Helmerich and Payne's Earnings Call Contradictions: International Margin Targets and Saudi Rig Reactivation Timelines Diverge

Date of Call: Aug 6, 2026

Financials Results

• Revenue: Over $1 billion, up 11% sequentially
• EPS: $0.74 per diluted share (net profit); reported a loss of $0.11 per share excluding the Utica Square sale and other select items

Guidance:

• North America Solutions: Q4 direct margin expected to average between $245 million and $255 million based on a rig count of 145 to 151. Full-year rig count range raised to 140-144.
• International Solutions: Q4 direct margin expected between $25 and $45 million. Annual rig guidance midpoint remains on course.
• Offshore Solutions: Q4 direct margin expected between $26 and $30 million. Full-year guidance raised to $113 to $117 million.
• Capital expenditures: Full-year guidance of $270 million to $310 million; Q4 expected to increase sequentially.
• Cash tax payments expected between $150 and $180 million.

Business Commentary:

Strong Financial and Operational Performance:

• Helmerich & Payne delivered an adjusted EBITDA of $236 million in the fiscal third quarter, exceeding the midpoint of their guidance.
• The performance was driven by strong operational results in the U.S., particularly in North America Solutions, and was supported by high direct margins.

Rig Activity and Market Dynamics:

• The company's North America Solutions segment averaged 142 rigs during the quarter, with direct margins reaching $241 million, at the high end of guidance.
• This growth was due to a strong rebound in activity and pricing environment, along with efficient rig reactivations, demonstrating the company's capability to adapt to market changes.

International and Offshore Growth:

• International Solutions reported a direct margin of $31 million, aligning with the high end of their guidance range, with notable strength in Latin America.
• Offshore Solutions also exceeded expectations with a direct margin of $29 million, driven by performance-related bonuses, indicating strong operational performance across regions.

Strategic Cost Optimization and Debt Repayment:

• The company is focused on accelerating debt repayment and optimizing costs, aiming to reduce corporate costs by an annualized $40 million by 2027.
• Initiatives include streamlining central functions, harmonizing ERP systems, and exiting non-core geographies to enhance profitability and shareholder value.

Future Outlook and Growth Expectations:

• Helmerich & Payne anticipates continued growth in 2027, supported by increasing demand for drilling services and a focus on technology and automation.
• The company's strategic positioning in key markets like the Vaca Muerta in Argentina and the Middle East is expected to drive future performance.

Sentiment Analysis:

Overall Tone: Positive

• Management stated they 'delivered strong financial and operational performance' and exceeded guidance midpoints. Activity in the U.S. Lower 48 continued to build, with confidence in sustained momentum into 2027. They are 'encouraged' by customer interactions and 'optimistic on the outlook' for 2027 and beyond, citing a 'multi-year upstream growth cycle'.

Q&A:

• Question from Derek Podhaizer (Piper Sandler): Walk through the different puts and takes for your fiscal 4Q guide and how to sustain momentum into fiscal 2027 across NAS, international, and offshore.
  Response: Sequential EBITDA improvement is driven by activity growth across all segments; confidence in Q4 carries into 2027 with customer conversations constructive.

• Question from Scott Gruber (Citigroup): Unpack the outlook for NAS margins, reactivation costs, performance bonuses, and margin potential with ~150 rigs in calendar 2027.
  Response: Margin fluctuations due to lumpiness in performance-based bonuses and reactivations; high-spec rigs in demand and market tightness supports margins.

• Question from Arun Jayaram (JPMorgan): Discuss confidence in maintaining a $300 million maintenance plus sustaining CapEx program as international activity grows in Argentina.
  Response: Disciplined capital allocation focused on debt reduction and unlocking growth without major incremental spending; capable of generating substantial free cash flow.

• Question from Saurabh Pant (Bank of America): Provide update on operations and opportunities in Saudi Arabia, timeline for remaining rig reactivations, and prospects beyond seven rigs.
  Response: Encouraged by stability and commercial momentum; focused on achieving $45M quarterly run rate for International Solutions; Jafurah unconventional project positions for future growth.

• Question from Keith Mackey (RBC): Discuss competitive landscape evolution in Argentina's Vaca Muerta and margin economics for exported rigs.
  Response: Market share at 25% with nine rigs; line of sight to 15 rigs, with potential for more; exported rigs have margins in line with domestic, supported by technology.

• Question from Eddie Kim (Barclays): Provide details on geothermal rig count, total projects, and return profile compared to oil and gas.
  Response: Currently below double-digit rigs globally; targeting double-digit marker; margins similar to Lower 48; supply tightness adds to overall market constraints.

Contradiction Point 1

Timeline for International Segment to Reach $45M Quarterly Direct Margin Run Rate

It involves conflicting statements on when the segment will return to its long-term margin target, which is a key financial forecast and impacts investor expectations for future performance.

What was Derek Podhaizer's question for Piper Sandler during the earnings call? - Derek Podhaizer (Piper Sandler)

2026Q3: International Solutions will be the fastest-growing segment... aiming for a $45M quarterly direct margin run rate. - [Todd Scruggs](CFO)

Could you detail the key drivers and challenges in your fiscal 4Q guide, how you plan to sustain momentum into fiscal 2027, and provide insights on NAS, international, and offshore segments? - Scott Gruber (Citigroup)

2026Q2: The $45M quarterly run rate is still the long-term target, but timing depends on conflict resolution. If supply chain costs persist, reaching $45M could shift to Q1 FY27. - [Kevin Vann](CFO)

Contradiction Point 2

Status of Saudi Arabia Rig Reactivations

Inconsistency on the progress and completion of reactivating rigs in Saudi Arabia, which affects operational forecasts and market confidence in the company's execution.

Saurabh Pant (Bank of America) - Saurabh Pant (Bank of America)

2026Q3: Current operations are stable at 22 rigs. The remaining two rigs are not added to the Q4 forecast. - [Trey Adams](CEO)

What are the key operational updates and new opportunities in Saudi Arabia following your recent visit, the timeline for reactivating the remaining two rigs, and potential for additional rigs beyond the seven coming off suspension? - Scott Gruber (Citigroup)

2026Q2: Operational continuity has been maintained, with 6 of 7 Saudi reactivations expected by Q3 end. - [Trey Adams](CEO) & [Kevin Vann](CFO)

Contradiction Point 3

Timeline and Margin Impact of Saudi Rig Reactivations

Contradiction on when reactivated rigs will reach full margin contribution, affecting financial projections and the expected timeline for business recovery.

Saurabh Pant (Bank of America) - Saurabh Pant (Bank of America)

2026Q3: Focus is on achieving the $45M quarterly direct margin target for International Solutions. The remaining two rigs are not added to the Q4 forecast... - [Trey Adams](CEO)

What are the key observations from your recent visit to Saudi Arabia regarding Middle East operations, new opportunities, and the timeline for the remaining two rig reactivations? - Scott Gruber (Citigroup)

2026Q1: Reactivated rigs in Saudi are anticipated to contribute ~$5M EBITDA annually each, with FlexRig margins expected to improve and reach full run rate by end of FY26. - [J. Vann](CFO)

Contradiction Point 4

Near-Term Outlook for North America (NAS) Margins

Contradiction on the immediate drivers and stability of NAS margins, which is crucial for understanding the company's cost structure and pricing power in its core market.

Scott Gruber (Citigroup) - Scott Gruber (Citigroup)

2026Q3: Margin fluctuations are due to lumpiness in performance bonuses (over half of rigs are on performance-based contracts) and reactivation costs, but the latter is a smaller component. - [Mike Lennox](Executive Vice President of the Western Hemisphere)

How are reactivation costs and performance bonuses impacting NAS margins? - Eddie Kim (Barclays)

2026Q1: Pricing discipline remains firm at 45-50% direct margins; the company is not chasing market share. Margins are currently holding around $18K/day, with potential for improvement in the back half driven by revenue opportunities and ongoing expense management. - [Michael Lennox](Executive Vice President of Western Hemisphere Land Operations)

Contradiction Point 5

Timeline and Financial Impact of Saudi Arabia Rig Reactivations

Conflicting statements on when reactivation costs will clear and the financial impact timeline, which is critical for assessing the company's financial health and recovery prospects.

What is Saurabh Pant's outlook for Bank of America's earnings? - Saurabh Pant (Bank of America)

2026Q3: The remaining two rigs are not added to the Q4 forecast; focus is on achieving the $45M quarterly direct margin target for International Solutions. - [Trey Adams](CEO)

What are the key operational updates and new opportunities in the Middle East/Saudi, the timeline for the remaining two rig reactivations, and potential for additional rigs beyond the seven currently coming off suspension? - Saurabh Pant (BofA Securities)

2025Q4: The 7 rig reactivations in Saudi Arabia are very positive. The reactivations will be a phased approach, expected to be finished by mid-2026. - [John Lindsay](CEO)