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Why Helmerich & Payne’s Income Fell in Fiscal 4Q15

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Nov. 13 2015, Published 11:20 a.m. ET

Price movement of Helmerich & Payne

Helmerich & Payne (HP) has a market cap of $5.8 billion. After its fiscal 4Q15 earnings report, HP fell by 3.6% to close at $53.44 per share on November 12, 2015. The company’s price movements on weekly, monthly, and YTD bases are -8.3%, -6.1%, and -17.3%, respectively.

Technically, the stock has broken the support of 20-day, 50-day, and 200-day moving averages throughout 2015. Currently, it’s trading 5.5% below its 20-day moving average, 0.25% above its 50-day moving average, and 14.8% below its 200-day moving average.

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The PowerShares Dynamic Oil & Gas Services Sector Portfolio ETF (PXJ) invests 5.0% of its holdings in Helmerich & Payne. The ETF tracks a tiered index of companies in the oil and gas services sector. The index uses a multifactor methodology to select holdings. The YTD price movement of PXJ was -18.7% as of November 11, 2015. The VanEck Vectors Oil Services ETF (OIH) invests 4.6% of its holdings in Helmerich & Payne.

The competitors of Helmerich & Payne (HP) and their market caps are listed below:

  • Transocean (RIG)—$5.4 billion
  • Noble Corporation (NE)—$3.2 billion
  • Nabors Industries (NBR)—$3.1 billion

Helmerich & Payne’s performance in fiscal 4Q15 and fiscal 2015

The company reported 4Q15 revenue of $566.1 million—a fall of 14.2% when compared to revenue of $659.7 million in 3Q15. Revenue from the US land drilling, offshore drilling, and international land drilling segments fell by 15.0%, 4.3%, and 15.8%, respectively, in 4Q15. Average rig revenue per day of these segments fell by 10.3%, 18.0%, and 5.2%, respectively, in 4Q15.

The company’s operating income as a percentage of revenue rose by 29.1% in 4Q15. Operating income fell to -$16.0 million in 4Q15 as compared to operating income of $132.8 million in 3Q15. The company’s net income and EPS (earnings per share) fell to -$21.2 million and $0.20, respectively, in 4Q15, as compared to net income and EPS of $90.9 million and $0.84, respectively, in 3Q15.

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According to John Lindsay, Helmerich & Payne’s president and CEO, “These past 12 months have brought very low and volatile oil prices and the industry rig count in the US has fallen to levels below those experienced during the recession in 2009. Drilling activity and service pricing levels continue to decline, and for many the major theme across the industry is survival. No company is immune to these conditions and, fortunately, a cornerstone of our strategy has always been fiscal conservatism, which continues to serve us well. We believe our advanced rig fleet, long-term contract backlog, strong customer base and best-in-class reputation for customer service and value creation position us very well in this difficult environment.”

Fiscal 2015 results

In fiscal 2015, the company reported revenue of $3,165.4 million, a fall of 14.9% on a YoY (year-over-year) basis. Revenue days of the US land and international land segments fell by 24.6% and 10.0%, respectively, and revenue days of the offshore segment rose by 5.0% in fiscal 2015, as compared to revenue days in fiscal 2014.

The company’s operating expenses as a percentage of revenue rose by 9.8% in fiscal 2015. Net income and EPS fell to $422.2 million and $3.87, respectively, as compared to net income and EPS of $708.7 million and $6.46, respectively, in fiscal 2014. The company’s cash and cash equivalents and current ratio rose to $718.0 million and 4.1, respectively, as compared to the cash and cash equivalents and current ratio of $360.9 million and 2.5, respectively, in fiscal 2014.

About Helmerich & Payne

Helmerich & Payne is a contract drilling company. It engages in the drilling of oil and gas wells for exploration and production companies.

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