $274.6 $265.5
Revenue Days13,711 13,871 13,708
Average Active Rigs149 151 149
International SolutionsOperating Revenues ($M)$54.8 $45.5 $47.5
Segment Operating Income (Loss) ($M)$5.4 $(5.1) $(15.2)
Direct Margin ($M)$10.2 $0.3 $(7.6)
Revenue Days1,173 1,336 1,689
Average Active Rigs13 15 18
Offshore Solutions (GOM)Operating Revenues ($M)$25.5 $27.5 $29.2
Segment Operating Income ($M)$3.1 $4.3 $3.5
Direct Margin ($M)$6.0 $7.1 $6.5
Revenue Days289 276 276
Average Active Rigs3 3 3

KPIs

KPI (NAS)Q4 FY2024Q1 FY2025
Recognized Revenue per Day ($/day)~$39,100/day $38,600/day
Direct Margin per Day ($/day)~$19,800/day $19,400/day
Exit Active Rigs151 148
Term Contract Rigs (date snapshot)85 (Nov 13, 2024) 87 (Dec 31, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NAS Direct MarginQ1 FY2025$260–$280M Actual Q1: $265.5M (direct margin) In-line
NAS Direct MarginQ2 FY2025—$240–$260M Lower sequential
NAS Exit Rig CountQ1 FY2025147–153 rigs Actual Q1 exit: 148 rigs In-line
NAS Exit Rig CountQ2 FY2025—146–152 rigs Maintained flat
International (Legacy H&P) Direct MarginQ1 FY2025$(2)–$2M Actual Q1: $(7.6)M Worse than guide
International (Legacy H&P) Direct MarginQ2 FY2025—$(7)–$(3)M Lower vs prior Q1 guide
International (KCA legacy) Direct MarginQ2 FY2025—$35–$50M New (post-close)
Offshore (Legacy H&P) Direct MarginQ1 FY2025$7–$9M Actual Q1: $6.5M Slightly below
Offshore (Legacy H&P) Direct MarginQ2 FY2025—$6–$8M Maintained range
Offshore (KCA legacy) Direct MarginQ2 FY2025—$18–$25M New (post-close)
Other Operations Direct MarginQ2 FY2025—$4–$6M New (post-close)
Gross CapexFY2025$290–$325M $360–$395M Raised
G&A ExpenseFY2025~$235M ~$280M Raised
Cash TaxesFY2025$140–$190M $190–$240M Raised
Depreciation (H&P legacy)FY2025~$400M ~$400M (unchanged) Maintained
R&D ExpenseFY2025~$32M ~$32M (unchanged) Maintained
Interest ExpenseFY2025 (Q2–Q4)—~$75M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2024 and Q4 FY2024)Current Period (Q1 FY2025)Trend
International expansion & KCA DeutagAnnounced acquisition; emphasized scale/diversification; noted Saudi rig suspensions risk Closed Jan 16; adds ~65 Middle East rigs by Mar 31, ~30 offshore management contracts, ~$5.5B backlog; integration underway Structurally positive long‑term; near‑term headwinds
NAS margins & performance contractsStable margins; ~50% rigs on performance contracts; margin uplift $1–$2K/day Healthy but Q2 NAS DM guided lower on fewer days/performance variability; ~half the fleet on term; backlog ~$700M Stable annually; quarterly noise
Saudi FlexRigs start-upFirst rig arrived/spud; additional exports progressing 8 delivered; 3 spud; learning curve reducing acceptance times; expect +$15–$20M margin once fully operational Improving ramp through Q2–Q3
Deleveraging & FCFPlan: maintain base dividend, suspend supplemental, ~$300M to debt reduction; liquidity strong FY2025 capex raised with KCA; target quick debt reduction; aim net leverage ≤1x by 2026; interest savings vs KCAD historical Focused deleveraging in 12–18 months
Technology/automationEfficiency, lower GHG; high-line power and automated engine load Intend to deploy H&P tech on KCA rigs; margin accretive Gradual international tech adoption

Management Commentary

  • CEO: “During the first fiscal quarter of 2025, the Company executed at a high level… NAS segment maintained its industry leading position… [and] we completed the exportation of eight rigs into Saudi Arabia… three of which have spud” .
  • CFO: “We expect operations in our North America Solutions segment to continue generating significant levels of cash flow… lower capex outlook for fiscal 2025 for H&P’s legacy operations… and the inclusion of KCA Deutag’s cash flow… will create free cash flow that we intend to use to service our near‑term debt reduction goals as well as continue to provide a competitive dividend” .
  • CEO on acquisition: KCA Deutag “establishes H&P as a global leader in onshore drilling,” increases Middle East contracted rigs from 11 to ~65 by Mar 31, adds ~30 offshore management contracts, and ~$5.5B backlog .

Q&A Highlights

  • KCA margin outlook: Q2 legacy KCA direct margin guided $35–$50M; majority of delta vs prior KCAD EBITDA run‑rate due to Saudi suspensions (~$7M per rig per year impact), with cost savings actions underway if suspensions persist .
  • NAS margin drivers: Quarter‑to‑quarter variability from performance contracts/tech revenues, not base dayrates; annual NAS direct margin expected ≥$1B in current environment .
  • Saudi ramp timing and earnings power: 3 rigs spud, 5 in country; once fully operational, ~$15–$20M margin contribution from the eight rigs .
  • Deleveraging plan: Combined liquidity remains strong; maintain base dividend; target net leverage ≤1x by 2026; ~$75M interest (Q2–Q4) with ~$35M savings vs KCAD historical .
  • Technology strategy: H&P automation/power management to be deployed internationally (including KCA rigs), expected to be margin accretive .

Estimates Context

Wall Street consensus (S&P Global) for Q1 FY2025 was not retrievable due to S&P Global rate limits during this session; as a result, comparisons vs consensus EPS and revenue are unavailable at this time. Expect estimate models to incorporate Q2 guidance (lower NAS direct margin on fewer days; addition of KCA legacy direct margins in International/Offshore) and FY2025 opex/capex revisions .

Key Takeaways for Investors

  • NAS remains a cash engine; despite quarterly variability, annual direct margin guidance ≥$1B supports deleveraging and dividend capacity .
  • International step‑change from KCA Deutag: material Middle East presence and ~$5.5B backlog provide durable cash flows, but near‑term Saudi suspensions and H&P Saudi start‑up costs will weigh on Q2 margins before improving through 2H FY2025 .
  • Guidance reset: FY2025 gross capex, G&A, and cash taxes raised with integration; model higher near‑term opex/interest ($75M for Q2–Q4) while tracking synergy and cost-out execution .
  • Segment mix shifts: monitor International/Offshore contributions from KCA (Q2 direct margin ranges provided), alongside NAS flat rig exit (146–152) and stable pricing .
  • Performance contracts and technology remain margin levers in NAS; international tech deployment offers incremental margin accretion over time .
  • Liquidity and credit: investment-grade profile intact; base dividend maintained; supplemental paused to prioritize rapid debt reduction over 12–18 months .
  • Trading implications: Near-term stock moves likely tied to Q2 guide execution (NAS DM range realization, Saudi ramp cadence) and visibility on timing of Saudi suspension lifts; medium‑term thesis anchored on diversified backlog/cash flow and deleveraging trajectory .