Helmerich & Payne, Inc.

with the scale and capabilities needed for future expansion into the premier international markets. It's been a little more than 100 days since the transaction closed and the integration is going well. Taking a long-term perspective, particularly considering the industry's current state, we are very well positioned for the future. Now we must demonstrate that we can execute on our international growth strategy I want to assure you that is what we are focused on. I want to commend our people. Two legacy organizations have come together as one team and are delivering significant value for customers. There are some noteworthy headwinds facing the industry stemming from several factors including OPEC Plus production increases and U.S. tariff initiatives that have created global economic uncertainty. Even so, we remain bullish about the long-term outlook for oil and gas markets and believe demand will continue to increase over time. The oil and gas production decline curve continues, and the only way to maintain and grow production is by drilling more wells. H&P is the most efficient driller in the U.S. and we plan to demonstrate we can do the same in international markets. I believe that our rigs, technology, people, and commercial models drive the best outcomes for our customers, and our differentiated solutions will drive our success in the future. Next, I'll spend a few minutes reviewing each of our operating segments. Our North America solutions segment remains resilient. as our customer and operational performance focus and best-in-class execution allowed us to maintain a steady rig count and realize margins that were better than our expectations going into the quarter. Looking ahead, we expect softer oil prices will lower the industry rig count as market volatility overrides any potential incremental demand. performance-based contracts and technology solutions remain a critical component of our overall contracting strategy. Our technology solutions are focused on automating processes that were previously more manual operations. These technologies drive greater efficiency, safety, and reliability for our customers. The combination of performance-based contracts and technology solutions offer advantages for both our customers and H&P by providing a mutually beneficial value proposition. Kevin will give more details in his remarks about our North America Solutions financials. Our international solutions segment reflects the inclusion of the legacy KCA DOITAG operations. and our team is working diligently to fully integrate international operations into a single cohesive business unit. We believe the combined cultures of performance, discipline, and customer focus, coupled with learnings from our North America Solutions experience, including our technology and commercial models, position us for success over the long term. During the quarter, We experienced challenges in our Saudi operations with startup delays with the legacy H&P flex rigs, which we believe have now been mostly resolved. The additional rig suspensions in the legacy KCA fleet were impactful as well. On the positive side, we have already started to reap the benefits of the expertise, infrastructure, and scale of the legacy KCAD operations in Saudi. It is gratifying to see the strong partnerships with customers we have in our international solutions business. In my recent visits to RIGS and the countries where we operate, I am confident that in the future, H&P can grow the business. In discussions with customers, it's become evident that there is a strong demand for the operational excellence, safety, and technology solutions that H&P delivers. despite near-term softening in the industry. Given the current outlook, direct margins in the international solutions segment in the third fiscal quarter will fall short of where ultimately we want to be. Our teams are working closely with our customers, and we do expect to see improvement in the results on a sequential basis as we continue to progress our integration efforts, especially in Saudi Arabia. We have a laser focus on getting this right, and Kevin will go into more details about what is driving our Q2 results and Q3 outlook. Now looking at our offshore solution segment, which continues to produce strong and steady cash flows. H&P's legacy offshore experience dates back more than 50 years, and the inclusion of the legacy KCAD fleet has added significant scale and geographic expansion to our offshore segment. Together, we are the largest global offshore operation and maintenance partner in the world. Our offshore solutions segment deliver drilling solutions, workovers, P&A, and rig modifications and asset management on platforms and jackups. KCA's first offshore contract started in 1972 in Norway. Our offshore business has low capital intensity and a blue chip customer base that we are very familiar with. And it's encouraging to see the growth opportunities emerging again in this segment of our business. In closing, having successfully accomplished the important strategic objective of expanding internationally, particularly to achieve scale in the Middle East, we are now entering the phase of enhancing value and performance for our customers and shareholders. For our customers, this means prioritizing safety, drilling efficiency, and reliability, which in turn drive financial performance for our shareholders. The oil and gas industry has always been cyclical and likely will remain so, but H&P has always been adept at navigating these cycles and coming out stronger on the other side. Throughout our 105-year history, the company has faced many challenges in the industry, and the enduring imperative is always to keep our core businesses performing well. In the upcoming quarters, we will focus on realigning our cost structures, securing value-add synergies, and reducing debt on our balance sheets. We are extremely optimistic about the future and our ability to scale in the most prolific oil and gas producing regions in the world. While also acknowledging that there may be temporary growing pains. And as I said previously, now we must demonstrate that we can execute on our international growth strategy. Before turning the call over to Kevin, I want to express my gratitude for the effort our people have put forth over the past year. With the acquisition, and continuing to run the day-to-day, everyone has worked very hard. The H&P organization is comprised of loyal and talented individuals whose dedication and support and focus on our customers are the key ingredients to our success, and I want to thank them. And now I'll turn the call over to Kevin.

Thanks. Thanks, John. Today I will review our fiscal second quarter 2025 operating results. which includes a partial quarter from our expanded international and offshore businesses resulting from the close of our KCA deacquisition in January. Provide guidance for the fiscal third quarter, update remaining full year 2025 guidance as appropriate, and finally comment on our financial position. Let me start with a few highlights. The company generated quarterly revenues of just over $1 billion. Total direct operating costs were $702 million. and general and administrative expenses were approximately $81 million for the quarter. Our G&A cost included the one-time charges associated with the Voluntary Early Retirement Program. Gross capital expenditures for our second quarter were $159 million, which was in line with our expectations as the program was more heavily weighted to the front half of the year. Second quarter cash flow from operations was $56 million, which was negatively impacted by significant non-recurring transaction related one-time cost in addition to some working capital challenges with our unconventional startup business in Saudi. However, we expect future quarters cash flows to be more reflective of our underlying business as those costs and issues have been substantially resolved. Turning to our three segments beginning with North American Solutions, we averaged 149 contracted rigs during the quarter. which is right in line with the rig count for the quarter. The exit rig count was 150, which was within our guided range of 146 to 152. Revenues of $600 million were essentially unchanged since the first quarter. Segment direct margin was approximately $266 million, which was a bit stronger than the first quarter. The realization uplift from performance-based contracts continued to enhance our margins and provide additional value to our customers utilizing them. This alignment of customer incentives and our performance resulted in industry-leading margins. In addition, over half of the U.S. active fleet is on a term contract. Our international solutions activity ended the second fiscal quarter with 76 rigs working, with approximately $4 billion of contracted drilling backlog. In Saudi, our FlexRig unconventional startup is nearly complete as seven rigs are currently working, and the eighth should commence operations any day. As a whole, our international solutions business generated a direct margin of $27 million. As John indicated, the rigged suspensions in Saudi had a large negative impact on the quarterly results. To that effect, we are aggressively reviewing and taking action to minimize our operational costs and to quickly and effectively integrate the resources, ideas, and expertise that we now share across KCAD and H&P operations. Finally, to our offshore solution segment, which generated $26 million in direct margins. We are very pleased with the performance of our steady and stable offshore business, which has current backlog of $2.5 billion. Much of this business was acquired through the KCAD acquisition, which included asset-light offshore management contract operations located in the North Sea, Angola, Azerbaijan, and Canada. Looking ahead, To the third quarter of fiscal 2025 for North American Solutions, we expect to average between 143 and 149 contract rigs. Revenue backlog from our North American Solutions fleet is roughly $700 million for rigs under term contract, which is consistent with where we were at the end of the first quarter. $500 million of this total will be recognized in our fiscal year 2025 with a balance in 2026. Again, we are focused on providing customer-centric solutions and believe direct margins in fiscal Q3 to range between $235 and $260 million. As the broader energy industry continues to face the near-term headwinds associated with commodity pricing and potential cost increases associated with tariffs, we will remain focused on providing our customers with mutually beneficial performance incentives and innovative technical solutions. As we look toward the third quarter of fiscal 25 for international, as we mentioned in the press release, we expect direct margins from our international solutions to be between 25 and 35 million, exclusive of any foreign exchange gains or losses. Further, we expect the average rig count to be approximately 85 to 91 contracted rigs, of which 68 to 74 are expected to be generating revenue. Again, we are managing the impacts of the rig suspensions and believe the Saudi flex rig startup costs are substantially behind us now. We are integrating the best possible outcomes associated with legacy KCAD operations in the unconventional startup. This includes operations, people, processes, technology, and systems. Coming out of these near-term headwinds, we will be positioned to be a leading provider of drilling services in the Middle East. Now turning to guidance for our offshore solution segment, we expect to generate between 22 and 29 million in direct margin in the third quarter, with average management contracts and contracted platform rates to be around 30 to 35. Outside of our core operating segments, we do have some businesses that generate direct margin, and collectively those are expected to contribute between two and five million in the third quarter. Now let me update full year fiscal Full year 2025 guidance items. As I stated earlier, our capex spend was weighted to the front half of the year and fully expected to moderate now for the balance of the year. As such, we're still estimating capital expenditures for the full fiscal year to be between 360 and 395 million. Just to remind you that last quarter we were unable to provide a good projection for depreciation expense as the initial allocation of purchase price for KCAD had not been completed. Now that the initial assessment has been finalized, we are projecting depreciation expense to be around 595 million for the full year. For general and administrative expenses, with the addition of KCAD numbers, we still expect the full fiscal 2025 year to be approximately 280 million. As we have discussed, we are already capturing some synergies post-close of acquisition and have identified additional cost savings that will put us in excess of the original 25 million by 2026. As we get deeper into integration, the opportunities not only for commercial opportunity expansion, but for cost reduction continues to materialize. We are also evaluating broader cost reductions across the enterprise and have a line of sight on 50 to 75 million in total 2026 run rate savings between synergies and other permanent cost reductions. We are still projecting a fiscal year 2025 cash tax range of $190 to $240 million, which includes the additional taxes resulting from the expanded international business. And lastly, nothing has really changed in regards to interest expense, and we are projecting around $50 million for the remainder of the fiscal year. Now looking at our financial position, H&P had cash and short-term investments of $196 million at March 31st. With our undrawn credit facility of $950 million and the remaining cash on hand, we have adequate liquidity to not only cash efficiently fund the 2025 operations, but continue to generate ample cash to fund our base dividend and pay back the $400 million term loan. As a matter of fact, we are anticipating that by the end of this calendar year, we will have repaid at least $175 million on it. H&P maintains an investment-grade credit rating. We have a long history of responsibly managing our balance sheet and balancing the interest of debt and equity holders. We will continue to do so. Yes, the markets are murky right now. However, collectively, this leadership team has lived and managed through the turbulent energy markets for decades now. We won't let the grass grow under our feet watching them unfold around us. And with that, I'll turn it back to the operator to open it up for questions.

Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question by pressing star two. Once again, to ask a question, please press the star and one on your telephone keypad. We'll take our first question from Keith McKee with RBC. Please go ahead, your line is open.