Helmerich & Payne, Inc.

Please stand by your program is about to begin. 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. You may register to ask a question anytime by pressing the star and one on your touch tone phone. Please note today's call is being recorded. It's my pleasure to turn the call over to Director of Investor Relations, Dave Wilson. Please go ahead.

Thank you, Keith, and welcome everyone to Hummer Campaign's conference call and webcast for the second quarter of fiscal 2020. With us today are John Lindsay, President and CEO, and Mark Smith, Senior Vice President and CFO. John and Mark will be sharing some comments with us, after which we'll open the call for questions. Before we begin our prepared remarks, I'll remind everyone that this call will include forward-looking statements as defined under the Securities Laws. Such statements are based upon current information and management expectations as of this date and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially. You can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other SEC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to publicly update these forward-looking statements. We'll also be making certain reference to non-GAAP financial measures such as segment operating income and operating statistics. You'll find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, now I'll turn the call over to John Lindsay.

Thank you, Dave. Good morning, everyone. The COVID-19 pandemic has no rivals in recent times for the dramatic and widespread impact it has unleashed on the world and our industry. Our highest priority over these past few months has remained focused on the health and safety of our employees, customers, and stakeholders. I want to begin by thanking all of our employees for their efforts to protect each other and our customers by adhering to physical distancing practices to control exposures and for following all of the protocols we put in place to protect our families and each other from the virus. Throughout our history, the company has sought to be in a position of strength, both operationally and financially, to face the uncertainty and an inherent cyclicality of the energy industry. We have taken swift actions to maintain the health and safety of our employees and customers. We've also made difficult, measured, but necessary decisions aimed at preserving the company's longstanding financial strength and its future. These timely actions have served to minimize the impact of COVID-19 on our operations and helped to preserve our financial position. This market has been referred to as unprecedented by many, and during my 33-year career at H&P, we have weathered many downturns, though this one does have unique characteristics. While the crude oil market imbalance is a global phenomenon, it has more acutely impacted the US market as a result of storage limitations subsequent to March 31st. The abruptness of and the overall size of the decrease in demand for refined products such as gasoline and diesel has created an abundance of supply which has caused refining capacity to shrink resulting in excess crude oil. This crude oil overhang in supply has created a storage dilemma for E&P companies, limiting opportunities to market their production, and even when they can sell, the prices are very depressed. Consequently, some E&P companies have chosen to shut in production, postpone completions of drilled and uncompleted wells, and many E&Ps have stopped drilling wells entirely until the market imbalance rights itself and it once again becomes economic to resume production and drilling. It is obvious that these current circumstances hold long-term negative implications for our industry. Our experience has shown us that two factors hold the key to surviving a downturn and ultimately furthering the strategic objectives of the company. First, maintaining financial strength. And second, maintaining a long-term view for future potential opportunities. In this regard, we will remain focused on establishing new commercial models, expanding our digital technology offerings to customers, increasing our international presence and cost management. Liquidity is critically important in a time like this, and we are actively reducing expenses in a thoughtful and intentional manner. We are drawing on learnings from the 2015-2016 downturn to idle rigs more efficiently, and we're seeing additional innovative efforts throughout the company pay off and anticipate that this will continue. We also ended a 48-year run of paying an increased dividend per share by announcing our intention to reduce our dividend to $0.25 per quarter beginning after our next dividend payment. Given this current environment, we are right-sizing our organization to reflect these new realities. And Mark will discuss this in more detail during his remarks. We are also using this as an opportunity to ensure our talent reflects the company's direction as well as the industry overall. We are intentionally aligning our organization towards a performance-driven approach that drives higher reliability and simplifies our customer's experience and forming a stronger partnership. As we have discussed in previous calls, we are making efforts to develop new commercial pricing models that create win-win value capture for customers and enable us to earn an equitable share of the value we create with our drilling solutions. We strive to align ourselves with the customer's objective to enhance economic returns through better performance and technology. we are working hard to put this shared focus and decision-making at the forefront of all of our partnerships. Such value is arguably even more pertinent in strained market conditions like we see today. While the reduction in our rig count has adversely affected the number of rigs we currently have under performance-based contracts, we expect the total of these to represent a larger percentage of our active flex rig fleet over time. The importance of well economics is magnified under these stressed market conditions and combining our digital technology solutions in the commercial model becomes even more appealing to some customers who recognize that wellbore quality and placement improves the lifetime value of the well. The COVID-19 pandemic has caused everyone to adjust to new realities such as remote office environments and in our field operations, to the logistical challenge of reducing virus exposure and screening rig site crews and third-party personnel. As a result, we are also seeing a new surge in interest for remote drilling and automation technologies. Many of our customers not only see the financial advantage of de-manning certain positions at the rig site, but also recognize that this trend is inevitable as these automation capabilities mature at a time when physical distancing is needed. Although the timing of a recovery is not clear, the consensus of the industry is that when it does occur, it is likely to be at a higher velocity than previous recoveries. With deep cuts to personnel, we would expect any recovery will occur without the benefit of a large portion of the industry's seasoned veterans. as many will likely leave the energy industry during this latest downturn. While the near-term focus is clearly on cost reduction, customers are not just reducing their human workforce. They are also asking how their organizations need to change to survive and be competitive with increasing cyclicality. And like other industries have experienced, automation and digitization of operations is common in these conversations. Despite the rapid reduction in industry rig activity, our automation solutions such as AutoSlide have remained stable and, in fact, have seen increased activity in recent months. We believe this is driven by both a move to reduce costs and human errors, but also a move to establish more manufacturing drilling through digital technology. In previous cycles, many of these efforts have centered around visualization and analytics rather than true automation, and while this has some value, a true redefinition of the workforce roles did not occur. However, given H&P's ability to show documented field success coupled with the financial pressure and health concerns in this current environment, there are signs the logjam has been broken that has previously hindered progress toward automation at the rig. We believe that automation is the future, and we are well positioned with digital technology offerings through the strategic acquisitions we've made in recent years. We also feel our uniform PlexRig fleet gives us a unique advantage in the ability to scale automation technology effectively for our customers. Our focus internationally continues to be on actively pursuing long-term growth opportunities, and development of these will likely be affected by travel and operational hurdles due to COVID-19. Although we expect the third quarter's results to be negatively impacted, we are encouraged about what the future holds for H&P internationally. The capabilities that allowed H&P to grow market share in the US over the past 15 years are some of the same capabilities that will benefit international growth in the future. Crucial to all of this is continuing to make investments that further our ESG efforts. We will continue to partner with customers to invest in areas that help lower the environmental impact of drilling for oil and gas through greenhouse gas emission reductions. Like many companies in today's environment, we continue to employ a global remote work model for office personnel and in our field operations where possible. While instituting the remote work platform required quick action, robust technology, and greater communication, we have not lost momentum. In fact, I think we're actually gaining momentum organizationally and with customers. During this time, we've digitized and automated processes to save time, money, and reduce the risk of human error. Our quick actions around COVID-19 at our rig sites is something that many of our customers and partners are modeling in their own operations, which underscores the fact that our commitment to health and safety is always paramount. H&P's people are difference makers on a daily basis. Our investment in the health of our organization has enabled us to remain agile at a time when the ability to adapt is one of the most critical, competitive advantages a company can have. I have been very impressed by the quality of work provided by our teams during this very intense and challenging time. In closing, I mentioned earlier about our focus on cost reductions, which are critical at this time. However, just like our customers, we are also looking at our organizational structures and asking ourselves how can we streamline our operations and use technology and automation to enhance the health and growth of our business over the long term. Automation and digitization of operations is a common conversation with our customers today, and we are using this as an opportunity to innovate for the future of our business success going forward. And now I'll turn the call over to Mark Smith.