Helmerich & Payne, Inc.

Good day, everyone, and welcome to today's Helmer & Payne's Fiscal Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer period. You may register to ask a question at any time by pressing star 1 on your touch-tone phone. Please note this call may be recorded. I will be standing by should you need any assistance. It is now my pleasure to turn today's call over to Vice President of Investor Relations, Dave Wilson. Please go ahead.

Thank you, Ashley, and welcome everyone to Humber Campaign's conference call and webcast for the third quarter of fiscal year 2023. With us today are John Lindsay, President and CEO, and Mark Smith, Senior Vice President and CFO. Both 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 want to remind everyone that this call will include forward-looking statements as defined under the securities laws. Such statements are based on current information and management's 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 make reference to certain non-GAAP financial measures such as segment operating income, direct margin, and other operating statistics. You'll find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, I'll turn the call over to John Lindsay.

Thank you, Dave, and good morning, everyone. H&P delivered another outstanding quarter driven by service quality, technology, and reliable execution, enabling us to deliver quality outcomes for our customers. H&P's financial results for the third fiscal quarter were significant for a few reasons. First, they demonstrate that we are achieving economic returns in the low to mid teens, which are just above our cost of capital. Second, these financial results were achieved during a slow period when rig activity was declining, primarily due to weak natural gas prices. This demonstrates that contract economics, rather than market share, drove the company's financial performance this quarter. Finally, these results highlight the behavioral change that has transpired within the energy industry, one that reflects fiscal prudence and capital allocation. Uncertainty continued during the third fiscal quarter and was mostly centered around the macro outlook for crude oil and natural gas prices. While this created an underlying sense of apprehension in the U.S. drilling market during the quarter, recent readings are more confident and we're sensing some optimism on the horizon. In the near term, we believe that U.S. rig activity declines will continue into the September ended quarter, although at a more modest pace than experienced thus far this calendar year. We see these declines as more of a function of customer budget and production discipline rather than a response to short-term commodity price movements, which is a prime example of the behavioral change in the industry. Having already received some promising indications, we expect to see an increase in rig activity during the fourth calendar quarter as our customers establish their capital budgets for 2024. Commodity prices remain attractive and we see the customer outlook being more positive regarding medium and long-term energy fundamentals. We believe there will be an increase in the demand for rigs relative to current levels due to fundamental supply and demand dynamics that are inherent in the industry. A major industry theme is service intensity. Our customers continue to do more with their acreage positions to drive stronger well economics. These desires typically require that our equipment works harder than ever. Laterals are longer, circulating pressures are higher to drill these wells and keep up with customer needs, and this drives costs higher. Our customers benefit from reliability, faster well cycles, and better well quality, all of which lowers the total well cost. Our operations and sales teams are working more closely than ever with the customer to deliver more collaborative solutions. In the face of recent rig count declines, we've been able to remain firm on our contractual economics by working with and collaborating closely with customers on alternative contract models. Our primary commercial model is using performance contracts combined with our technology solutions. Having the operational confidence in our ability to consistently execute enables H&P to enter into alternative contractual arrangements, including our automation solutions, which can result in win-win economics for both customer and H&P. Today we have approximately 51% of our active fleet using performance-based contracts, which is a high point since we implemented this new commercial model in 2019. Even with these ongoing efforts, we are anticipating our North America solutions margins in the fourth fiscal quarter to compress slightly as the rigs idle during the second half of our fiscal year have been mainly in the spot market and had contractual margins above the overall fleet average. In short, the absence of those rigs, which had leading edge revenues and margins, will likely result in a modest decline in North America solutions margins during the fourth fiscal quarter. Expanding our international footprint remains a core strategy for the company, but it is unfolding at a slower pace than expected. Our flex rig in Australia is scheduled to commence drilling soon. We look forward to demonstrating our expertise and drilling efficiencies and the power of our technology platform for our customer Tamborin, as they work to unlock the unconventional resources of the Beteloo Basin in the Northern Territory. Additionally, we plan to send a second super spec rig to the Middle East in anticipation of the pending results of an unconventional tender. This would become our first unconventional rig award in the Middle East. Activities in our other international markets look to remain relatively steady for the foreseeable future. capital returns to shareholders remains a priority for the company. Mark will give more specific details, but we repurchased approximately 3.2 million shares for roughly $103 million in the fiscal quarter. Fiscal year to date, we have returned approximately $451 million of capital to shareholders through base and supplemental dividends together with share repurchases. In closing, We remain optimistic that the political and economic uncertainty over the past several quarters, which has impacted the global crude oil and natural gas markets, is abating. During the third fiscal quarter, we once again achieved returns in excess of our cost of capital, and moving forward, our focus will remain on maintaining these levels of returns while delivering superior economic outcomes to our customers. This level of performance is possible because of the service attitude of our people and their ability to deliver value through drilling efficiencies and technology in collaboration with our customers. And now we'll turn the call over to Mark.