Helmerich & Payne (NYSE:HP), a leading oil and natural gas drilling company, delivered mixed fiscal 2025 first-quarter results on Feb. 5.
For the period, which ended Dec. 31, earnings per share (EPS) of $0.54 were significantly below the anticipated $0.68. Revenue held steady year over year at $677 million, but it also missed analysts' $692 million estimate as the company faced challenges in the U.S. market. Following the end of the quarter, however, it closed on its acquisition of KCA Deutag, which meaningfully boosted its footprint in the Middle East.
| Metric | Fiscal Q1 2025 | Fiscal Q1 2025 Analysts' Estimate | Fiscal Q1 2024 | % Change |
|---|---|---|---|---|
| EPS | $0.54 | $0.68 | $0.94 | (42.5%) |
| Revenue | $677 million | $692 million | $677 million | 0.0% |
| Net income | $55 million | N/A | $95 million | (42.1%) |
| Adjusted EBITDA | $199 million | N/A | $215 million | (7.5%) |
Source: Analysts' estimates for the quarter provided by FactSet.
Overview of Helmerich & Payne
Helmerich & Payne is a player in the oil and natural gas drilling sector, with an extensive fleet of advanced AC drive drilling rigs. The company's North America solutions segment is its largest, providing nearly 88.7% of its fiscal 2024 revenue. The segment's focus lies in unconventional shale plays, given its technological edge with super-spec rigs.
Recently, the company has concentrated on international expansion and introducing innovative drilling technologies. It put significant focus on expanding its presence in the Middle East through strategic acquisitions to leverage growing global energy demand, mitigate regional market risks, and reinforce its revenue streams.
Quarterly Performance Highlights
In the quarter, North America solutions, Helmerich & Payne's core business in land drilling, experienced a $4 million decline in operating income to $152 million. This was due to reduced revenue days and a drop in active rig count from 151 to 148. The segment’s direct margin saw a reduction of $9.1 million, indicating profitability pressures.
The international solutions segment's operating losses surged due to startup costs in Saudi Arabia. Nevertheless, the KCA Deutag acquisition is expected to significantly expand the company's rig count in key Middle East markets from 11 to 65, which could boost margins in future quarters.
The acquisition of KCA Deutag, finalized in January, will be pivotal for Helmerich & Payne's Middle East agenda. This $5.5 billion deal broadens its service offerings and customer depth, and diversifies its revenue flows, albeit at near-term financial integration costs.
Revenue sensitivity to oil and natural gas capital expenditures is high for Helmerich & Payne. Stable oil prices were countered by geopolitical uncertainties, which impacted drilling demand in the quarter.
Looking Forward
Helmerich & Payne aims to sustain its North American rig numbers while augmenting the contribution from its international solutions segment. Management projects that direct margins will face ongoing pressure due to transitional costs and market dynamics. Its focus remains on generating cash flow and integrating the KCA Deutag acquisition.
Investors should observe developments in the Middle East operations and gauge impacts on margin trajectories. The overall strategy is angled towards sustaining technological lead and operational agility, while navigating the complex dynamics of the global oil and gas markets.
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