Helmerich & Payne, Inc. Announces Record Second Quarter Results

TULSA, Okla., April 27 /PRNewswire-FirstCall/ -- Helmerich & Payne, Inc. reported record net income of $64,573,000 ($1.22 per diluted share) from operating revenues of $290,830,000 for its second fiscal quarter ended March 31, 2006, compared with net income of $22,350,000 ($0.43 per diluted share) from operating revenues of $185,450,000 during last year's second fiscal quarter ended March 31, 2005. Included in net income were gains from the sale of portfolio securities and drilling equipment of $0.04 per share for the second fiscal quarter of 2006 and $0.01 per share for the second fiscal quarter of 2005.

For the six months ended March 31, 2006, the Company reported net income of $115,387,000 ($2.18 per diluted share) from operating revenues of $546,218,000, compared with net income of $61,660,000 ($1.20 per diluted share) from operating revenues of $360,129,000 during the six months ended March 31, 2005. Included in net income were gains from the sale of portfolio securities and drilling equipment of $0.08 per share for the first six months of fiscal 2006 and $0.44 per share for the first six months of fiscal 2005.

Worldwide demand for drilling services continued to put pressure on rig supply in each segment of the Company's operations. As a result, pre-tax operating income for all three of the Company's contract drilling segments were up sharply from both last year's second quarter and this year's first quarter. Operating profit for U.S. land rig operations rose to $82.9 million for this year's second quarter, compared with $35.8 million for last year's second quarter, and $71 million for this year's first quarter. Average revenue per rig day for U.S. land rigs rose to a record high of $22,593 for this year's second quarter, compared with $15,018 per rig day during last year's second quarter and $20,198 per rig day during this year's first quarter. Operating cost rose by 9% over the previous quarter, with increases coming from expense categories across the board, including labor, materials, supplies, insurance and rentals. In spite of higher operating costs, average margins per rig day rose to $12,567 per day for this year's second quarter, compared with $6,944 during last year's second quarter and $11,019 during this year's first quarter. Average U.S. land rig utilization was 98% during the second quarter, compared with 94% during last year's second quarter and 97% during this year's first quarter. During this year's second quarter, the Company sold its only idle U.S. land rig and is now operating at 100% utilization of its U.S. land rig fleet.

As demand for U.S. land rigs continued to push activity and dayrates during the quarter, the Company's offshore operations also recorded an increase in financial results. Pre-tax operating income for U.S. offshore platform operations rose to $7.4 million for this year's second quarter, from $4.2 million during last year's second quarter and $5.1 million from this year's first quarter. The increased income is a result of improved rig activity and increases in daily rig cash margins. Rig utilization for the U.S. offshore business improved to 71% during this year's quarter, compared with 45% during last year's second quarter and 64% for this year's first quarter.

Pre-tax operating profit from the Company's international contract drilling operations increased to $13.1 million during this year's second quarter from $3.6 million during last year's second quarter and $9.3 million during this year's first quarter. Venezuela and Ecuador continue to be the Company's most active operations with eleven of twelve rigs working in Venezuela and all eight rigs active in Ecuador. Utilization for the 27 international rigs rose during the quarter to 89%, compared with 71% during last year's second quarter and 83% during this year's first quarter.

The Company also announced today that the number of customer commitments for construction of new FlexRigs(R) has increased to 61. A total of 16 exploration and production companies have now committed to contracts for a minimum of three years of work for 13 new FlexRig3s and 48 new FlexRig4s.

Company President and C.E.O., Hans Helmerich commented, "We are pleased to announce another record quarter for the Company. Our U.S. land margins saw further expansion and we are encouraged by the continued strengthening of our U.S. offshore platform and international business segments. In terms of our new build program, the performance results of the four FlexRig4s that recently began work in the Piceance Basin have exceeded our expectations and are already adding value to our customer's operations. At the same time, manufacturing costs are moving higher than we anticipated. We underestimated the cost pressures associated with a strong upcycle and the impact of last year's hurricanes on labor availability and costs. We are now estimating up to an average of 13% higher than budgeted capital costs for the 30 rigs scheduled to be delivered this fiscal year. Financial returns remain very attractive in spite of these cost increases. We continue to receive inquiries about additional new build orders, and are confident about their ability to add shareholder value."

Helmerich & Payne, Inc. is a contract drilling company that owns 94 U.S. land rigs, 11 U.S. platform rigs located in the Gulf of Mexico, and 27 international rigs, for a total of 132 rigs. Included in the total fleet of 132 rigs are 54 H&P-designed and operated FlexRigs.

Helmerich & Payne, Inc.'s conference call/webcast is scheduled for this morning and can be accessed at http://www.hpinc.com/ under Investors and will begin at 11:00 a.m. ET (10:00 a.m. CT). If you are unable to participate during the live webcast, the call will be archived for a year on H&P's website indicated above.

Statements in this release and information disclosed in the conference call and webcast that are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 are based on current expectations and assumptions that are subject to risks and uncertainties. For information regarding risks and uncertainties associated with the Company's business, please refer to "Risk Factors" and "Management's Discussion & Analysis of Results of Operations and Financial Condition" sections of the Company's SEC filings, including but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. As a result of these factors, Helmerich & Payne, Inc.'s actual results may differ materially from those indicated or implied by such forward-looking statements.

* FlexRig(R) is a registered trademark of Helmerich & Payne, Inc. HELMERICH & PAYNE, INC. Unaudited (in thousands, except per share data) Three Months Ended Six Months Ended Dec. 31 March 31 March 31 CONSOLIDATED STATEMENTS OF INCOME 2005 2006 2005 2006 2005 Operating Revenues: Drilling - U.S. Land $172,754 $193,668 $122,394 $366,422 $231,582 Drilling - U.S. Offshore 29,520 33,703 18,649 63,223 39,005 Drilling - International 50,257 61,117 41,799 111,374 84,270 Real Estate 2,857 2,342 2,608 5,199 5,272 255,388 290,830 185,450 546,218 360,129 Operating costs and other: Operating costs, excluding depreciation 140,596 156,800 114,321 297,396 225,573 Depreciation 22,923 23,385 23,950 46,308 47,212 General and administrative 11,938 13,957 9,593 25,895 18,839 Income from asset sales (973) (3,563) (971) (4,536) (11,787) 174,484 190,579 146,893 365,063 279,837 Operating income 80,904 100,251 38,557 181,155 80,292 Other income (expense): Interest and dividend income 2,530 2,456 1,193 4,986 2,154 Interest expense (2,580) (1,946) (3,246) (4,526) (6,555) Gain on sale of investment securities 2,720 --- (36) 2,720 26,313 Other (513) 27 348 (486) 346 2,157 537 (1,741) 2,694 22,258 Income before income taxes and equity in income of affiliates 83,061 100,788 36,816 183,849 102,550 Income tax provision 32,802 38,240 15,153 71,042 42,283 Equity in income of affiliates net of income taxes 555 2,025 687 2,580 1,393 NET INCOME $50,814 $64,573 $22,350 $115,387 $61,660 Earnings per common share: Basic $0.98 $1.23 $0.44 $2.21 $1.22 Diluted $0.96 $1.22 $0.43 $2.18 $1.20 Average common shares outstanding: Basic 51,993 52,314 50,955 52,152 50,747 Diluted 53,087 53,057 51,891 52,886 51,571 A reclassification has been made to prior period amounts to conform to the current period presentation of including income from asset sales in operating income. HELMERICH & PAYNE, INC. Unaudited (in thousands) CONSOLIDATED CONDENSED BALANCE SHEETS 3/31/06 9/30/05 ASSETS Cash and cash equivalents $195,155 $288,752 Short-term investments 81,398 388 Other current assets 251,604 210,657 Total current assets 528,157 499,797 Investments 234,046 178,452 Net property, plant, and equipment 1,118,529 981,965 Other assets 3,288 3,136 TOTAL ASSETS $1,884,020 $1,663,350 LIABILITIES AND SHAREHOLDERS' EQUITY Total current liabilities $115,613 $89,481 Total noncurrent liabilities 324,745 294,631 Long-term notes payable 200,000 200,000 Total shareholders' equity 1,243,662 1,079,238 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,884,020 $1,663,350 HELMERICH & PAYNE, INC. Unaudited (in thousands) Six Months Ended March 31 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 2006 2005 OPERATING ACTIVITIES: Net income $115,387 $61,660 Depreciation 46,308 47,212 Changes in assets and liabilities (20,136) 9,727 Gain on sale of assets and investment securities (7,120) (38,100) Other 1,657 (2,584) Net cash provided by operating activities 136,096 77,915 INVESTING ACTIVITIES: Capital expenditures (170,900) (22,519) Purchase of investments (83,010) (5,000) Proceeds from sale of assets 12,983 89,298 Net cash provided by (used in) investing activities (240,927) 61,779 FINANCING ACTIVITIES: Dividends paid (8,624) (8,380) Proceeds from exercise of stock options 11,860 11,843 Excess tax benefit from stock-based compensation 7,998 --- Net cash provided by financing activities 11,234 3,463 Net increase (decrease) in cash and cash equivalents (93,597) 143,157 Cash and cash equivalents, beginning of period 288,752 65,296 Cash and cash equivalents, end of period $195,155 $208,453 SEGMENT REPORTING Three Months Ended Six Months Ended Dec. 31 March 31 March 31 2005 2006 2005 2006 2005 (in thousands, except days and per day amounts) US LAND OPERATIONS Revenues $172,754 $193,668 $122,394 $366,422 $231,582 Direct operating expenses 84,215 92,051 69,695 176,266 136,673 General and administrative expense 3,082 3,908 1,839 6,990 3,705 Depreciation 14,466 14,832 15,063 29,298 29,819 Segment operating income $70,991 $82,877 $35,797 $153,868 $61,385 Activity days 8,035 8,086 7,589 16,121 15,177 Average rig revenue per day $20,198 $22,593 $15,018 $21,399 $14,191 Average rig expense per day $9,179 $10,026 $8,074 $9,603 $7,938 Average rig margin per day $11,019 $12,567 $6,944 $11,796 $6,253 Rig utilization 97% 98% 94% 97% 93% US OFFSHORE OPERATIONS Revenues $29,520 $33,703 $18,649 $63,223 $39,005 Direct operating expenses 20,308 21,820 10,992 42,128 23,839 General and administrative expense 1,437 1,828 817 3,265 1,651 Depreciation 2,664 2,686 2,668 5,350 5,175 Segment operating income $5,111 $7,369 $4,172 $12,480 $8,340 Activity days 644 699 450 1,343 1,013 Average rig revenue per day $36,339 $39,707 $29,297 $38,092 $27,350 Average rig expense per day $22,986 $23,642 $14,928 $23,328 $14,552 Average rig margin per day $13,353 $16,065 $14,369 $14,764 $12,798 Rig utilization 64% 71% 45% 67% 51% SEGMENT REPORTING Three Months Ended Six Months Ended Dec. 31 March 31 March 31 2005 2006 2005 2006 2005 (in thousands, except days and per day amounts) INTERNATIONAL OPERATIONS Revenues $50,257 $61,117 $41,799 $111,374 $84,270 Direct operating expenses 35,693 42,398 32,920 78,091 63,775 General and administrative expense 606 872 497 1,478 1,150 Depreciation 4,656 4,735 4,800 9,391 9,566 Segment operating income $9,302 $13,112 $3,582 $22,414 $9,779 Activity days 2,028 2,160 1,728 4,188 3,551 Average rig revenue per day $20,285 $22,979 $19,430 $21,674 $19,316 Average rig expense per day $13,512 $15,003 $13,672 $14,281 $13,504 Average rig margin per day $6,773 $7,976 $5,758 $7,393 $5,812 Rig utilization 83% 89% 71% 86% 71% Per day calculations for international operations exclude gains and losses from translation of foreign currency transactions. Operating statistics exclude the effects of offshore platform and international management contracts, and do not include reimbursements of "out-of-pocket" expenses in revenue per day, expense per day and margin calculations. Reimbursed amounts were as follows: US Land Operations $10,463 $10,978 $8,419 $21,441 $16,208 US Offshore Operations $3,753 $3,489 $1,410 $7,242 $2,881 International Operations $5,125 $6,796 $3,794 $11,921 $6,893 REAL ESTATE Revenues $2,857 $2,342 $2,608 $5,199 $5,272 Direct operating expenses 801 1,010 1,174 1,811 2,201 Depreciation 603 606 573 1,209 1,135 Segment operating income $1,453 $726 $861 $2,179 $1,936 SEGMENT REPORTING Three Months Ended Six Months Ended Dec. 31 March 31 March 31 2005 2006 2005 2006 2005 Segment Operating income US Land $70,991 $82,877 $35,797 $153,868 $61,385 US Offshore 5,111 7,369 4,172 12,480 8,340 International 9,302 13,112 3,582 22,414 9,779 Real Estate 1,453 726 861 2,179 1,936 Segment operating income $86,857 $104,084 $44,412 $190,941 $81,440 Corporate general and administrative (6,813) (7,349) (6,440) (14,162) (12,333) Other depreciation (534) (526) (846) (1,060) (1,517) Inter-segment elimination 421 479 460 900 915 Income from asset sales 973 3,563 971 4,536 11,787 Operating income $80,904 $100,251 $38,557 $181,155 $80,292 Other income (expense): Interest and dividend income 2,530 2,456 1,193 4,986 2,154 Interest expense (2,580) (1,946) (3,246) (4,526) (6,555) Gain on sale of investment securities 2,720 --- (36) 2,720 26,313 Other (513) 27 348 (486) 346 Total other income (expense) 2,157 537 (1,741) 2,694 22,258 Income before income taxes and equity in income of affiliates $83,061 $100,788 $36,816 $183,849 $102,550