HP - Earnings call transcript Q1 2019 | Helmerich & Payne, Inc.

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Operator

Good day, everyone, and welcome to today's Fiscal Second Quarter 2019 Earnings Conference Call for Helmerich & Payne. [Operator Instructions] Please note this call is being recorded. It is now my pleasure to turn today's program over to Dave Wilson, Director of Investor Relations. Please go ahead.

Dave Wilson

Thank you, Priscilla, and welcome everyone to Helmerich & Payne's conference call and webcast for the second quarter of fiscal year 2019. John and and CFO. are Smith, and today President Vice us Lindsay, CEO; President Mark With for John comments which, call with Mark us, and will after we'll be open sharing some questions. the

not remarks, expectations I'll we will forward-looking date, as on Such of as statements current our Laws. are Before under Securities are remind this include the begin guarantees defined statements that performance. this everyone information of call future prepared based and and management's

are difficult risks, certain uncertainties, that and involve predict. statements to assumptions Forward-looking

As could such, and materially. differ results our actual outcomes

You Annual can and our on in learn more about XX-Q, these quarterly Report risks our our Form filings. XX-K, on SEC other Form reports

place undertake reliance publicly forward-looking to should forward-looking statements. these undue no not obligation And we update You on statements.

to segment such financial reference certain operating statistics. We non-GAAP operating and will as be measures income also making

comments Lindsay. find that With over I'll press will GAAP You the calculations to in yesterday's the release. and now call John turn said, reconciliation

John Lindsay

everyone. you, quarter morning Thank outset, with and challenged uncertainty. this was Dave, good From the industry

So, also which I delivered super-spec income, the prices quarter, to net from not for company demand milestones. improved sequentially target the but stayed persisted that on rigs. two over only crude and significant prior Concern oil am incremental softened achieved report pleased

of than representing However, capacity. super-spec FlexRigs pipeline. backlog end, we number the added and increased already at margins, quarter H&P significant to of at more attractive in the super-spec upgrade With industry's completed total our term planned XXX the those rigs, XX% rates U.S. and

of fiscal we early will Company's certain and FlexRig range. out XXX XX% remain count during Our higher in in the utilization will releases, trends And across current Considering the bottom this plus we basins FlexRigs. levels seeing approximately demand, rig rig believe super-spec third is current count are quarter. the the the U.S. rig churn

environment. Importantly, current this supportive utilization should of of pricing level be the

supporting land XX% the U.S. fleet. is drillers is the factor of Another active super-spec approximately own super-spec that pricing top five

in dividend cash were regarding this years technology platform up by to call, down, is activity. and own these goal of to XX long-term we WTI fleet our when wells to in on On well utilized, In in XX policy. years. the an with customer also price environment degree with the are a the deliver of prioritization seeing movement higher spending focused last over pricing bring cash XX% FlexRig and the forward. we are CapEx. for of is since over leader past value cash our customers towards customer focus up, a a and right the additional in are flow. sturdier disciplined with XX% on already and exceptionally and a are going placement through fleet our super-spec of our digital positioned even of activity drilling wellbore today, software, both environment this this returns and the right where is hardware, and flows Further, They outlooks a had promotes to concentration past on reductions put performance the less industry the over improve with of on and would more some returns and we year. performance align cycles, that to industry. on believe This for capital H&P proven unconventional a includes which shareholder. with the flat. January dividend allocation an economics. mix Part action price behavior aligned Clearly, and is Yet growth. quality approach determining improve our added that and Principles be returning are industry rig of kind with the changing, that principles temperate on increasing With has We calendar response beginning said emphasis supply shareholders can resonate focused kind the oil focused deployed The

customers, represent a by far, their that, be expectation We in an H&P's totaled the is than January count our of the compared setting current we of of XXXX. budgets which their overall X% budgets approximately $XX customers then of that approximately barrel, the found We working budgeted price year-over-year. the with XX% be to less $XX flat more are would thus rig also expect And to through will the rigs, announced only on of company approximately industry do down WTI. rest the we this rig reticent an a is rig XX remain for X% compared to horizontal aggregate with to XXXX $XX rigs. approximately expected supports count quarter. about rigs. expressed the top majors reduced reduction our budgets and that the likely Further down XXXX CapEx XXXX XX view This XXX our and would CapEx call public Even for CapEx

and E&P We of public flat course, than WTI. prices we oil or price less and strategy to common including rig least would the oil prices, more price higher the and the improves experienced in practice and know If private rig with XXXX. have has count we volatility caveat is this perhaps, the that half second half of we'll who know strong better there I allocation like take to remained one would E&Ps capital index than of activity in Of advantage is if of CapEx of back align the XXXX. oil be at true, the

and has and oil interference but higher have trend more segment. multi-well Industry do begin I wells Both more But let quality, milestone in requirements. wellbore. a with drill discussing type to the our additional well produced more isn't with industry issues. to as in sufficient anymore, accurately during have less to child and parent important toward our of achieved only the need documented these fewer customers manufacturing to ushered important are less. It on that pads, placed produced wellbores me this tortuosity quarter. a reliability and will the new studies Technologies also need first fast placed efficiently the With wellbores for it's accurately when H&P factors more touch with minute want consider more

We have commitment first super-spec FlexRig a to send overseas. our

We our leadership have would international position basins opportunities FlexRigs. drilling to H&P's US to the long believed further US unconventional in deploy lead super-spec

including fleet FlexApps we come the from first signed quarter. Our deploy and this to solutions the those super-spec deploy of fruition Argentina letter FlexRig later has overseas. technology our as H&P to intent our slide That and software to U.S. land a

this it what but for portends Latin about excited opportunity and as are other H&P's locations only not We international well. for business American

the segment technology Now let's focus our our second the milestone. to significant shift H&P and

as During is drilling uniform its drilling FlexRigs fiscal scalable H&P on AutoSlide. automation second next FlexRig result system. quarter, automation of We step technology in is our that the operating believe commercialized AutoSlide evolutionary a the

Our software-based offerings and performance. to our segment designed for enhance are from MOTIVE along downhole which our technology FlexRigs with MagVAR FlexApps tools H&P with and drilling

to impact the risk of returns have financial improving lowering bolstering I drilling, dynamics As by push earlier, of well of continue meaningful on the through the mentioned the as benefits the and production envelope economics a life H&P interference, technologies well. manufacturing wellbore on thereby customers

benefits to autonomous that are provide. committed We unlock drilling with technologies to partnering these our can customers

also business offerings technology we developed. not involves only the the differentiation platform important technology of model Another have our but

to is the it strategy contracted and our Our is available utilize rigs. allows distinction on is of customers H&P across rigs unique. and all software entire This technology digital our FlexRigs. because designed of software just Most important not datasets their and an fleet

call the to several to turning during the over I excellent company before quarter. accomplishments the So results and achieved with recognizing want that close Mark, operational technical

conditions securing excellence. to by is respond paramount. of working now, a new Mark. opportunities I'll to to uncertain achievements to on deliver the people our adapt goals efforts Our These possible forming success exemplify partnerships for to without commitment call our while customers. as our team the turn And market ability strong with and are and H&P's These over efforts long-term

Mark Smith

for our operating I update third XXXX as position. results will provide comment John. guidance financial year Thanks, second fiscal fiscal quarter guidance review and appropriate, quarter, our on XXXX the Today, full

attributable in the working Let's the were completed is experience and costs previous settlement revenue operating $XXX rate projects, is The our quarter. well the expenses and for as the not totaled in operating fiscal in certain U.S. changed. rigs Land effect U.S. average administrative operating the of rig primarily This the quarter million year full full below million General second company quarter. daily than for in costs quarter. million second primarily The lower versus daily decrease due regular in expected. the $XX to of the expected on a Land legal $XXX supplies, for million for guidance million for number of and start The to Total direct first The year reactivation in run lower due G&A of quarter. million revenues but has quarterly timing generated is costs the to decrease second guidance -- quarterly one-time segment costs. were to both for our decrease as company as the $XXX $XXX the maintenance in $XX recently previous quarter. with highlights operating a versus incurred

and in overall $X.XX quarter, for rate share quarter. state incremental includes the versus effective this was was and U.S. taxes approximately well tax earned per H&P Our previous rate XX% income of line $X.XX our as from fiscal operations as result the Summarizing expected with rate. continuing statutory the the in quarter, annual diluted second foreign which

a per earnings in items our impacted release. -- negatively highlighted was per quarter of @X.XX by select as selected Second press share net share

adjusted per for first quarter select the million. $X.XX XXXX second Capital items expenditures adjusted quarter the of diluted versus an Asset in the $X.XX fiscal were second during share were fiscal quarter. $XXX earnings

fiscal quarter. when lines year expended So XX% as our with frontloaded. that CapEx, the approximately be up would our of with guidance revise have last CapEx we XXXX QX CapEx guidance This combined full

exited maintain approximately U.S. XX% quarter. our of maintained rig in to from fiscal an of XXX active a detail in will share over market rig Land which Turning four quarter-to-quarter. super-spec cycle number beginning approach XX% leading I share a in But the XX% in the market quarter fiscal U.S. bottom three Land Eagle as approximately than average decrease X% we will level Permian, that to XX% the the top in class was XX%. in we utilization quarter-to-quarter. contracted anticipate rigs, in with the the discuss more our second of Scoop/Stack. moment. U.S. our this H&P current and rigs segments basins H&P Ford segment, third And will count a the

type the and in we slowing in Despite were fiscal Our respectively. super-spec activity contracted to space. rigs conditions levels in market quarter, market each second are XX maintain able XXX, XX the pricing

revenue in rig day our per that revenue line are lower early rains average due lower revenues Our adoption expense rate XX,XXX. offerings XXX approximately for fleet Included per our $XXX to termination is per across reactivation the quarter. previously This the and our is guided the and quarter expected last The in increasing day below here XX,XXX with supplies increased to of day excluding decreased average guidance. expenses rig customer FlexApp from adjusted per to maintenance costs. than

a the rig to fiscal also late contracts, XXXX third quarter U.S. second experienced Land, fiscal ahead releases. to while number work quarter upgrades under quarter Looking for term putting of we of

a of to releases revenue of are translates to in is result decrease We XXX during XX,XXX net super-spec quarter, X% To of during the expect we the rig revenue quarter. currently average my of to which comment, to X% number approximately rig which to quarter call. XX,XXX. where rig we Compared reiterate third per a range utilization will count approximately in today's as of per XX% rigs flat at we be sequential within the expect average the remain and XX,XXX to day approximately days. the the third an day, This moderate, second quarterly adjusted are previous seeing range

significant the rigs related in day. low Land This normalized per segment the day in leading term upfront the reactivation expenses to flex in reactivation related quarter. related day time. number day reduced XX for XXs. the expenses inactive released amount is have expenses these rigs working of through beginning the this $XX,XXX with Note to that pricing average super-spec quarter, spot average directly and a markets per rate to the Our rig ranges expense re-costs, remains average that for third per per in Including continue toward rigs to and directly expense idle constant XX,XXX in average the the figure been normalized day a expected day of while U.S. and to idling excludes at is upfront time. mid the expense rig mid day per number to of will to The per of of down rigs range the the for rig XX,XXX expense edge is both in moving the $XX,XXX upgrades come rig be and impact

the rigs expenses quarter. commenced note will or the had and working However, active that term XXX We XXX second still toward an today quarter reactivation our third the from XX% of number that of that about upgrades second average contracts during the see is XXX quarter end rigs under of rigs.

rates. XXX term the rigs have XXX the rigs to contract the quarter average and earning day an in average of quarter under third expect We fourth in fiscal current

associated overall term per revenues. in early receive the during have is experienced calendar The second terminations that the cancellations termination were in a and our remaining remain quarter today's day the revenue higher couple For million rigs day material rate average. than XXXX, not terms these contract We in this $XXX fiscal early on approximately of to $X.X XX only under year.

due in which Land fewer adjusted segment segment, in rig in the Colombia. due fiscal by The the second Stacking and average revenue and per the quarterly by the decreased day was expected. working quarter offset higher is the primarily rigs our International fiscal as to early Colombia rig with second quarter, our day increase rigs margin $XXXX in quarter increased of $XX,XXX in than XX% two line to margins primarily Regarding the number expected to were in guidance

average to an active quarter average slightly days look count XX international, As of in quarter flat third down of quarterly are rigs for third the toward we XXXX fiscal approximately to with rig revenue absorbing expected be to that third slightly The due expected the country's rig per between day overhead only fiscal costs. Colombia rig $X,XXX $XX,XXX segment. decrease quarter, one active to to is the margin during to in

expected mentioned earlier, Argentina. fiscal fourth first send John a E&P to the will midway under to quarter rig we commence term to with through agreement their operations our be margins. to are that is super rig expecting As spec average international accretive international an customer This international

this just Xs signed in we separately LOI Flex X Bahrain addition two Flex country in In the to that reactivated also an of to country. week, increasing

fiscal standby segment, decreased second rigs negatively second operations due offshore which with to the revenues well our the continued standby six self-insurance margin quarter being most a of moved average in to Turning as quarter. higher active expenses. as for sequentially impacted rate the we rig effect lower during rig quarter for rate but the The day per to

to standby to per the from segment, to as six As full expected of during are the quarter the to a operating of the rigs move fiscal we eight anticipated day is rates look for third The toward two offshore the have $XXXX currently quarter of XXXX average margin third increase rigs contracted. range to we $XX,XXX rigs.

segment, are John for an software this it adoption methodically to now From anecdotal accretion that to the plans believe for approximately value directional an quality our the $X,XXX Timing to are this, mentioned, AutoSlide a our be amount Technology perspective, AutoSlide path day is technology day. and rate historical to quality. H&P day market and a to services customers at new active placement of service consistent of rate of potential predict the at roll services. reflecting would per margin drilling commercial wellbore of juncture added Added for a inclusive driller and repeatable we looking begins rate is our of models bases. toward provides unique pricing early differentiated Now out but hard at as

a are autonomous services we market and believe significant previously new we guided, will path we are continuing As which investments to toward make and drilling on and research over time. share development increased in result

it let look remainder for Now fiscal items me corporate of on the year. for the

year expected $X.X rigs million contain is $XXX under terms original revised U.S. the was remain rig that six the fleet Land are fixed define for range contracts to revenue which Capital in billion. early least in to to we backlog $XXX fiscal provisions termination months guided we of with at which full contracts for January XXXX current expenditures for Our approximately as term and the million.

for a of rig fleet in contains walking reminder of X fiscal convert was contracts. distinct upgrades Bucket super-spec a buckets, is remainder As capacity capital comprised total capital front to the planned the bucket investment three first loaded with our quarters by much year are upgrade this and rigs two of to of expenditures five first flex in which fiscal backed the term approximately

consists bucket to dollars year. second $X of flex typically per active $XXX,XXX which million rig maintenance between per The capital ranges rig

is items, third purchases and time reactivated bulk scale XXXX average super-spec cost four over being bucket years The comprised close the our on rig due one of of to of of fiscal stacking. two idle XXXX rig equipment hire up CapEx to to of two the reactivation years catch spare the support increased capital two year fleet last

Our CapEx while range in the to aforementioned super-spec expenditures our Argentina range overall rig CapEx includes incremental leaving unchanged. as

flat G&A will for We expect full the purchases with for activity initiatives. expenses to our maintenance to our of results, due our year quarter-to-quarter from in administrative fiscal and QX of operating correlate timing general rig roughly fluctuate see million with the from these timing reduced expenditures and are rig approximately bulk current along closely the certain $XXX company Despite counts. somewhat levels XXXX to expected various will XXXX given CapEx be total.

$XXX rate to of XX%. March & short continue to XX, position, the extended annual liquidity incur now rate, our state expanded taxes be projecting million are income approximately we in Helmerich billion. foreign we And tax and revolving to statutory and at cash credit XXXX. addition XX% range incremental U.S. at our the investments approximately and term Payne had financial facility In availability, effective Including to looking of our still was $X and our

Our XX% was debt the to capital at approximately peer end group. lowest amongst quarter our

debt no XXXX. have maturing We until

to to and returning dividend. strength, backlog through balance and market of liquidity H&P of our flexibility term adapt level our to capital shareholders take practice Our the opportunities contract sheet long maintain provide conditions, advantage attractive

proxy, approximately As cash this planning future in we $XXX Using the fleet. horizon, the million our from we quarter simple run we as together offshore into planning potential rig our our look XXX flow international of a generate operations from cash and are flow U.S. current of of rigs. generation Land count confident active with cash annual flow ahead million rate could $XXX XX active second

prepared only Assuming annual CapEx simple of $XXX remaining be longstanding available our the guidance would for flow $XXX,XXX other at approximately static active be annual maintenance in fiscal quarter. run rate per our opportunities. $XXX concludes CapEx the example our rate the rig The million. second comments That allocation dividend capital for million would midpoint cash and run

to me for the turn over call Let Priscilla questions. now

Operator

[Operator today Instructions] take we'll Fargo. Jud And Bailey our with from question first Wells

open. Your line is

Jud Bailey

morning. to some we Mark can operating in on the as question, ultimately September that the think reactivation should XX,XXX, that still of December sense anticipate, kind I that's sight level makes upgrades? per for based have to something cost a normalized you is on of line to do your a My I start of on about -- first around the you the comments super-spec slowdown get or think to expect think -- is quarter, think that day, or wanted of follow-up good Thanks, level -- I indicated, you

John Lindsay

for the and Well, question. thanks call

per upfront currently is about As we at a for reactivation it, there $XXX expenses. breakdown look day of

So, start you that slower mere cadence. part is modeling assume, downward to the would Jud that can I actively

count to experienced day, idled have related as However, have the as to calls we've per that still inactive we rig idle recently. we the rigs about that well $XXX

that So, is determine harder sight you. bit little of line to a bucket a to direct

Jud Bailey

and you're get is now it, maybe all talk you what how the Well, how little AutoSlide in think that for quickly Okay, you there more that's quickly out commercializing field? a follow-up think that more hearing the maybe maybe helpful Could and you're and right. though. I bit rollout My from talk systems about may little about customers you John.

John Lindsay

this Okay, at it's the of his judge very to Jud, hard mentioned the prepared in stage as speed rollout remarks. Mark

in then terms Scoop intent various to a deploy now we're it we in we as rolling the design Midland, into our all basins, Stack a intent with of basins. have to in we're our started in to out of months, -- Ford is the said, and couple the play, We of is AutoSlide going but Eagle and and have

about FlexRig phase, machine you operating as the algorithm so, system. in the Motive using and automation think we're and learning the we're doing And actually what

great So basin, provide. the the learn these -- specific that challenges kind learn basin know, each the news is to and/or you differences algorithms these continue of and may

We're thus in and more excited customers working so, automation be again, again, on when drilling Eagle And again, about one of sliding four for and in function And there far, will Ford. the come to a now, the Midland, it. performance we're the the horizontal three well. is this

So, that's overview. kind of the

Jud Bailey

lot. Okay, Well, back, Thanks a I'll right. it all thanks. turn

John Lindsay

you. Thank

Operator

We'll today you. our Stephens, with Thank Inc. Moll from next take Tommy question

Your line is open.

Tommy Moll

thanks morning, questions. my and for Good taking

John Lindsay

morning, Good Tommy.

Tommy Moll

I customers the deliver directional in to we question, value $X,XXX or capture there follow-up you prepared to think to think day alternative the day as market driller. the one AutoSlide, being should is full that to framework AutoSlide and rate a about with strategy us able to AutoSlide? wanted you're way an comparison here going go about a with How to with for to remarks, for it, to a right mentioned

John Lindsay

using I because that's does for elimination of we're bat, value customer looking was definitely part drillers on off the of simply the as side. proposition AutoSlide at the a based we're directional kind allow of rig the a of idea of a see Tommy, just right Yes, the the model can that on rate. think, that day definitely -- not not an commercialization Mark

three of themes having is as rig watching of have reliant you a over you about is years, demanding and being two, one are that are the on think we as on that less last Now, off-site drillers side. wells many people more -- enables industry real-time, automation, the one some the directional it but

important the those it's that of allow normally would one the go think process the back I it, slower major maybe reason of AutoSlide you than the rolled is other pace. a rigs phase, the days first about were of seen steps of there's Part month we utilize to two you think but and off to rollout years, adopt of a utilize as so, levels themes taking desire out, luxury need an and that definitely that of industry for we've to that with adoption little demanding. understand we again kind we And of as slower at last taking what proposition, our early there technology, the one to digital to of FlexRig, course the a of the take if things value at was that's looking tendency definitely of a over building -- started higher and to and building and we industry But technology, an has a couple happen.

really the opportunity. that's So

that And higher then we saying are but lowering mean production. So wellbore the I it life. have some allows the which fewer times, we're require less the I'd less delivers things tripping to rig at like It in potential that this oil customer. there's downhole piece, automation value my out tortuous industry work longer, we're that risk remarks on the site. again, there for tortuosity, there to has better tools proposition studies on mentioned there's with also last downhole tortuosity, means tool the -- which which are Again, means jointly

and going So different. every those going are deals customer be to different be is situation to is big every

of out of to standing us It's up are And product. dollar our are those kind not technologies, the we're H&P investments management structure all about but success for important course of ways outlier. higher think only of in all levels I that's significant of So very sorts things customers. the figuring the deliver time making wise, value

a paper of which think to value So, to that value, to customers going I again want seen a think we've when this see be lot all perform. we the about in customer point the position pay they're and

Tommy Moll

to John. anything you just as you follow-up, how going story, give talk in called you, out long a of the helpful. conversations LOI on. important rig an update a then how potentially prepared time. Anything you this of could going opportunity That's it pretty your internationally. to also opportunity there, and over Thank deployment first And did not mentioned the been super-spec gears see, given remarks, you can to international switch terms anecdotally big the in do involves all technology I a to share And us send Argentina, have the but wanted back forward, the about have is only you

helpful. So, some your you be the it generally answer capability, more Thanks. that specific about to just export would Argentina whether opportunity to of

John Lindsay

have not upgraded spec, in Tom. they and aren't I they thanks, the as specs. been those super the the on Sure, Argentina Well, to super of upgrade advantages that ability one again we super-spec a XX flex threes super-spec, to the again is reminder, of we've think one XX now have or

out the of couple it's we've probably the been months. it's first last fully Again, don't Argentina. on to I this down is great something for even timing, the know this coming So of rig upgraded going a opportunity; super-spec working over FlexRig

send I on think there the there's obviously also us of additional other the specifically that's rigs existing ground, to countries in is opportunity capacity. then for and more FlexRig And the to over opportunity time. U.S. to super-spec capacity upgrade into Argentina super-spec

we've the additional opportunities market outside what So here that's great, us, in it's of I for the position U.S. on depending great a U.S. does got the think

as some about associated adoption will customers coming be traction, able seen demonstrate far to talk FlexRigs, we've on international so other lot the expect on Motive of our I markets, and these more technologies, of both interest MagVar to as would that the said, contracting. And with rigs other a technologies. and quarters that both of H&P as we in both As that are there's the think specifically we've well I of be and some those to technologies able applicable as that are with

we've a potential, in think Middle is made there's America have definitely always as there I rig our both know, pull past and mentioned we've in technology opportunity the East for the the South through offerings. but technology that, in the one to -- You the interest

Tommy Moll

Thank you, John. That's all for me.

John Lindsay

All Thank right, Tommy. you.

Operator

you. with next Scott Citigroup. Thank our take today from question And we'll Gruber

line Your open. is

Scott Gruber

morning. Yes, good

John Lindsay

morning, Good Scott.

Scott Gruber

A morning. either the the will a costs a to know of is in just it a extra kind Good reactivate, ballpark, Land, on cost rig two? I U.S. what rig-by-rig to ballpark, to the basis question is differ what cost relative those on but delta the between

John Lindsay

might calls my I million is in particular idling than can substantially to that remarks that $X the less be rig. that. OpEx to Well, $X.X prepared about about a really going The I an perspective, oh, mentioned is on million have depend from think, cost reactivation

why buckets or idling that's have the costs versus those costs delta. range of for reactivation So

rigs so a on that reactivation been the of those mentioned incur a rigs time inactive. period the more bit will leveling cost Scott, been that upgrades. we are costs in bit cadence we're the that the shake quarter, color because of other idling that through will we I I've regression that fleet the of continue static are early third again activation for to for have in So of time. in count, The as cost related them long well. little Mark idling the see off just but to here guess costs just seeing that mirror a will slowdown that are little long we idle very bucket clear

in took fact, The XX look what costs the recently the idled most very low. back to do very the to in even and strongest those, we as recently, reactivation term, of go of churn. was going those and in ago, we low very, months, to go gone them idling in and idling we we churn we rigs are this rigs It's rigs, when you recently, rigs those we is work then, still a to fully saw you work. because the have a a the couple continual compared of which fact, lot a is than higher a reactivation obviously realized or even XX back but today, that that markets. the continue care just back to lot level those XX, have, weren't idled to idled were expense have we're near are is of say, four timeframe, or If to five it And believe months going common, in to know, at a weeks of work rigs some of great have we churn, couple ongoing of because so lot that we in

low cost. make idled is with rigs certain just I very, most recently to So you that to very the wanted reactivate a recognize

Scott Gruber

the then I out think And day a Mark rigs. appreciate color. of you costs inactive called the for $XXX I

the on three if So daily in change? the to should as closer taking rig we're be plus rate XXk normalizes, we just caught normal flat the of and everything count cost XX

Mark Smith

than been off we've when year moderation thousand or come experienced. costs XXX calendar so less little of to those a the rigs as is this because day say that fleet, be XXX that per idle. cost It'll the legacy of will, that Scott, been idle and in idling the inactive have we've this rigs if a with will combination that you recently let's And

going just we to always, -- it'll we market. to it's So, see always it's reducing, be you it going but know, the going be -- churn ultimate the number the to is but they some to to going what be, up is

Scott Gruber

Again, quarter. expense? level count, ballpark, fiscal rate be rig Given million, good or maintenance one your color half is that? $XXX And for would activity additional no set. run I a maintenance the where your it assuming like think swings current in on you'll appreciate lower $XXX it than CapEx, per getting In looks spend XX-XX the million, your major year, or to on stands XX about second the Okay. that then about

Mark Smith

would it I than think lower be that.

essentially rig and If this you assume that we proxy the you example, a bulk remove catch-up the upgrade three again, planning in think about for the the mentioned in illustrative buckets prepared would just also next as year you bucket were count well. remarks, if eliminated I as you flat bucket

the next long really if that maintenance that's think So, modeling about And you how active say, I regular rig get count. year. is the to just down way on the how really to --

Scott Gruber

color. I you. Thank appreciate the

John Lindsay

welcome. are You

Mark Smith

Thank you.

Operator

RBC. next today we'll Hallead Thank take with our Kurt question from you. And

Your line is open.

Kurt Hallead

morning. Good you. Thank

John Lindsay

Kurt. morning, Good

Kurt Hallead

great It summary. all insights. the and appreciate is a commentary color I

the I'd think clear, what focus model John, business the to slide, a the the applications want technology, be I dynamic. well and and and So around photo as to I like new that on dynamics think maybe is the algorithms bit new just on

the segment you new So have is technology a segment.

that within rate? So mainly it's rate I technology be generation segment. all correctly, new adding everything revenue a just algorithms segment, technology and vis-à-vis be I that's layered because to like that you're that. differentiate else, be apps going into that first in for the business going And for and AutoSlide day the that and will understanding that specific say Am going business all foremost, housed day and to driven a that not to

John Lindsay

a Kurt, in them type pricing and the and are that we're those not resin different industry, fashion, our and down and hard HPT. applications. of IDC rate day in a go but a been We're are the they not the they model. it's sort not FlexApps, it's generally type an of hard business work model. rest segment, In pricing Motive AutoSlide to of on those to generally The MagVar, HPT -- --

or the a And again, doing type model I think so been type that develop a cases that's different performance you, to our effort some other a successful We've is models. more -- kind if legacy it of in in separation. and of something that's it's day work of cases; piece. pricing of sorts is

Kurt Hallead

that's helpful. Okay,

with marketplace, do new FlexApps kind of the a discussions demonstrate been comfortable this what you of customer HP bring guys is with So Obviously, the defining and base value of the ever table. to you spoke what should this to are discussion going and the since AutoSlide the in of about advent proposition be that the you very working understanding dynamic? able technology you customer FlexRigs How having value E&Ps as you've into the and how prop. been learning these that the discussions kind view the been have to you've with going around these base find

John Lindsay

been most I -- still And just is new close the But those mean, close the MagVar regardless I you're industry a different using Motive to and or our Motive of very embracing. think, I challenge It's been is an -- part, think XXX introducing for in It's very management think XXX again, got general, example very we've the technologies, I embracing. much a not still they've the the if have industry. there's adds a in our of on but think that technology the certain is technology change when element But has than under today challenges as of rigs a always think, question to they're challenges, H&P. for XX I example. works are MagVar of I rigs. customers on of, if value. some an general, embracing.

as tortuosity, lot reliability, We less lot of only particularly another elements able customers, drill automation today a being There're placement. it's and well. to I there's and my is level and better of interest, drive have it in remarks, of, enough a other said fast better, there's as very of reliability effective -- that, on a there's and not to for

And really so, I think that's important. really,

Kurt Hallead

pretty snapshot I you around, rig How always upgraded? give a currently there and are could how rigs on you follow-up, market it's is great. dynamics. many Can you guys size again? capability? rigs the good super-spec And And us that we talk many about super-spec maybe information think provide are it's good, out that know, what quick a be the potentially

John Lindsay

what we I overtime around then strictest at look today. you and there's if super-spec -- rigs using hookload or some that are and their There said that's at drawworks if working I either of be. that strictest been actually half rigs think might with think so XXX that the maybe size could that another that another some definition the XXX working use I rigs that think you we've you utilized, expand today. in And super-spec maybe our be is, active the are definition, definition larger have market are horsepower at XXX actually upgraded. what think or have And I those XXX And to of outfitted larger if and a look again, what capacity. are

so that what XXX you or gives that are active. a so And

are is, XXXX. today, working the there's also important when SCR out I capacity or some mostly number I are still about this rigs think this legacy don't another what working rigs work. -- SCR today fewer XXX gone. to have probably challenging know more conversation that or And it's XXX in are rigs, those much saw rigs mechanical been than that have also we or even seven of in There's upgraded XXX some obviously, there rigs you do mentioned some we that right but that that horizontal what

They're quarterly, fully disrupt AC you'll And closely opportunity to of in very share. So way. environment that's who I performing growing real that a see aren't much coming is fleet we proposition higher And to that's that business. an years. expect specifically the is quarterly situations, determining performance customers I FlexRigs, large think legacy and fleets their having there's in today, rig the continue particularly, to continue looking take and happen think and a to over find and And, going not. to drive deliver a like where disk to where those level value they're and I their to market scale customers going them additional at at you're think rigs. in reviews looking And who some I going

Mark Smith

super-spec as add of to at we have those eight upgrade, we just currently ourselves H&P. another that we And working. available And XX have to for earlier, John, here that are said XXX rigs are

have added -- certainly fleet. still still within capacity have our we So

Kurt Hallead

info. awesome. that that's Thanks for I appreciate right, it. All

Mark Smith

Thank you, Kurt.

John Lindsay

Thanks, Kurt.

Operator

with to today Meakim we'll And Sean you. Morgan. JP Thank next go

open. is line Your

Sean Meakim

morning. Good you. Thank

John Lindsay

morning, Good Sean.

Sean Meakim

maybe I hoping, we XX, just the have clarify the upgrades make could for fiscal sure just was cadence number you of straight.

the nine year. were I your be the talks second there release I quarter three the more for we may in think you think more, or that in in two comments, earlier XQ, think about five XX completed fiscal current have and I the quarter, said that in

something we're I So to sure make of probably wanted the XX five? the may or the about two that talking be inclusive So five like rigs. three something

foot that with prior seems of seems X.X is at million million $XXX prior maybe around the system think kind that walking to to guidance skid all of properly? your the set versus budget I foot

Mark Smith

yes, spot math your your is is - Sean, it math does on.

Sean Meakim

All not case. it's the right, always

lower more a detail, clarification. rig what's to that. get Could international appreciate the And a us international I So give count it just little there, of maybe understanding bit driving quarter-over-quarter is, a as on that active more rigs compression maybe and the it we if is then get within more can. the more some shift is there working moves margin are mix as rig you

Mark Smith

we we've January, guidance to movements recently, directly even contract for not market see see in to call tuned. had it, giving we that do market back trajectory correlating provided the we oil In really price seen for Upcoming quarter. this we're that expected the more that Colombia a we bit, revisions that some with oil but price guidance the any stay

Sean Meakim

Got it.

other the appetite rest the long fair of One markets? rain, Argentina ex deployed international, do and of super-spec of appetite about bit how can some rigs contract think the in Argentina then and rigs talked good incremental the piece to Okay, the last going term we for a the about enough. be that you flux internationally for world these

Mark Smith

there really the U.S. unconventional or year as to that in it unconventional make specifically comment talked land about relates be in in next, on look Arabian calls, about others introductory the success of success play had that to as for an previous mirrors and to a talked John's to the Peninsula. had move - story we've we've two We'll certainly Argentina we've we part continuing the aim we tremendous

talks different going this in LOI of X how is exemplary block play the particular really we've the even about and week. think in unconventional and laterals and just rigs internationally January done have super-spec that of the deploy the that there, flex it that in there complex we've But longer. inquiries getting and first Argentina, those getting super-spec mentioned for several had in East in more are brain just those exciting, actually some is countries because mortar AC to are in So inbound the I that call we the Middle we inquiries --

of this come So the the the through for will super-spec field. development into need more play

John Lindsay

more the for where more in when by solution just see when this in need the as H&P a would we've I you opportunity add, Yes, and preface capacity Sean. point it wells And for saying course seen we've time horizontal a we really and the internationally of the type long and as an manufacturing get unconventionals rigs then to a that there's to situation. process of deliver

really I that's we've I think what is seen happen like up for programs to we've those think and has really what So the us. see in begins - got Argentina developed types of to to opportunities that open

Sean Meakim

I make sense. appreciate all it. both. you, Thank that Sure

John Lindsay

you. Thank

Operator

we'll And today next go Brad to Handler with Jefferies.

is open. line Your

Brad Handler

whatever, just the creeping guess recently and to for risks guys business. in. to can involved you it's thanks they in very up it's going squeezing it have I me right IMF, question and I'm your Argentina inflation Argentina sounds get as one can clearly Hi, were help to in as good you think like as think about more risk as related help things just us about it relates how a us is aren't

I are dollar-denominated. think contracts your all

goes disruption unfortunately just what the but good, about Argentina that's to other if and way. about we have think So, wrong that labor may factors or

Mark Smith

Brad. I'll of, start

right a dollar back think it As about contracts the to it from The dollars. US there. to contracts are same way day tied to relates technically literally and the a pesos. is U.S. we country so corrected the perspective, dollar, in convert there are paid payment, perspective. in From But U.S. in cost revenue and the and can billing to

pieces a mix some denomination. will that our several cetera, we that inputs have dollar equipment, et of U.S. of have We have

personnel, component of and expenses each of tied U.S. We are also the dollar peso to the have the are and in locally which some offset other. cost expat then

kind So the we have. high that level, of is

keep hyperinflationary the that been continue other well position in have pretty So, look to we state. H&P words, shielded to from to work and and there

relates it John market, let comment. I'll the to labor As

John Lindsay

our been at there Argentina, times Brad. the unions Yes, but have very labor positive. in [indiscernible] are We, challenges in experience with

to further to theme to it times is that kind risks Argentina point and of we've of Haven't I heard particularly internationally come has think many, least challenges that that in south, this general another associated a haven't reasons get the to back overarching whole in comes to areas the in make the that that the at returns of and we in to faced it's we you grow back why working I of like land up with and compared worked as time. level able us general this able many U.S. in fleet been other though you've we think contracts investments the you make as made been that because we've and really grown we one our it. much way haven't because made that term that the we've in internationally, risk would to in haven't US can't

we've turns a that questions to obviously yes, So Argentina, one there's is come lot it's one is of that things used out. the upcoming to of in and election how and we'll the see

Brad Handler

Okay, I fair you. it Yes, guess enough. I Thank said I think turn I will back.

Mark Smith

Okay, Brad. thanks,

Operator

One please. any moment our conclude for does for John today. Q&A the back call to right, Lindsay and this All closing turn session I'll remarks.

John Lindsay

and Okay, well, hard H&P again contribute thank our all every appreciate that attendance work today employees of to the day being ways. to I you. to interested thanks H&P everyone's in

great a very day. you Have much. thank So,

Operator

today's program. you conclude your you at disconnect does any for This Thank participation, may time.

Helmerich & Payne (HP) 25 Apr 192019 Q1 Earnings call transcript