What changed in this filing

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Item 1. Business

2020-11-20 compared with 2019-11-15 · 299 added, 252 removed, 171 unchanged (76% of the section changed)

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("H&P," which, together with its subsidiaries, is identified as the “Company,” “we,” “us” or “our,” except where stated or the context requires otherwise) was incorporated under the laws of the State of Delaware on February 3, 1940 and is successor to a business originally organized in 1920.

We provide performance-driven drilling services and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

We provide performance-driven drilling solutions that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

We are an important vendor for a number of oil and gas exploration and production companies, but we focus primarily on the drilling segment of the oil and gas production value chain.

Our global business is composed of four reportable business segments - three contract drilling business segments:

Land, Offshore and International Land and one drilling technology-based business segment:

Helmerich & Payne Technologies ("H&P Technologies").

During the fiscal year ended September 30, 2019 , our U.S.

Land operations were located in Colorado, Louisiana, Ohio, Oklahoma, Montana, New Mexico, North Dakota, Pennsylvania, Texas, Utah, West Virginia and Wyoming.

Our Offshore operations were conducted in U.S.

Our global business is composed of three reportable business segments:

North America Solutions, Offshore Gulf of Mexico, and International Solutions.

During the third quarter of fiscal year 2020, as part of our restructuring efforts (see Note 19—Restructuring Charges to our Consolidated Financial Statements) and consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, we implemented organizational changes.

We are moving from a product-based offering, such as a rig or separate technology package, to an integrated solution-based approach by combining proprietary rig technology, automation software, and digital expertise into our rig operations.

Operations previously reported within the former U.S.

Land and H&P Technologies operating and reportable segments are now managed and presented within the North America Solutions reportable segment.

Our technology services focus on developing, promoting and commercializing technologies designed to improve the efficiency and accuracy of drilling operations, as well as wellbore quality and placement.

During the fiscal year ended September 30, 2020 , our North America Solutions operations were primarily located in Colorado, Ohio, Oklahoma, New Mexico, North Dakota, Pennsylvania, Texas, West Virginia and Wyoming.

Our Offshore Gulf of Mexico operations were conducted in Louisiana and in U.S.

federal waters in the Gulf of Mexico.

Our International Land operations had rigs located in four international locations during fiscal year 2019 :

Our International Solutions operations had rigs located in four international locations during fiscal year 2020 :

Argentina, Bahrain, Colombia and United Arab Emirates (“U.A.E.”).

Our H&P Technologies operations focus on developing, promoting and commercializing technologies designed to improve the efficiency and accuracy of drilling operations, as well as wellbore quality and placement.

Our research and development endeavors include both internal development and external acquisition of developing technologies.

We also own, develop and operate limited commercial real estate properties.

Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center containing approximately 389,000 leasable square feet, multi ‑ tenant industrial warehouse properties containing approximately one million leasable square feet and approximately 210 acres of undeveloped real estate.

Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center containing approximately 389,000 leasable square feet and approximately 210 acres of undeveloped real estate.

Our research and development endeavors include both internal development and external acquisition of developing technologies.

On October 1, 2019, we elected to utilize a wholly-owned insurance captive (“Captive”) to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs.

The Company and the Captive maintain excess property and casualty reinsurance programs with third-party insurers in an effort to limit the financial impact of significant events covered under these programs.

Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other."

Drilling Fleet

The following map and table sets forth certain information concerning our U.S.

land drilling rigs as of September 30, 2019 :

The following map shows the number of working rigs by basin in our North America Solutions reportable segment as of September 30, 2020 :

The following table sets forth certain information concerning our North America Solutions drilling rigs as of September 30, 2020 :

North America Solutions Fleet

Current Location

AC (FlexRig3) (1)

AC (FlexRig4) (2)

AC (FlexRig5) (3)

Total Available

Rigs Contracted

Total Available (5)

Rigs Contracted

Super-Spec FlexRig ® (1)

Non Super-Spec FlexRig ® (2)

Total Available

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Rigs Contracted

The FlexRig3 is equipped with a 750,000 lb.

mast, Varco TDS-11HP top drive and Gardner Denver PZ-11 mud pumps.

It can be equipped with an optional skidding or walking system for pad work and 7,500 psi high pressure mud system.

An optional third pump and 7,500 psi high pressure mud system can also be used.

This rig is capable of horizontal and vertical drilling.

The FlexRig4 model has a small footprint and is designed to be highly mobile.

The rig is equipped with a 500,000 lb.

or 600,000 lb.

mast, 400HP top drive and Gardner Denver HS-2250 or PZ-11 mud pumps.

Range 3 drill pipe is used without setback.

The rig is capable of horizontal and vertical drilling.

The FlexRig5 base configuration includes a 100-foot, bi-directional skidding system with an optional package that extends to 200 feet.

It includes a 750,000 lb.

mast, Varco TDS-11HP top drive and Gardner Denver mud pumps.

An optional third pump and 7,500 psi high pressure mud system can also be used.

This rig is capable of horizontal and vertical drilling.

A silicon-controlled-rectifier (“SCR”) system converts alternate current (“AC”) produced by one or more AC generator sets into direct current (“DC”).

These two SCR rigs are equipped with 3,000 horsepower drawworks to drill deep conventional wells.

In total, seven Domestic FlexRig4's completed their conversions to Domestic FlexRig3's.

Two conversions were completed in the fourth quarter of fiscal year 2018, followed by five conversions in the first quarter of fiscal year 2019.

In addition, the Domestic FlexRig4’s were downsized by 51 rigs by the end of the third quarter of fiscal year 2019.

See Note 5—Property, Plant and Equipment to our Consolidated Financial Statements.

We operate a large fleet of super-spec rigs, which are generally considered to include the following rig specifications:

AC drive, minimum of 1,500 horsepower drawworks, minimum of 750,000 lbs.

hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability.

The chart below depicts the states in which our super-spec rigs operate.

The following table sets forth certain information concerning our offshore drilling rigs as of September 30, 2019 :

Offshore Fleet

AC drive, 1,500 horsepower drawworks, 500,000 or 750,000 lbs.

hookload rating, 5,000 or 7,500 psi mud circulating system, may or may not have multiple-well pad capability.

The following table sets forth certain information concerning our Offshore Gulf of Mexico drilling rigs as of September 30, 2020 :

Offshore Gulf of Mexico Fleet

Shallow Water (1)

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Rigs are idle, stacked on land and not in state waters.

The following table sets forth certain information concerning our international land drilling rigs as of September 30, 2019 :

International Land Fleet

The following table sets forth certain information concerning our International Solutions drilling rigs as of September 30, 2020 :

International Solutions Fleet

Current Location

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Rigs Contracted

At the end of the third quarter of fiscal year 2019, the fleet was downsized by two rigs.

See Note 5—Property, Plant and Equipment to our Consolidated Financial Statements.

Contract Drilling Services

We are the largest provider of advanced technology AC drive land rigs in the Western Hemisphere.

Other than one super–spec rig (as described above) in Argentina, the FlexRig ® 3 is equipped with an AC drive, 1,500 horsepower drawworks, and a 750,000 lb.

hookload rating.

It can be equipped with an optional skid or walking system, third mud pump, and 7,500 psi high pressure mud system.

The other 11 rigs in Argentina are equipped with skid systems.

The FlexRig ® 4 model has a small footprint and is designed to be highly mobile.

The rig is equipped with a 300,000 lb.

mast, 400HP top drive and two mud pumps.

Range 3 drill pipe is used without setback.

The rig is capable of horizontal and vertical drilling.

A silicon-controlled-rectifier (“SCR”) system converts alternate current (“AC”) produced by one or more AC generator sets into direct current (“DC”).

Of the six SCR rigs, one is equipped with 2,100 horsepower drawworks and the remaining five are equipped with 3,000 horsepower drawworks to drill deep conventional wells.

Drilling Services and Solutions

We are the largest provider of super-spec AC drive land rigs in the Western Hemisphere.

Operating principally in North and South America, we specialize in shale and unconventional resource plays, drilling challenging and complex wells in oil and gas producing basins in the United States and in international locations.

In the United States, we have a diverse mix of customers consisting of large independent, major, mid-sized and small oil companies that are focused on unconventional shale basins.

In South America, our customers primarily include major international and national oil companies.

In the United States, we have a diverse mix of customers consisting of large independent, major, mid-sized and small cap oil companies and private independent companies (including private equity-backed companies) that are focused on unconventional shale basins.

In South America and the Middle East, our customers primarily include major international and national oil companies.

We do not operate any legacy mechanical rigs.

Revenue from individual customers that are approximately 10% or more of our total consolidated revenues are as follows:

We had revenues from individual customers, within our North America Solutions segment, that constituted 10 percent or more of our total revenues as follows:

(in thousands)

EOG Resources, Inc.

We did not have any individual customers that represented 10% or more of our total consolidated revenues in fiscal year 2019.

We did not have any individual customers that represented 10% or more of our total consolidated revenues in fiscal years 2019 or 2020.

The following table presents our average active rigs per day (a measure of activity and utilization over the fiscal year) and average utilization for the fiscal years 2020 , 2019 , and 2018 :

Year Ended September 30,

International Land

North America Solutions

Offshore Gulf of Mexico

International Solutions

Average active rigs per day

Average utilization (4)

A rig is considered to be utilized when it is operating (or otherwise deployed for a customer) or being moved, assembled or dismantled pursuant to a drilling contract.

At the beginning of the third quarter of fiscal year 2020, the fleet was downsized by 37 rigs.

See Note 5—Property, Plant and Equipment to our Consolidated Financial Statements.

At the end of the third quarter of fiscal year 2019, the fleet was downsized by 51 rigs.

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See Note 5—Property, Plant and Equipment to our Consolidated Financial Statements.

We believe we operate the largest technologically advanced AC drive drilling rig fleet in the United States and have a presence in most of the U.S.

A rig is considered to be utilized when it is operating (or otherwise deployed for a customer) or being moved, assembled or dismantled pursuant to a drilling contract, or stacked under contract.

North America Solutions Segment

We believe we operate the largest technologically advanced AC drive drilling rig fleet in North America and have a presence in most of the U.S.

shale and unconventional basins.

We have a leading market share in the three most active basins, which include the Permian Basin, Eagle Ford Shale, and Woodford Shale.

More than 95 percent of our active rigs are drilling horizontal or directional wells.

As of September 30, 2019 , we had over 20 percent of the total market share in U.S.

We have a leading market share in the three most active oil basins, which include the Permian Basin, Eagle Ford Shale, and Woodford Shale.

Nearly all of our active rigs are drilling horizontal or directional wells.

As of September 30, 2020 , we had approximately 20 percent of the total market share in U.S.

land drilling and approximately 29 percent of the super-spec market share in U.S.

land drilling.

As of September 30, 2019 , 194 of our 299 marketed rigs were under contract, 128 were under fixed ‑ term contracts, and 66 were working well-to-well.

Over the past three fiscal years, we have reinvested in our fleet, upgrading 171 rigs to industry-leading super-spec capabilities that are designed to drill the most complex unconventional wells.

Land segment contributed approximately 85 percent ( $2.4 billion ) of our consolidated operating revenues during fiscal year 2019 , compared with approximately 83 percent ($2.1 billion) and 80 percent ($1.4 billion) of our consolidated operating revenues during fiscal years 2018 and 2017 , respectively.

In the United States, we draw our customers primarily from the major oil companies, large independent oil companies and small cap oil companies.

Additionally, we have a growing customer base in private equity-backed companies.

Offshore Segment

Our Offshore Drilling segment has been in operation since 1968 and currently consists of eight rigs in the Gulf of Mexico.

In the United States, we have the industry's largest super-spec fleet with 234 rigs, of which 67 were under contract at September 30, 2020.

In total, 69 of our 262 marketed rigs were under contract, 54 were under fixed‑term contracts, and 15 were working well-to-well as of September 30, 2020 .

Our drilling technology solutions within this segment enables a holistic solution-based approach that includes products, services and capabilities.

This approach provides performance-driven drilling services intended to deliver greater levels of accuracy, consistency, optimization and a reduction of human error to create higher quality wellbores.

This technology is intended to address our customers' unique challenges and should result in less wellbore tortuosity and reduce positional uncertainty in the directional drilling process.

During fiscal year 2019, we released AutoSlide ® , which integrates the MOTIVE Bit Guidance System ® and several FlexApps to function within the FlexRig ® operating system and fully automates the control of mud motors while sliding during the vertical, the curve, and the lateral hole sections during horizontal drilling operations.

Currently, our AutoSlide® application is commercially available in all U.S.

oil and gas basins.

Many components of our digital technology, including the MOTIVE Bit Guidance System ® technology and MagVar TM survey correction, can be used on any rig, regardless of the drilling or service provider, allowing our customers to benefit from these technologies on all rigs.

Our North America Solutions segment contributed approximately 83.1 percent ( $1.5 billion ) of our consolidated operating revenues during fiscal year 2020 , compared to approximately 86.7 percent ( $2.4 billion ) and 84.2 percent ( $2.1 billion ) of our consolidated operating revenues during fiscal years 2019 and 2018 , respectively.

In North America, our customers are primarily from the major oil companies, large independent oil companies, small cap oil companies and private independent companies (including private equity-backed companies).

Offshore Gulf of Mexico Segment

Our Offshore Gulf of Mexico segment has been in operation since 1968 and currently consists of eight platform rigs in the Gulf of Mexico.

We supply the rig equipment and crews and the operator who owns the platform will typically provide production equipment or other necessary facilities.

Our offshore rig fleet operates on both conventional jackup style platforms and floating platforms attached to the sea floor with mooring lines, such as Spars and Tension Leg Platforms.

Our offshore rig fleet operates on conventional fixed leg platforms and floating platforms attached to the sea floor with mooring lines, such as Spars and Tension Leg Platforms.

Additionally, we provide management contract services to customer platforms where the customer owns the drilling rig.

As of September 30, 2019 , six of the eight offshore rigs were under contract.

Our Offshore operations contributed approximately 5 percent ( $147.6 million ) of our consolidated operating revenues during fiscal year 2019 , compared to approximately 6 percent ($142.5 million) and 8 percent ($136.3 million) of our consolidated operating revenues during fiscal years 2018 and 2017 , respectively.

As of September 30, 2020 , five of the eight offshore rigs were under contract.

Our Offshore Gulf of Mexico operations contributed approximately 8.1 percent ( $143.1 million ) of our consolidated operating revenues during fiscal year 2020 , compared to approximately 5.3 percent ( $147.6 million ) and 5.7 percent ( $142.5 million ) of our consolidated operating revenues during fiscal years 2019 and 2018 , respectively.

Revenues from drilling services performed for our largest offshore drilling customer totaled approximately 81.1 percent ($116.1 million) of offshore revenues during fiscal year 2020 .

International Land Segment

Our International Land segment operates primarily in Argentina and Colombia, in addition to smaller operations in Bahrain and U.A.E.

International Solutions Segment

Our International Solutions segment operates primarily in Argentina, Colombia, Bahrain and U.A.E.

During the fourth quarter of fiscal year 2018, we ceased operations in Ecuador.

As of September 30, 2020 , we had 5 land rigs contracted for work in locations outside of the United States.

Our International Land operations contributed approximately 8 percent ($211.7 million) of our consolidated operating revenues during fiscal year 2019 , compared with approximately 10 percent ($238.4 million) and 12 percent ($213.0 million) of our consolidated operating revenues during fiscal years 2018 and 2017 , respectively.

Our International Solutions operations contributed approximately 8.1 percent ( $144.2 million ) of our consolidated operating revenues during fiscal year 2020 , compared to approximately 7.6 percent ( $211.7 million ) and 9.6 percent ( $238.4 million ) of our consolidated operating revenues during fiscal years 2019 and 2018 , respectively.

Argentina As of September 30, 2020 , we had 20 rigs in Argentina.

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The Argentine drilling contracts are primarily with large international or national oil companies.

As of September 30, 2019 , we believe we had over 15 percent of total market share and over 30 percent of the unconventional horizontal drilling market share in Argentina.

Colombia As of September 30, 2020 , we had seven rigs in Colombia.

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The Colombian drilling contracts are primarily with large international or national oil companies.

Bahrain As of September 30, 2019, we had two rigs in Bahrain.

Bahrain As of September 30, 2020 , we had three rigs in Bahrain.

Revenues generated by Bahrain drilling operations contributed approximately 1.6 percent ( $28.7 million ) of our consolidated operating revenues in fiscal year 2020 , compared to approximately 0.4 percent ( $11.5 million ) and 0.4 percent ( $9.5 million ) of our consolidated operating revenues during fiscal years 2019 and 2018 , respectively.

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Revenues generated by U.A.E.

drilling operations contributed approximately 0.2 percent ($4.7 million) of our consolidated operating revenues in fiscal year 2019, compared to nominal amounts in fiscal year 2018 and 0.5 percent ($8.2 million) of our consolidated operating revenues during fiscal year 2017.

H&P Technologies

Effective October 1, 2018 and during the fourth quarter of fiscal year 2019, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources.

As a result of the reorganization of our operations during the first quarter of fiscal year 2019, we identified a new reportable segment, H&P Technologies.

This reportable segment is used to drive development of advanced digital drilling technologies and directional drilling automation solutions, designed to improve safety, reliability, drilling consistency, and well performance economics for our customers.

Subsequent to the reorganizations, all of our technology companies are included within the H&P Technologies reportable segment.

Combining drilling technology expertise within this new segment creates a holistic solution-based approach that includes products, services and capabilities.

This approach provides performance-driven drilling services with greater levels of accuracy, consistency, optimization and a reduction of human error to create higher quality wellbores.

This technology addresses our customers' unique challenges, resulting in less tortuosity and reducing positional uncertainty in the directional drilling process.

Another key benefit is that many components of our digital technology, including MOTIVE bit guidance and MagVAR TM survey correction, can be used on any rig, regardless of the drilling or service provider, allowing our customers to benefit from these technologies on all rigs.

During fiscal year 2019, H&P Technologies released AutoSlide SM , which integrates the MOTIVE bit guidance system and several FlexApps to function within the FlexRig operating system and fully automates the control of mud motors while sliding during the vertical, the curve, and the lateral hole sections during horizontal drilling operations.

Similar to our approach with FlexApps, H&P Technologies plans to market AutoSlide across the FlexRig TM fleet initially at a price point that improves cost-efficiency for our customers.

Subsequently, there are also plans to integrate the software to make this offering compatible with non–H&P rigs for those customers with multi-vendor rig fleets.

Currently, our AutoSlide application is commercially available in four regions including the Midland, Bakken, Eagle Ford and MidCon basins and we will be expanding into additional basins in the coming months.

The adoption of our FlexApps continues as customers see the value of these technologies as demonstrated by their requests to use them on both H&P and non-H&P rigs.

Our preparation to respond to this type of demand includes migrating our FlexApp offerings into our H&P Technologies business segment, which occurred in the fourth quarter of fiscal year 2019 and developing rig-neutral solutions to operate the software on non-H&P rigs.

drilling operations contributed approximately 1.4 percent ( $24.7 million ) of our consolidated operating revenues in fiscal year 2020 , compared to approximately 0.2 percent ( $4.7 million ) in fiscal year 2019 and nominal amounts in fiscal year 2018 .

Other Operations

Other Operations include additional non-reportable operating segments.

Revenues included in “Other” consist primarily of real estate rental income.

We own, develop and operate limited commercial real estate properties.

Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center, multi ‑ tenant industrial warehouse properties, and undeveloped real estate.

We have also established a wholly-owned captive insurance company to insure various risks of our operating subsidiaries.

The amount of actual cash investments held by the captive insurance company varies, depending on the amount of premiums paid to the captive insurance company, the timing and amount of claims paid by the captive insurance company, and the amount of dividends paid by the captive insurance company.

Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center and undeveloped real estate.

On October 1, 2019, we elected to utilize the Captive to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs.

Casualty claims occurring prior to October 1, 2019 will remain recorded within each of the operating segments and future adjustments to these claims will continue to be reflected within the operating segments.

Reserves for legacy claims occurring prior to October 1, 2019, will remain as liabilities in our operating segments until they have been resolved.

Changes in those reserves will be reflected in segment earnings as they occur.

We will continue to utilize the Captive to finance the risk of loss to equipment and rig property assets.

Our operating subsidiaries are paying premiums to the Captive, typically on a monthly basis, for the estimated losses based on the external actuarial analysis.

The Company is also utilizing the Captive to provide stop-loss coverage over its self-insured employee health plan, which covers insured claims in excess of employee deductibles.

The Company did not previously purchase any stop-loss coverage.

During the third quarter of fiscal year 2019, the Company established an incubator program for new research and development projects, the results of which have been included in "Other" within our segment disclosures.

Internal Restructuring

During fiscal year 2019, we reorganized our active International Land drilling operations and our Offshore Drilling operations into separate, wholly-owned subsidiaries of Helmerich & Payne, Inc.

through an internal restructuring transaction.

This reorganization is intended to foster operational efficiency, simplify our organizational structure and provide additional clarity in our internal reporting.

It had no impact on our segment reporting.

Rigs, Equipment, R&D, and Facilities

During the late 1990’s, we undertook a strategic initiative to develop a new generation drilling rig that would be the safest, fastest-moving and highest performing rig in the land drilling market.

Our first “FlexRig®” entered the market in 1998.

Our first FlexRig ® drilling rig entered the market in 1998.

The original 18 rigs were designated as FlexRig ® 1 and FlexRig ® 2 rigs and were designed to drill wells with a depth of between 8,000 and 18,000 feet.

From 2002 to 2004, we designed, built and delivered 32 of the next generation, AC drive rigs, known as “FlexRig3,” which incorporated new drilling technology and improved the safety and environmental design.

The FlexRig3s found immediate success by delivering higher value wells to the customer and marked the beginning of the AC land rig revolution.

We also changed our pricing and contracting strategy, and beginning in 2005, all new FlexRigs were built supported by a firm contract and attractive returns.

To date, we have built 232 FlexRig3s and our strategy included building them under a multi-year term contract with substantial payback at attractive rates of return.

From 2002 to 2004, we designed, built and delivered 32 of the next generation, AC drive rigs, known as “FlexRig ® 3 rigs,” which incorporated new drilling technology and improved the safety and environmental design.

The FlexRig ® 3 rigs found immediate success by delivering higher value wells to the customer and marked the beginning of the AC land rig revolution.

We also changed our pricing and contracting strategy, and beginning in 2005, predominantly all new FlexRig ® drilling rigs were built supported by a firm contract and attractive returns.

To date, we have built over 200 FlexRig ® 3 rigs that align with this strategy.

An important part of our strategy was to design a rig that could support continuous improvement through upgrade capability of the hardware and software on the rigs to take advantage of technology improvements and lengthening the industry rig replacement cycle.

These upgrades included, but were not limited to, enhanced drilling control

systems and software, skid and walking systems for drilling multiple well pads, 7,500 psi mud systems, set back capacity to accommodate the pipe that the longer laterals demanded, and additional mud system capacity.

These upgrades included, but were not limited to, enhanced drilling control systems and software, skid and walking systems for drilling multiple well pads, 7,500 psi mud systems, set back capacity to accommodate the pipe that the longer laterals demanded, and additional mud system capacity.

H&P has a strategic advantage due to our ability to utilize our AC rig design and operational and engineering expertise to exploit different well depths and designs that customers demand.

In 2006, we introduced the FlexRig4, which was designed to efficiently drill shallower wells on multi-well pads.

In 2006, we introduced the FlexRig ® 4 drilling rig, which was designed to efficiently drill shallower wells on multi-well pads.

The FlexRig ® 4 design offers two options that include trailerized or multi-well pad drilling capability, both of which incorporate additional environmental and safety by design improvements.

While the trailerized FlexRig4 design provides for more efficient moves between individual well pads, the multi-well pad design uses a skidding capability that allows for drilling multiple wells from a single pad, which results in reduced environmental impact and increased production from a smaller footprint.

In 2011, we announced the introduction of the FlexRig5.

The FlexRig5 was designed for deeper wells than the FlexRig4 and long lateral drilling of multiple wells from a single location and is designed for drilling horizontally in unconventional shale reservoirs.

The new design preserves the key performance features of the FlexRig3 design but adds a bi-directional skidding system and equipment capacities suitable for wells in excess of 25,000 feet of measured depth.

In 2017, we introduced our first walking rig by reconfiguring our skid designed FlexRig3s.

Since then we have reconfigured, converted and upgraded a total of 40 FlexRigs to super-spec walking rigs.

H&P also has an important advantage in the super-spec space in that our FlexRig3s and FlexRig5s are ideally suited for super-spec upgrades, and we have more upgradeable rigs than our competitors.

As of September 30, 2019 , we held approximately 37 percent of the super-spec market share in U.S.

land drilling.

Our competency in design and construction allows us to efficiently upgrade our rigs to super-spec, and our financial strength enables us to continue such upgrades as long as market demand for such rigs remains high and there remains a supply of economically viable super-spec upgradable rigs.

We do these upgrades at our fabrication facility in Houston, Texas.

Years of designing and building our fleet of AC drive FlexRigs has given us many competitive benefits.

While the trailerized FlexRig ® 4 design provides for more efficient moves between individual well pads, the multi-well pad design uses a skidding capability that allows for drilling multiple wells from a single pad, which results in significantly reduced environmental impact and increased production from a smaller footprint.

In 2011, we announced the introduction of the FlexRig ® 5 drilling rig.

The FlexRig ® 5 drilling rig was designed for deeper wells than the FlexRig ® 4 drilling rig and long lateral drilling of multiple wells from a single location and is designed for drilling horizontally in unconventional shale reservoirs.

The new design preserves the key performance features of the FlexRig ® 3 rig design but adds a bi-directional skidding system and equipment capacities suitable for wells in excess of 25,000 feet of measured depth.

In 2016, we saw the progression of longer lateral wells and the technical challenges involved in drilling longer lateral wells.

At that time, we began delivering rigs to the market that were equipped and capable of drilling the longer lateral wells.

The industry would later refer to these rigs as super-spec rigs, which have the following specific characteristics:

AC drive, minimum 1,500 horsepower drawworks, minimum of 750,000 lbs.

hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability.

Additionally, our competency in design and construction as well as our financial strength enabled us to efficiently upgrade our other existing rigs to super-spec, resulting in what we believe to be the largest fleet of super-spec rigs in the world.

As of September 30, 2020 , we held approximately 29 percent of the super-spec market share in the U.S.

land drilling market with 234 super-spec rigs.

In 2017, we introduced our first walking rig by reconfiguring our skid designed FlexRig ® 3 drilling rigs.

Since then, we have reconfigured, converted, and upgraded a total of 44 FlexRig ® drilling rigs to super-spec walking rigs.

Years of designing and building our fleet of AC drive FlexRig ® drilling rigs has given us many competitive benefits.

One key advantage is fleet uniformity.

We have overseen the design and assembly of all of our AC FlexRigs, and our different rig classes share many common components.

We have overseen the design and assembly of all of our AC FlexRig ® drilling rigs, and our different rig classes share many common components.

We co-designed the control systems for our rigs and have the right to make any changes or modifications to those systems that we desire.

A uniform fleet creates an adaptive environment to reach maximum efficiency for employees, equipment and technology and is critical to our ability to provide consistent, safe and reliable operations in increasingly complex basins.

In addition, our fleet has greater scale than any other competitor, which enables us to upgrade our existing FlexRigs to super-spec in a capital efficient way.

High levels of uniformity in crew training and rotation, as well as parts and supplies improve our cost-effectiveness, and our ability to control and remove safety exposures across a more standard fleet allows us to deliver higher performance in a safer and more reliable manner for the customer.

Further, our fleet is supported by a Company-owned supply chain that provides standardized materials directly to the rigs from our regional warehouses.

In addition, our fleet has greater scale than any other competitor, which enables us to upgrade our existing FlexRig ® drilling rigs to super-spec in a capital efficient way.

High levels of uniformity in crew training and rotation and our ability to control and remove safety exposures across a more standard fleet allow us to deliver higher performance in a safer and more reliable manner for the customer.

Further, our fleet is supported by a cost-effective Company-owned supply chain that provides standardized materials directly to the rigs from our regional warehouses.

A long-standing challenge in our industry is providing high quality and consistent results.

In addressing the challenge of providing safe, high quality and consistent results, we utilize process excellence techniques that are developed internally.

We provide experienced drilling and maintenance support for our operations, which provides value by reducing nonproductive time in our operations and improving drilling performance through our Center of Excellence (“COE”).

The COE is manned 24 hours a day, seven days a week, with the ability to monitor and detect trends in drilling and drilling services performance onboard our rigs.

Our monitoring group within the COE provides real-time help and feedback to our wellsite employees, as well as our customers, to fully optimize our operational performance.

Additionally, our COE has a staff of performance engineers that work with our customers to enhance drilling program execution and overall drilling performance.

The monitoring group and our performance engineers capture our drilling work steps to ensure we provide high quality and reliable results for our customers.

Our RSMS and ROCs are manned 24 hours a day, seven days a week, with the ability to monitor and detect trends in drilling and drilling services performance onboard our rigs.

Our monitoring group within the RSMS provides real-time help and feedback to our wellsite employees, as well as our customers, to fully optimize our operational performance.

Additionally, our RSMS and ROCs have staffs of engineers and industry experts that work with our customers to enhance wellbore positioning, drilling program execution and overall drilling performance.

The monitoring group and our performance engineers capture our drilling work steps to help provide high quality and reliable results for our customers.

We currently have two facilities that provide vertically integrated solutions for drilling rig manufacturing, upgrades, retrofits and modifications, as well as overhauling, recertification, and repairs as it relates to our rigs and equipment.

These facilities utilize lean manufacturing processes to enhance quality and efficiency as well as provide important insights in the maintenance and wear of equipment on our rigs.

Our fabrication and assembly facility is located near Houston, Texas.

Additionally, our overhauling, recertification, and repairs facility is located near Tulsa, Oklahoma.

During fiscal year 2018, we commercialized our FlexApp services, which include several new software applications that layer on top of our FlexRig drilling control systems.

These applications are enabled by our uniform digital fleet and are designed to provide additional value to our customers’ well programs by providing a platform for machine-human collaboration during the drilling process to improve efficiency.

The FlexApps can help play an important role in deploying our strategy as we strive towards autonomous drilling.

The FlexApps that are currently in use include the following:

Our assembly facility is located near Houston, Texas.

Our facility near Tulsa, Oklahoma is utilized for overhauling, recertification, and repairs.

During fiscal year 2020, we continued to see adoption and growth with our technologies and automation focused solutions.

Our FlexApp solutions, which layer on top of our FlexRig ® drilling control system, continue to add value for our customers.

Our AutoSlide ® service, which is powered by our Motive Bit Guidance System ® technology, continued to grow in commercial feet steered, new customer adoption and the number of deployments.

Our MagVar TM , Drillscan ® and Motive Bit Guidance System ® solutions continue to be available on both H&P and third - party rigs.

These solutions continue to provide differentiated value for our customers in the areas of drilling engineering, wellbore placement, and wellbore quality.

Our path to autonomous drilling continues to evolve with several solutions in Alpha and Beta testing.

All of our automation focused solutions and applications are enabled by our uniform digital fleet and are designed to provide additional value to our customers' well programs by providing a platform for machine-human collaboration during the drilling process to improve efficiency.

All of our technologies play an important role in developing our strategy as we head towards autonomous drilling.

The technologies that are currently in use include the following:

Application Name

Hardware and software designed to decrease downhole drilling vibration and "slip-stick" during drilling.

This helps with drilling efficiency and extends bit and downhole tool life, which is expected to reduce costly nonproductive time.

This helps with drilling efficiency and is intended to help extend bit and downhole tool life to help reduce costly nonproductive time.

Flex-Oscillator 2.0™

Rig control software that automates drill string rotation during directional "slide" operations, which helps reduce downhole drag and the potential for stuck pipe.

It also supports more effective directional drilling.

Software to engage and disengage the bit during connections in an established controlled and consistent manner allowing for better bit and downhole tool life, better drilling parameters and less costly bit trips out of the hole.

It also helps support more effective directional drilling.

Software to engage and disengage the bit during connections in an established controlled and consistent manner that is intended to help extend bit and downhole tool life, better drilling parameters and less costly bit trips out of the hole.

FlexDrill 1.0™

Software licensed from ExxonMobil to maximize the bit's rate of penetration, which we have automated, allowing the drilling control system to achieve the ideal mechanical specific energy at the bit.

("MOTIVE") and MagVAR software that utilizes a drill bit guidance system and geomagnetic survey correction, respectively, improving wellbore quality with a scalable, repeatable data driven platform approach and helping to reduce surveying uncertainty, while increasing horizontal well economics and helping to reduce risk.

Software licensed from ExxonMobil to help maximize the bit's rate of penetration, which we have automated, that is intended to allow the drilling control system to achieve the ideal mechanical specific energy at the bit.

Powered by Motive’s Bit Guidance System ® technology and utilizes machine learning and automation to help interface with FlexRig ® control systems to allow for automatic slide drilling via computer control.

Solution intended to help improve surveying accuracy and contribute to increased horizontal well economics while reducing collision risk.

Industry leader in physics-based modeling software to help select bottom hole assemblies and help provide real-time drilling dynamics evaluation.

MOTIVE Bit Guidance System ®

Automated directional drilling guidance system that helps improve wellbore quality with a scalable, repeatable data driven platform approach to help increase horizontal well economics and help reduce risk.

We have historically offered ancillary services, which are now referred to as FlexServices ® .

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For further information concerning risks associated with our business, including volatility surrounding oil and natural gas prices and the impact of low oil prices on our business, see Item 1A— “Risk Factors” and Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10‑K.

Our industry is highly competitive, and we strive to differentiate our services based upon the quality of our FlexRigs and our engineering design expertise, operational efficiency, software technologies, and safety and environmental awareness.

Our industry is highly competitive, and we strive to differentiate our services based upon the quality of our FlexRig ® drilling rigs and our engineering design expertise, operational efficiency, software technologies, safety and environmental awareness.

The number of available rigs generally exceeds demand in many of our markets, resulting in significant price competition.

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Our contracts vary in their terms and rates depending on the nature of the operations to be performed, the duration of the work, the amount and type of equipment and services provided, the geographic areas involved, market conditions and other variables.

Our contracts often cover multi ‑ well and multi ‑ year projects.

In many instances, our contracts cover multi‑well and multi‑year projects.

Except for a limited number of rigs operated under master agreements, each drilling rig operates under a separate drilling contract.

During fiscal year 2019 , substantially all of our drilling services were performed on a “daywork” contract basis, under which we charged a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market.

During fiscal year 2020 , a majority of our drilling services were performed on a “daywork” contract basis, under which we charged a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market.

We may also enter into contracts where we charge a fixed rate per foot of hole drilled to a stated depth, with a fixed rate per day for the remainder of the hole.

Contracts performed on a “footage” basis generally involve a greater element of risk to the contractor compared to contracts performed on a “daywork” basis.

Also, we may enter into “turnkey” contracts under which we charge a fixed sum to deliver a hole to a stated depth and agree to furnish services such as testing, coring and casing the hole which are not normally done on a “footage” basis.

“Turnkey” contracts entail varying degrees of risk greater than the usual “footage” contract.

We also actively pursue “performance daywork” contracts.

These contracts typically have a lower dayrate portion and give us the opportunity to share in the well cost savings based on meeting or exceeding certain key performance indicators that are mutually agreed on by ourselves and our customers.

Contracts performed on a “footage” basis generally involve a greater element of risk to H&P compared to contracts performed on a “daywork” basis.

Also, we may enter into “lump-sum” contracts under which we charge a fixed sum to deliver a hole to a stated depth and agree to furnish services such as testing, coring and casing the hole which are not normally done on a “footage” basis.

“Lump-sum” contracts entail varying degrees of risk greater than the usual “footage” contract.

We also actively pursue “performance daywork” contracts, pursuant to which we are compensated based upon our performance against a mutually agreed upon set of predetermined targets.

These contracts typically have a lower base dayrate but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets.

The risks associated with these contracts relate to the failure to reach the agreed upon performance targets.

If we do not meet these targets, we will not receive additional compensation beyond the base dayrate and will recognize less overall drilling services revenue than we would by utilizing other types of contracts.

We are seeing a growing adoption of performance contracts by our customers and we expect this trend to continue.

The duration of our drilling contracts are generally either “well‑to‑well” or for a fixed term.

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Contract Backlog

As of September 30, 2019 , and 2018 , our drilling contract backlog, being the expected future dayrate revenue from executed contracts, was $1.2 billion and $1.1 billion , respectively.

Drilling contract backlog is the expected future dayrate revenue from executed contracts.

We calculate backlog as the total expected revenue from fixed-term contracts and do not include any anticipated contract renewals as part of its calculation.

Additionally, contracts that currently contain month-to-month terms are represented in our backlog as one month of unsatisfied performance obligations.

In addition to depicting the total expected revenue from fixed-term contracts, backlog is indicative of expected future cash flow that the Company expects to receive regardless of whether a customer honors the fixed-term contract to expiration of a contract or decides to terminate the contract early and pay an early termination payment.

In the event of an early termination payment, the timing of the recognition of backlog and the total amount of revenue may differ;

however, the overall associated cash flow is preserved.

As such, management finds backlog a useful metric for future planning and budgeting, whereas investors consider it in estimating future revenue and cash flows of the Company.

As of September 30, 2020 , and 2019 , our drilling contract backlog was $0.7 billion and $1.2 billion , respectively.

The decrease in backlog at September 30, 2020 from September 30, 2019 is primarily due to prevailing market conditions causing a decline in the number of drilling contracts executed and to some extent an increase in the number of early terminations of contracts.

Approximately 33.3 percent of the total September 30, 2020 backlog is reasonably expected to be filled in fiscal year 2022 and thereafter.

Included in backlog is early termination revenue expected to be recognized after the periods presented in which early termination notice was received prior to the end of the period.

Fixed-term contracts customarily provide for termination at the election of the customer, with an early termination payment to be paid to us if a contract is terminated prior to the expiration of the fixed term.

As a result of the depressed market conditions and negative outlook for the near term, beginning in the second quarter of fiscal year 2020, certain of our customers, as well as those of our competitors, have opted to renegotiate or early terminate existing drilling contracts.

Such renegotiations have included requests to lower the contract dayrate in exchange for additional terms, temporary stacking of the rig, and other proposals.

During the fiscal years ended September 30, 2020 and 2019 , early termination revenue associated with term contracts was $73.4 million and $11.3 million , respectively.

In response to the current market conditions, several operators included in our North America Solutions operating segment have opted to place their rigs in an idle-but-contracted state as an alternative to early termination.

This includes "warm stacking" and "cold stacking." Warm stacking occurs when a rig remains on-site while pausing drilling activity, while cold stacking occurs when a rig is demobilized and returned to the yard temporarily until next steps are determined.

When rigs are stacked, they remain under the terms of the contract but typically pay a reduced rate, where the remaining term days are generally not reduced, but our operating expenses are reduced.

In many instances for stacked rigs, for the total days stacked there are proportional days added to the original contract length at the original contracted rate.

As of September 30, 2020 , there are five rigs that are warm stacked, five rigs that are cold stacked within the North America Solutions segment.

The following table sets forth the total backlog by reportable segment as of September 30, 2020 and 2019 , and the percentage of the September 30, 2020 backlog reasonably expected to be filled in fiscal year 2022 and thereafter:

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September 30, 2019

International Land

We do not have material long-term contracts related to our H&P Technologies segment.

As noted above, under certain limited circumstances a customer is not required to pay an early termination fee.

There may also be instances where a customer is financially unable or refuses to pay an early termination fee.

In addition, contract terms could be modified or extended after the initial contract is signed.

Accordingly, the actual amount of revenue earned may vary from the backlog reported.

For further information, see Item 1A— “Risk Factors — Our current backlog of contract drilling services revenue may continue to decline and may not be ultimately realized as fixed ‑ term contracts may in certain instances be terminated without an early termination payment .”

North America Solutions

Offshore Gulf of Mexico

International Solutions

The early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows.

In some limited circumstances, such as sustained unacceptable performance by us, no early termination payment would be paid to us.

Early terminations could cause the actual amount of revenue earned to vary from the backlog reported.

See Item 1A— “Risk Factors — Our current backlog of drilling services and solutions revenue may continue to decline and may not be ultimately realized as fixed‑term contracts and may, in certain instances, be terminated without an early termination payment " within this Form 10-K regarding fixed-term contract risk.

Additionally, see Item 1A— “Risk Factors — The impact and effects of public health crises, pandemics and epidemics, such as the ongoing outbreak of COVID-19, have adversely affected and are expected to continue to adversely affect our business, financial condition and results of operations " within this Form 10-K.

As of September 30, 2020 , we had 3,634 employees within the United States and 504 employees in our international operations.

The number of employees fluctuates depending on the current and expected demand for our services.

We consider our employee relations to be robust.

None of our U.S.

employees are represented by a union.

However, some of our international employees are unionized.

Human Capital Objectives and Programs

We strive to create a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together can help us gain a competitive advantage.

Our recruiting practices and decisions on whom to hire are among our most important activities.

In a downturn year such as fiscal year 2020, we maintain relationships with former employees and prioritize recalling our most experienced people for field positions.

In addition, we utilize social media, local job fairs and educational organizations across the United States to find diverse, motivated and responsible employees.

Core Values and Culture

Fostering and maintaining a strong, healthy culture is a key strategic focus.

Our core values reflect who we are and the way our employees interact with one another, our customers, partners and shareholders.

Our first core value of Actively C.A.R.E.

Our core value of Actively C.A.R.E.

means that we treat one another with respect.

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We consider the needs of others and provide solutions to meet their needs.

Our third core value, Innovative Spirit means that we constantly work to improve and are willing to try new approaches.

Our core value of Innovative Spirit means that we constantly work to improve and are willing to try new approaches.

We make decisions with the long-term view in mind.

Finally, our core value of teamwork means that we listen to one another and work toward a common goal.

Our core value of teamwork means that we listen to one another and work across teams toward a common goal.

We collaborate to achieve results and focus on success for our customers and shareholders.

As of September 30, 2019 , we had 7,767 employees within the United States (17 of whom were part ‑ time employees) and 743 employees in international operations.

The number of employees fluctuates depending on the current and expected demand for our services.

We consider our employee relations to be robust.

None of our U.S.

employees are represented by a union.

However, some of our international employees are unionized.

Finally, we do the right thing.

That means we are honest and transparent.

We tackle tough situations, make decisions, and speak up when needed.

To further encourage living out our core values, during fiscal year 2020, an average of 10 organizational health sessions per month were conducted with employee teams.

Education and Training

We are dedicated to the continual training and development of our employees, especially of those in field operations, to ensure we can develop future managers and leaders from within our organization.

Our training starts right at the beginning with on-boarding procedures that focus on safety, responsibility, ethical conduct and inclusive teamwork.

In addition to on–boarding training, we provide extensive ongoing training and career development focused on:

compliance with our Code of Business Conduct and Ethics and laws applicable to our business

skills and competencies directly related to employees' positions;

responsibility for personal safety and the safety of fellow employees, others on location and the environment.

Safety Training and Serious Injury and/or Fatality ("SIF") Reduction Program

Over the last three years, 94% of our Rig Managers and 91% of Drillers received in-field coaching from a Safety Leadership Coach and employees received, on average, 26 hours of training.

One of our most critical responsibilities is the safety of our employees and the employees of our customers.

Traditional approaches to safety focused on lagging indicators that centered on reacting to injuries after they occurred.

However, we believe the best approach is to focus on exposures (leading indicators) and controlling and removing them, thus helping prevent injuries before they occur.

Accordingly, we have moved to tracking potential SIFs with annual goals targeted at reducing SIFs.

In calendar year 2019, we focused on reducing the number of SIF incidents by improving pre-job planning tools as a means for reducing incidents with SIF potential, year-over-year reduction in incidents related to handling of tubulars and year-over-year increase in seatbelt usage among employees based on self-reported seatbelt use.

Educational Assistance Plan

We offer an Educational Assistance Plan for eligible employees pursuing an undergraduate degree and, in some cases, post-graduate degrees.

Health and Welfare

We support our employees’ and their families’ health by offering full medical, dental, and vision insurance for employees and their families, life insurance and long-term disability plans, and health and dependent care flexible spending accounts.

We foster teamwork and a sense of community amongst our employees through our H&P Way Fund that provides assistance to employees and their families experiencing emergencies.

We provide a variety of resources and services to help our employees for Retirement.

H&P offers a comprehensive retiree medical plan for those who meet eligibility requirements.

In addition, we provide a 401(k) plan with a company match.

Insurance and Risk Management

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We retain a significant portion of our expected losses under our workers’ compensation, general liability and automobile liability programs.

We self-insure a number of other risks including loss of earnings and business interruption and most cyber risks.

We self-insure a number of other risks including loss of earnings and business interruption.

We are unable to obtain significant amounts of insurance to cover risks of underground reservoir damage.

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Government Regulations

Our operations are subject to a variety of national, state, local and international environmental, health and safety laws, regulations, treaties and conventions.

We monitor our compliance with environmental regulations in each country of operation and generally have seen an increase in environmental regulation.

We have made and will continue to make the required expenditures to comply with current and future environmental requirements.

We do not anticipate that compliance with currently applicable environmental rules and regulations and required controls will significantly change our competitive position, capital spending or earnings during 2020 , as these regulations are generally imposed on exploration and production companies instead of contract drilling services companies.

We believe we are in material compliance with applicable environmental rules and regulations and that the cost of such compliance is not material to our business or financial condition.

For a more detailed description of the environmental rules and regulations applicable to our operations, see Item 1A— “Risk Factors — Failure to comply with or changes to governmental and environmental laws could adversely affect our business.”

Our operations are affected from time to time and in varying degrees by foreign and domestic political developments and a variety of federal, state, foreign, regional and local laws, rules and regulations, including those relating to:

• drilling of oil and natural gas wells;

• directional drilling services;

• protection of the environment;

• workplace health and safety;

• labor and employment;

• data privacy;

• exportation or importation of equipment, technology and software;

• currency conversion and repatriation.

Environmental laws and regulations that apply to our operations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act (each, as amended) and similar laws that provide for responses to, and liability for, air emissions, water discharges or releases of oil or hazardous substances into the environment, including damages to natural resources.

Applicable environmental laws and regulations also include similar foreign, state or local counterparts to the above-mentioned federal laws, which regulate air emissions, water discharges and hazardous substances and waste.

Environmental laws can have a material adverse effect on the drilling industry, including our operations, and compliance with such laws may require us to make significant capital expenditures, such as the installation of costly equipment or operational changes, and may affect the resale values or useful lives of our drilling rigs.

The Occupational Safety and Health Act (“OSHA”) and other similar laws and regulations govern the protection of the health and safety of employees.

The OSHA hazard communication standard, the Environmental Protection Agency community right-to-know regulations under Title III of CERCLA, the Emergency Planning and Community Right-to-Know Act and similar state statutes and local regulations require that information be maintained about hazardous materials used in our operations and that this information be provided to employees, state and local governments, emergency responders and citizens.

A number of countries actively regulate and control the importation and/or exportation of oil and gas and other aspects of the oil and gas industries in their countries.

In addition, government actions and initiatives by OPEC+ may continue to contribute to oil price volatility.

In some areas of the world, government activity has adversely affected the amount of exploration and development work done by oil and gas companies and influenced their need for drilling services, and likely will continue to do so.

In addition, we are subject to a variety of other U.S.

and foreign laws and regulations, including, but not limited to, the U.S.

Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws.

Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S.

officials for the purpose of obtaining or retaining business.

Failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines, penalties or other sanctions.

For more information, see Item 1A— “Risk Factors — Failure to comply with the U.S.

Foreign Corrupt Practices Act or foreign anti‑bribery legislation could adversely affect our business .

We are also subject to the jurisdiction of the U.S.

Treasury Department’s Office of Foreign Assets Control, the U.S.

Commerce Department’s Bureau of Industry and Security, the U.S.

Customs and Border Protection and other U.S.

laws and regulations governing the international trade of goods, services and technology.

Such regulations regarding exports and imports of covered goods or dealings with sanctioned countries, persons or entities include licensing, recordkeeping and reporting requirements.

Failure to comply with applicable laws and regulations relating to customs, tariffs, sanctions and export controls may subject us to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets.

For more information, see Item 1A— “Risk Factors — Government policies, mandates, and regulations specifically affecting the energy sector and related industries, regulatory policies or matters that affect a variety of businesses, taxation polices, and political instability could adversely affect our financial condition and results of operations .

We are also subject to regulation by numerous other regulatory agencies, including, but not limited to, the U.S.

Department of Labor, which sets employment practice standards for workers.

In addition, we are subject to certain requirements to contribute to retirement funds or other benefit plans, and laws in some jurisdictions restrict our ability to dismiss employees.

We monitor our compliance with applicable governmental rules and regulations in each country of operation.

We have made and will continue to make the required expenditures to comply with current and future regulatory requirements.

We do not anticipate that compliance with currently applicable rules and regulations and required controls will significantly change our competitive position, capital spending or earnings during 2021 .

We believe we are in material compliance with applicable rules and regulations and, to date, the cost of such compliance has not been material to our business or financial condition.

However, future events such as additional laws and regulations, changes in existing laws and regulations or their interpretation or more vigorous enforcement policies of regulatory agencies, may require additional expenditures by us, which may be material.

Specifically, the expansion of the scope of laws or regulations protecting the environment has accelerated in recent years, particularly outside the United States, and we expect this trend to continue.

Accordingly, there can be no assurance that we will not incur significant compliance costs in the future.

See Item 1A— “Risk Factors — Failure to comply with or changes to governmental and environmental laws could adversely affect our business.

Sustainability

At the direction of the oil and gas exploration and production companies we work with, we contract to drill oil and gas wells.

The exploration and production companies determine whether and when to extract those resources from the ground, following completion of the well.

Below are summaries of what we do and what we do not do, the latter of which is provided because it is often incorrectly assumed that our operations overlap with exploration and production, midstream and downstream parts of the oil and gas sector in ways they do not.

Strive to make drilling for oil and gas safer and more efficient

Build and renovate drilling rigs at two industrial facilities in Texas and Oklahoma

Oversee drilling operations on our rigs on customer sites

Drill predominantly on-shore in the U.S.

What We Do Not Do

Hydraulic fracturing

Buy, lease, prepare, manage or restore land on which rigs are located, or have responsibility for the protection of wildlife or biodiversity of our customers’ properties

Pump or extract oil or gas from the ground

Procure, transport or pump water underground, or treat, store, manage or remove waste water from the drilling sites, or arrange for its disposal

Assume responsibility for the prevention of fugitive releases or emissions associated with the oil and gas exploration or production process

We marked our 100 year anniversary in 2020 in a cyclical industry that at times has proven to be highly volatile.

Much planning and work goes into our Company by all its employees, both past and present, to ensure our sustainability.

The Company continues to refine its comprehensive sustainability strategy rooted in our core value to "do the right thing," as discussed under "— Human Capital Objectives and Programs — Core Values and Culture." This strategy uses data to better understand our impacts in areas like emissions, diversity, and safety so we can make any necessary improvements.

Improving Lives Through Affordable and Responsible Energy

We believe affordable and responsible energy improves lives globally.

With a focus on leading-edge technology, we strive to deliver industry-leading efficiency, safety, and value while continuing to reduce the environmental impact of our solutions.

Energy has been essential to human life, but the forms of energy that have been relied on have evolved over time.

People have relied upon and harnessed energy from resources like fire, water, wind, horsepower, fossil fuels, nuclear, solar, and more, with each having its own unique societal benefits and costs.

At a certain point, the continued growth of the world’s population highlighted a need to capture more concentrated forms of energy, making a reliance on fossil fuels increasingly central.

Over the last several decades, those responsible for producing fossil fuels gained more expertise and became more specialized.

A “service sector” developed to supply the most scientific and technologically specialized needs of the oil and gas sector.

We provide highly specialized services in this narrow segment of the very broad and constantly evolving energy sector.

We continue to innovate in an effort to increase efficiency for our customers and provide continued societal benefits with less impact to the environment.

Focused on Safer and More Efficient Drilling

We design, build and operate rigs that make drilling for oil and gas safer and more efficient.

Focused on the drilling segment of the oil and gas production value chain, we provide the expertise, technology and equipment to drill oil and gas wells for our customers - the exploration and production ("E&P") companies.

Our E&P customers then determine if and when to extract those resources from the ground, following completion of the well.

H&P and the Fossil Fuel Value Chain

While we do play an important role in helping our customers make overall production as safe and efficient as possible, our most critical responsibility is ensuring the safety of our employees and the employees of our customers.

Although many of the environmental and safety risks associated with the oil and gas sector fall outside of our operations, we remain committed to utilizing our expertise and advancing our technologies to aid our customers in minimizing personal and environmental risks and maximizing industry sustainability efforts.

Below is a description of the roles that H&P plays, in the oil and gas value chain, as a drilling solutions provider in comparison to the roles that participants in other sectors of the oil and gas industry play.

makes drilling for oil safer and more efficient;

build and renovates drilling rigs at two industrial facilities in Texas and Oklahoma;

oversees drilling operations on its rigs on customer sites;

drills predominantly on-shore in the United States (88 percent of available rigs are on onshore);

makes significant and impactful investments in research and development and new technologies;

employs over 4,100 people;

provides robust benefit plans to protect the physical and financial health of its valued employees.

Other Sectors of the Oil and Gas Industry:

buy, lease, prepare, manage or restore land or are responsible for the protection of wildlife on or biodiversity of property;

engage in hydraulic fracturing;

pump oil or gas from the ground;

procure, transport or pump water underground, or treat or remove wastewater from the site, or arrange for its disposal;

assume responsibility for the prevention of fugitive releases or emissions associated with the oil and gas production process;

engage in oil and gas transport, refining or storage;

engage in downstream operations.

Thus, many of the environmental and safety risks associated with the oil and gas sector fall outside the scope of our operations and areas of responsibility.

Our most critical responsibility is therefore the safety of our employees and the employees of our customers.

To be successful, we strive to be leaders in innovation, technology, cost competitiveness, safety, customer service, relationship tending, and reputation management.

To maintain this leadership edge and generate shareholder value, we invest in our employees, customers, communities, and other stakeholders in the ways listed below.

Our recruiting practices and decisions on whom to hire are among our most important activities.

In addition to traditional school recruiting events, we utilize social media and local job fairs across the U.S.

to find diverse, motivated and responsible employees.

Education and Training

We strive to create a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together can help us gain a competitive advantage.

Our organizational development team has responsibility for talent management as well ongoing training and development, including development and succession plans, mentoring and change management initiatives, and diversity and inclusion programs.

Our training starts right at the beginning with good on–boarding procedures that focus on safety, responsibility, ethical conduct and inclusive teamwork.

In addition to on–boarding training, we provide extensive ongoing training and career development focused on:

compliance with our Code of Business Conduct and Ethics (the "Code") and laws applicable to our business including:

the importance of creating an inclusive environment that encourages the best out of all employees and avoids illegal discrimination

the importance of individual responsibility in meeting our Code's requirements and taking action when needed, including reporting

the Foreign Corrupt Practices Act, trade controls and anti–boycott training for appropriate employees (the H&P FCPA Policy, which prohibits facilitation payments, can be found on our website)

skills and competencies directly related to employees' positions

commitment to an incident–free work environment

responsibility for personal safety and the safety of fellow employees, others on location and the environment

Our Educational Assistance Plan offers reimbursement of tuition fees for any employee pursuing an undergraduate degree and, in some cases, post–graduate degrees.

Health and Welfare

We support our employees’ and their families’ health with full medical, dental, and vision insurance for employees and their families, life insurance and long-term disability plans, and health and dependent care flexible spending accounts.

We foster teamwork and a sense of community amongst our employees through our H&P Way Fund that provides assistance to employees and their families experiencing emergencies.

We provide a 401(k) plan with a company match.

All of our safety programs are designed to comply with applicable laws and industry standards as well as to benefit employees, customers and communities.

We have a dedicated Health, Safety and Environmental (“HSE”) function overseen by senior executives and implemented at every H&P drilling rig and facility worldwide.

Our safety-focused C.A.R.E.

program promotes employee and customer safety and well-being.

In addition, our H&P Technologies segment is investing in digital technology safety solutions for the purpose of controlling and removing exposures on FlexRigs.

We incorporate safety features into our rig designs through our Safety by Design program.

The success of our safety initiatives, including our C.A.R.E.

and Safety by Design programs, and the Company’s performance with respect to safety metrics are important elements of the compensation of our executives, as discussed further in our proxy statement.

Our Safety by Design program helps us:

Identify and work to eliminate hazards in the rig design phase

Use leading-edge technology to enhance efficiency and thus reduce the number and severity of safety risks

Standardize designs, which can reduce the variability in the types of rigs we use to allow our employees to have a greater familiarity with the rigs than would be achieved if they had to master a wider variety of rig types

Design and configure loads and interconnects with rig moves in mind.

By striving to integrate equipment to the greatest extent possible, we minimize risks associated with moves and risks associated with double handling

Our COE promotes process excellence and safety by providing experienced drilling and maintenance real-time support around the clock to our operations.

Our COE Call Center and Real-Time Monitoring Groups are staffed with experienced systems technicians who work with field personnel to leverage each group’s knowledge in troubleshooting rig events.

In addition, experienced engineers monitor safety critical alarms and perform daily safety performance and data analysis throughout the fleet.

In the event that an operational incident does occur, we have developed and implemented a comprehensive Emergency Management and Crisis Response Plan to help ensure H&P has the ability to respond promptly and effectively to the most severe adverse situations or crises.

Environmental Management

H&P does not itself lease properties used for the operations of our customers.

However, many of our customers operate in regions that have stringent safety and environmental laws and regulations, with which we comply as applicable.

The standards we employ include:

Applying industry-accepted environmental best practices

Minimizing rig physical footprints, and using technology to configure drilling rigs, where appropriate, for space efficient multi-well pads, all to minimize the impact on the environment in which we and our customers operate

Conversion of many of our rigs to allow partial substitution of cleaner burning natural gas as a fuel source to reduce air emissions

Upgrading our drilling rig fleet to utilize AC drive power and control systems which are more energy efficient and have significantly lower noise levels as compared to SCR and mechanical drilling rigs

Using a variety of recycling and other initiatives in our facilities and operations to minimize waste

Ethics and Compliance

We expect corporate, professional and personal responsibility from each of our employees as well as compliance with high ethical standards to achieve operational excellence.

In addition to the corporate governance oversight provided by the Board of Directors and its committees, management observes and enforces our Code described on our website.

Our Code provides employees with the tools to make consistent, ethical decisions and emphasizes the duty to report any concerns or violations.

In addition to our Code, we have and enforce a Code of Ethics for Principal Executive Officers and Senior Financial Officers and a Foreign Corrupt Practices Act Compliance Policy.

We foster a culture of trust and transparency and frequently remind our employees that they are encouraged to ask questions and report concerns.

To empower every employee to promote responsible behavior, we have implemented an independent and anonymous reporting mechanism for employees to voice concerns pertaining to our Code, policies or compliance with law without fear of retaliation.

Our Ethics Hotline, administered by a third–party, provides a convenient and confidential channel for employees and non-employees to report any suspected compliance concerns or complaints.

We believe this focus on finding and getting the best out of our people, our programs, our standards and our technology collectively support our operations, our reputation and our returns.

Human Capital

For a description of our recruiting practices, education and training for employees, and employee benefits, see "— Human Capital Programs and Objectives" above.

Available Information

Our website is located at www.hpinc.com.

Annual reports on Form 10 ‑ K, quarterly reports on Form 10 ‑ Q, current reports on Form 8 ‑ K, and amendments to those reports, earnings releases, and financial statements are made available free of charge on the investor relations section of our website as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the SEC.

The information contained on our website, or accessible from our website, is not incorporated into, and should not be considered part of, this annual report on Form 10 ‑ K or any other documents we file with, or furnish to, the SEC.

Annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to those reports, earnings releases, and financial statements are made available free of charge on the investor relations section of our website as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission ("SEC").

The information contained on our website, or accessible from our website, is not incorporated into, and should not be considered part of, this Form 10‑K or any other documents we file with, or furnish to, the SEC.

The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business