Helmerich & Payne (HP) Q3 2024 earnings summary

Executive summary

• Announced acquisition of KCA Deutag for $1.97 billion in cash, creating a global leader in onshore drilling with leading positions in the U.S. and Middle East, and accelerating international growth strategy.

• Transaction is expected to be immediately accretive to cash flow and free cash flow per share, with double-digit accretion projected for 2025 and returns expected to exceed cost of capital by 2026.

• Combined company will have a robust $7.2 billion contract backlog, enhancing cash flow stability and visibility, and a more diversified and resilient earnings base.

• Board of Directors unanimously approved the transaction, expected to close before year-end 2024, subject to regulatory approvals.

• Fiscal Q3 2024 net income was $89 million ($0.88 per diluted share), with operating revenues of $698 million, up from $688 million in Q2 2024.

Financial highlights

• Q3 FY24 net income: $89 million ($0.88 per diluted share); operating revenues: $698 million, up from $688 million in Q2.

• Q3 cash flow from operations was $197 million; free cash flow was approximately $21 million after capex and dividends.

• Pro forma 2023 operating EBITDA increases by 30%, with international diversification rising to ~25%.

• Transaction multiple of 5.4x run-rate EBITDA, below peer average of 11.1x, reflecting attractive valuation.

• Cash and short-term investments at June 30, 2024, were $290 million.

Outlook and guidance

• North America Solutions segment expected to end fiscal Q4 with 147–153 rigs working; rig count is stabilizing.

• International activity to remain steady, with the first Saudi Arabia rig commencing operations in Q4 and additional rigs to follow.

• Full-year 2024 capex expected at the top end of $500 million; international expansion capex is $175 million.

• Annual base dividend of $1/share to be maintained, with supplemental dividend suspended in fiscal 2025.

• Full run-rate synergies of $25 million expected by 2026.