HP - Earnings call transcript Q2 2020 | Helmerich & Payne, Inc.

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Operator

Good day everyone and welcome to the Fiscal Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call maybe recorded.

It is now my pleasure to turn the conference over to Director of Investor Relations David Wilson. ahead. go Please

David Wilson

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

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

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

and could results outcomes materially. differ such, As our

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

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

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

will and yesterday's comments release. calculations the find press GAAP in You reconciliation

now said, John call over that With will turn Lindsay. I the to

John Lindsay

impact times everyone. the you, in and rivals pandemic dramatic the recent and unleashed has Thank has Dave, and no COVID-XX The on morning, good widespread world it industry. for our

months priority stakeholders. and remained Our and these focused our few highest customers, employees, safety has past over on of the health

virus. to protect place and families the practices and of begin thanking distancing protect for put employees other by their all from each each to we other in all want efforts customers our protocols following I exposures the and to our by of our control to physical to adhering for

both industry. position financially sought in a operationally face energy uncertainty the inherent cyclicality company to Throughout the our of the an has and and history, of to be strength,

swift and We safety actions our health and the to customers. of taken maintain have employees

served to financial necessary our helped its measured COVID-XX of These minimize difficult, have on made but preserve strength and the preserving operations decisions position. future. our longstanding timely company's at financial impact actions also aimed and We've the to

referred been we And has weathered this XX does many. market as H&P, though many at one year characteristics. downturns, to have by have unprecedented unique my This during career

a the the market has imbalance it as March is a oil US market acutely storage limitations to impacted phenomenon, result more global XX. While of crude subsequent

The abruptness of E&P gasoline oil of limiting can decrease depressed. as oil. created refined prices in such and production, to an companies, crude and supply resulting in their has storage and overhang even the abundance diesel capacity market the has demand This opportunities when which to supply dilemma overall in are size excess of caused crude products refining shrink, has created they very for a the sell for

have and have E&P drilled drilling the becomes once to entirely E&Ps economic again to chosen until imbalance market completions companies wells Consequently, uncompleted many shut production production, some postpone of wells, and itself drilling. and in rights stopped it resume and

negative It that industry. hold is circumstances our these long-term implications obvious for current

company. factors Our surviving and furthering objectives the ultimately strategic to has that the downturn a us the two of shown experience hold key

financial and regard, offerings technology second, our strength; In customers, and remain opportunities. a we our to potential future long-term this increasing maintaining expanding management. digital establishing First, on maintaining international for models, commercial focused presence, new will view cost

and a reducing intentional actively Liquidity in and we manner. is expenses at are this, critically like important time thoughtful a

continue. and downturn innovative more that from idle to seeing We and pay company efficiently, we're will throughout efforts rigs on are this off the XXXX-XXXX drawing learnings anticipate additional the

our per dividend quarter, XX-year beginning next run an We increased to payment. ended announcing by share dividend a reduce of our dividend paying per our to after also intention $X.XX

to rightsizing are we reflect environment, current these realities. this our Given organization new

in discuss will remarks. during his this detail more Mark And

well ensure overall. as our also as are this direction opportunity to as the using reflects industry company's an We talent the

are aligning a stronger organization customers' our performance-driven drives reliability experience simplifies approach that intentionally partnership. and and forming towards We our a higher

calls, efforts an value for share discussed new our us making have and models we we to previous As to solutions. customers, we the in equitable that are enable create of win-win create earn develop commercial with drilling value capture pricing

We strive ourselves economic align enhance the performance customers' better objective to to and returns technology. with through

today. We in are all partnerships. more at put and strained this we decision forefront to market even working value making hard conditions of arguably pertinent the Such our focus is like shared of see

of reduction fleet the percentage contracts, adversely under the have of represent performance-based affected active these a in we While to has currently number total FlexRig overtime. expect of rigs count our our we larger rig the

The is of the lifetime digital market well more who technology customers and commercial model our value placement wellbore some the combining to even well. and conditions economics becomes that and stressed importance magnified improves appealing these the recognize quality under of solutions

challenge site rig realities of and The new exposure to reducing to virus our COVID-XX environments, caused pandemic in screening has as third-party crews personnel. to such field operations adjust everyone remote logistical and the and office

a our only at Many when interest at de-manning not result, automation certain a mature the site, that rig see also but new this in these as automation distancing capabilities of customers drilling technologies. are financial inevitable As the seeing a and needed. physical positions is time trend remote is we also surge of recognize for advantage

it during downturn. large will without industry's a veterans this a leave industry the the to is of any likely the of would does expect when not than of to deep we is cuts likely occur velocity recovery With higher benefit recoveries. the occur, as latest the previous energy it many will be recovery the seasoned Although portion of consensus is timing that clear, at personnel, the industry

clearly and is asking conversations. these their cyclicality. have are reducing common how change experience reduction, workforce, of on like organizations other focus like to not industries and near-term human digitization just experienced, customers they And also to is the be cost increasing are with While need competitive their -- automation other in operations survive

but have in recent drilling activity, automation human rig believe this remained also and We a reduce our errors, industry driven is solutions technology. to move to seen such a in in activity have AutoSlide more reduction move through establish manufacturing rapid the by both costs digital increased as months. Despite fact and stable

many cycles, redefinition rather visualization the some efforts true and have true occur. than this previous and value, automation, a of centered roles has did analytics In workforce while of these around not

However, previously given H&P's automation the this that documented has in coupled success signs at there jam are the log field with the progress financial ability rig. to and broken toward show concerns has hindered been health current pressure, environment,

technology the We we've the in strategic believe is through made acquisitions years. future, and that are automation digital with well offerings positioned we recent

our us the and ability for effectively automation scale gives unique a feel uniform We our fleet customers. rig advantage to also flex technology

Our by and actively focus due pursuing long-term and will these internationally be affected continues growth COVID-XX. opportunities to to hurdles operational likely travel of be on development

we H&P the future Although internationally. the what holds to third quarter's be expect impacted, results for about encouraged negatively are we

grow in market that that to benefit capabilities to to over capabilities that efforts. future. the all past H&P allowed U.S. in share the are ESG of the international years, will The investments further make XX this the continuing Crucial our growth of some same is

to greenhouse invest of drilling gas help customers continue impact the gas partner oil through to that will for and in environmental areas reductions. We with emission lower

possible. to office global model Like work environment, employ continue we remote many in for and companies in personnel operations our a today's were field

greater we communication platform the remote have quick work momentum. and robust action, technology instituting lost required not While

and momentum actually we're think I gaining fact, customers. In organizationally with

time, this risk money digitized to we've error. processes During and the time, and of save automated reduce human

always which COVID-XX operations, are around that the underscores actions modeling own our to is paramount. many quick that sites customers and Our rig in at health commitment their safety partners our is something of and our fact

people are on H&P's daily a makers basis. difference

Our of teams competitive at challenging investment by work have. time. a time, very by the us most the critical, adapt provided organization this during health quality advantages intense company to when remain can one in a ability very have our of has the to is the I of our been and enabled impressed agile

closing, In this cost about focus on critical time. earlier which mentioned reductions, at I are our

also the ourselves our growth health business we our organizational technology asking long-term. our how the our and use and and and just of automation looking structures, However, we like are enhance to can at streamline operations over customers,

today the Automation for and opportunity forward. this to business' going success an is common and our are of our operations conversation customers with of innovate we as future digitization using a

And now to Smith. Mark over the call I'll turn

Mark Smith

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

by of Let million is recently The with highlights The generated second previous million in to us revenues in $XXX revenue the U.S. rig the versus land $XXX quarterly in to our early quarter. notification $XX.X million well increase termination press result primarily in quarter. demand quarterly destruction start pandemic due company completed the for energy revenue caused to fees described well releases as due the release. segment, the in of as COVID-XX and a

million $XXX related prior second rigs. and the Total direct self-insurance quarter previous stack is the year were adjustments operating $XXX costs for and to versus to release demobilize million reserves The cost to quarter. attributable increase incurred to for incurred

with an total of fleet. our assessment non-super approximately During $XXX the of utilization including an goodwill, of fiscal analysis particularly impairment FlexRig intangible and resulted fleet our market portion combined million. quarter, assets in future of the second events This that triggered of charges spec non-cash evaluation our expected

capital decommissioned classes. of of non-super the PP&E end. by million. impacted materials the capable following for A impairment excess goodwill million. million. supplies $XX The $XXX rigs subsequent which And of impairment to were equipment by $XX by million. by were XX $XX XX rigs the impacted asset by PP&E the value of Inventory and of for spec less total quarter

and rigs customers accrued rigs decrease reversal As number U.S. a administrative $X million in General such, three first to U.S. from of we FlexRig, the non-super primarily expenses for the rigs driven compensation. eight by of the drilling quarter, sequential have totaled to XX spec of downsized incentive annual domestic million the $XX marketed

by tax are pretax as fiscal states full and income, effective QX which tax various forecasting in now versus rate the international U.S. income book book offset XX% for year pretax jurisdictions. was we is loss approximately local Our

second At quarter. versus incurred results profit a diluted a of this juncture, per share of of the loss let the me previous the $X.XX H&P summarize $X.XX in quarter.

share net press release. as Second per our of items highlighted per quarter by was earnings in negatively select $X.XX share impacted loss

the for we our quarter select $X.XX conditions. first to during XXXX fiscal items, adjusted a per begun of share were loss wind second $X.XX as in quarter fiscal earnings Capital down these market $XX in million profit the quarter. Absent canceled projects expenditures an was of have second light the versus adjusted

Turning to our during U.S. segment. second quarter. four segments beginning rigs We working the land averaged XXX with the

and the rigs. second activity As the March COVID-XX quickly we crisis last XXX developed fiscal the declined working half with during rig exited of quarter

revenue added of due in higher partly quarter performance million balance of the March. sequentially partly the $XX.X revenues last $XX.X attributable to The to were well in demobilization to through the Revenues fees. well released rigs and fees million is contracts early notification to of half termination for

the U.S. quarter land two second to operating due factors. increased in expenses

the quarter First, demobilization end as stacking because as various our rig incurred releases, rigs of for trucking we arrived at well costs yards. when those costs

related XXXX. occurred legacy self-insurance to claims Second, reserves increased which October to we X, prior

These in they segments operating claims resolved. our remain until been will liabilities have

As the a ensure to utilize our we'd X to and forward. captive compensations wholly October like XXXX point from on the liability that liability insurance workers deductibles and reminder programs automotive for general owned insurance

XXXX to quarter fiscal ahead U.S. Looking for third segment. land of the

and the said, of slowdown energy a created COVID-XX has economic pandemic shortage excess John the storage. and supplies As resulting

seize continue the rigs in to since and some to production and/or of seen This this and completions March. rig caused more wells. in well early release customers have has Given situation, we than are release XXX to [ph] notifications customers drilling turn electing new shut

rigs are Included the We expect generating some the with that XX contracted June to X. approximately decrease XX rigs majority of our that happening to margin. end rigs quarter idled vast prior below third are in

wellbore contracts like the as the well and H&P in value new larger other Also, are through and are customers and environment, our working designed a commercial in formula of even models. a discussed, where expected shift models customer to this has acceptance, to reduced participate performance our ability around overall John portion placement factors created quality. fleet costs value to is win-win These gaining

segment. on This of Technology value H&P the can through from H&P be software FlexRigs achieved utilization delivered our

in the H&P for In with drilling example, hit to elect charges to targets, intersegment an eliminate while cases, utilize performance all incurred which or in are solutions For may we HPT FlexRig. consolidation. software well, order these some

utilize software technology for contracts, HPT to as the solution creates of combination to models performance able and best and the The our the revenue such value FlexRig for solutions additional customer across we were we best H&P. return as develop consolidated segments in on the value. and Therefore, commercial new capture the investment services

and customers. delivered of pricing wells drilled with for our efficiently to more discussions quality higher The different customers requires value

We in in well speak investors. will way discussions as now a with begin to our different

guidance will forward defined revenues direct segment rig are margins, operating this on individual segment less from not operating rates. and as Our expenses, point be on rig which

day furnish this We per and press public tables the to end rig information will filings the continue releases in through year. current fiscal of and segment

land to approximately $XX range $XX million we segment, margins termination million from early to between the U.S. In that with the expect million $XXX of coming revenue. gross

Our revenue under roughly term is fleet million from rigs backlog current U.S. land contracts. for $XXX

not during third $XX of terminations, million amount approximately This is quarter. to include which be recognized early does expected million of $XX our fiscal

segment. Regarding international our land

of increased most active activity the during in averaged the business fiscal XX Argentina. sequentially East land rigs decline Middle down the second offset international in as quarter, Our slightly

slightly prior we up quarter as and margin from lower Segment costs. benefited gross versus startup revenue was mobilization

look activity for quarter fiscal to local XXXX already our was to situation legacy in international, suffer macroeconomic the roll-off toward we of contracts. due the Argentina expected for third As and

have COVID-XX, with we million. falling million in activity recent Argentina the oil $X and international in between margins negative pace price to exacerbated The accelerated majeure of $X force expect Due and provisions to decline. response to that to associated be a loss declines

we contracted. five of eight Turning segment, offshore to offshore rigs have currently our operations our

new One five XX to shipyard of short from recently for the contract. those a rigs mobilized a day platform

repairs primarily quarter. demobilization million as gross a to down downtime as of bad $XX basis generated sequential $XXX,XXX expense quarter, a the Offshore and a during due during well debt margin the roughly incurred on

our gross million. million margin As toward $X the $X contracts between XXXX for offshore we quarter generate generating million of offshore with fiscal expect we look third will of another offshore management to segment, operating $X

evidenced segment. at the quality seeing the our papers at wellbore IADCSPE seven customers and International in benefits Conference members Drilling Xth. HPT of Now our on Exhibition are as H&P Many looking Technology presented of in Texas Galveston, by technical and the placement team March

interested slide we As well at John to in utilizing site. more given environment, this in customers effort demand mentioned are seeing an intensified the auto

fiscal generated the revenue million in HPT of $XX quarter. second

million are be $X decline direct to HPT QX a for releases expecting sequential to million. H&P big industry. revenue as between We result both for and $X expected of This the for

delivery performance a contracted software contracts land percentage expect leverage achievement U.S. successes continued value As we our to drive HPT and teams and of penetration to customers. of as rigs, leverage of

Now, and on fiscal let me for look fiscal items the corporate forward year. third the quarter the remainder of

the and a down have result financial and for business, number the and production As of a energy maintain measures to oil extend gas strength. cycle of H&P's today's we outlook undertaken

our We have intended updated dividends. future allocation capital reducing by our

operations of during We year, finalize levels. fiscal have reduced land working this our we reorganization activity the expenditures are to our US for capital lower

near rightsizing to for appropriately the midterm to begun We to And scale and the calibrate are have our horizon. international assessing our serve to general overhead administrative offices for reduce we of activity. planning

And capital next a will discussing to of expectations our discuss and and quarter. by take minutes areas. close me these five for each working I the few liquidity Let

Directors XX, Board First, we payments and reduce mentioned, XX% quarterly quarter. per size per as by to announced John March intends as from of our $X.XX on share future $X.XX to the dividend of

of This basis. reduction an preserves $XXX annualized cash million on approximately

$XXX over our between a XXXX million, over CapEx. Second, range $XX XXXX million fiscal $XXX reduction from to budget, expected million initial of year capital fiscal now for reduction expenditures full which are the is fiscal XXXX a of from $XXX to and million

extent previously fleet. capital reduced possible from projects. the part for lower to in as in and to we quarter the be activities We our rigs expended used an mentioned for decommissioned $XX that Note the will operating effort costs in procurement and million second components as reined

are damaged A the XX between CapEx the reminder that operations. be sales expected fiscal million to and value primarily within purchases These replacement of lost for tubular drilling asset of sales this portion are offset is drill to reimbursement customer that hole year. in our $XX pipe during million or a

reduction land field districts in releases, finalize to reduce our impacting plans US to and May individuals. to resulted four. aforementioned the are with rig of drop Therefore, operational number fixed overhead, of of we unfortunate from of over land the and US workforce in activity a in month our Third, is has working precipitous reorganization seven the X,XXX

administrative structure smaller allowing operating should overhead still in to while where This existing $XX direct serve the save customers basins work. approximately we million expenses annually, us throughout

flex this of the have of proportionally in majority rig the owned and stored long levels our utilization operate fleet we those the last relative have We where yards to cycle. rig working facilities

with our potential country active levels we footprint sizing smaller international overhead activity our downsizing support market and toward of and eye operational rig have the rig intention fixed today, Fourth, begun started of assessment finally, process with medium an and a opportunities. Fifth of an administrative to we general the offices business. have term to now

full current of reduced from administrative of compensation. year fiscal Our incentive XXXX, expectation expenses reversal is $XXX now budget because part fiscal the general in for initial accrued annual and million

We are G&A implementing structure. to of cost evergreen the our now reductions in process service

these decisions are difficult downsizing ones employees. company for for Collectively, the our and

these and charge are as down allow reduction we the the will These the rightsizing expect to expect company challenges across a measures of complete us outlined the in to to today's process fiscal a together, above Taken efforts cycle. recognize result. third and quarter onetime meet in cost restructuring

include estimated $XX cash will roughly at currently charge component This a million.

we in push through and as drilling. research We toward the development our autonomous will investments cycle continue

as year. permanent rate well book is fiscal and rate full statutory of our and related to any cash estimating the differences We tax state The difference effective to as taxes. income to tax additional foreign to significant XX% related not incurring annual in range versus the XX% anticipate be are to XXXX effective in tax do rate

position. financial and of approximately facility our versus investments and our at XX, availability, million liquidity XX, at Including $XXX revolving XXXX. our $XXX had Payne billion. $X.XX Helmerich at looking short credit cash million March approximately Now term December was

We flows $XXX quarter fiscal a million operations the had versus approximately cash from million of in in QX. $XXX second

be the of the half We remaining as activity amount significant be year. from the year the in next the lower flows quarters. cash result expect over income higher operations decline to the will expect operating ongoing of to quarters second a in of capital we several fiscal in working fiscal Conversely,

they prior initiatives, improvement capital place will enhance working further several that cash have we are the position. our in already downturn Additionally, to

quarter was with net a cap, X.X% to at measurement debt-to-capital a XX% peer amongst our end best-in-class Our debt is continued which group.

We and have until second no grade. contemplated at historically buybacks investment no rating quarter from our share debt credit XXXX time. the remains have repurchased as maturing some we time, shares this time to We’ve are further in

management for expectations Our including will company of finalizing our which XXXX, of measures occur cost continued most quarter. in the third levels. declines Simultaneously and rig activity activity, fiscal rightsizing in we will remainder the to new the be

selling sufficient should to These flow maintenance and and on debt forward our efforts generate service capital administrative intended cash building go preserving expenditures costs, hand. expenses, while dividend lower free cover our cash and general our

volatile balance sheet for Our strength XXX able this to they are significant upon and serve been differentiator cornerstone which in and endure and liquidity cyclical a a industry. have level as years we

for comments prepared second our fiscal concludes That the quarter.

the to Keith turn call now over for questions me Let

Operator

Operator first ahead. Morgan. Meakim We'll go to Instructions] with go Please Sean JP

Sean Meakim

good Thank you. Hi, morning.

John Lindsay

Sean. Thanks,

Sean Meakim

gross fiscal to there of that for margins when put on Are guidance to the quite could terminations account like looks costs parse early start particularly associated kind XQ, impact. maybe to land, transitory It John, trying the you trying the any what in be kind basis, stabilizes fiscal you're rig compressed, So U.S. through pace out. as fiscal how land maybe maybe rig in margins looked on the fiscal some think we XQ? XQ should normalized the to U.S. about of in relative like normalize of it drops XQ? say Just with operating that count into

John Lindsay

you have… Mark,

Mark Smith

cuts Yes. coming costs that Sean, more for finished but just still minutes the thanks question. offsetting describing I transitory cost incurring stacking, as certainly We ago. are to few a expense are related

have early little a would look to quarters now. So, final what two still from be at a

John Lindsay

rig and of with there's so in it's count I clarity choppy our doing Sean, with burden way but idling say my you managing the you've drop. -- a I activity so just pretty have amount the the bit distancing then in just rigs costs, great the field, on little we'll remarks, and of COVID-XX much said, would and additional quickly, the right managing And coming we're But as And with also people, that greater that a quarter. now the happening physical seen Mark Yeah. again going through said job that's the different with process. it's in have in we’er

Sean Meakim

appreciate I Well, that you Okay. providing context.

premium super-spec stretch suite related are coming I it HPT create have. rigs topic, in Somewhat trying but different along they will with for obviously quarters way a customers. is to to dollars CapEx leveraging be the your every think value if Perhaps, E&Ps a

working But see also can Do activity world operations the for a getting and changing in be done remotely. in customers? MOTIVE terms remote more for might what any potentially of particularly as more critical and and to of low perceptions be you – that traction MOTIVE being remote customers you your level agree on

make there change just particular? curious to scrambling in environment beyond to just in feel I'm working lower show or is value remote it you where the some ways to easier -- – about activity, for MOTIVE immediate you for how everyone's about,

John Lindsay

Yeah, Sean.

The wellbore over several customers we've describe think we've to quality described, I on past we've value placement us proposition that is and as the there. seen and had weeks. wellbore

de-man. to ability this have We

directional ability automate this have to We drilling.

as And desire having of another exposures, for to to again, the virus, about de-man reasons. start there's those you thinking exposures health level

in And so interest. a pickup seeing yes, we are

meetings We very have encouraging. and good continue that's think customers, I with both small, to large and

hand, in it's in automated do you fashion. can this no an one that think on But a it, as you about the brainer

efficiency higher customer. higher in wellbore higher-quality behind working the same added proposition a a even quality your of leaving do at the terms levels but with can You then time, of so it value efficiency in wellbore, there's or of you're

holistically combining rig a offering, So, the advantages of overall to technology that then you're offering offering with with specifically as and desires, start lot kind customer's of offering, and the there's about structuring that. and needs and the a you thinking to

seeing your interest in it some to to interest and level we addition we got with faced people additional COVID-XX yes, about that we’re So, that of challenges the the had. has answer talking we've already question,

Sean Meakim

Thanks, John. me. to sense Makes

John Lindsay

you. Thank

Operator

to Please Tommy go with go Moll Stephens. next ahead. We'll

Tommy Moll

And Good for my morning. taking thanks questions.

John Lindsay

morning, Tommy. Good

Tommy Moll

John, not I just on conversations. price dropped on most wanted to to a start because customer is and been primarily recently, the have was much rigs negotiating stop difference. My because customer drilling making assumption decision would have made

far where that's discussion per if before correct price? look is If do to mid-teens near you downturn, probably meaningful how $X,XXX we down to to think the get we have bottom. up the I a the And back day we around road ended look last

And around, bogey about market or different wonder somewhat think may time if in have this changed the that's and to I may way? a be if dynamic fair some

John Lindsay

rig what indiscriminate, Well, it of be. wouldn't rigs, matter it the we've certainly really the with the price described as and release and would of

even of know, you has lot their E&Ps by, XX%, XX%, rig to and either are cutting -- zero. seen, have As some XX%, as XX% XX%, a gone everybody count

cases, case that the in about And having we're the that proposition customers. that that day that That's can you're we're a But conversations model huge we're retired. be so notion seeing going provide value really There's this. we approach way to framing at rate, H&P, to the you needs we're with those up day in and obsolete, this start of it and is thinking as rig. matter about the doesn't rate the making

enhance right Well, obviously So the also best returns. even with that into a dead our that ourselves but in level better want entering the behind. they align costs, customers to that stated seeing We're for customer's this now, environment doing we're reasons left they contracts we're are to economic I type lower with wellbore win-win contracts objective the earlier. want

every we're We our not customers. we're with models really to one model of the different obsolescence different. working be side, rates on keep is day and And model, don't fits because on is a expect hard goal all. going to discussing of the the partnership working customer So, have to

doing adapting ourselves organization were that's part organizing we're our see We've that got offering is an for customer. of sort and capable you'll that's that as that, restructuring, of more to time our that to of an over

Tommy Moll

Following that of or rig and the do in the where what's currently kinds market you theme, default bottom about be on headed the any terms be standard order of shed And market. might may be added to spec the expectation when do capabilities terms competitive, on edge not assumptions you have might be capabilities bring the light technologies to just or John, of that any what perceived start might could at we need sense in then the the to offering we leading super in look that to recover, for you or like?

John Lindsay

space. range of Sure. have the Well, we even wide a pretty our sure spec definition super super within spec. of I'm capabilities every company does. There's

So, market rigs the best rigs, out, best rigs, shakes previous performing once performing first. best will crews, the work in cycles, to that go back are as I the think the those

about, day the in of humans life, again, can't. a oilfield brings will exists The power see mean wellbore. we we see the that that that it, the in it every it more think shift quality do of I as software predictability towards I well. and talking

this opportunity. And so there's there is great

And so to in position very the I will place. do the think we're that in working that, that ourselves requirements Obviously, future. change hard

all hate about, hate talked we how As downturns. I

take and a lot change, the for is to what the double about weathered We've is on a performance it that technology downturns opportunity type us contracts great But advantage and a and say really of down it's driver for can we them. offerings.

differentiator. think We that's a are because there, planning continue heavily to invest we to

long of a answering it's your way saying So, question.

I does. think it

said earlier, changes. different We've lot little bit that's are fine. that can like I we different. of provide And I a some various think But there for a customer every offerings got customers. is

Tommy Moll

it back. you, I'll Thank turn John.

John Lindsay

you. Thank

Operator

question Kurt ahead. RBC. next Hallead our go from Please take Will with

Kurt Hallead

hope healthy. everybody, I families well and all morning. are doing Good your

John Lindsay

to Same you Kurt. Thanks. doing well, Same you. to

Kurt Hallead

Thank you. Appreciate that.

you I market the I sure as provided, at guidance expected go just look that out dynamics during take want when quarter. that want guess early a correctly what termination there's heard the first payments that here to Mark billion is make next yes, say US and the ask So, in just you are you the to $X another quarter, occur into I the to

And early if for haven't alerted you is absolute that possibility to quite that there payments so, to yet? is customers or termination the minimum a additional be going

John Lindsay

of The think have a June other what clear And no see could also hand of sight June Kurt. we visibility. activity, one five level X we on we and correct be hand, when to is the line look a XX a number but we then on

If the weeks ago, had question you'd have have asked completely we three different answer. me would a

therefore levels So, that be and with the that as well. uncertain would is associated term in activity the early some is regard

Kurt Hallead

that. basically appreciate And dynamic. performance way continue have based for forward you you to with you Perfect, win-win follow-up with the more and John, a as push day two model maybe rate just

If you think cycle were much much this to on next value that that and of now H&P. for us incremental throughout evolution. how performance into looking call on EBITDA, you with know, can so based as just in the the model you think of I How don’t result incremental,

can What would model, next it you EBITDA be do look you cycle rate derived? look value of was more the at based. if kind think one, Right, the peak at when performance incremental a you driven which your last day be

John Lindsay

is Well, have to be on will a day rigs a customers to do want that working are There's first time. take rate that I’ll the Kurt to number We'll that. and know is. continue start going with, that’s do know transitionary what all, a What this don’t period. some basis I I that, great question. of

wellbore. notion attractive quality the and seeing again, having of whole to in very But we're it. delivering This higher skin evidence of It's game customers.

a answer clear add to over to some to Mark may additional that. turn So Mark, that. to has see color I if have don't I

day believe position way But what things better new I do we with commercial always path in do we're the creating with like obsolete a is these we've continuing will then be down model, them an going model. that done that the models, rate much to going the

Mark Smith

recognized $XX approximately expect third well. still cash recognized to the Nothing sure five that $X that million do then of that and to would just million in receive with $XX make We million to the want deferred I of be the are listening add. for quarter, But Kurt, quarter. and as another third payment others clarify to after

Kurt Hallead

see And That's that for attribution, know can great. specific interesting clarification. on to John, have that you for it be don't how I value Thank sure. evolves answers you the

So I at it. stand your appreciate

John Lindsay

We'll thanks for keep the Yeah, question. working hard.

Operator

question Taylor is from Pickering next Please Our with go Zurcher & ahead. Holt. Tudor

Taylor Zurcher

to morning. to the these Wanted follow-up you. correctly ideal of I spot the models sorts If be market. based rigs that enter call, model. the on you or into the remember rigs performance in on Thank about these talked Hey, questions to of last on some incremental good

coverage into push as as of And you forward forward? protect with you perspective contract term a sort moving of do moving contracts you enter how approach from this yourself forward, these more

lower it think to I you sort And contracts then performance incentive. make the with secondarily, having base than these tend a day edge leading up of and rate rate

you early into enter So are these you from perspective contracts? apples protected, basis to apples as termination an

Mark Smith

and the that We equally we to to market take I'll both spot like exposed do port. enter on term and undetermined and have early term John. then any a model. the turn it On performance rigs into other contracts traditional over

we putting recognize But quarters of many couple to already one months last this the had were market. in last place, contracts an soft you thing more as performance is that

in of fleet So spot any case. you're exposed having the more market overall the to

expect a differently, way up term have in that utilization we comes of see return said to to on in the when utilization. point contracts, whenever So market performance this improve, I for yes, time coverage would

Taylor Zurcher

on like wobble today? fairly of big sounds negative have that. many guidance working are international you I'll issues Okay. and a quarter rigs frame meaningful how the you Could the part for it us is next EBITDA COVID-XX for

that well. reason asked coverage only contract I the is because so in segment that the And

And so of three rig how many I how And quarters? know, don't you rigs count have are the today? over working do two next certain level to a or visibility many

John Lindsay

Next to countries approximately quarters segment all international we across expect working. have and XX

Taylor Zurcher

it is to too that Okay. say? that And early higher to or be going or beyond is lower

John Lindsay

too to is simply It's early say.

Taylor Zurcher

Okay, great. Thanks, guys.

John Lindsay

you. Thank

Operator

question with go The Ian Macpherson next Simmons. from ahead. is Please

Ian Macpherson

try more and can run refresh the do predict. side, efficient two, keep time staying the with you give more or Or on over change that long maybe but essentially very you exposure description out here U.S. -- in think you consolidate the difficult company you to for more color appetite the that domestically? a to have, focus? blend for and John, quarter for on Thank appetite the to beyond or that distance all the [ph] international world exposure some a footprint the is realities the just which new a to you to you, in looking gentlemen, the But this given make international

John Lindsay

And quite about and pushed down, of quite obviously being Middle in everything's respects traction are bit been and shutting pandemic out. the We course we've talking different East. we've for definitely in of a some the time economy with and had this then

that if the that in months, or well I if are it's the H&P don't it's brings values months internationally. or I remarks, in -- know position that very that nine six helped the us we said XX my get out prepared and But in, think translate to months. quality as pushed I the U.S.,

in definitely Again, international country we've down, And Argentina. there's obviously, there the about little to East, continuing been so interested now. pursue on excited going anything is very we're activity. of shut clearly, But very Middle

that So the investments, another we're -- with capability. to already And doubling that's we're but pleased we're invest think we've but again, time, That's a it's opportunity that we down that described. of kind going what that take also on continue to as going place to area -- some to do. about going set in

forward. more And a we're together. got that we've to think, ourselves to great going effective continue team going to to We find put we've organize be ways

invest our we're to to those both say continue I'd capabilities. So of in going areas,

Ian Macpherson

Got it. you up follow had And then I for Mark. a

correct year. that, by me, steep you're second and CapEx How play of still Your for end it's and the if act strike lagging. Please breakdown the in of you of half of cutting disagree aggressively, me is year. this this while guidance the decline rate

think offer it's thumb to anything XXX, us think, of count. close to rig I rule give when maintenance be about for company, some lower don't terms helpful. you realistically the CapEx Could of would That framework a could but in if there? you

Mark Smith

Ian. Thanks question. the Yes for

think back -- the of as the I through to And active year. stated to, be will fiscal to two we CapEx a per will $X range question, million get remaining evident, move reductions of the to more our your $XXX,XXX of the little certainly point which be quarters should previously You rig.

So, we're working very rightsize, quickly operations. to and wind the down

FlexRig For machinery for our example the in complimentary services center which here entire of fleet. Tulsa,

also said time complimentary I through utilize in plan decommissioned to As rigs. remarks, we the prepared my through

be. all as be where million international $XXX,XXX the CapEx. know the also of and and the part of yes, includes, the But that includes mostly, eggs maintenance offshore well. don't $X I that the nearly So will Hopefully will Remember range that to for lower portion CapEx within US range primary company. our of range

Ian Macpherson

Perfect. Thank both. you

John Lindsay

Thank you.

Operator

next We'll Jacob Lundberg Credit Please from ahead. of take question our Suisse. go

Jacob Lundberg

if contracts good the on describe being sticking discussions from I'm you've morning, KPIs going or contract any could your into I guys. the guess customers? either changes performance the are just in seen Hey, based discussion. curious that you realized actually those with

John Lindsay

only and And not that I quality already there's are only -- of a -- think but metrics It great associated is the it's I've cost. it's the that not say discussion it's those. to said more wellbore this, function and and a speed wellbore placement. there's would question I point make with

always Wellbore back a of There's necessarily smoother torture well. both clear less creates as drilling torturous, a not this value the is the evidence But yes, hasn't that a during lot of been to the lifetime it to well measured, measure. not as advantages, definitely well easy of benchmark. velocity, there's wellbore

So that the be those sorts today. of are are used KPIs to beginning

an you're what human so a algorithm that's kind an you're work. algorithm And doing of software, benchmarking doing same against, is versus the

change. an And so it's interesting

it day of wellbore the you're be lower higher going ultimately to where a a over cost, have automation and again, And left that's level I to it's behind. does think, reliability, have time will going better because win

those those you So nine interest the KPIs there to some if were at lot are discussion looked of being in months are are a or that. wasn't ago, versus or that ask, of today six

Jacob Lundberg

set or would sheet execute just given thinking about downturn. on guess given the helpful. That's opportunity earlier kind but that liquidity the can touched of we've guys follow-up the And advantage the on curious, it strong of you in I just your I'm be position, discussion, during balance my take

to of this offense You've of touched play anything, on you in but terms on during based wonder offerings, scope are if as technology thinking the if doubling anything that down good contracts, in guys a well downtime? able that beyond being as there's there's about performance position being

John Lindsay

be the utilizing just also Well, to as more more there's technology, effective cost there's overall further improvement. an thinking rightsize be ability Again, to structure the the about more to organization, effective, organization start you lower organization.

we us I lot as how modernize. today, I but of for being to I'm I'm very real company opportunities think our think are hard not still to some we get I a they've there's specific. that. a proud ahead, worked people and continue to of still opportunities where have know

the next XXXX said, back We've is looking opportunity. we've got XXXX. always We're always is for strong open. and what got eyes know in do great to balance And I what which acquisitions made going our sheet. you some But we

balance we've that. And And and got do edge. sheet we're to that again the the for capacity looking

customers. figure our and keep and to to to continuing open value going change we're improve our the our ways to So eyes out industry to offering try

Jacob Lundberg

very much. Thank thoughts. you Appreciate the

John Lindsay

Thank you.

Operator

[ph] final [ph]. go today's take Altera Syed question Waqar from with We'll ahead. Please Capital

Unidentified Analyst

Thank you for my taking question.

Are you rigs seeing on each down country First same Colombia break by of you as all COVID-XX. the a the you're you And the in XX country? Like working could how basis? seen issues with country that in many well? maybe get that

John Lindsay

an today. split in of and We America South as five the five equal in Middle East have Waqar of

Unidentified Analyst

that in in the five is right? And Okay. America South one of is Colombia,

John Lindsay

correct. That's

Unidentified Analyst

work or have interruption you seen Colombia any well interruptions, no? as Okay. in And

John Lindsay

The rig gone to work. in has just Colombia actually

yes -- but we're talked in about as So an remarks, we effect there. saw Argentina, in prepared certainly

Mark Smith

how own you has know, country its we've you modify to each approaching. have challenges country. And but they're Waqar as And our protocols we internal to playbook, got will own and if playbook fit each that their within and H&P

and each doing having can in to remotely time. all with associated a where challenges countries in we that have of of We quarantine to challenges are the certain are And country. getting for the different crews we rigs can the all amount what remotely. of working there's in Obviously again, running, sorts There's the offices. we're

Unidentified Analyst

So there that country today zero Hughes the in in put XXth, was whole and they a active Baker on lockdown Argentina, rigs I March shows believe rig count in Argentina.

So paid getting you for one. two, you have working April? do through no come number activity there? are rig there's Number you back getting when on And paid may in still Are expectations if Argentina? those any

Mark Smith

the mentioned Well, in provision have those majeure Waqar. ones were prepared I comments a rigs the force that

Unidentified Analyst

Okay.

Mark Smith

question, as to issue separately said tell soon issues, were And before second of will in issues the market, all COVID-XX there of but There's within we've global the about return. only activity macroeconomic country Argentina and when not part the your oversupply, to too the aspects of it's that.

Unidentified Analyst

Sure.

very questions Okay, My great. Thank you been answered. much. have it. Appreciate

Mark Smith

Thanks Waqar.

John Lindsay

the Thank of our we're you time. end at think Keith Waqar. I

and team signing XX Before Stouter, Engineer. to two that years. I Chief retirement. their wanted VP off, have over attention to my He Rob our announced of senior members recently with has call been H&P was

over you -- I them our in thing, years. going great leadership, work made great the are VP their of to desire of do I've Clark, to gentlemen. Wade luck most He you both the But, honestly been of about of fortunate and Land. team XX U.S. VPs these our the their We're future. to miss contributions right years. be plus both appreciate integrity, They've players. their both what to was best of to closely with able to one H&P

the And course, you in have out And on Thank day. for Dave again reach call for listening a our great to have additional of and you you thank questions. if Wilson. and questions

Operator

you does This today's for conclude program. your participation. Thank

disconnect. now may You

Helmerich & Payne (HP) 1 May 202020 Q2 Earnings call transcript