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01/11 03:35
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong financial performance with North America and International margins above guidance. Despite some uncertainties in the Q&A, such as unquantified reactivation costs, the company has a positive outlook on rig reactivation and technology expansion. The market cap indicates moderate sensitivity, and the positive guidance and strategic plans are likely to lead to a stock price increase of 2% to 8% over the next two weeks.
Quarterly revenues A little over $1 billion, which is the third consecutive quarter over that $1 billion mark.
Total direct operating costs $715 million for the fourth quarter versus $735 million for the previous quarter.
General and administrative expenses $78 million for the fourth quarter and $287 million for fiscal 2025. These results include a $10 million write-off related to one of our investment securities.
Net loss per diluted share $0.58 per diluted share for the fourth quarter versus a net loss of $1.64 in the previous quarter. Earnings per share for the full year were a net loss of $1.66 per share.
Capital expenditures $64 million for the fourth quarter, with full year 2025 totaling $426 million. This outcome was primarily driven by accelerated CapEx investment in the Eastern Hemisphere and increased investment in harmonizing our ERP footprint.
Operating cash flow $207 million in the fourth quarter and a total of $543 million during the full year.
North America Solutions segment direct margin $242 million for the fourth quarter, which was above the midpoint of guidance range. Margins were slightly down from the third quarter.
International Solutions segment direct margin Approximately $30 million in the fourth quarter, above the midpoint of expectations. This result is slightly down from the third quarter.
Offshore Solutions segment direct margin Approximately $35 million during the quarter, which was above guidance range.
Advanced digital solutions usage: Increased by 20% over the year, driving efficiencies for customers.
FlexRigs export and reactivation: Exported 8 FlexRigs to Saudi Arabia and announced reactivation of 7 suspended rigs in Saudi Arabia for fiscal 2026.
International expansion: Expanded operations to Saudi Arabia, Kuwait, Oman, Argentina, Europe, and other countries, with a focus on the MENA region.
Permian Basin market share: Expanded market share despite a decline in total rig count in the region.
Operational efficiencies in North America: Average lateral lengths and drilled footage per day increased by 5%. Over 40% of wells now exceed 3-mile laterals.
Offshore operations: Active in multiple regions including Gulf of America, Caspian Sea, and North Sea, with a 30% share in the global platform operations and maintenance business.
KCAD acquisition: Acquired KCAD, making H&P the largest active land driller globally and adding a global offshore labor contract business.
Deleveraging and cost reduction: Paid off $210 million of term loan debt and achieved $50 million in savings from cost reduction efforts.
Oil Price Volatility: The company anticipates oil prices to remain range-bound between the upper $50s and mid-$60s in the first half of 2026, which could limit rig activity and revenue growth.
Permian Basin Rig Count Decline: The total rig count in the Permian Basin declined throughout 2025 due to softening oil price fundamentals, posing challenges to maintaining operational efficiency and market share.
Eastern Hemisphere Challenges: The company faced significant challenges in the Eastern Hemisphere in fiscal 2025, requiring reorganization and strategy realignment, which could impact operational stability and financial performance.
Capital Expenditure Pressures: Accelerated capital expenditures in the Eastern Hemisphere and ERP harmonization projects increased financial strain, though the company expects reduced capital investment levels in 2026.
Saudi Arabia Rig Reactivations: Reactivating 7 rigs in Saudi Arabia will incur reactivation costs and operational risks, potentially impacting margins in the first half of 2026.
Debt Reduction Goals: While the company is ahead of its debt reduction goals, the remaining $190 million term loan and associated interest expenses could constrain financial flexibility.
Super-Spec Rig Utilization: The tight utilization rates of super-spec rigs, while beneficial, could limit the company's ability to scale operations quickly in response to market demand.
International Rig Count Variability: The international rig count is expected to fluctuate, with some lower rig counts in non-core countries, potentially affecting revenue and margins.
Offshore Segment Stability: While the offshore segment provides stable revenues, its growth potential may be limited compared to other segments.
ERP Platform Integration: Operating on three distinct ERP platforms creates inefficiencies and requires significant investment to harmonize, delaying cost savings and operational synergies.
Oil Demand Growth: The IEA projects robust demand growth for oil over the next quarter century under the current policy scenario, with energy security and affordability remaining critical global concerns.
Natural Gas Demand: The rise of AI and surging power needs for data centers, coupled with significant LNG capacity build-out on the Gulf Coast, is expected to drive strong activity in gas-rich basins over the next several years.
North America Solutions Segment: The segment is expected to maintain its leadership in the U.S. land market, with continued focus on efficiency, longer lateral well designs, and advanced technology. Utilization rates for super-spec rigs idled less than 12 months remain strong at over 80%. The segment is positioned for continued natural gas activity expansion in fiscal 2026.
International Operations: Seven previously idled rigs in Saudi Arabia will be reactivated in fiscal 2026, increasing active rigs from 17 to 24. Operations will resume in the second and third fiscal quarters. The company expects margin improvements across these rigs by the end of fiscal 2026. Oman operations remain a bright spot with strong NOC and IOC relationships.
Offshore Segment: The segment is strategically positioned to benefit from a strong offshore investment cycle, with operations in multiple regions including the Gulf of America, Caspian Sea, and North Sea. The integration of land and offshore operating models is expected to deliver differentiated value for customers.
Capital Expenditures: Fiscal 2026 capital expenditures are projected to be $280 million to $320 million, reflecting reduced investment levels and a focus on capital discipline. Maintenance capital expenditures are expected to approach historically low figures.
Financial Position: The company plans to pay off its $190 million term loan by June 2026, maintain a base dividend of $100 million, and generate free cash flow to enhance shareholder returns and invest for growth.
Base Dividend: The company plans to maintain its long-standing base dividend of approximately $100 million in fiscal year 2026.
The earnings call shows strong financial performance with North America and International margins above guidance. Despite some uncertainties in the Q&A, such as unquantified reactivation costs, the company has a positive outlook on rig reactivation and technology expansion. The market cap indicates moderate sensitivity, and the positive guidance and strategic plans are likely to lead to a stock price increase of 2% to 8% over the next two weeks.
The earnings call presents a mixed picture: while EBITDA and some margins improved, rig counts and capital expenditures declined. The Q&A section highlights growth potential but lacks clarity on timelines and specifics, particularly for international expansion. The market cap suggests moderate sensitivity to these factors, resulting in a neutral sentiment.
The earnings call reflects challenges such as rig suspensions, integration issues, and market volatility. Despite stable revenues and adequate liquidity, the lack of clear guidance on Saudi operations and potential rig suspensions, coupled with cautious outlooks for Q4, suggest negative sentiment. Management's vague responses in the Q&A further contribute to uncertainty. The market cap indicates moderate reaction sensitivity, leading to a negative stock price prediction.
The earnings call summary presents a mixed picture: stable revenues and strong direct margins in North America, but increased operational costs and uncertainties in the Saudi market. The Q&A reveals management's lack of clarity on rig suspensions, potentially concerning investors. Despite a strong liquidity position and positive shareholder return plans, the market reaction may remain cautious due to uncertainties and flat revenue growth. Given the company's market cap of $3.5 billion, the stock price is likely to remain stable over the next two weeks, leading to a neutral prediction.
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