{"id":5586,"date":"2023-05-08T04:00:40","date_gmt":"2023-05-08T08:00:40","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/helmerich-payne-a-weakening-outlook-could-hurt-the-stock-price-nysehp\/"},"modified":"2023-05-08T04:00:41","modified_gmt":"2023-05-08T08:00:41","slug":"helmerich-payne-a-weakening-outlook-could-hurt-the-stock-price-nysehp","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=5586","title":{"rendered":"Helmerich & Payne: A Weakening Outlook Could Hurt The Stock Price (NYSE:HP)"},"content":{"rendered":"
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Introduction<\/h2>\n

The Tulsa, Oklahoma-based Helmerich & Payne, Inc. (NYSE:HP<\/span>) released its fiscal second quarter 2023 results on April 26, 2023.<\/p>\n

This article is an update of my preceding article, published on January 30, 2023. I have followed HP on Seeking Alpha since September 2014.<\/span><\/p>\n

1 – Fiscal 2Q23 Results Snapshot<\/strong><\/h3>\n

Helmerich & Payne, Inc. announced a fiscal second-quarter 2023 net income of $164.04 million, or $1.55 per diluted share, compared to a loss of $4.98 per diluted share in the same quarter a year ago. This quarter, revenues were $769.22 million, up significantly from $467.60 million last year.<\/p>\n

President and CEO John Lindsay said in the conference call:<\/p>\n

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H&P delivered another outstanding quarter and executed on several strategic objectives. On our Q2 earnings call last year, we announced a goal to achieve direct margins of 50% in our North America Solutions segment, as the pathway to generating an annualized return of our cost of capital. I’m pleased to report we have achieved that margin goal with the second fiscal quarter results.<\/span><\/p>\n<\/blockquote>\n

Net cash provided by operating activities was $140.88 million for the second quarter of the fiscal year 2023 compared to $22.61 million in the prior quarter.<\/p>\n

In March, H&P’s North America Solutions segment left the fiscal first quarter with 179 active rigs. However, the rig count will decrease next quarter to 155 and 160 contracted rigs.<\/p>\n

Mark Smith said in the conference call:<\/p>\n

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we exited fiscal Q2 with 179 rigs working, we have since seen several April releases and as of today’s call we have 169 rigs contracted. 176 of which are super spec rigs, and we project that by the end of the third fiscal quarter, we will have between 155 and 160 contracted rigs.<\/p>\n

Last quarter we peaked at 185 working super-spec rigs and with 18 recently idled, we are at approximately 90% utilization of the recently active fleet.<\/p>\n<\/blockquote>\n

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HP Rig counts Presentation (HP March Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

2 – Investment Thesis<\/strong><\/h3>\n

Helmerich & Payne’s results were better than expected. The onshore drilling business has been solid over the past few quarters. However, oil and gas prices have dropped significantly this quarter, weakening demand.<\/p>\n

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HP 1-Year Chart oil and NG Prices (Fun Trading StockCharts)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Thus, I still consider HP a good long-term investment with a sound balance sheet and excellent growth prospects. HP is tightly associated with oil and gas prices and could easily be the first stock to drop if oil prices fall due to declining demand.<\/p>\n

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HP Investment Thesis (HP Presentation)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Still, we may enter some tough headwinds in this industry, which could push HP to drop even further if the risk of recession materializes in H2 2023. Hence, it is essential to accumulate the stock cautiously, expecting lower lows for a while.<\/p>\n

Therefore, I suggest trading 50% LIFO in your entire position to protect you from a sudden drop. This dual strategy is what I am suggesting in my marketplace, “The Gold and Oil Corner.”<\/p>\n

3 – Segment Discussion<\/strong><\/h3>\n

3.1 – North America Solutions Segment<\/strong><\/h4>\n

Operating income was $182.1 million, compared to $145.3 million last year. The increase in operating income reflects more of our older term contracts continuing to reprice at higher contract economics, improving the overall pricing level across the fleet.<\/p>\n

Direct margins increased by $35.9 million to $296.2 million as revenues and expenses increased sequentially.<\/p>\n

Quarterly operating results were impacted by the costs associated with reactivating rigs: $5.2 million in the second fiscal quarter compared to $8.6 million in the previous quarter.<\/p>\n

3.2 – Offshore Gulf of Mexico Segment nearly unchanged sequentially<\/strong><\/h4>\n

The company recorded an operating income of $6.7 million compared to an operating income of $6.7 million during the previous quarter. Direct margins for the quarter were $9.3 million compared to $9.5 million in the prior quarter.<\/p>\n

3.3 – International Rigs Segment<\/strong><\/h4>\n

This segment had an operating income of $4.0 million compared to an operating income of $1.6 million during the previous quarter.<\/p>\n

Direct margins during the fourth fiscal quarter were $8.6 million compared to $13.8 million during the previous quarter.<\/p>\n

4 – Stock Performance<\/strong><\/h3>\n

HP is down 38% on a 1-year basis, while Nabors Industries (NBR), its direct competitor, is down 43%. HP and NBR significantly underperformed the VanEck Vectors Oil Services ETF (OIH).<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

Helmerich & Payne – Balance Sheet: 1Q23 (Fiscal Second Quarter 2023) – The Raw Numbers<\/h2>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n
Helmerich & Payne<\/strong><\/sub><\/td>\n4Q21 (fiscal 1Q22)<\/strong><\/td>\n1Q22 (fiscal 2Q22)<\/strong><\/td>\n2Q22 (fiscal 3Q22)<\/strong><\/td>\n3Q22 (fiscal 4Q22)<\/strong><\/td>\n4Q22 (fiscal 1Q23)<\/strong><\/td>\n1Q23 (fiscal 2Q23)<\/strong><\/td>\n<\/tr>\n
Total Revenues in $ Million<\/sub><\/td>\n409.78<\/td>\n467.60<\/td>\n550.23<\/td>\n631.33<\/td>\n719.64<\/td>\n769.22<\/td>\n<\/tr>\n
Net income in $ Million<\/sub><\/td>\n-51.36<\/td>\n-4.98<\/td>\n17.75<\/td>\n45.54<\/td>\n97.15<\/td>\n164.04<\/td>\n<\/tr>\n
EBITDA in $ Million<\/sub><\/td>\n47.85<\/td>\n105.38<\/td>\n124.32<\/td>\n175.95<\/td>\n229.83*<\/td>\n315.52<\/td>\n<\/tr>\n
EPS diluted in $\/share<\/sub><\/td>\n-0.48<\/td>\n-0.05<\/td>\n0.16<\/td>\n0.42<\/td>\n0.91<\/td>\n1.55<\/td>\n<\/tr>\n
Operating cash flow in $ Million<\/sub><\/td>\n-3.72<\/td>\n22.61<\/td>\n97.75<\/td>\n117.27<\/td>\n185.38<\/td>\n140.88<\/td>\n<\/tr>\n
CapEx in $ Million<\/sub><\/td>\n47.89<\/td>\n67.14<\/td>\n78.15<\/td>\n79.35<\/td>\n96.03<\/td>\n85.45<\/td>\n<\/tr>\n
Free Cash Flow in $ Million<\/sub><\/td>\n-51.61<\/td>\n-44.53<\/td>\n19.59<\/td>\n37.92<\/td>\n89.35<\/td>\n55.43<\/td>\n<\/tr>\n
Total cash in $ Million<\/sub><\/td>\n441.26<\/td>\n350.58<\/td>\n332.99<\/td>\n349.23<\/td>\n347.64<\/td>\n244.76<\/td>\n<\/tr>\n
Long-term debt in $ Million<\/sub><\/td>\n542.24<\/td>\n541.97<\/td>\n542.29<\/td>\n542.61<\/td>\n542.93<\/td>\n542.73<\/td>\n<\/tr>\n
Dividend per share in $<\/sub><\/td>\n0.25<\/td>\n0.25<\/td>\n0.25<\/td>\n0.25+0.235<\/td>\n0.25+0.235<\/td>\n0.25+0.235<\/td>\n<\/tr>\n
Shares outstanding (Basic) in Million<\/sub><\/td>\n107.57<\/td>\n105.39<\/td>\n106.02<\/td>\n106.08<\/td>\n106.10<\/td>\n104.36<\/td>\n<\/tr>\n<\/table>\n

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