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Helmerich & Payne, Inc. (HP)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY2025 revenue rose to $1.016B (+47.5% q/q; +47.7% y/y), driven by consolidation of KCA Deutag (KCAD) operations; diluted EPS fell to $0.01 as start-up costs in Saudi and transaction/integration charges weighed on profitability .
  • Versus Street: Revenue beat ($1.016B vs $955M estimate*), but EPS was a significant miss ($0.01 vs $0.616 estimate*); Adjusted EBITDA was broadly in-line/slightly above consensus at ~$241.5M* .
  • Guidance: Q3 direct margin ranges lowered in North America and International (reflecting rig suspensions and volatility), while FY2025 depreciation raised to ~$595M (from TBD/legacy ~$400M), interest expense for remainder FY2025 trimmed to ~$50M (from ~$75M prior), capex maintained at $360–$395M .
  • Strategic update: KCAD integration on track; identified $50–$75M aggregate run-rate cost reductions by FY2026 (exceeding initial $25M synergy target), and debt paydown underway ($25M repaid in Q2, ~$175M targeted by YE’25) .

*Values retrieved from S&P Global

What Went Well and What Went Wrong

What Went Well

  • Completed KCAD acquisition, establishing HP as a leading global driller with expanded presence and offshore scale; management expects “well in excess of $25M” synergies and total cost reductions of $50–$75M by FY2026 .
  • North America Solutions resilience: operating income $151.9M; direct margin $265.6M despite fewer revenue days, supported by performance-based contracts and technology solutions .
  • Offshore Solutions strength: operating income rose to $17.4M (from $3.5M q/q); direct margin $26.2M with KCAD offshore contribution; backlog ~$2.5B referenced on the call .

Quotes:

  • “This quarter marks a significant achievement… completed our acquisition of KCA Deutag… positioning us as a leading global drilling company.” — CEO John Lindsay .
  • “We expect… overall cost structure to be reduced by $50 to $75 million.” — CFO Kevin Vann .
  • “Our Offshore Solutions segment continues to produce strong and steady cash flows.” — CEO John Lindsay .

What Went Wrong

  • EPS compressed to $0.01; select items included $(0.11) per share of transaction/integration losses and $(0.05) from actuarial assumption changes; international start-up costs and rig suspensions in Saudi weighed on results .
  • International Solutions operating loss widened to $(35.0)M; rig suspensions and start-up delays in Saudi drove lower margins sequentially .
  • Cash flow from operations $56.0M was constrained by front-loaded capex and working capital changes tied to Saudi unconventional start-up .

Data points:

  • Net income attributable to HP: $1.654M; diluted EPS: $0.01 .
  • International direct margin: $26.9M vs loss of $(6.9)M in Q1; operating loss worsened to $(35.0)M .
  • Operating cash flow: $56.0M; Adjusted EBITDA: $241.5M .

Financial Results

Consolidated Financials (Quarterly progression: oldest → newest)

MetricQ2 2024Q1 2025Q2 2025
Operating Revenues ($USD Millions)$687.9 $677.3 $1,016.0
Operating Income ($USD Millions)$111.2 $90.9 $42.2
Net Income Attributable to HP ($USD Millions)$84.8 $54.8 $1.7
Diluted EPS ($USD)$0.84 $0.54 $0.01
Adjusted EBITDA ($USD Millions)$222.8 $199.8 $241.5

Q2 2025 Actual vs Wall Street Consensus

MetricActualConsensus*Beat/Miss
Revenue ($USD Millions)$1,016.0 $955.4*Beat
Diluted EPS ($USD)$0.01 $0.616*Miss (Significant)
Adjusted EBITDA ($USD Millions)$241.5 $240.7*In-line

*Values retrieved from S&P Global

Segment Breakdown (Q2 2025)

SegmentOperating Revenues ($MM)Segment Operating Income ($MM)Direct Margin ($MM, Non-GAAP)
North America Solutions$599.7 $151.9 $265.6
International Solutions$247.9 $(35.0) $26.9
Offshore Solutions$149.1 $17.4 $26.2
Other & EliminationsN/A$(9.8) (Other $(1.4), Eliminations $(8.5)) N/A

KPIs

KPIQ2 2024Q1 2025Q2 2025
NAS Revenue Days14,123 13,708 13,416
NAS Average Active Rigs155 149 149
International Average Active Rigs11 18 69
Offshore Average Active Rigs3 3 3
NAS Direct Margin per Day ($)$19,800 $19,400 $19,800
Total Management Contracts (Offshore)3 (Dec) 3 34

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NAS Direct Margin (Non-GAAP)Q2 FY2025 (prior)$240–$260MM ——
NAS Direct Margin (Non-GAAP)Q3 FY2025 (current)—$235–$260MM Maintained lower band vs prior quarter outlook
NAS Avg Contracted RigsQ3 FY2025—~143–149 New guidance
International Direct Margin (Non-GAAP)Q2 FY2025 (prior)H&P legacy: $(7)–$(3)MM; KCAD legacy: $35–$50MM ——
International Direct Margin (Non-GAAP)Q3 FY2025 (current)—$25–$35MM (ex-FX) Lower vs combined Q2 guidance; sequential improvement expected
International Avg Contracted RigsQ3 FY2025—~85–91 (68–74 generating revenue) New guidance
Offshore Direct Margin (Non-GAAP)Q2 FY2025 (prior)H&P legacy: $6–$8MM; KCAD legacy: $18–$25MM ——
Offshore Direct Margin (Non-GAAP)Q3 FY2025 (current)—$22–$29MM Higher vs H&P-only prior; reflects KCAD consolidation
Other Direct Margin (Non-GAAP)Q3 FY2025—$2–$5MM New guidance
Capex (Gross)FY2025$360–$395MM $360–$395MM Maintained
DepreciationFY2025Legacy ~$400MM; PPA not completed ~$595MM Raised
G&AFY2025~$280MM ~$280MM Maintained
Cash TaxesFY2025~$190–$240MM ~$190–$240MM Maintained
Interest ExpenseRemainder FY2025~$75MM (Q2–Q4) ~$50MM (Q3–Q4) Lowered
DividendOngoingBase $0.25/share declared (Dec 11) ~$25MM returned in Q2 via dividends Ongoing program reaffirmed

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 FY2024, Q1 FY2025)Current Period (Q2 FY2025)Trend
International expansion & KCAD integrationAnnounced KCAD deal; Middle East scale; strong backlog expectations Integration progressing; synergies >$25M; total cost reductions $50–$75M by FY2026 Positive execution despite near-term headwinds
Saudi rig suspensionsFirst suspensions in Aug; 1-year duration noted; start-up of FlexRigs ongoing Suspensions impacted Q2; visibility limited on timing; expect Q4 inflection as FlexRigs fully operational Near-term pressure, improving into Q4
Performance-based contracts (U.S.)~50% of fleet; supports margins through cycles >50% preferred; helps offset pricing pressure; margin uplift continues Stable adoption; margin support
Offshore solutionsH&P legacy steady; KCAD adds scale/asset-light contracts Strong cash flows; largest global O&M partner; $2.5B backlog Strengthening
Macro & tariffsCautious sentiment; volatility OPEC+ output, U.S. tariffs adding uncertainty; moderating rigs Headwinds near term
Technology & automationDifferentiation via tech solutions Expanding automation internationally; potential margin accretion Expanding footprint

Management Commentary

  • “We’re confident this international expansion will benefit us over the long-term… despite near-term challenges” — CEO John Lindsay .
  • “Expect… overall cost structure to be reduced by $50 to $75 million… full impact… during fiscal year 2026” — CFO Kevin Vann .
  • “Direct margins in the International Solutions segment in the third fiscal quarter will fall short… we… expect to see improvement… on a sequential basis” — CEO John Lindsay .
  • “H&P maintains an investment-grade credit rating… anticipating… repaid at least $175M [term loan] by end of this calendar year” — CFO Kevin Vann .

Non-GAAP adjustments (Q2): EPS included $+0.16 FMV gains, $(0.11) transaction/integration, $(0.05) actuarial changes, $(0.01) equipment FMV impairment; adjusted net income ~$1.86M ($0.02/share) .

Q&A Highlights

  • Saudi suspensions: Management lacks clarity on timing; historical pattern suggests rigs return post budget cycles; modeled inflection in Q4 as FlexRigs fully operational .
  • International EBITDA trajectory: KCAD’s prior quarterly run-rate ~$80M EBITDA; rig suspensions reduce ~$7M per rig annually; cost actions underway to mitigate .
  • North America rig count and pricing: Expect modest declines with lower oil; maintaining discipline via performance-based contracts; utilization of truly available super-spec rigs remains high .
  • Offshore: Pockets of strength; pursuing new business; steady, asset-light cash flows .
  • G&A synergies: Path to $50–$75M run-rate G&A reductions by FY2026; exit rate details to come .

Estimates Context

  • Revenue beat: $1,016.0M vs $955.4M estimate* — driven by KCAD consolidation and steady NAS margins .
  • EPS miss: $0.01 vs $0.616 estimate* — transaction/integration costs, actuarial changes, Saudi start-up costs and foreign exchange losses compressed earnings .
  • Adjusted EBITDA broadly in-line/slightly above: $241.5M vs $240.7M estimate* .
  • Forward look: Q3 consensus EPS ~$0.223* and revenue ~$998.7M* imply modest sequential improvement; management guides NAS direct margin $235–$260M and International $25–$35M .

*Values retrieved from S&P Global

Key Takeaways for Investors

  • Near-term EPS pressure from Saudi start-up and suspensions, but revenue/Adjusted EBITDA resilient due to KCAD consolidation and NAS margin discipline .
  • Street likely reduces EPS estimates to reflect higher depreciation (~$595M) and lingering international headwinds; revenue estimates may drift higher on offshore/international scale .
  • Focus for next quarter: execution on FlexRig start-up (8 rigs) and cost actions to offset suspensions; watch for sequential direct margin improvement in International .
  • Medium-term thesis: KCAD integration, $50–$75M run-rate cost reductions, technology deployment internationally, and asset-light offshore cash flows support margin stability and deleveraging .
  • Capital allocation: front-loaded capex normalizing; debt paydown ($175M by YE’25) and base dividend continuation provide support; liquidity strong with $950M undrawn revolver .
  • Trading implications: Expect volatility around international headlines and commodity/tariff dynamics; positive catalysts include Q4 international margin inflection, synergy updates, and backlog wins .
  • Real estate review: Engaged Eastdil Secured to evaluate options for Utica Square; potential monetization aligns with post-acquisition asset review .