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Item 7. Management’s Discussion and Analysis

2021-11-18 compared with 2020-11-20 · 339 added, 282 removed, 224 unchanged (73% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Part I of this Form 10‑K as well as the Consolidated Financial Statements and related notes thereto included in Item 8— “Financial Statements and Supplementary Data” of this Form 10‑K.

The following discussion should be read in conjunction with Part I of this Form 10‑K as well as the Consolidated Financial Statements and related notes thereto included in Part II, Item 8— “Financial Statements and Supplementary Data” of this Form 10‑K.

Our future operating results may be affected by various trends and factors which are beyond our control.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in this Form 10-K under “Cautionary Note regarding Forward-Looking Statements” and Item 1A— “Risk Factors.” Accordingly, past results and trends should not be used by investors to anticipate future results or trends.

2021 FORM 10-K | 38

Executive Summary

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As of September 30, 2021, our drilling rig fleet included a total of 273 drilling rigs.

Our drilling services and solutions segments consist of the North America Solutions segment with 262 rigs, the Offshore Gulf of Mexico segment with eight offshore platform rigs and the International Solutions segment with 32 rigs as of September 30, 2020 .

Our reportable operating business segments consist of the North America Solutions segment with 236 rigs, the Offshore Gulf of Mexico segment with seven offshore platform rigs and the International Solutions segment with 30 rigs as of September 30, 2021.

At the close of fiscal year 2021, we had 137 contracted rigs, of which 73 were under a fixed-term contract and 64 were working well-to-well, compared to 79 contracted rigs at September 30, 2020.

Our long-term strategy remains focused on innovation, technology, safety, operational excellence and reliability.

As we move forward, we believe that our advanced uniform rig fleet, technology offerings, financial strength, contract backlog and strong customer and employee base position us very well to respond to continued volatile market conditions and take advantage of future opportunities.

As we move forward, we believe that our advanced uniform rig fleet, technology offerings, financial strength, contract backlog and strong customer and employee base position us very well to respond to continued cyclical and often times volatile market conditions and take advantage of future opportunities.

Market Outlook

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In early March 2020, the increase in crude oil supply resulting from production escalations from the Organization of the Petroleum Exporting Countries and other oil producing nations ("OPEC+") combined with a decrease in crude oil demand stemming from the global response and uncertainties surrounding the COVID-19 pandemic resulted in a sharp decline in crude oil prices.

Since the beginning of the calendar year 2020, crude oil prices fell from approximately $60 per barrel to the low-to-mid-$20 per barrel range, lower in some cases.

Consequently, we have seen a significant decrease in customer 2020 capital budgets representing a decline of nearly 50% from calendar year 2019 levels.

There has been a corresponding dramatic decline in the demand for land rigs, such that the overall rig count for calendar year 2020 will average significantly less than in calendar year 2019.

During calendar year 2020, our North American Solutions rig count has declined from 195 contracted rigs at December 31, 2019 to 69 contracted rigs at September 30, 2020.

Of the 69 contracted rigs at September 30, 2020, 58 are active with 11 stacked.

When contracted 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 typically reduced.

We experienced much of our rig count decline during our second and third fiscal quarters with the absolute level of our rigs remaining relatively stable during the fourth fiscal quarter.

Additionally, during our fourth fiscal quarter, the market experienced a stabilization of crude oil prices in the $40 per barrel range.

At such levels, we believe our customers will have more robust capital budgets entering into 2021 and are already seeing evidence of this in our near-term rig count activity projections.

Consequently, we believe we will experience a higher level of rig activity in fiscal year 2021 compared to where we stand today.

However, given the current levels of commodity prices and the lasting impacts of the global pandemic, we do not expect or anticipate customers' capital budgets will support activity levels like those experienced prior to March 2020.

Specifically, during calendar year 2020, crude oil prices fell from approximately $60 per barrel to the low-to-mid-$20 per barrel range, lower in some cases, which resulted in customers decreasing their 2020 capital budgets nearly 50 percent from calendar year 2019 levels.

There was a corresponding dramatic decline in the demand for land rigs, such that the overall rig count for calendar year 2020 averaged roughly 430 rigs, significantly lower than in calendar year 2019, which averaged approximately 940 rigs.

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We experienced much of our rig count decline during the second and third quarters of fiscal year 2020 as our North American Solutions active rig count declined from 195 rigs at December 31, 2019 to a low of 47 rigs in August 2020.

However, during the fourth quarter of fiscal year 2020, the market experienced a stabilization of crude oil prices in the $40 per barrel range and subsequently crude oil prices moved toward $50 per barrel as our customers set their capital budgets for calendar year 2021.

More recently, crude oil prices have continued to increase, reaching more than $70 per barrel.

That said, however, we do not expect rig activity to move in tandem with crude oil prices to the same extent as it has historically.

This is primarily due to a large portion of our customers having a more disciplined approach to their operations and capital spending.

We expect a majority will maintain their activity levels in accordance with their capital budgets for 2021, which were set during a time when crude oil prices were lower and will not adjust spending levels higher as crude oil prices move higher.

Along with stabilization of crude prices during the fourth quarter of fiscal year 2020, our rig activity began to increase, and increased more significantly during the first and second quarters of fiscal year 2021.

Our North America Solutions active rig count has more than doubled from 47 rigs in August 2020 to 127 rigs at September 30, 2021.

We do anticipate further increases in our rig count for the remainder of calendar year 2021 as customers prepare for 2022 operations based upon the expectation that the level of capital spending will be higher in calendar year 2022 than it was in calendar year 2021.

Utilization for our super-spec FlexRig ® fleet peaked in late calendar year 2018 with 216 of 221 super-spec rigs working (98 percent utilization);

however, the recent decline in the demand for land rigs resulted in customers idling a large portion of our super-spec FlexRig ® fleet.

however, the subsequent decline in the demand for land rigs resulted in customers idling a large portion of our super-spec FlexRig ® fleet.

At September 30, 2021, we had 105 idle super-spec rigs out of our FlexRig ® fleet of 230 super-spec rigs (54 percent utilization).

Collectively, our other business segments, Offshore Gulf of Mexico and International Solutions, are exposed to the same macro environment adversely affecting our North America Solutions segment and those unfavorable factors are creating similar challenges for these business segments as well.

Collectively, our other business segments, Offshore Gulf of Mexico and International Solutions, are exposed to the same macro commodity price environment affecting our North America Solutions segment;

however, activity levels in the International Solutions segment are also subject to other various geopolitical and financial factors specific to the countries of our operations.

While we do not expect much change in our Offshore Gulf of Mexico segment, we see opportunities for improvement in our International Solutions segment, but those will likely occur on a more extended timeline compared to what we have experienced in the North America Solutions segment.

H&P recognizes the uncertainties and concerns caused by the COVID-19 pandemic;

however, we have managed the Company over time to be in a position of strength both financially and operationally when facing uncertainties of this magnitude.

The COVID-19 pandemic has had an indirect, yet significant financial impact on the Company.

The global response to coping with the pandemic has resulted in a drop in demand for crude oil, which, when combined with a more than adequate supply of crude oil, has resulted in a sharp decline in crude oil prices, causing our customers to have pronounced pullbacks in their operations and planned capital expenditures.

The COVID-19 pandemic has had a significant financial impact on the Company, including increased costs as a result of labor shortages and logistics constraints.

The global response to coping with the pandemic resulted in a drop in demand for crude oil, which, when combined with a more than adequate supply of crude oil, resulted in a sharp decline in crude oil prices, causing our customers to have pronounced pullbacks in their operations and planned capital expenditures.

The direct impact of COVID-19 on H&P's operations has created some challenges that we believe the Company is adequately addressing to ensure a robust continuation of our operations albeit at a lower activity level.

The Company is an ‘essential critical infrastructure’ company as defined by the Department of Homeland Security and the Cybersecurity and Infrastructure Security Agency and, as such, continues to operate rigs and technology solutions, providing valuable services to our customers in support of the global energy infrastructure.

The health and safety of all H&P stakeholders - our employees, customers, and vendors - remain a top priority at the Company.

Accordingly, H&P has implemented additional policies and procedures designed to protect the well-being of our stakeholders and to minimize the impact of COVID-19 on our ongoing operations.

Some of the safeguards we have implemented include:

The Company mobilized a global COVID-19 response team to manage the evolving situation

The Company moved to a global "remote work" model for office personnel (beginning March 13, 2020)

The Company suspended all non-essential travel

We are adhering to Center for Disease Control ("CDC") guidelines for evaluating actual and potential COVID-19 exposures

Operational and third-party personnel are required to complete a COVID-19 questionnaire prior to reporting to a field location and office personnel are required to complete one prior to returning to their respective offices in order to evaluate actual and potential COVID-19 exposures and individuals identified as being high risk are not allowed on location

The temperatures of operational personnel are taken prior to them being allowed to enter a rig site

The Company has implemented enhanced sanitization and cleaning protocols

We are complying with local governmental jurisdiction policies and procedures where our operations reside;

in some instances, policies and procedures are more stringent in our foreign operations t han in our North America operations and this has resulted in a complete suspension, for a certain period of time, of all drilling operations in at least one foreign jurisdiction

As of September 30, 2020, the Company was aware that 109 out of its approximately 4,100 employees have had confirmed cases of COVID-19 since the COVID-19 outbreak began, of which we believe approximately 52% contracted the virus outside of their work location.

We have had no fatalities and 100 of 109 employees who had confirmed cases have returned to work.

Upon being notified that an employee has tested positive, the Company follows pre-established guidelines and places the employee on leave as appropriate.

Per CDC Guidelines, employees testing positive are permitted to return to their worksite after 10 days.

Employees who are considered a Level 1 exposure but who have not tested positive are required to quarantine and are permitted to return to their worksite after 14 days.

In addition, the Company applies its enhanced sanitization procedures to the employee’s work location prior to allowing employees to re-enter the location.

We are adhering to Center for Disease Control guidelines for evaluating actual and potential COVID-19 exposures and we are complying with local governmental jurisdiction policies and procedures where our operations reside;

in some instances, policies and procedures are more stringent in our foreign operations than in our North America operations and this resulted in a complete suspension, for a certain period of time, of all drilling operations in at least one foreign jurisdiction.

In the United States, the Company is an ‘essential critical infrastructure’ company as defined by the Department of Homeland Security and the Cybersecurity and Infrastructure Security Agency and, as such, continues to operate rigs and technology solutions, providing valuable services to our customers in support of the global energy infrastructure.

Since the COVID-19 outbreak began, no rigs have been fully shut down (other than temporary shutdowns for disinfecting) and such measures to disinfect facilities have not had a significant impact on service.

We believe our service levels are unchanged from pre-pandemic levels.

From a financial perspective we believe the Company is well positioned to continue as a going concern even through a more protracted disruption caused by COVID-19.

From a financial perspective, we believe the Company is well positioned to continue as a going concern even through a more protracted disruption caused by COVID-19, oil oversupply and low oil prices.

We have taken measures to reduce costs and capital expenditures to levels that better reflect a lower activity environment.

Actions taken during the second quarter of fiscal year 2020 included a reduction to the annual dividend of approximately $200 million, a reduction in planned fiscal year 2020 capital spend of $95 million, and a reduction of over $50 million in fixed operational overhead.

During the third quarter of fiscal year 2020, the Company took further steps to reduce its planned fiscal year 2020 capital spend by another $40 million and its selling, general and administrative cost structures by another $25 million on an annualized basis.

The actions we took during fiscal year 2020 included a reduction to the annual dividend of approximately $200 million, a reduction of approximately $145 million in the fiscal year 2020 capital spend, a reduction of over $50 million in fixed operational overhead, and a reduction of selling, general and administrative expenses of more than $25 million on an annualized basis.

The culmination of these cost-saving initiatives resulted in a $16 million restructuring charge during fiscal year 2020.

We anticipate further cost reductions in our International Solutions operations as well and are working through local jurisdictional regulations to implement those measures.

At September 30, 2020, the Company had cash and cash equivalents and short-term investments of $577.2 million and availability under the 2018 Credit Facility (as defined herein) of $750.0 million resulting in approximately $1.3 billion in near-term liquidity.

Further, we took additional steps in fiscal year 2021 to reduce our cost structure.

These measures will result in an estimated annualized savings of more than $10 million with the full benefit expected to be realized in calendar year 2022.

We anticipate further cost reductions going forward;

however, implementation of future cost initiatives will be incremental and are anticipated to be realized over the next few quarters.

These cost reduction measures could lead to additional restructuring charges in future periods.

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At September 30, 2021, the Company had cash and cash equivalents and short-term investments of $1.1 billion and availability under the 2018 Credit Facility (as defined herein) of $750 million.

On September 27, 2021, the Company delivered a conditional notice of optional full redemption for all of the outstanding 4.65% unsecured senior notes due 2025 (the "2025 Notes") at a redemption price calculated in accordance with the indenture governing the 2025 Notes, plus accrued and unpaid interest on the 2025 Notes to be redeemed.

On September 29, 2021, we issued $550.0 million aggregate principal amount of our 2.90% unsecured senior notes due 2031 (the "2031 Notes").

The Company’s obligation to redeem the 2025 Notes was conditioned upon the prior consummation of the issuance of the 2031 Notes, which was satisfied on September 29, 2021.

The proceeds from the offering of the 2031 Notes were used to redeem the 2025 Notes.

On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

The associated make-whole premium and accrued interest of $58.1 million and the write off of the unamortized discount and debt issuance costs of $3.7 million will be recognized during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 redemption.

Subsequent to the redemption, our near-term liquidity was approximately $1.3 billion .

We currently do not anticipate the need to draw on the 2018 Credit Facility.

See “—Liquidity and Capital Resources—Senior Notes—2.90% Senior Notes due 2031” below and Note 7—Debt to our Consolidated Financial Statements for more information.

As part of the Company's normal operations, we regularly monitor the creditworthiness of our customers and vendors, screening out those that we believe have a high risk of failure to honor their counter-party obligations either through payment or delivery of goods or services.

We also perform routine reviews of our accounts receivable and other amounts owed to us to assess and quantify the ultimate collectability of those amounts.

At September 30, 2020, the Company had a net allowance against its accounts receivable of $1.8 million and incurred bad debt expense of $2.2 million during fiscal year 2020.

Subsequent to March 31, 2020, we adjusted our credit risk monitoring for specific customers, in response to the recent economic events described above.

At September 30, 2021 and September 30, 2020, the Company had a net allowance against its accounts receivable of $2.1 million and $1.8 million, respectively.

The nature of the COVID-19 pandemic is inherently uncertain, and as a result, the Company is unable to reasonably estimate the duration and ultimate impacts of the pandemic, including the timing or level of any subsequent recovery.

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Recent Developments

Treasury and Investments

Senior Notes Offering and Redemption of 4.65% Senior Notes due 2025

On September 29, 2021, we completed our offering of $550.0 million aggregate principal amount of the 2031 Notes.

We received net proceeds from the offering of the 2031 Notes of approximately $545.1 million, after deducting the initial purchasers’ discounts and commissions and offering expenses.

In October 2021, the net proceeds from the offering were principally used to redeem all $487.1 million aggregate principal amount of our outstanding 2025 Notes.

See “—Liquidity and Capital Resources—Senior Notes—2.90% Senior Notes due 2031” below and Note 7—Debt to our Consolidated Financial Statements for more information.

On September 29, 2021, we issued $550.0 million aggregate principal amount of our 2.90% unsecured senior notes due 2031 (the "2031 Notes").

The Company’s obligation to redeem the 2025 Notes was conditioned upon the prior consummation of the issuance of the 2031 Notes, which was satisfied on September 29, 2021.

The proceeds from the offering of the 2031 Notes were used to redeem the 2025 Notes.

On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

See “—Liquidity and Capital Resources—Senior Notes—4.65% Senior Notes due 2025” below and Note 7—Debt to our Consolidated Financial Statements for more information.

Credit Facility Maturity Extension

On April 16, 2021, lenders with $680.0 million of commitments under the 2018 Credit Facility exercised their option to extend the maturity of the 2018 Credit Facility from November 13, 2024 to November 12, 2025.

No other terms of the 2018 Credit Facility were amended in connection with this extension.

The remaining $70.0 million of commitments under the 2018 Credit Facility will expire on November 13, 2024, unless extended by the applicable lender before such date.

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ADNOC and Helmerich & Payne Strategic Alliance

During September 2021, the Abu Dhabi National Oil Company ("ADNOC") and its subsidiary ADNOC Drilling Company P.J.S.C ("ADNOC Drilling") and the Company jointly announced a strategic alliance, through which ADNOC Drilling acquired eight of our FlexRig ® land rigs for $86.5 million.

Following this transaction, H&P made a $100.0 million cornerstone investment in ADNOC Drilling's initial public offering subject to a three-year lock up period.

Our investment is classified within Investments in our Consolidated Balance Sheets as of September 30, 2021.

ADNOC Drilling’s IPO completed on October 3, 2021 and our $100.0 million investment represents 159.7 million shares of ADNOC Drilling, equivalent to a one percent ownership stake.

We will account for our investment in ADNOC Drilling prospectively, after the IPO date of October 3, 2021, as a marketable equity security with a readily determinable fair value.

Fair value will be measured using a market approach on a recurring basis and is categorized using the fair value hierarchy.

Any changes in such values will be reflected in net income.

The availability of inputs observable in the market depends on a variety of factors, including the type of instrument, whether the instrument is actively traded and other characteristics particular to the transaction, which includes the effect of the lock-up period.

This alliance is intended to further drive ADNOC Drilling's growth and expansion as well as enhance their rig-based operational performance by providing them access to our world-class FlexRig ® fleet and leveraging our expertise and technologies.

Additionally, this alliance facilitates our goal of allocating capital international, particularly in the Middle East and North Africa region, by accelerating our access to the attractive and fast-growing Abu Dhabi market as a key platform for further regional expansion.

The eight rigs had an aggregate net book value of $55.6 million and were recorded as assets held-for-sale in our Consolidated Balance Sheets as of September 30, 2021.

The rigs' fair value less estimated cost to sell of $29.0 million, including approximately $24.0 million of cash costs to be incurred, approximated their net book values at September 30, 2021.

Two of the eight rigs were already located in the U.A.E where ADNOC Drilling is domiciled with the remaining six rigs to be shipped from the United States.

As part of the sales agreement, the rigs will be delivered and commissioned in stages over a twelve-month period subject to acceptance upon successful completion of final inspection on customary terms and conditions.

No rigs have been delivered to ADNOC Drilling as of September 30, 2021.

Property, Plant and Equipment

Sale of Offshore Rig

During the first quarter of fiscal year 2021, we closed on the sale of an offshore platform rig within our Offshore Gulf of Mexico operating segment for total consideration of $12.0 million with an aggregate net book value of $2.8 million, resulting in a gain of $9.2 million, which is included within (gain) loss on sale of assets on our Consolidated Statements of Operations during the fiscal year ended September 30, 2021.

Assets Held-for-Sale

In March 2021, the Company's leadership continued the execution of the current strategy, which was initially introduced in 2019, focusing on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet.

As a result, the Company has undertaken a plan to sell 71 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares.

The book values of those assets were written down to $13.5 million, which represents the fair value less estimated cost to sell, and were reclassified as held-for-sale in the second and third quarter of fiscal year 2021.

As a result, we recognized a non-cash impairment charge of $56.4 million, during the fiscal year ended September 30, 2021, in the Consolidated Statement of Operations.

During the year ended September 30, 2021, we completed the sale of a portion of the assets with a net book value of $6.5 million that were originally classified as held-for-sale during the second and third quarter of fiscal year 2021.

During the fiscal year ended September 30, 2021, we formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running services, which contributed approximately 2.8 percent to our consolidated revenue during fiscal year 2021, all within our North America Solutions segment.

The combined net book values of these assets of $23.2 million were written down to their combined fair value less estimated cost to sell of $8.8 million, and were reclassified as held-for-sale in the Consolidated Balance Sheets as of September 30, 2021.

As a result, we recognized a non-cash impairment charge of $14.4 million in the Consolidated Statement of Operations during the year ended September 30, 2021.

Subsequent to September 30, 2021, we closed on the sale of these assets in two separate transactions.

The sale of our trucking services was completed on November 3, 2021 while the sale of our casing running services was completed on November 15, 2021 for combined cash consideration less costs to sell of $5.8 million in addition to the possibility of future earnout revenue.

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Restructuring

Beginning in the third quarter of fiscal year 2020, we implemented cost controls and began evaluating further measures to respond to the combination of weakened commodity prices, uncertainties related to the COVID-19 pandemic, and the resulting market volatility.

We restructured our operations to accommodate scale during an industry downturn and to re-organize our operations to align to new marketing and management strategies.

We commenced a number of restructuring efforts as a result of this evaluation, which included, among other things a reduction in our capital allocation plans, changes to our organizational structure, and a reduction of staffing levels.

Refer to Note 19—Restructuring Charges to our Consolidated Financial Statements.

Business Segments

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.

As a result, beginning with the third quarter of fiscal year 2020, our drilling services operations are organized into the following reportable operating business segments:

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

All prior period segment disclosures have been recast for these segment changes.

Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other." Consolidated revenues and expenses reflect the elimination of intercompany transactions.

Self-Insurance

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.

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.

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

These premiums are currently held in a restricted account, resulting in a transfer of risk from our operating subsidiaries to the Captive.

The actuarial estimated underwriting expenses for the fiscal year ended September 30, 2020 were approximately $16.4 million and were recorded within drilling services operating expenses in our Consolidated Statement of Operations.

Intercompany premium revenues and expenses during the fiscal year ended September 30, 2020 amounted to $36.9 million , which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, Offshore Gulf of Mexico, and International Solutions reportable operating segments and are reflected as intersegment sales within "Other." The Company self-insures employee health plan exposures in excess of employee deductibles.

Starting in the second quarter of fiscal year 2020, the Captive insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $50,000.

This program will also be reviewed at the end of each policy year by an outside actuary.

One hundred percent of the stop-loss premium is being set aside by the Captive as reserves.

The stop-loss program does not have a material impact on a consolidated basis.

During the fiscal year ended September 30, 2020, we closed on the sale of a portion of our real estate investment portfolio, including six industrial sites, for total consideration, net of selling related expenses, of $40.7 million and an aggregate net book value of $13.5 million, resulting in a gain of $27.2 million, which is included within Gain on Sale of Assets on our Consolidated Statement of Operations.

In December 2019, we closed on the sale of a wholly-owned subsidiary of Helmerich & Payne International Drilling Co.

("HPIDC"), TerraVici Drilling Solutions, Inc.

("TerraVici").

As a result of the sale, 100% of TerraVici's outstanding capital stock was transferred to the purchaser in exchange for approximately $15.1 million, resulting in a total gain on the sale of TerraVici of approximately $15.0 million.

Prior to the sale, TerraVici was a component of the North America Solutions operating segment.

This transaction does not represent a strategic shift in our operations and will not have a significant effect on our operations and financial results going forward.

During the second quarter of fiscal year 2020, several significant economic events took place that severely impacted the current demand on drilling services, including the significant drop in crude oil prices caused by OPEC+'s price war coupled with the decrease in the demand due to the COVID-19 pandemic.

Property, Plant and Equipment and Inventory During the second quarter of fiscal year 2020, to maintain a competitive edge in a challenging market, the Company’s management introduced a new strategy focused on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet.

This resulted in grouping the super-spec rigs of our legacy Domestic FlexRig ® 3 asset group and our FlexRig ® 5 asset group creating a new "Domestic super-spec FlexRig ® " asset group, while combining the legacy Domestic conventional asset group, FlexRig ® 4 asset group and FlexRig ® 3 non-super-spec rigs into one asset group (Domestic non-super-spec asset group).

Given the current and projected low utilization for our Domestic non-super-spec asset group and all International asset groups, we considered these economic factors to be indicators that these asset groups may be impaired.

As a result of these indicators, we performed impairment testing at March 31, 2020 on each of our Domestic non-super-spec and International conventional, FlexRig ® 3, and FlexRig ® 4 asset groups which had an aggregate net book value of $605.8 million.

We concluded that the net book value of each asset group is not recoverable through estimated undiscounted cash flows and recorded a non-cash impairment charge of $441.4 million in the Consolidated Statement of Operations for the fiscal year ended September 30, 2020 .

Of the $441.4 million total impairment charge recorded, $292.4 million and $149.0 million was recorded in the North America Solutions and International Solutions segments, respectively.

Impairment was measured as the amount by which the net book value of each asset group exceeds its fair value.

No further impairments were recognized in fiscal year 2020.

The most significant assumptions used in our undiscounted cash flow model include timing on awards of future drilling contracts, drilling rig utilization, estimated remaining useful life, and net proceeds received upon future sale/disposition.

These assumptions are classified as Level 3 inputs by Accounting Standards Codification ("ASC") Topic 820 Fair Value Measurement and Disclosures as they are based upon unobservable inputs and primarily rely on management assumptions and forecasts.

In determining the fair value of each asset group, we utilized a combination of income and market approaches.

The significant assumptions in the valuation are based on those of a market participant and are classified as Level 2 and Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures.

As of March 31, 2020, the Company also recorded an additional non-cash impairment charge related to in-progress drilling equipment and rotational inventory of $44.9 million and $38.6 million, respectively, which had aggregate book values of $68.4 million and $38.6 million, respectively, in the Consolidated Statement of Operations for the fiscal year ended September 30, 2020.

Of the $83.5 million total impairment charge recorded for in-progress drilling equipment and rotational inventory, $75.8 million and $7.7 million was recorded in the North America Solutions and International Solutions segments, respectively.

Goodwill Consistent with our policy, we test goodwill annually for impairment in the fourth quarter of our fiscal year, or more frequently if there are indicators that goodwill might be impaired.

Due to the market conditions described above, during the second quarter of fiscal year 2020, we concluded that goodwill and intangible assets might be impaired and tested the H&P Technologies reporting unit, where the goodwill balance is allocated and the intangible assets are recorded, for recoverability.

This resulted in a goodwill only non-cash impairment charge of $38.3 million recorded in Asset Impairment Charge on the Consolidated Statement of Operations during the fiscal year ended September 30, 2020 .

The recoverable amount of the H&P Technologies reporting unit was determined based on a fair value calculation which uses cash flow projections based on the Company’s financial projections presented to the Board covering a five-year period, and a discount rate of 14 percent .

Cash flows beyond that five-year period were extrapolated using the fifth-year data with no implied growth factor.

The reporting unit level is defined as an operating segment or one level below an operating segment.

The recoverable amount of the intangible assets tested for impairment within the H&P Technologies reporting unit is determined based on undiscounted cash flow projections using the Company’s financial projections presented to the Board covering a five-year period and extrapolated for the remaining weighted average useful lives of the intangible assets.

The most significant assumptions used in our cash flow model include timing on awards of future contracts, commercial pricing terms, utilization, discount rate, and the terminal value.

These assumptions are classified as Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures as they are based upon unobservable inputs and primarily rely on management assumptions and forecasts.

Although we believe the assumptions used in our analysis and the probability-weighted average of expected future cash flows are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion.

During the second quarter of fiscal year 2021, we reorganized our IT operations and moved select IT functions to a managed service provider.

Costs incurred as of September 30, 2021 in connection with the restructuring are primarily comprised of one-time severance benefits to employees who were involuntarily terminated.

The termination date of some of the employees extend beyond September 30, 2021, and such employees are required to render service through their respective termination date in order to receive the one-time severance benefit.

During the third quarter of fiscal year 2021, we commenced a voluntary separation program at our local office in Argentina for which we incurred one-time severance charges for employees who were voluntarily terminated.

Total costs incurred related to our IT reorganization and our Argentina separation program were $1.5 million for the fiscal year ended September 30, 2021.

Additionally, we continue to take measures to lower our cost structure based on activity levels.

During fiscal year 2021, we incurred $4.5 million in one-time moving related expenses primarily due to the downsizing and relocation of our Houston assembly facility and various storage yards used for idle rigs.

This together with additional restructuring activities that could result from our in-process cost management review could result in additional restructuring charges throughout the year.

Contract Backlog

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 or expected performance bonuses 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 useful in estimating future revenue and cash flows of the Company.

As of September 30, 2021 and 2020, our contract drilling backlog was $572.0 million and $658.0 million, respectively.

These amounts do not include any anticipated contract renewals or expected performance bonuses.

The decrease in backlog at September 30, 2021 from September 30, 2020 is primarily due to prevailing market conditions causing a decline in the number of longer term drilling contracts executed.

Approximately 22.9 percent of the September 30, 2021 total backlog is reasonably expected to be fulfilled in fiscal year 2023 and thereafter.

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, opted to renegotiate or early terminate existing drilling contracts.

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

We recognized $7.7 million and $73.4 million in early termination revenue associated with term contracts for the fiscal years ended September 30, 2021 and 2020, respectively.

The following table sets forth the total backlog by reportable segment as of September 30, 2021 and 2020, and the percentage of the September 30, 2021 backlog reasonably expected to be fulfilled in fiscal year 2023 and thereafter:

(in millions) September 30, 2021 September 30, 2020 Percentage Reasonably

Expected to be Fulfilled in Fiscal Year 2023

and Thereafter

North America Solutions $ 429.6 $ 542.4 17.4 %

Offshore Gulf of Mexico 17.2 16.7 —

International Solutions 125.2 98.9 45.1

$ 572.0 $ 658.0

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 COVID-19 pandemic, have adversely affected and are expected to continue to adversely affect our business, financial condition and results of operations" within this Form 10-K.

2021 FORM 10-K | 43

Results of Operations for the Fiscal Years Ended September 30, 2021 and 2020

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Net Loss We reported a loss from continuing operations of $337.5 million ($3.14 loss per diluted share) from operating revenues of $1.2 billion for the fiscal year ended September 30, 2021 compared to a loss from continuing operations of $496.4 million ($4.62 loss per diluted share) from operating revenues of $1.8 billion for the fiscal year ended September 30, 2020.

Included in the net loss for the fiscal year ended September 30, 2020 is income of $1.9 million ( $0.02 impact per diluted share) from discontinued operations.

Included in the net loss for the fiscal year ended September 30, 2021 is income of $11.3 million ($0.10 per diluted share) from discontinued operations.

Including discontinued operations, we recorded a net loss of $326.2 million ($3.04 loss per diluted share) for the fiscal year ended September 30, 2021 compared to a net loss of $494.5 million ($4.60 loss per diluted share) for the fiscal year ended September 30, 2020.

1 unchanged sentence

Excluding early termination revenue, operating revenue decreased $0.5 billion in fiscal year 2021 compared to fiscal year 2020.

The decrease in fiscal year 2020 from fiscal year 2019 was driven by lower activity and pricing as a result of the collapse in oil prices that occurred in March 2020, which drove our customers to quickly reduce rig activity beginning in the second half of March 2020 and continuing throughout the remainder of fiscal year 2020 .

The decrease in fiscal year 2021 from fiscal year 2020 was driven by lower activity, lower early termination revenue, and lower average rig pricing.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses in fiscal year 2021 were $1.0 billion, compared with $1.2 billion in fiscal year 2020.

The decrease in fiscal year 2020 from fiscal year 2019 was primarily attributable to the previously-mentioned lower activity levels.

The decrease in fiscal year 2021 from fiscal year 2020 was primarily attributable to the previously mentioned lower activity levels, partially offset by fixed overhead costs and higher rig recommissioning expenses, as we reactivated rigs across fiscal year 2021.

Depreciation and Amortization Depreciation and amortization expense was $419.7 million in fiscal year 2021 and $481.9 million in fiscal year 2020.

The decrease in depreciation and amortization during fiscal year ended September 30, 2020 compared to fiscal year ended September 30, 2019 was primarily attributable to the lower carrying cost of our impaired assets.

Depreciation and amortization includes amortization of intangible assets of $7.2 million and $5.8 million in fiscal years 2020 and 2019 , respectively, and abandonments of equipment of $4.0 million and $11.4 million in fiscal years 2020 and 2019 , respectively.

The decrease in depreciation and amortization during fiscal year ended September 30, 2021 compared to fiscal year ended September 30, 2020 was primarily attributable to the lower carrying cost of our impaired assets as well as ongoing low levels of capital expenditures.

Depreciation and amortization includes amortization of intangible assets of $7.2 million in fiscal years 2021 and 2020, and abandonments of equipment of $2.0 million and $4.0 million in fiscal years 2021 and 2020, respectively.

Research and Development For the fiscal years ended September 30, 2021 and 2020, we incurred $21.7 million and $21.6 million, respectively, of research and development expenses.

The decrease in expense was primarily due to reduced spending related to the development of rotary steerable system tools given the December 2019 sale of TerraVici.

Selling, General and Administrative Expense Selling, general and administrative expenses decreased to $167.5 million in the fiscal year ended September 30, 2020 compared to $194.4 million in the fiscal year ended September 30, 2019 .

The $26.9 million decrease in fiscal year 2020 compared to fiscal year 2019 is primarily due to lower accrued variable compensation expense and a reduction of staffing levels that was implemented in third quarter of fiscal year 2020 .

Asset Impairment During the fiscal year ended September 30, 2020 , we impaired several assets, including inventory, property, plant and equipment, and goodwill, which resulted in a non-cash impairment charge of $563.2 million ($437.5 million, net of tax, or $5.21 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statement of Operations.

Comparatively, during the fiscal year ended September 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig ® 4 drilling rigs, we wrote down excess capital spares and drilling support equipment, which had an aggregate net book value of $235.3 million, and as a result, an asset impairment charge of $224.3 million ($195.0 million, net of tax, or $1.78 per diluted share) was recorded in our Consolidated Statements of Operations.

Restructuring Charges Beginning in the third quarter of fiscal year 2020 , we implemented cost controls and began evaluating further measures to respond to the combination of weakened commodity prices, uncertainties related to the COVID-19 pandemic, and the resulting market volatility.

We commenced a number of restructuring efforts as a result of this evaluation, which included, among other things, a reduction in our capital allocation plans, changes to our organizational structure, and a reduction of staffing levels.

For the fiscal year ended September 30, 2020 , we incurred $16.0 million in restructuring charges.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $172.2 million in the fiscal year ended September 30, 2021 compared to $167.5 million in the fiscal year ended September 30, 2020.

The $4.7 million increase in fiscal year 2021 compared to fiscal year 2020 is primarily due to higher accrued variable compensation expense and professional service fees.

Asset Impairment During the fiscal year ended September 30, 2021, we undertook a plan to sell 71 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares.

This resulted in an impairment charge of $56.4 million ($43.3 million, net of tax, or $0.40 per diluted share.

During the fiscal year ended September 30, 2021, we formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running services, all within our North America Solutions segment.

The combined book values of these assets were written down to $8.8 million, which represents their combined fair value less cost to sell, and were reclassified as held-for-sale in the Consolidated Balance Sheets as of September 30, 2021.

As a result, we recognized a non-cash impairment charge of $14.4 million ($10.9 million, net of tax, or $0.10 per diluted share).

Comparatively, during the fiscal year ended September 30, 2020, we recorded an asset impairment charge of $563.2 million ($437.5 million, net of tax, or $5.21 per diluted share) resulting from impairment of several assets including rotational inventory, property, plant and equipment, and goodwill.

Restructuring Charges During the fiscal years ended September 30, 2021 and 2020, we incurred $5.9 million and $16.0 million, respectively, in restructuring charges.

The charges incurred during the fiscal year ended September 30, 2021 included $1.5 million in one-time severance benefits paid to employees who were voluntarily or involuntarily terminated primarily as a result of the reorganization of our IT operations coupled with charges of $4.5 million primarily related to the relocation of our Houston assembly facility and the downsizing of our storage yards used for idle rigs.

The charges incurred during the fiscal year ended September 30, 2020 were primarily comprised of $19.5 million in one-time severance benefits to employees who were voluntarily or involuntarily terminated, offset by a benefit of $3.5 million related to forfeitures and modifications of stock-based compensation awards.

2021 FORM 10-K | 44

Interest and Dividend Income Interest and dividend income was $10.3 million and $7.3 million in fiscal years 2021 and 2020, respectively.

The decrease in interest and dividend income in fiscal year 2020 was primarily due to lower interest rates.

The increase in interest and dividend income in fiscal year 2021 was primarily due to $3.2 million of interest income received from the U.S.

Department of the Treasury related to a tax refund, partially offset by lower interest rates.

Interest Expense Interest expense totaled $24.0 million in fiscal year 2021 and $24.5 million in fiscal year 2020.

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Discontinued Operations Expenses incurred within the country of Venezuela are reported as discontinued operations.

Our wholly-owned subsidiaries, HPIDC and Helmerich & Payne de Venezuela, C.A., filed a lawsuit in the United States District Court for the District of Columbia on September 23, 2011 against the Bolivarian Republic of Venezuela, Petroleos de Venezuela, S.A.

Our wholly-owned subsidiaries, Helmerich & Payne International Drilling Co.

("HPIDC") and Helmerich & Payne de Venezuela, C.A., filed a lawsuit in the United States District Court for the District of Columbia on September 23, 2011 against the Bolivarian Republic of Venezuela, Petroleos de Venezuela, S.A.

and PDVSA Petroleo, S.A.

2 unchanged sentences

In March 2016, the Venezuelan government implemented the previously announced plans for a new foreign currency exchange system.

Activity within discontinued operations for both fiscal years 2020 and 2019 is primarily a result of the impact of exchange rate fluctuations due to the remeasurement of uncertain tax liabilities.

Activity within discontinued operations for both fiscal years 2021 and 2020 is primarily a result of the impact of exchange rate fluctuations due to the remeasurement of an uncertain tax liability.

North America Solutions

The following table presents certain information with respect to our North America Solutions reportable segment:

(in thousands, except operating statistics)

(in thousands, except operating statistics) 2021 2020 % Change

Operating revenues $ 1,026,364 $ 1,474,380 (30.4) %

Direct operating expenses 773,507 942,277 (17.9)

Segment gross margin 252,857 532,103 (52.5)

Depreciation and amortization 392,415 438,039 (10.4)

Research and development 21,811 20,699 5.4

2 unchanged sentences

Restructuring charges 3,868 7,005 (44.8)

Segment operating income (loss)

Segment operating loss $ (287,176) $ (393,902) (27.1)

Operating Statistics 1 :

Average rig revenue per day (3)

Average rig expense per day (3)

Average rig margin per day (3)

Number of rigs at the end of period

Rig utilization

Operations previously reported within the H&P Technologies reportable segment are now managed and presented within the North America Solutions reportable segment.

These operating metrics allow investors to analyze the various components of segment financial results in terms of volume, revenue per unit, cost per unit and margin per unit.

Average active rigs 107 134 (20.1)

Number of active rigs at the end of period 127 69 84.1

Number of available rigs at the end of period 236 262 (9.9)

Reimbursements of "out-of-pocket" expenses $ 113,897 $ 171,455 (33.6)

(1) These operating metrics allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results.

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $171.5 million and $285.6 million for fiscal years 2020 and 2019 , respectively.

Operating Income (Loss) The North America Solutions segment had an operating loss of $393.9 million for the fiscal year ended September 30, 2020 compared to operating income of $80.9 million for the fiscal year ended September 30, 2019 .

The decrease was primarily driven by increased asset impairment charges and reduced rig activity in fiscal year 2020 .

Beginning in the first quarter of fiscal year 2021, these operating metrics replaced previously used per day metrics.

As a result, prior year comparative information is also provided above.

Segment Gross Margin The North America Solutions segment gross margin was $252.9 million for the fiscal year ended September 30, 2021 compared to $532.1 million for the fiscal year ended September 30, 2020.

The decrease was primarily driven by lower activity levels, lower early termination revenue, lower average rig pricing, and higher rig recommissioning expenses.

Revenues were $1.0 billion and $1.5 billion in fiscal year 2021 and 2020, respectively.

Included in revenues for fiscal year 2020 is early termination revenue of $68.8 million compared to $6.4 million during fiscal year 2019 .

The decrease in operating revenue is primarily due to the factors mentioned above.

Included in revenues for fiscal year 2021 is early termination revenue of $5.8 million

2021 FORM 10-K | 45

compared to $68.8 million during fiscal year 2020.

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 (except in limited circumstances including sustained unacceptable performance by us).

Revenue Excluding early termination per day revenue of $1,404 and $78 for fiscal years 2020 and 2019 , respectively, average rig revenue per day decreased by $904 to $25,185 primarily due to a portion of our contracted rigs operating in an idle-but-contracted state during the third and fourth quarters of fiscal year 2020 , with lower average daily revenue and average daily expense and lower pricing for rigs working in the spot market.

Compared to fiscal year 2019 , our revenue days declined by 40.1 percent .

This decline was initially driven by the collapse in oil prices that occurred in March of 2020, which led our customers to quickly reduce rig activity beginning in the second half of March 2020 and continuing throughout fiscal year 2020 .

Our level of contracted rigs hit a low of 62 rigs in August of 2020 before modestly recovery to 69 rigs at fiscal year end.

Direct Operating Expenses Average rig expense per day increased $487 to $15,730 during the fiscal year ended September 30, 2020 compared to the fiscal year ended September 30, 2019 .

The increase is due to higher self-insurance expenses and idle rig expenses, partially offset by the previously mentioned effect of idle-but-contracted rigs.

Depreciation Depreciation expense decreased to $438.0 million during the fiscal year ended September 30, 2020 compared to the fiscal year ended September 30, 2019 .

The decrease in depreciation during fiscal year ended September 30, 2020 compared to fiscal year ended September 30, 2019 was primarily attributable to the lower carrying cost of our impaired assets.

Depreciation includes charges for abandoned equipment of $2.5 million and $10.6 million for the fiscal years ended September 30, 2020 and 2019 , respectively.

In the fiscal year ended September 30, 2020 , depreciation expense included $1.5 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2021 as compared to $4.7 million of accelerated depreciation for fiscal year ended September 30, 2019 .

Asset Impairment Charge During the fiscal year ended September 30, 2020 , we impaired our Domestic non-super-spec asset group, in addition to in-progress drilling equipment and rotational inventory.

This resulted in an aggregate non-cash impairment charge of $368.2 million ($284.1 million, net of tax, or $3.41 per diluted share) for the fiscal year ended September 30, 2020 .

During the fiscal year ended September 30, 2020 , we also recorded a goodwill impairment loss of $38.3 million ($29.6 million, net of tax, or $0.35 per diluted share).

Comparatively, during the fiscal year ended September 30, 2019 , we recorded an asset impairment charge of $216.9 million ($188.6 million, net of tax, or $1.72 per diluted share), mainly driven by the downsizing of our fleet of FlexRig ® 4 drilling rigs.

These non-cash impairment charges are included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal years ended September 30, 2020 and 2019 .

Restructuring Charges For the fiscal year ended September 30, 2020 , we incurred $7.0 million in restructuring charges primarily comprised of one-time severance benefits to employees as a result of headcount reductions that occurred during the third fiscal quarter of 2020.

Utilization Rig utilization decreased to 47 percent for the fiscal year ended September 30, 2020 compared to 67 percent during the fiscal year ended September 30, 2019 .

In addition to the previously mentioned reduction in revenue days, we decommissioned two rigs and 35 rigs from our legacy Domestic Conventional asset group and FlexRig ® 3 asset group, respectively effective as of April 30, 2020.

At September 30, 2020 , 69 out of 262 existing rigs in the North America Solutions segment were contracted.

Of the 69 contracted rigs, 54 were under fixed-term contracts and 15 were working in the spot market.

Direct operating expenses decreased to $773.5 million during the fiscal year ended September 30, 2021 as compared to $942.3 million during the fiscal year ended September 30, 2020 primarily due to the factors mentioned above.

Depreciation Depreciation expense decreased to $392.4 million during the fiscal year ended September 30, 2021 as compared to $438.0 million during the fiscal year ended September 30, 2020.

The decrease is primarily attributable to the absence of depreciation on the 71 rigs that were reclassified as held-for-sale during the second and third quarters of fiscal year 2021 and rig impairments during fiscal year 2020, in addition to ongoing low levels of capital expenditures.

Asset Impairment Charge During the fiscal year ended September 30, 2021, we undertook a plan to sell 71 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares.

This resulted in an impairment charge of $56.4 million ($43.3 million, net of tax, or $0.40 per diluted share.

The combined net book values of these assets were written down to $8.8 million, which represents their combined fair value less cost to sell, and were reclassified as held-for-sale in the Consolidated Balance Sheets as of September 30, 2021.

As a result, we recognized a non-cash impairment charge of $14.4 million ($10.9 million, net of tax, or $0.10 per diluted share).

Comparatively, during the fiscal year ended September 30, 2020, we recorded an impairment charge of $406.5 million ($313.7 million, net of tax, or $3.76 per diluted share) resulting from our impairment of our Domestic Conventional, FlexRig3, and FlexRig4 asset groups, in addition to our in-progress drilling equipment, rotational inventory and goodwill.

Restructuring Charges For the fiscal years ended September 30, 2021 and 2020, we incurred $3.9 million and $7.0 million, respectively, in restructuring charges.

The charges incurred during the fiscal year ended September 30, 2021 primarily included charges of $3.8 million related to the relocation of the Houston assembly facility and the downsizing of storage yards used for idle rigs.

The charges incurred during the fiscal year ended September 30, 2020 were primarily comprised of $10.0 million in one-time severance benefits to employees who were voluntarily or involuntarily terminated, offset by a benefit of $3.0 million related to forfeitures and modifications of stock-based compensation awards.

Offshore Gulf of Mexico

The following table presents certain information with respect to our Offshore Gulf of Mexico reportable segment:

(in thousands, except operating statistics)

(in thousands, except operating statistics) 2021 2020 % Change

Operating revenues $ 126,399 $ 143,149 (11.7) %

Direct operating expenses 97,249 119,371 (18.5)

Segment gross margin 29,150 23,778 22.6

Depreciation 10,557 11,681 (9.6)

Selling, general and administrative expense 2,624 3,365 (22.0)

2 unchanged sentences

Operating Statistics 1 :

Average rig revenue per day (2)

Average rig expense per day (2)

Average rig margin per day (2)

Number of rigs at the end of period

Rig utilization

These operating metrics allow investors to analyze the various components of segment financial results in terms of volume, revenue per unit, cost per unit and margin per unit.

Average active rigs 4 5 (20.0)

Number of active rigs at the end of period 4 5 (20.0)

Number of available rigs at the end of period 7 8 (12.5)

Reimbursements of "out-of-pocket" expenses $ 27,388 $ 30,436 (10.0)

(1) These operating metrics allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results.

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $30.4 million and $26.4 million for fiscal years 2020 and 2019 , respectively.

The operating statistics only include rigs that we own and exclude offshore platform management and contract labor service revenues of $26.0 million and $40.1 million , offshore platform management and contract labor service expenses of $17.0 million and $25.9 million , and currency revaluation expense of $30.1 thousand and $1.0 thousand for fiscal years 2020 and 2019 , respectively.

Operating Income During the fiscal year ended September 30, 2020 , the Offshore Gulf of Mexico segment had operating income of $7.5 million compared to operating income of $19.6 million for the fiscal year ended September 30, 2019 .

This decrease is primarily attributable to lower contribution from two rigs that demobilized back to shore during the first quarter of fiscal year 2020 .

One of the two rigs began mobilizing to a new platform during March 2020 and commenced drilling operations during the third quarter of fiscal year 2020 .

Additionally, we incurred $4.2 million of bad debt expense during fiscal year 2020 .

Revenue Average rig revenue per day increased 20.5 percent to $45,145 in fiscal year 2020 compared to fiscal year 2019 .

This was primarily due to one of our customers shifting its activity from a customer-owned rig managed by H&P to a rig owned by H&P.

Direct Operating Expenses Average rig expense per day increased to $37,410 during fiscal year 2020 from $28,663 during fiscal year 2019, primarily due to factors mentioned above.

Restructuring Charges For the fiscal year ended September 30, 2020 , we incurred $1.3 million in restructuring charges primarily comprised of one-time severance benefits to employees as a result of headcount reductions that occurred during the third fiscal quarter of 2020.

Utilization As of September 30, 2020 , five of our eight available platform rigs were under contract, compared to six of our eight available platform rigs as of September 30, 2019 .

Beginning in the first quarter of fiscal year 2021, these operating metrics replaced previously used per day metrics.

As a result, prior year comparative information is also provided above.

Segment Gross Margin During the fiscal year ended September 30, 2021, the Offshore Gulf of Mexico segment gross margin was $29.2 million compared to a gross margin of $23.8 million for the fiscal year ended September 30, 2020.

This increase was driven by the absence of $4.2 million of bad debt expense that was incurred during the fiscal year ended September 30, 2020.

We had an 11.7 percent decrease in operating revenue during the fiscal year ended September 30, 2021 compared to the fiscal year ended September 30, 2020.

The decrease in operating revenue is primarily due to lower activity levels partially offset by the mix of rigs working as compared to being on standby or mobilization rates.

Direct operating expenses decreased to $97.2 million during the fiscal year ended September 30, 2021 as compared to $119.4 million during the fiscal year ended September 30, 2020.

The decrease was primarily driven by the factors described above.

2021 FORM 10-K | 46

Restructuring Charges We did not incur any restructuring charges during the fiscal year ended September 30, 2021.

During the fiscal year ended September 30, 2020, we incurred $1.3 million in restructuring charges.

Charges incurred during the fiscal year ended September 30, 2020 primarily consisted of employee termination benefits that resulted from our reduction in staffing levels.

International Solutions

The following table presents certain information with respect to our International Solutions reportable segment:

(in thousands, except operating statistics)

(in thousands, except operating statistics) 2021 2020 % Change

Operating revenues $ 57,917 $ 144,185 (59.8) %

Direct operating expenses 68,672 124,791 (45.0)

Segment gross margin (10,755) 19,394 (155.5)

Depreciation 2,013 17,531 (88.5)

Selling, general and administrative expense 8,028 4,565 75.9

1 unchanged sentence

Restructuring charges 207 2,980 (93.1)

Segment operating income (loss)

Segment operating loss $ (21,003) $ (162,368) (87.1)

Operating Statistics 1 :

Average rig revenue per day (2)

Average rig expense per day (2)

Average rig margin per day (2)

Number of rigs at the end of period

Rig utilization

These operating metrics allow investors to analyze the various components of segment financial results in terms of volume, revenue per unit, cost per unit and margin per unit.

Average active rigs 5 13 (61.5)

Number of active rigs at the end of period 6 5 20.0

Number of available rigs at the end of period 30 32 (6.3)

Reimbursements of "out-of-pocket" expenses $ 6,693 $ 10,099 (33.7)

(1) These operating metrics allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results.

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

Operating statistics for per day revenue, expense and margin do not include reimbursements of “out‑of‑pocket” expenses of $10.1 million and $10.8 million for fiscal years 2020 and 2019 , respectively.

Also excluded are the effects of currency revaluation expense of $8.5 million and $8.1 million for fiscal years 2020 and 2019 , respectively.

Operating Income (Loss) The International Solutions segment had an operating loss of $162.4 million for fiscal year 2020 compared to operating income of $5.4 million for fiscal year 2019 .

The decrease was primarily driven by asset impairment charges during fiscal year 2020 .

Revenue We experienced a 28.3 percent decrease in revenue days when comparing fiscal year 2020 to fiscal year 2019 .

The average number of active rigs was 12.6 during fiscal year 2020 compared to 17.6 during fiscal year 2019 .

Average rig revenue per day decreased by 6.9 percent primarily due to a shifting rig mix.

Direct Operating Expenses Average rig expense per day increased to $23,066 during fiscal year 2020 as compared to $21,626 during fiscal year 2019 .

The increase was driven by lower activity coupled with fixed minimum levels of country overhead.

Depreciation Depreciation expense decreased to $17.5 million during the fiscal year ended September 30, 2020 compared to the fiscal year ended September 30, 2019 .

The decrease in depreciation during fiscal year ended September 30, 2020 compared to fiscal year ended September 30, 2019 was primarily attributable to the lower carrying cost of our impaired assets.

Asset Impairment Charge During the fiscal year ended September 30, 2020 , we impaired our International Conventional, FlexRig ® 3, and FlexRig ® 4 asset groups, in addition to rotational inventory.

This resulted in an aggregate non-cash impairment charge of $156.7 million ($123.8 million, net of tax, or $1.45 per diluted share), which is included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2020 .

Comparatively, during the fiscal year ended September 30, 2019 , mainly driven by the downsizing of our fleet of FlexRig ® 4 drilling rigs, we wrote down capital spares and drilling support equipment and, as a result, we recorded an asset impairment charge of $7.4 million , in our Consolidated Statements of Operations for the fiscal year ended September 30, 2019 .

Restructuring Charges For the fiscal year ended September 30, 2020 , we incurred $3.0 million in restructuring charges primarily comprised of one-time severance benefits to employees as a result of headcount reductions that occurred during the third fiscal quarter of 2020.

Utilization Our utilization decreased during fiscal year 2020 compared to fiscal year 2019 .

At September 30, 2020 , five out of 32 existing rigs in the International Solutions segment were contracted.

Of the five contracted rigs, two were under fixed-term contracts and three were working in the spot market.

Beginning in the first quarter of fiscal year 2021, these operating metrics replaced previously used per day metrics.

As a result, prior year comparative information is also provided above.

Segment Gross Margin The International Solutions segment gross margin was $(10.8) million for the fiscal year ended September 30, 2021 compared to a gross margin of $19.4 million for the fiscal year ended September 30, 2020.

The change was primarily driven by lower activity levels coupled with fixed minimum levels of country overhead during the fiscal year ended September 30, 2021.

We had a 59.8 percent decrease in operating revenue during the fiscal year ended September 30, 2021 compared to the fiscal year ended September 30, 2020.

The decrease in operating revenue is primarily due to lower activity levels.

Direct operating expenses decreased to $68.7 million during the fiscal year ended September 30, 2021 as compared to $124.8 million during the fiscal year ended September 30, 2020 and was driven by the factors described above.

Asset Impairment Charge During the fiscal year ended September 30, 2021, we recorded no impairment charges.

Comparatively, during the fiscal year ended September 30, 2020, we recorded an impairment charge of $156.7 million ($123.8 million, net of tax, or $1.45 per diluted share) resulting from our impairment of our International Conventional, FlexRig ® 3, and FlexRig ® 4 asset groups, in addition to rotational inventory.

Restructuring Charges For the fiscal years ended September 30, 2021 and 2020, we incurred $0.2 million and $3.0 million in restructuring charges, respectively.

During the fiscal year ended September 30, 2021, we commenced a voluntary separation program at our local office in Argentina for which we incurred one-time severance charges for employees who were voluntarily terminated.

Charges incurred during the fiscal year ended September 30, 2020 primarily consisted of employee termination benefits that resulted from our reduction in staffing levels.

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Other Operations

Results of our other operations, excluding corporate selling, general and administrative costs, corporate restructuring, and corporate depreciation, are as follows:

(in thousands)

(in thousands) 2021 2020 % Change

Operating revenues $ 43,304 $ 49,114 (11.8) %

Direct operating expenses 50,064 41,027 22.0

Depreciation and amortization

Gross margin (6,760) 8,087 (183.6)

Depreciation 1,426 1,241 14.9

Research and development 127 946 (86.6)

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Restructuring charges 186 260 (28.5)

Operating income

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

Direct operating costs include accruals for estimated losses of approximately $16.4 million allocated to the Captive during the fiscal year ended September 30, 2020 .

Intercompany premium revenues recorded by the Captive during the fiscal year ended September 30, 2020 amounted to $36.9 million , which were eliminated upon consolidation.

Operating income (loss) $ (9,704) $ 4,403 (320.4)

Gross Margin On October 1, 2019, we elected to capitalize a new Captive insurance company to insure the deductibles for our domestic workers’ compensation, general liability and automobile liability claims programs, and to continue the practice of insuring deductibles from the Company's international casualty and rig property programs.

Direct operating expenses consisted primarily of adjustments to accruals for estimated losses of $12.6 million and $16.4 million allocated to the Captive and rig and casualty insurance premiums of $21.9 million and $6.7 million during the fiscal years ended September 30, 2021 and 2020, respectively.

The decrease in estimated losses is primarily due to actuarial valuation adjustments by our third-party actuary as well as lower activity levels.

Intercompany premium revenues recorded by the Captive during the fiscal years ended September 30, 2021 and 2020 amounted to $35.4 million and $36.9 million, respectively, which were eliminated upon consolidation.

Results of Operations for the Fiscal Years Ended September 30, 2020 and 2019

A discussion of our results of operations for the fiscal year ended September 30, 2019 compared to the fiscal year ended September 30, 2018 is included in Part II, Item 7— "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended September 30, 2019, filed with the SEC on November 15, 2019 , and is incorporated by reference into this Form 10-K.

A discussion of our results of operations for the fiscal year ended September 30, 2020 compared to the fiscal year ended September 30, 2019 is included in Part II, Item 7— "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, filed with the Securities and Exchange Commission ("SEC") on November 20, 2020 , and is incorporated by reference into this Form 10-K.

Liquidity and Capital Resources

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Historically, we have financed operations primarily through internally generated cash flows.

During periods when internally generated cash flows are not sufficient to meet liquidity needs, we may utilize cash on hand, borrow from available credit sources, access capital markets or sell our marketable securities.

Likewise, if we are generating excess cash flows, we may invest in highly rated short‑term money market and debt securities.

Likewise, if we are generating excess cash flows or have cash balances on hand beyond our near-term needs, we may invest in highly rated short‑term money market and debt securities.

These investments can include U.S.

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Agency issued debt securities, corporate bonds and commercial paper, certificates of deposit and money market funds.

Our marketable securities are recorded at fair value.

We may seek to access the debt and equity capital markets from time to time to raise additional capital, increase liquidity as necessary, fund our additional purchases, exchange or redeem senior notes, or repay any amounts under the 2018 Credit Facility.

Our ability to access the debt and equity capital markets depends on a number of factors, including our credit rating, market and industry conditions and market perceptions of our industry, general economic conditions, our revenue backlog and our capital expenditure commitments.

The effects of the COVID-19 outbreak and the oil price collapse in 2020 have had significant adverse consequences for general economic, financial and business conditions, as well as for our business and financial position and the business and financial position of our customers, suppliers and vendors and may, among other things, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all and affect our future need or ability to borrow under the 2018 Credit Facility.

The effects of the COVID-19 pandemic and the oil price collapse in 2020 have had significant adverse consequences for general economic, financial and business conditions, as well as for our business and financial position and the business and financial position of our customers, suppliers and vendors and may, among other things, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all and affect our future need or ability to borrow under the 2018 Credit Facility.

In addition to our potential sources of funding, the effects of such global events may impact our liquidity or need to alter our allocation or sources of capital, implement additional cost reduction measures and further change our financial strategy.

Although the COVID-19 outbreak and the oil price collapse could have a broad range of effects on our sources and uses of liquidity, the ultimate effect thereon, if any, will depend on future developments, which cannot be predicted at this time.

Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the dayrates we receive under those contracts, the efficiency with which we operate our drilling units, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures, all of which was impacted by the COVID-19 outbreak and the oil price collapse in 2020.

As our revenues increase, net working capital is typically a use of capital, while conversely, as our revenues decrease, net working capital is typically a source of capital.

Although the COVID-19 pandemic and the oil price collapse could have a broad range of effects on our sources and uses of liquidity, the ultimate effect thereon, if any, will depend on future developments, which cannot be predicted at this time.

2021 FORM 10-K | 48

Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the revenue we receive under those contracts, the efficiency with which we operate our drilling units, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures, all of which was impacted by the COVID-19 pandemic and the oil price collapse in 2020.

As our revenues increase, operating net working capital is typically a use of capital, while conversely, as our revenues decrease, operating net working capital is typically a source of capital.

To date, general inflationary trends have not had a material effect on our operating margins.

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(in thousands) 2021 2020 2019

Net cash provided (used) by:

Net cash provided by (used in):

Operating activities $ 136,440 $ 538,881 $ 855,751

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Financing activities 425,523 (297,220) (376,329)

Net increase (decrease) in cash and cash equivalents and restricted cash

Net increase in cash and cash equivalents and restricted cash $ 399,969 $ 153,776 $ 56,786

Operating Activities

For the purpose of understanding the impact on our Cash Flow from Operations, net working capital is calculated as current assets, excluding cash and short-term investments, less current liabilities, excluding dividends payable, short–term debt and the current portion of long–term debt.

Net working capital was $194.2 million as of September 30, 2020 compared to $381.7 million as of September 30, 2019 .

Included in accounts receivable as of September 30, 2020 were $5.2 million of early termination fees and $42.4 million of income tax receivables.

Cash flows provided by operating activities was $538.9 million in fiscal year 2020 compared to $855.8 million fiscal year 2019 .

The decrease in cash provided by operating activities is primarily driven by lower operating activity and a favorable variance in the use of working capital.

Cash flows provided by operating activities in fiscal year 2018 was $557.9 million .

The $297.9 million increase compared to fiscal year 2019 was primarily due to a decrease in working capital.

For the purpose of understanding the impact on our cash flows from operating activities, operating net working capital is calculated as current assets, excluding cash and cash equivalents, short-term investments, and assets held-for-sale, less current liabilities, excluding dividends payable and the current portion of long-term debt.

Operating net working capital was $43.4 million, $194.2 million and $381.7 million as of September 30, 2021, 2020 and 2019, respectively.

The sequential decrease in net working capital was primarily driven by the receipt of the $86.5 million in cash consideration from ADNOC Drilling in advance of delivering the eight purchased rigs.

The total cash proceeds were recorded within Accrued Liabilities within our Consolidated Balance Sheets as of September 30, 2021.

This was partially offset by activity-driven increases in other components of our operating net working capital.

Included in accounts receivable as of September 30, 2021 was $24.5 million of income tax receivables.

Cash flows provided by operating activities were $136.4 million, $538.9 million and $855.8 million in fiscal years 2021, 2020 and 2019, respectively.

The decrease in cash provided by operating activities is primarily driven by lower operating activity and lower pricing.

Investing Activities

Capital Expenditures Our investing activities are primarily related to capital expenditures for our fleet.

Our capital expenditures were $140.8 million , $458.4 million and $466.6 million in fiscal years 2020 , 2019 and 2018, respectively.

The year-over-year decrease in capital expenditures is driven by a decrease in super-spec upgrades and lower maintenance capital expenditure levels as a result of lower activity.

Our fiscal year 2021 capital spending is currently estimated to be between $85 and $105 million .

This estimate includes normal capital maintenance requirements, information technology spending and a limited number of upgrades primarily related to augmenting the capabilities of our existing rig fleet.

Acquisition of Business We paid $16.2 million and $47.9 million , net of cash acquired, during the 2019 and 2018 fiscal year, respectively, for the acquisition of drilling technology companies.

Capital Expenditures Our capital expenditures were $82.1 million, $140.8 million and $458.4 million in fiscal years 2021, 2020 and 2019, respectively.

The year-over-year decrease in capital expenditures is driven by lower maintenance capital expenditures as a result of lower activity.

Our fiscal year 2022 capital spending is currently estimated to be between $250 million and $270 million.

This estimate includes normal capital maintenance requirements, information technology spending and skidding to walking conversions for a limited number of rigs.

Purchase of Investments Our net (purchases) sales of investments were $(209.9) million, $(40.0) million and $1.1 million in fiscal years 2021, 2020 and 2019, respectively.

The increase in purchases is attributable to our strategy to optimize our returns on investment, including our purchase of our cornerstone investment of $100.0 million in ADNOC Drilling.

Acquisition of Business We paid $16.2 million, net of cash acquired, during fiscal year 2019, for the acquisition of drilling technology companies.

Sale of Assets Our proceeds from asset sales totaled $43.5 million, $78.4 million and $50.8 million in fiscal year 2021, 2020 and 2019, respectively.

The current year increase is primarily driven by the sale of a portion of our real estate investment portfolio.

Sale of Subsidiary In December 2019, we closed on the sale of a wholly-owned subsidiary of HPIDC, TerraVici.

Sale of Subsidiary In December 2019, we closed on the sale of a wholly-owned subsidiary of HPIDC, TerraVici Drilling Solutions, Inc.

("TerraVici").

Marketable Securities In September 2019, we sold our remaining 1.6 million shares in Valaris, previously known as Ensco Rowan plc, for total proceeds of approximately $12.0 million.

As of September 30, 2020 , our marketable securities consist primarily of common shares in Schlumberger, Ltd.

Equity Securities As of September 30, 2021, our equity securities primarily consist of common shares in Schlumberger, Ltd.

that, at the close of fiscal year 2021, had a fair value of $13.9 million.

The value of our securities are subject to fluctuation in the market and may vary considerably over time.

Our marketable securities are recorded at fair value on our balance sheet.

Our equity investment in Schlumberger Ltd.

held as of September 30, 2020 is presented below:

(in thousands, except for share amounts)

Number of Shares

Schlumberger, Ltd.

The value of our securities is subject to fluctuation in the market and may vary considerably over time.

This investment is recorded at fair value on our Consolidated Balance Sheets.

Refer to Note 13—Fair Value Measurement of Financial Instruments to our Consolidated Financial Statements.

In September 2019, we sold our remaining 1.6 million shares in Valaris, previously known as Ensco Rowan plc, for total proceeds of approximately $12.0 million.

2021 FORM 10-K | 49

Advance payment for sale of property, plant and equipment During September 2021, the Company agreed to sell eight FlexRig land rigs with an aggregate net book value of $55.6 million to ADNOC Drilling for $86.5 million.

Two of the eight rigs were already located in the U.A.E where ADNOC Drilling is domiciled with the remaining six rigs to be shipped from the United States.

We received the $86.5 million in cash consideration in advance of delivering the rigs.

No rigs have been delivered to ADNOC Drilling as of September 30, 2021 and, therefore, the total cash proceeds of $86.5 million is recorded in Accrued Liabilities within our Consolidated Balance Sheets as of September 30, 2021.

Financing Activities

Repurchase of Shares During fiscal year 2020, we repurchased 1.5 million shares for $28.5 million compared to one million shares for $42.8 million during fiscal year 2019.

Repurchase of Shares We have an evergreen authorization from the Board of Directors (the "Board") for the repurchase of up to four million common shares in any calendar year.

The repurchases may be made using our cash and cash equivalents or other available sources.

We repurchased 1.5 million shares for $28.5 million during fiscal year 2020 and one million shares for $42.8 million during fiscal year 2019.

There were no purchases of common shares in fiscal year 2021.

Dividends We paid dividends of $1.00, $2.38, and $2.84 per share during fiscal years 2021, 2020 and 2019, respectively.

Total dividends paid were $109.1 million, $260.3 million and $313.4 million in fiscal years 2021, 2020 and 2019, respectively.

On June 3, 2020, we reduced our quarterly cash dividend to $0.25 per share and on September 9, 2020, declared a cash dividend in that amount for shareholders of record on November 13, 2020, payable on December 1, 2020.

A cash dividend of $0.25 per share was declared on September 1, 2021 for shareholders of record on November 23, 2021, payable on December 1, 2021.

The declaration and amount of future dividends is at the discretion of the Board and subject to our financial condition, results of operations, cash flows, and other factors the Board deems relevant.

Debt Issuance Proceeds and Costs On September 29, 2021, we issued $548.7 million aggregate principal amount of the 2031 Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act (“Rule 144A”) and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S under the Securities Act (“Regulation S”).

Debt issuance fees paid as of September 30, 2021 were $3.9 million.

On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

The Company financed the redemption of the 2025 Notes with the net proceeds from the offering of the 2031 Notes, together with cash on hand.

Additional details are fully discussed in Note 7—Debt.

Credit Facilities

On November 13, 2018, we entered into a credit agreement by and among the Company, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, which was amended on November 13, 2019, providing for an unsecured revolving credit facility (the “2018 Credit Facility”) that is set to mature on November 13, 2024.

On November 13, 2018, we entered into a credit agreement by and among the Company, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto, which was amended on November 13, 2019, providing for an unsecured revolving credit facility (as amended, the “2018 Credit Facility”), that was set to mature on November 13, 2024.

No other terms of the 2018 Credit Facility were amended in connection with this extension.

The remaining $70.0 million of commitments under the 2018 Credit Facility will expire on November 13, 2024, unless extended by the applicable lender before such date.

The 2018 Credit Facility has $750.0 million in aggregate availability with a maximum of $75.0 million available for use as letters of credit.

The 2018 Credit Facility also permits aggregate commitments under the facility to be increased by $300.0 million, subject to the satisfaction of certain conditions and the procurement of additional commitments from new or existing lenders.

The borrowings under the 2018 Credit Facility accrue interest at a spread over either the London Interbank Offered Rate ("LIBOR") or the Base Rate.

The borrowings under the 2018 Credit Facility accrue interest at a spread over either the London Interbank Offered Rate ("LIBOR") or an adjusted base rate (as defined in the credit agreement).

We also pay a commitment fee on the unused balance of the facility.

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Based on the unsecured debt rating of the Company on September 30, 2021, the spread over LIBOR would have been 1.125 percent had borrowings been outstanding under the 2018 Credit Facility and commitment fees are 0.125 percent.

There is a financial covenant in the 2018 Credit Facility that requires us to maintain a total debt to total capitalization ratio of less than or equal to 50 percent .

There is a financial covenant in the 2018 Credit Facility that requires us to maintain a total funded debt to total capitalization ratio of less than or equal to 50 percent.

The 2018 Credit Facility contains additional terms, conditions, restrictions and covenants that we believe are usual and customary in unsecured debt arrangements for companies of similar size and credit quality, including a limitation that priority debt (as defined in the credit agreement) may not exceed 17.5 percent of the net worth of the Company.

At September 30, 2020 , we were in compliance with all debt covenants, and we anticipate that we will continue to be in compliance during the next quarter of fiscal year 2021 .

As of September 30, 2021, there were no borrowings or letters of credit outstanding, leaving $750.0 million available to borrow under the 2018 Credit Facility.

As of September 30, 2020 , we had two separate outstanding letters of credit with banks, in the amounts of $24.8 million and $2.1 million , respectively.

As of September 30, 2021, we had 3 separate outstanding letters of credit with banks, in the amounts of $24.8 million, $3.0 million and $2.1 million, respectively.

As of September 30, 2021, we also had a $20.0 million unsecured standalone line of credit facility, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds.

Of the $20.0 million, $7.6 million of financial guarantees were outstanding as of September 30, 2021.

Subsequent to September 30, 2020, $2.6 million in financial guarantees have expired.

2021 FORM 10-K | 50

The applicable agreements for all unsecured debt contain additional terms, conditions and restrictions that we believe are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality.

Exchange Offer, Consent Solicitation and Redemption

On December 20, 2018, we settled an offer to exchange (the “Exchange Offer”) any and all outstanding 4.65 percent unsecured senior notes due 2025 of HPIDC (the "HPIDC 2025 Notes") for (i) up to $500.0 million aggregate principal amount of new 4.65 percent unsecured senior notes due 2025 of the Company (the “Company 2025 Notes”), with registration rights, and (ii) cash, pursuant to which we issued approximately $487.1 million in aggregate principal amount of Company 2025 Notes.

Interest on the Company 2025 Notes is payable semi-annually on March 15 and September 15 of each year, commencing March 15, 2019.

The debt issuance costs are being amortized straight-line over the stated life of the obligation, which approximates the effective interest method.

Following the consummation of the Exchange Offer, HPIDC had outstanding approximately $12.9 million in aggregate principal amount of HPIDC 2025 Notes.

On December 20, 2018, HPIDC, the Company and Wells Fargo Bank, National Association, as trustee, entered into a supplemental indenture to the indenture governing the HPIDC 2025 Notes to adopt certain proposed amendments pursuant to a consent solicitation conducted concurrently with the Exchange Offer.

On September 27, 2019, we redeemed the remaining approximately $12.9 million in aggregate principal amount of HPIDC 2025 Notes for approximately $14.6 million , including accrued interest and a prepayment premium.

Simultaneously with the redemption of the HPIDC 2025 Notes, HPIDC was released as a guarantor under the Company 2025 Notes and the 2018 Credit Facility.

As a result of such release, H&P is the only obligor under the Company 2025 Notes and the 2018 Credit Facility.

Repurchase of Common Shares

We have an evergreen authorization from the Board for the purchase of up to four million common shares in any calendar year.

During the fiscal year ended September 30, 2020 , we purchased 1.5 million common shares at an aggregate cost of $28.5 million , which are held as treasury shares.

We purchased 1.0 million common shares at an aggregate cost of $42.8 million, which are held as treasury shares, during the fiscal year ended September 30, 2019 .

We had no purchases of common shares during the fiscal year ended September 30, 2018 .

At September 30, 2021, we were in compliance with all debt covenants, and we anticipate that we will continue to be in compliance during the next quarter of fiscal year 2022.

2.90% Senior Notes due 2031 On September 29, 2021, we issued $550.0 million aggregate principal amount of the 2.90 percent 2031 Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act (“Rule 144A”) and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S under the Securities Act (“Regulation S”).

Interest on the 2031 Notes is payable semi-annually on March 29 and September 29 of each year, commencing on March 29, 2022.

The 2031 Notes will mature on September 29, 2031 and bear interest at a rate of 2.90 percent annum.

Prior to June 29, 2031, the Company may redeem the 2031 Notes at its option, in whole or in part, at any time or from time to time at a redemption price equal to the greater of:

(i) 100% of the principal amount of the 2031 Notes to be redeemed or (ii) the sum of the present values, as calculated by the Independent Investment Banker (as defined in the 2031 Notes Indenture (as defined herein)), of the remaining scheduled payments of principal and interest thereon (exclusive of the interest accrued to the redemption date) computed by discounting such payments to the redemption date on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at a rate equal to the sum of the Treasury Rate (as defined in the 2031 Notes Indenture) for such 2031 Notes plus 25 basis points, plus, in either case, accrued and unpaid interest, if any, to, but excluding, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

On or after June 29, 2031, the Company may redeem the 2031 Notes at its option, in whole or in part, at any time or from time to time at a redemption price equal to 100% of the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).

The 2031 Notes were issued pursuant to an Indenture, dated as of December 20, 2018 (the “Base Indenture”), as supplemented by the Second Supplemental Indenture thereto, dated as of September 29, 2021 (together with the Base Indenture, the “2031 Notes Indenture”), in each case by and between the Company and Wells Fargo Bank, National Association, as trustee.

The 2031 Notes Indenture contains certain covenants that, among other things and subject to certain exceptions, limit the ability of the Company and its subsidiaries to incur certain liens;

engage in sale and lease-back transactions;

and consolidate, merge or transfer all or substantially all of the assets of the Company.

The 2031 Notes Indenture also contains customary events of default with respect to the 2031 Notes.

4.65% Senior Notes due 2025 On December 20, 2018, we issued approximately $487.1 million in aggregate principal amount of the 2025 Notes.

Interest on the 2025 Notes is payable semi-annually on March 15 and September 15 of each year, commencing on March 15, 2019.

The debt issuance costs are being amortized straight-line over the stated life of the obligation, which approximated the effective interest method.

On September 27, 2021, the Company delivered a conditional notice of optional full redemption for all of the outstanding 2025 Notes at a redemption price calculated in accordance with the indenture governing the 2025 Notes, plus accrued and unpaid interest on the 2025 Notes to be redeemed.

The Company financed the redemption of the 2025 Notes with the net proceeds from the offering of the 2031 Notes, together with cash on hand.

The Company’s obligation to redeem the 2025 Notes was conditioned upon the prior consummation of the issuance of the 2031 Notes, which was satisfied on September 29, 2021.

On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

2021 FORM 10-K | 51

Future Cash Requirements

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However, there can be no assurance that we will continue to generate cash flows at current levels.

On June 3, 2020, we reduced our quarterly cash dividend to $0.25 per share.

If needed, we may decide to obtain additional funding from our $750.0 million 2018 Credit Facility.

Our indebtedness under our unsecured senior notes totaled $487.1 million at September 30, 2020 and matures on March 19, 2025.

We currently do not anticipate the need to draw on the 2018 Credit Facility.

Our indebtedness under our long-term unsecured senior notes totaled $550.0 million at September 30, 2021 and matures on September 29, 2031.

As of September 30, 2021, we had a $563.4 million deferred tax liability on our Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

Our increased levels of capital expenditures over the last several years have been subject to accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, enabling us to defer a portion of cash tax payments to future years.

Our capital expenditures over the last several years have been subject to accelerated depreciation methods (including bonus depreciation) available under the Internal Revenue Code of 1986, as amended, enabling us to defer a portion of cash tax payments to future years.

Future levels of capital expenditures and results of operations will determine the timing and amount of future cash tax payments.

We expect to be able to meet any such obligations utilizing cash and investments on hand, as well as cash generated from ongoing operations.

At September 30, 2021, we had $4.6 million recorded for uncertain tax positions and related interest and penalties.

However, the timing of such payments to the respective taxing authorities cannot be estimated at this time.

The long‑term debt to total capitalization ratio was 15.9 percent at September 30, 2021 compared to 12.8 percent at September 30, 2020.

For additional information regarding debt agreements, refer to Note 7—Debt to our Consolidated Financial Statements.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements as that term is defined in Item 303(a)(4)(ii) of Regulation S-K.

For information regarding our drilling contract backlog, see Item 1— “Business — Contract Backlog ” .

Material Commitments

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Payments due by year

(in thousands)

Long-term debt

(in thousands) Total 2022 2023 2024 2025 2026 Thereafter

1,037,148 487,148 — — — — 550,000

162,915 16,239 16,289 16,159 16,251 16,253 81,724

Make-whole premium and accrued interest 3

59,064 59,064 — — — — —

Operating leases 4

39,863 10,596 8,660 7,391 4,332 1,876 7,008

Purchase obligations 5

48,100 48,100 — — — — —

Total contractual obligations $ 1,347,090 $ 621,147 $ 24,949 $ 23,550 $ 20,583 $ 18,129 $ 638,732

Interest on fixed‑rate debt was estimated based on principal maturities.

(1) On October 27, 2021, we redeemed the $487.1 million outstanding 2025 Notes.

See Note 7—Debt to our Consolidated Financial Statements.

(2) Interest on fixed-rate 2031 Notes was estimated based on principal maturities.

See Note 7—Debt to our Consolidated Financial Statements.

(3) On October 27, 2021, we redeemed all of the outstanding 2025 Notes, which resulted in the payment of a make-whole premium and accrued interest on the 2025 Notes.

See Note 7—Debt to our Consolidated Financial Statements.

(4) See Note 5—Leases to our Consolidated Financial Statements.

(5) See Note 16—Commitments and Contingencies to our Consolidated Financial Statements.

The above table does not include obligations for our pension plan or amounts recorded for uncertain tax positions.

In fiscal years 2020 and 2019 , we did not make any contributions to the pension plan.

Contributions may be made in fiscal year 2021 to fund unexpected distributions in lieu of liquidating pension assets.

Future contributions beyond fiscal year 2021 are difficult to estimate due to multiple variables involved.

At September 30, 2020 , we had $16.3 million recorded for uncertain tax positions and related interest and penalties.

However, the timing of such payments to the respective taxing authorities cannot be estimated at this time.

Income taxes are more fully described in Note 9—Income Taxes to our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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Estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

These estimates and assumptions are evaluated on an on‑going basis.

These estimates and assumptions are evaluated on an ongoing basis.

Actual results may differ from these estimates under different assumptions or conditions.

The following is a discussion of the critical accounting policies and estimates used in our financial statements.

2021 FORM 10-K | 52

Property, Plant and Equipment

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Both the estimated useful lives and salvage values require the use of management estimates.

Assets held-for-sale are reported at the lower of the carrying amount or fair value less estimated costs to sell.

Our estimate of fair value represents our best estimate based on industry trends and reference to market transactions and is subject to variability.

Certain events, such as unforeseen changes in operations, technology or market conditions, could materially affect our estimates and assumptions related to depreciation or result in abandonments.

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Self‑Insurance Accruals

We insure working land rigs and related equipment at values that approximate the current replacement costs on the inception date of the policies.

However, we self-insure large deductibles under these policies.

We also carry insurance with varying deductibles and coverage limits with respect to stacked rigs, offshore platform rigs, and “named wind storm” risk in the Gulf of Mexico.

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

We self‑insure a significant portion of expected losses relating to workers’ compensation, general liability, employer’s liability and automobile liability.

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Estimates for liabilities and retained losses are based on adjusters’ estimates, our historical loss experience and statistical methods commonly used within the insurance industry that we believe are reliable.

We also engage a third-party actuary to perform a periodic review of our domestic casualty losses.

We also engage a third-party actuary to perform a periodic review of our casualty losses.

Nonetheless, insurance estimates include certain assumptions and management judgments regarding the frequency and severity of claims, claim development and settlement practices.

Unanticipated changes in these factors may produce materially different amounts of expense that would be reported under these programs.

Our wholly‑owned captive insurance company finances a significant portion of the physical damage risk on company‑owned drilling rigs as well as international casualty deductibles.

An actuary reviews our captive losses on an annual basis.

We insure working land rigs and related equipment at values that approximate the current replacement costs on the inception date of the policies.

However, we self-insure large deductibles under these policies.

We also carry insurance with varying deductibles and coverage limits with respect to stacked rigs, offshore platform rigs, and “named wind storm” risk in the Gulf of Mexico.

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

Our wholly‑owned captive insurance companies finance a significant portion of the physical damage risk on company‑owned drilling rigs as well as casualty deductibles.

An actuary reviews the loss reserves retained by the Company and the captives on an annual basis.

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Revenue Recognition

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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 7. Management’s Discussion and Analysis