What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-11-18 compared with 2020-11-20 · 613 added, 641 removed, 1022 unchanged (55% of the section changed)

6 unchanged sentences

Consolidated Statements of Operations for the Years Ended September 30, 2021 , 2020 and 2019

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2020, 2019 and 2018

Consolidated Statements of Comprehensive Loss for the Years Ended September 30, 2021 , 2020 and 2019

Consolidated Statements of Shareholders’ Equity for the Years Ended September 30, 2021 , 2020 and 2019

1 unchanged sentence

Notes to Consolidated Financial Statements

2021 FORM 10-K | 56

Management’s Report on Internal Control over Financial Reporting

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Our internal control over financial reporting was designed under the supervision of the Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and includes those policies and procedures that:

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and the Board of Directors;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and the Board of Directors;

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

5 unchanged sentences

Helmerich & Payne, Inc.

Director, President and Chief Executive Officer

Lindsay /s/ Mark W.

Director, President and Chief Executive Officer Mark W.

Senior Vice President and Chief Financial Officer

November 20, 2020

November 18, 2021 November 18, 2021

2021 FORM 10-K | 57

Report of Independent Registered Public Accounting Firm

3 unchanged sentences

We have audited the accompanying consolidated balance sheets of Helmerich & Payne, Inc.

(the Company) as of September 30, 2020 and 2019 , the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended September 30, 2020 , and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with U.S.

19 unchanged sentences

The Company's self-insurance liability for workers’ compensation and other casualty claims was $81.0 million at September 30, 2021.

As described in Note 2 to the consolidated financial statements, this liability is based on a third-party actuarial analysis, which includes an estimate for incurred but not reported claims.

As described in Note 2—Summary of Significant Accounting Policies, Risks and Uncertainties to the consolidated financial statements, this liability is based on a third-party actuarial analysis, which includes an estimate for incurred but not reported claims.

The actuarial analysis considers a variety of factors, including third-party adjusters’ estimates, historic experience, and statistical methods commonly used within the insurance industry.

Auditing the Company's reserve for self-insured risks for worker’s compensation and other casualty claims is complex and required us to use our actuarial specialists due to the significant measurement uncertainty associated with the estimate, management’s application of significant judgment, and the use of various actuarial methods.

2021 FORM 10-K | 58

How We Addressed the Matter in Our Audit

We evaluated the design and tested the operating effectiveness of the Company’s controls over the workers’ compensation and other casualty claims accrual process.

For example, we tested controls over management’s determination of the appropriateness of the significant assumptions used in the calculation and the completeness and accuracy of the data underlying the reserve.

To evaluate the self-insurance liability for worker’s compensation and other casualty claims, we performed audit procedures that included, among others, testing the completeness and accuracy of the underlying claims data provided to management’s actuary and obtaining legal confirmation letters to evaluate the reserves recorded on significant litigated matters.

We evaluated the design and tested the operating effectiveness of the Company’s controls over the workers’ compensation and other casualty claims accrual process, including management's review controls over the significant assumptions used in the calculation and the completeness and accuracy of the data underlying the reserve.

To test the self-insurance liability for worker’s compensation and other casualty claims, we performed audit procedures that included, among others, testing the completeness and accuracy of the underlying claims data provided to management’s actuary and obtaining legal confirmation letters to evaluate the reserves recorded on significant litigated matters.

Additionally, we involved our actuarial specialists to assist in our evaluation of the methodologies applied by management’s actuary in establishing the actuarially determined reserve.

We compared the Company’s assumptions to ranges of assumptions independently developed by our actuarial specialists.

Impairment of Long-Lived Assets

Description of the Matter

As more fully described in Note 5 to the consolidated financial statements, the Company recognized a $441.4 million impairment charge in 2020 due to projected low utilization of the domestic non-super spec and all international asset groups.

Auditing the Company's impairment analysis involved a high degree of subjectivity as the determination of undiscounted cash flows was based on assumptions about future market and economic conditions.

Significant assumptions used in the Company’s undiscounted cash flow estimate included drilling rig utilization and net proceeds received upon future sale/disposition.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's process to estimate the undiscounted cash flows of the asset groups that were tested for recoverability.

For example, we tested controls over management's assessment of the appropriateness of the significant assumptions underlying the undiscounted cash flows.

Our testing of the Company’s undiscounted cash flows included, among other procedures, evaluating the significant assumptions used and testing the completeness and accuracy of the underlying data.

For example, we compared the projected drilling rig utilization assumption to current and forecasted industry and market information and any ongoing bid and contracting activity and compared the estimated net proceeds received upon future sale/disposition to industry ranges, market quotes and the Company’s historical experience.

We also compared the Company’s historical experience and market activity to peer averages.

Furthermore, we searched for and evaluated information that corroborates or contradicts the Company’s assumptions, performed retrospective reviews of projected cash flows to historical actuals, and performed a sensitivity analysis to evaluate the change in the projected cash flows that would result from changes in the underlying assumptions.

Valuation of Goodwill and Finite-lived Intangibles

Valuation of Assets Held-for-Sale

Description of the Matter

As more fully described in Note 7 to the consolidated financial statements, during 2020 the Company performed goodwill and finite-lived intangible impairment analyses, resulting in a $38.3 million goodwill impairment charge.

Auditing the Company’s impairment analyses was complex and highly judgmental due to the significant estimation required to determine the estimated future cash flows.

In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the utilization, discount rate, and terminal value, which are affected by expectations about future market and economic conditions.

As more fully described in Note 4—Property, Plant and Equipment to the consolidated financial statements, during 2021 the Company committed to a plan to sell 71 non-super spec rigs.

This action resulted in classification of the assets as held-for-sale.

The Company measured these assets at fair value less cost to sell, resulting in a $56.4 million impairment charge.

Auditing the Company's valuation of the assets-held-for-sale was complex and required subjective judgment and involvement of a valuation specialist in evaluating management’s assumptions used in determining the fair value less costs to sell.

Significant assumptions used in the Company’s estimate included management’s use of market quotes.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and finite-lived intangibles impairment review process, including controls over management’s review of the significant assumptions described above.

For example, we evaluated controls over the Company’s forecasting process used to develop the estimated future cash flows.

We also tested controls over management’s review of the data used in their valuation models and the significant assumptions such as the estimation of utilization, discount rate and terminal value.

To test the estimated cash flows of the applicable reporting unit and finite-lived intangibles, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analyses.

We compared the projected cash flows to available industry and market forecast information.

We involved our valuation specialists to assist in testing the discount rate.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting unit and finite-lived intangibles that would result from changes in the assumptions.

For finite-lived intangibles, we also assessed whether the assumptions used were consistent with those used in the goodwill impairment review process.

We evaluated the design and tested the operating effectiveness of controls over the Company's process to estimate fair value less costs to sell.

For example, we tested management's review controls over the significant assumptions underlying the fair value analysis.

Our testing of the Company’s held-for-sale analysis included, among other procedures, evaluating management’s selection of valuation methodologies, evaluating the significant assumptions used and testing the completeness and accuracy of the underlying data.

For example, we compared the market quotes used in the analysis to external documentation.

We also performed sensitivity analyses of the assumptions to evaluate the change in the fair value resulting from changes in assumptions.

We involved our valuation specialists to assist in our procedures.

/s/ Ernst & Young LLP

2 unchanged sentences

November 18, 2021

2021 FORM 10-K | 59

Report of Independent Registered Public Accounting Firm

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2020 and 2019 , the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2020 , and the related notes and our report dated November 20, 2020 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2021, and the related notes and our report dated November 18, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

17 unchanged sentences

November 18, 2021

2021 FORM 10-K | 60

HELMERICH & PAYNE, INC.

6 unchanged sentences

Accounts receivable, net of allowance of $ 2,068 and $ 1,820 , respectively

228,894 192,623

Inventories of materials and supplies, net 84,057 104,180

Prepaid expenses and other

Prepaid expenses and other, net 85,928 89,305

Assets held-for-sale 71,453 —

Total current assets 1,586,566 963,327

Investments 135,444 31,585

Property, plant and equipment, net 3,127,287 3,646,341

Other Noncurrent Assets:

Goodwill 45,653 45,653

Intangible assets, net 73,838 81,027

Operating lease right-of-use asset 49,187 44,583

Other assets, net 16,153 17,105

Total other noncurrent assets 184,831 188,368

Liabilities and Shareholders’ Equity

Total assets $ 5,034,128 $ 4,829,621

LIABILITIES & SHAREHOLDERS' EQUITY

Current Liabilities:

1 unchanged sentence

Dividends payable 27,332 27,226

Current portion of long-term debt 483,486 —

Accrued liabilities 283,492 155,442

3 unchanged sentences

Deferred income taxes 563,437 650,675

Other 147,757 147,180

Noncurrent liabilities - discontinued operations 2,013 13,389

3 unchanged sentences

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 and 112,151,563 shares issued as of September 30, 2021 and 2020, respectively, and 107,898,859 and 107,488,242 shares outstanding as of September 30, 2021 and 2020, respectively

11,222 11,215

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

3 unchanged sentences

Treasury stock, at cost, 4,324,006 shares and 4,663,321 shares as of September 30, 2021 and 2020, respectively

( 181,638 ) ( 198,153 )

Total shareholders’ equity 2,912,618 3,318,514

1 unchanged sentence

The accompanying notes are an integral part of these consolidated financial statements.

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HELMERICH & PAYNE, INC.

4 unchanged sentences

Drilling services $ 1,210,800 $ 1,761,714 $ 2,785,557

Other 7,768 12,213 12,933

1,218,568 1,773,927 2,798,490

OPERATING COSTS AND EXPENSES

7 unchanged sentences

Gain on sale of assets ( 1,042 ) ( 46,775 ) ( 39,691 )

1,647,117 2,394,114 2,777,908

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS ( 428,549 ) ( 620,187 ) 20,582

4 unchanged sentences

Gain on sale of subsidiary — 14,963 —

Income (loss) from continuing operations before income taxes

Other ( 5,657 ) ( 5,384 ) ( 1,596 )

( 12,631 ) ( 16,311 ) ( 71,804 )

Loss from continuing operations before income taxes ( 441,180 ) ( 636,498 ) ( 51,222 )

Income tax benefit ( 103,721 ) ( 140,106 ) ( 18,712 )

Income (loss) from continuing operations

Loss from continuing operations ( 337,459 ) ( 496,392 ) ( 32,510 )

Income from discontinued operations before income taxes 11,309 30,580 32,848

1 unchanged sentence

Income (loss) from discontinued operations 11,309 1,895 ( 1,146 )

Net income (loss)

NET LOSS $ ( 326,150 ) $ ( 494,497 ) $ ( 33,656 )

Basic earnings (loss) per common share:

Income (loss) from continuing operations

Loss from continuing operations $ ( 3.14 ) $ ( 4.62 ) $ ( 0.33 )

Income (loss) from discontinued operations 0.10 0.02 ( 0.01 )

Net income (loss)

Net loss $ ( 3.04 ) $ ( 4.60 ) $ ( 0.34 )

Diluted earnings (loss) per common share:

Income (loss) from continuing operations

Loss from continuing operations $ ( 3.14 ) $ ( 4.62 ) $ ( 0.33 )

Income (loss) from discontinued operations 0.10 0.02 ( 0.01 )

Net income (loss)

Net loss $ ( 3.04 ) $ ( 4.60 ) $ ( 0.34 )

Weighted average shares outstanding:

Basic 107,818 108,009 109,216

Diluted 107,818 108,009 109,216

The accompanying notes are an integral part of these consolidated financial statements.

2021 FORM 10-K | 62

HELMERICH & PAYNE, INC.

Consolidated Statements of Comprehensive Income (Loss)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Year ended September 30,

(in thousands) 2021 2020 2019

Net income (loss)

Net loss $ ( 326,150 ) $ ( 494,497 ) $ ( 33,656 )

Other comprehensive income (loss), net of income taxes:

Unrealized appreciation on securities, net of income taxes of $3.3 million at September 30, 2018

Minimum pension liability adjustments, net of income taxes of $0.8 million at September 30, 2020, $(3.5) million at September 30, 2019 and $1.9 million at September 30, 2018

Net change related to employee benefit plans, net of income taxes of $ 1.8 million at September 30, 2021, $ 0.8 million at September 30, 2020 and $( 3.5 ) million at September 30, 2019

5,944 2,447 ( 11,875 )

Other comprehensive income (loss) 5,944 2,447 ( 11,875 )

Comprehensive income (loss)

Comprehensive loss $ ( 320,206 ) $ ( 492,050 ) $ ( 45,531 )

The accompanying notes are an integral part of these consolidated financial statements.

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HELMERICH & PAYNE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Retained Earnings

Common Stock Additional

Capital Retained Earnings Accumulated

Comprehensive

Income (Loss)

Treasury Stock

(in thousands, except per share amounts)

Balance at September 30, 2017

Comprehensive income:

Other comprehensive income

Dividends declared ($2.82 per share)

Exercise of employee stock options, net of shares withheld for employee taxes

Vesting of restricted stock awards, net of shares withheld for employee taxes

Stock-based compensation

Adoption of ASU 2016-09

Income (Loss) Treasury Stock

(in thousands, except per share amounts) Shares Amount Shares Amount Total

Balance at September 30, 2018

112,009 $ 11,201 $ 500,393 $ 4,027,779 $ 16,550 3,015 $ ( 173,188 ) $ 4,382,735

Comprehensive loss:

Net loss — — — ( 33,656 ) — — — ( 33,656 )

Other comprehensive loss — — — — ( 11,875 ) — — ( 11,875 )

Dividends declared ($ 2.84 per share)

— — — ( 313,088 ) — — — ( 313,088 )

Exercise of employee stock options, net of shares withheld for employee taxes — — ( 7,153 ) — — ( 151 ) 8,474 1,321

3 unchanged sentences

Cumulative effect adjustment for adoption of ASU No.

2014-09 — — — ( 38 ) — — — ( 38 )

Cumulative effect adjustment for adoption of ASU No.

2016-01 (Note 10)

2016-01 — — — 29,071 ( 29,071 ) — — —

Reclassification of stranded tax effect for adoption of ASU No.

2018-02 — — — 4,239 ( 4,239 ) — — —

Balance at September 30, 2019

112,080 $ 11,208 $ 510,305 $ 3,714,307 $ ( 28,635 ) 3,642 $ ( 194,962 ) $ 4,012,223

Comprehensive income (loss):

Net loss — — — ( 494,497 ) — — — ( 494,497 )

Other comprehensive income — — — — 2,447 — — 2,447

Dividends declared ($ 1.92 per share)

— — — ( 209,798 ) — — — ( 209,798 )

Exercise of employee stock options, net of shares withheld for employee taxes — — ( 3,151 ) — — ( 110 ) 7,195 4,044

3 unchanged sentences

Balance at September 30, 2020

112,151 $ 11,215 $ 521,628 $ 3,010,012 $ ( 26,188 ) 4,663 $ ( 198,153 ) $ 3,318,514

Comprehensive income (loss):

Net loss — — — ( 326,150 ) — — — ( 326,150 )

Other comprehensive income — — — — 5,944 — — 5,944

Dividends declared ( 1.00 per share)

— — — ( 109,236 ) — — — ( 109,236 )

Vesting of restricted stock awards, net of shares withheld for employee taxes 71 7 ( 18,683 ) — — ( 339 ) 16,515 ( 2,161 )

Stock-based compensation — — 27,858 — — — — 27,858

Cumulative effect adjustment for adoption of ASU No.

2016-13 — — — ( 1,251 ) — — — ( 1,251 )

Other — — ( 900 ) — — — ( 900 )

Balance at September 30, 2021

112,222 $ 11,222 $ 529,903 $ 2,573,375 $ ( 20,244 ) 4,324 $ ( 181,638 ) $ 2,912,618

The accompanying notes are an integral part of these consolidated financial statements.

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HELMERICH & PAYNE, INC.

3 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Net loss $ ( 326,150 ) $ ( 494,497 ) $ ( 33,656 )

Adjustment for (income) loss from discontinued operations ( 11,309 ) ( 1,895 ) 1,146

Income (loss) from continuing operations

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Loss from continuing operations ( 337,459 ) ( 496,392 ) ( 32,510 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 419,726 481,885 562,803

1 unchanged sentence

Amortization of debt discount and debt issuance costs 1,423 1,817 1,732

Provision for bad debt

Provision for credit loss 203 2,203 2,321

Stock-based compensation 27,858 36,329 34,292

3 unchanged sentences

Deferred income tax benefit ( 89,752 ) ( 157,555 ) ( 44,554 )

Other 13,794 ( 2,423 ) 4,431

Change in assets and liabilities:

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Capital expenditures ( 82,148 ) ( 140,795 ) ( 458,402 )

Purchase of short-term investments

Purchase of investments ( 417,601 ) ( 134,641 ) ( 97,652 )

Payment for acquisition of business, net of cash acquired — — ( 16,163 )

Proceeds from sale of short-term investments

Proceeds from sale of investments 207,716 94,646 98,764

Proceeds from sale of subsidiary — 15,056 —

Proceeds from sale of marketable securities

Proceeds from asset sales 43,515 78,399 50,817

Advance payment for sale of property, plant and equipment 86,524 — —

Other — ( 550 ) —

Net cash used in investing activities ( 161,994 ) ( 87,885 ) ( 422,636 )

1 unchanged sentence

Dividends paid ( 109,130 ) ( 260,335 ) ( 313,421 )

Proceeds from debt issuance 548,719 — —

Debt issuance costs ( 3,935 ) — ( 3,912 )

4 unchanged sentences

Share repurchases — ( 28,505 ) ( 42,779 )

Net cash used in financing activities

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

Other ( 719 ) ( 446 ) —

Net cash provided by (used in) financing activities 425,523 ( 297,220 ) ( 376,329 )

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

Cash and cash equivalents and restricted cash, beginning of period 536,747 382,971 326,185

3 unchanged sentences

Interest paid $ 26,706 $ 22,928 $ 26,739

Income tax paid (refund), net

Income tax paid (received), net ( 32,462 ) 46,700 16,218

Cash paid for amounts included in the measurement of lease liabilities:

Payments for operating leases 17,266 18,646 —

Non-cash operating and investing activities:

Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment ( 1,526 ) 3,123 17,771

Changes in accounts receivable, property, plant and equipment and other noncurrent assets related to the sale of equipment 9,290 — —

Cumulative effect adjustment for adoption of ASU No.

2016-13 ( 1,251 ) — —

The accompanying notes are an integral part of these consolidated financial statements.

2021 FORM 10-K | 65

HELMERICH & PAYNE, INC.

3 unchanged sentences

(“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

During the third quarter of fiscal year 2020 , we restructured our operations (see Note 19—Restructuring Charges ) to accommodate scale during an industry downturn and to re-organize our operations to align to new marketing and management strategies.

This is consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources.

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 were organized into the following reportable operating business segments:

Our drilling services operations are organized into the following reportable operating business segments:

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

All 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." Refer to Note 17—Business Segments and Geographic Information for further details on our reportable segments.

Our North America Solutions operations are primarily located in Colorado, Ohio, Oklahoma, New Mexico, North Dakota, Pennsylvania, Texas, West Virginia and Wyoming.

Our North America Solutions operations are primarily located in Colorado, Louisiana, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming.

Additionally, Offshore Gulf of Mexico operations are conducted in Louisiana and in U.S.

1 unchanged sentence

Argentina, Bahrain, Colombia and United Arab Emirates.

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

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

We also own and operate a limited number of commercial real estate properties located in Tulsa, Oklahoma.

Our real estate investments include a shopping center and undeveloped real estate.

Fiscal Year 2020 Dispositions

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

3 unchanged sentences

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.

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

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES

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and its domestic and foreign subsidiaries.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary.

Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the consolidated statement of operations and comprehensive income (loss) from the date the Company gains control until the date when the Company ceases to control the subsidiary.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Consolidation of a subsidiary begins when the Company gains control over the subsidiary and ceases when the Company loses control of the subsidiary.

Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the Consolidated Statements of Operations and Comprehensive Loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

All intercompany accounts and transactions have been eliminated in consolidation.

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COVID-19 and OPEC+ Production Impacts

The outbreak of a novel strain of coronavirus (“COVID-19”) and its development into a pandemic have resulted in significant global economic disruption, including North America and many of the other geographic areas where we operate, or where our customers are located, or suppliers or vendors operate.

The outbreak of a novel strain of coronavirus (“COVID-19”) and its development into a pandemic has resulted in significant global economic disruption, including North America and many of the other geographic areas where we operate, or where our customers are located, or suppliers or vendors operate.

Actions taken to prevent the spread of COVID-19 by governmental authorities around the world, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby resulting in lower demand for crude oil.

In particular, the travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers.

Governmental authorities have also implemented multi-step policies with the goal of re-opening various sectors of the economy.

However, certain jurisdictions began re-opening only to return to restrictions in the face of increases in new COVID-19 cases, while other jurisdictions are continuing to re-open or have nearly completed the re-opening process despite increases in COVID-19 cases.

The COVID-19 outbreak may significantly worsen during the upcoming months, which may cause governmental authorities to reconsider restrictions on business and social activities.

In the event governmental authorities increase restrictions, the re-opening of the economy may be further curtailed.

We have experienced, and expect to continue to experience, some resulting in disruptions to our business operations, as these restrictions have significantly impacted, and may continue to impact, many sectors of the economy.

In addition, the perceived risk of infection and health risk associated with COVID-19, and the illness of many individuals across the globe, has and will continue to alter behaviors of consumers, and policies of companies around the world, resulting in many of the same effects intended by such governmental authorities to stop the spread of COVID-19, such as self-imposed or voluntary social distancing and quarantining and remote work policies.

In addition to the impact on demand for crude oil, the travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers.

Governmental authorities have also implemented multi-step policies with the goal of reopening various sectors of the economy.

However, certain jurisdictions began reopening only to return to restrictions in the face of increases in new COVID-19 cases, while other jurisdictions are continuing to reopen or have completed the reopening process despite increases in COVID-19 cases.

Despite the increased availability of vaccines in certain jurisdictions, the COVID-19 pandemic may continue unabated or worsen during the upcoming months, including as a result of the emergence of more infectious strains of the virus, vaccine hesitancy or increased business and social activities, which may cause governmental authorities to reconsider restrictions on business and social activities.

In the event governmental authorities increase restrictions, the reopening of the economy may be curtailed.

We have experienced, and expect to continue to experience, some disruptions to our business operations, as these restrictions have significantly impacted, and may continue to impact, many sectors of the economy.

Depressed economic conditions exacerbated by COVID-19 restrictions in one foreign jurisdiction where we operate have led to an increase in community strikes which have resulted in periodic suspensions of our operations.

such altered behaviors and policies have many of the same effects intended by governmental authorities to stop the spread of COVID-19, such as self-imposed or voluntary social distancing, quarantining, and remote work policies.

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

In some cases, policies and procedures are more stringent in our foreign operations than 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.

In addition, a customer in one foreign jurisdiction has claimed force majeure resulting in zero chargeable revenues during the suspension period.

In some cases, policies and procedures are more stringent in our foreign operations than in our North America operations.

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.

Consequently, we have seen a significant decrease in customer 2020 capital budgets and a corresponding dramatic decline in the demand for land rigs.

In April 2020, OPEC+ finalized an agreement to cut oil production by 9.7 million barrels per day during May and June 2020.

On June 6, 2020, OPEC+ agreed to extend such production cuts until the end of July 2020.

On July 15, 2020, OPEC+ agreed to ease the production cuts from 9.7 million barrels per day to 7.7 million barrels per day from August to December 2020.

Despite the production cuts, prices in the oil and gas market have remained depressed, as the oversupply and lack of demand in the market persist.

Oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreak and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported.

Consequently, we saw a significant decrease in customer 2020 capital budgets and a corresponding dramatic decline in the demand for land rigs.

Although OPEC+ agreed in April 2020 to cut oil production, OPEC+ has been gradually reducing such cuts and in July 2021, agreed to further reduce such cuts on a monthly basis with a goal of phasing out all production cuts towards the end of 2022.

There is no assurance that the most recent OPEC+ agreement will be observed by its parties and OPEC+ may change its agreement depending upon market conditions.

Although crude oil prices have recovered since March 2020, oil and natural gas prices are expected to continue to be volatile as a result of near-term production instability, the ongoing COVID-19 pandemic, changes in oil and natural gas inventories, industry demand, global and national economic performance, and the actions of OPEC+.

These events have had, and could continue to have, an adverse impact on numerous aspects of our business, financial condition and results of operations.

The ultimate extent of the impact of COVID-19 and prolonged excess oil supply on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of the COVID-19 outbreak within the United States and the parts of the world in which we operate and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread of COVID-19 and the development and availability of effective treatments and vaccines, all of which are highly uncertain and cannot be predicted with certainty at this time.

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

At September 30, 2020 , the Company had cash and cash equivalents and short-term investments of $ 577.2 million .

The ultimate extent of the impact of COVID-19 on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of COVID-19 within the United States and the parts of the world in which we operate and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread of COVID-19 and the development, availability, timely distribution and acceptance of effective treatments and vaccines worldwide, all of which are highly uncertain and cannot be predicted with certainty at this time.

At September 30, 2021, the Company had cash and cash equivalents and short-term investments of $ 1.1 billion.

The 2018 Credit Facility (as defined within Note 7—Debt) has $ 750.0 million in aggregate availability with a maximum of $ 75.0 million available for use as letters of credit.

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.

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

Furthermore, the Company 2025 Notes (as defined within Note 8—Debt ) do not mature until March 19, 2025.

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.

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 the 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 2031 Notes mature on September 29, 2031.

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

As a result, these notes were included in the current portion of long-term debt on our Consolidated Balance Sheets as of September 30, 2021.

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.

Refer to Note 7—Debt for further details.

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Foreign Currencies

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Monetary assets and liabilities denominated in currencies other than the U.S.

dollar are translated at exchange rates in effect at the end of the period, and the resulting gains and losses are recorded on our statement of operations.

dollar are translated at exchange rates in effect at the end of the period, and the resulting gains and losses are recorded on our Consolidated Statements of Operations.

Aggregate foreign currency losses of $ 5.3 million, $ 8.8 million and $ 8.2 million in fiscal years 2021, 2020 and 2019, respectively, are included in drilling services operating expenses.

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We had restricted cash and cash equivalents of $ 19.2 million and $ 48.9 million at September 30, 2021 and 2020, respectively.

Of the total at September 30, 2020 and 2019 , $ 3.6 million and $ 3.0 million , respectively, is related to the acquisition of drilling technology companies described in Note 3—Business Combinations , $ 2.0 million as of both fiscal year ends is from the initial capitalization of the captive insurance company, and $ 43.1 million and $ 30.0 million , respectively, represents an additional amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance company.

Of the total at September 30, 2021 and 2020, $ 1.5 million and $ 3.6 million, respectively, is related to the acquisition of drilling technology companies, $ 2.0 million as of both fiscal year ends is from the initial capitalization of the captive insurance companies, and $ 17.7 million and $ 43.1 million, respectively, represents an additional amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies.

The restricted amounts are primarily invested in short-term money market securities.

The restricted cash and cash equivalents are reflected in the Consolidated Balance Sheets as follows:

Cash, cash equivalents, and restricted cash are reflected in the Consolidated Balance Sheets as follows:

September 30,

(in thousands) 2021 2020 2019

Cash $ 917,534 $ 487,884 $ 347,943

Restricted cash

Prepaid expenses and other 18,350 45,577 31,291

Other assets 832 3,286 3,737

Total cash, cash equivalents, and restricted cash $ 936,716 $ 536,747 $ 382,971

Accounts Receivable

Accounts receivable represents valid claims against our customers for our services rendered, net of allowances for doubtful accounts.

Accounts receivable represents valid claims against our customers for our services rendered, net of allowances for credit losses.

We perform credit evaluations of customers and do not typically require collateral in support for trade receivables.

We provide an allowance for doubtful accounts, when necessary, to cover estimated credit losses.

Outstanding customer receivables are reviewed regularly for possible nonpayment indicators, and allowances for doubtful accounts are recorded based upon management’s estimate of collectability at each balance sheet date.

Refer to Note 16—Supplemental Balance Sheet Information .

We provide an allowance for credit losses, when necessary, to cover estimated credit losses.

Outstanding customer receivables are reviewed regularly for possible nonpayment indicators, and allowances for credit losses are recorded based upon management’s estimate of expected credit losses.

Refer to "Allowance for Credit Losses" below and Note 15—Supplemental Balance Sheet Information for additional information.

Inventories of Materials and Supplies

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The reserves for excess and obsolete inventory were $ 29.3 million and $ 36.5 million for fiscal years 2021 and 2020, respectively.

We maintain investments in equity securities of certain publicly traded companies.

We recognize our marketable equity securities that have readily determinable fair values at fair value, with changes in such values reflected in net income.

We maintain investments in equity and debt securities of certain publicly traded and private companies.

We recognize our equity securities that have readily determinable fair values at fair value, with changes in such values reflected in net income.

Our equity securities without readily determinable fair values are measured at cost, less any impairments.

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Property, Plant, and Equipment

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Interest is capitalized based on the average interest rate on related debt.

We had no capitalized interest during fiscal years 2020 and 2019 and $ 0.4 million of capitalized interest during fiscal year 2018 .

We had no capitalized interest during fiscal years 2021, 2020 and 2019.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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For certain contracts, we receive payments contractually designated for the mobilization of rigs and other drilling equipment.

Mobilization payments received, and direct costs incurred for the mobilization, are deferred and recognized on a straight-line basis as the drilling service is provided.

Revenues associated with mobilization and lump-sum demobilization and direct costs incurred for the mobilization, are deferred and recognized on a straight-line basis as the drilling service is provided.

Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred.

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Reimbursements for fiscal years 2021, 2020 and 2019 were $ 148.0 million, $ 212.0 million and $ 322.8 million, respectively.

For contracts that are terminated by customers prior to the expirations of their fixed terms, contractual provisions customarily require early termination amounts to be paid to us.

For fixed-term contracts that are terminated by customers prior to the expirations, contractual provisions customarily require early termination amounts to be paid to us.

Revenues from early terminated contracts are recognized when all contractual requirements have been met.

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Rent Revenues

We enter into leases with tenants in our rental properties consisting primarily of retail and multi-tenant warehouse space.

We enter into leases with tenants in our rental properties consisting primarily of retail space.

The lease terms of tenants occupying space in the retail centers and warehouse buildings generally range from three to ten years .

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Recoveries from tenants for property taxes and operating expenses are recognized in other operating revenues in the Consolidated Statements of Operations.

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.

See Note 5—Property, Plant and Equipment for additional details.

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Our rent revenues are as follows:

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Overage and percentage rents 726 656 932

At September 30, 2020 , minimum future rental income to be received on noncancelable operating leases was as follows (in thousands):

At September 30, 2021, minimum future rental income to be received on noncancelable operating leases was as follows:

Fiscal Year Amount

(in thousands)

Thereafter 4,064

Total $ 23,390

Leasehold improvement allowances are capitalized and amortized over the lease term.

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Accumulated depreciation ( 28,846 ) ( 27,588 )

$ 14,456 $ 15,801

Current income tax expense is the amount of income taxes expected to be payable for the current fiscal year.

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The Board of Directors (the "Board") has determined to award stock-based compensation to non-employee directors solely in the form of restricted stock.

The fair value of each option granted prior to fiscal year 2019 was estimated on the date of grant based on the Black-Scholes options-pricing model utilizing assumptions for a risk-free interest rate, volatility, dividend yield and expected remaining term of the awards.

The assumptions used in calculating the fair value of stock-based payment awards represented management’s best estimates, but these estimates involve inherent uncertainties and the application of management's judgment.

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The grant date fair value of performance share units is determined through the use of the Monte Carlo simulation method.

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Beginning October 1, 2019, leases are recognized as a right-of-use asset and a corresponding liability within accrued liabilities and other non-current liabilities at the date at which the leased asset is available for use by the Company.

Each lease payment is allocated between the liability and finance cost.

The finance cost is recognized over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis for finance type leases and as the difference between the levelized lease cost and the finance cost for operating leases.

Operating lease expense is recognized on a straight-line basis over the life of the lease.

The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis for finance type leases.

Assets and liabilities arising from a lease are initially measured on a present value basis.

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The lease payments are discounted using the interest rate implicit in the lease.

If that rate cannot be determined, the lessee’s incremental borrowing rate is used, which is the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

If that rate cannot be determined, our incremental borrowing rate is used, which is the rate that we would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost and are comprised of the following:

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• Asset retirement obligations related to that lease, as applicable.

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Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss.

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Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

The assessment is reviewed if a significant event or a significant change in circumstances occurs and is within the control of the lessee.

The assessment is reviewed if a significant event or a significant change in circumstances occurs and is within our control.

Refer to Note 5—Leases for additional information regarding our leases.

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The following table provides a brief description of recent accounting pronouncements and our analysis of the effects on our financial statements:

Effect on the Financial

Standard Description Date of

Adoption Effect on the Financial

Statements or Other Significant Matters

Recently Adopted Accounting Pronouncements

2016-02, Leases (Topic 842) and related ASUs issued subsequent

2016-02 requires organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms of more than 12 months.

Lessor accounting remains substantially similar to current U.S.

In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information.

2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

ASU 2016-02 mandates a modified retrospective transition method of adoption with an option to use certain practical expedients.

October 1, 2019

We adopted this ASU during the first quarter of fiscal year 2020, as required.

Refer to Note 6—Leases for additional information.

2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

This ASU aims to reduce complexity in the accounting for costs of implementing a cloud computing service arrangement.

2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

This update is effective for annual and interim periods beginning after December 15, 2019.

The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

Early adoption is permitted.

October 1, 2019

We early adopted this ASU during the first quarter of fiscal year 2020 on a prospective basis.

The prospective impact is not material to our consolidated financial statements and disclosures.

Standards that are not yet adopted as of September 30, 2020

2016-13, Financial Instruments – Credit Losses (Topic 326) and related ASUs issued subsequent

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(1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income (loss), and (4) beneficial interests in securitized financial assets.

This update is effective for annual and interim periods beginning after December 15, 2019.

This update is effective for annual periods beginning after December 15, 2019.

October 1, 2020

The guidance will be applied using the modified retrospective method with a cumulative effect adjustment to our beginning retained earnings balance.

This update will apply primarily to receivables arising from revenue transactions.

We have analyzed our historical credit losses and considered current economic conditions in developing our expected credit loss rate.

We are currently finalizing our processes, internal controls and disclosures that are required upon adoption.

We do not believe the implementation of this guidance will have a material impact on our consolidated financial statements and disclosures.

Effect on the Financial

Statements or Other Significant Matters

We adopted this ASU during the first quarter of fiscal year 2021, as required.

Refer to "Allowance for Credit Losses" below for additional information.

2018-14, Compensation – Retirement Benefits – Defined Benefit Plans—General (Topic 715-20):

Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit, pension and other postretirement plans.

This update is effective for annual periods ending after December 15, 2020.

September 30, 2021

We adopted this ASU during the fourth quarter of fiscal year 2021.

The adoption did not have a material effect on our consolidated financial statements and disclosures.

Standards that are not yet adopted as of September 30, 2021

2019-12, Financial Instruments – Income Taxes (Topic 740):

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Upon adoption, the amendments addressed in this ASU will be applied either prospectively, retrospectively or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings.

October 1, 2021

We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.

2018-14, Compensation – Retirement Benefits – Defined Benefit Plans—General (Topic 715-20):

Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit, pension and other postretirement plans.

This update is effective for annual and interim periods ending after December 15, 2020.

Upon adoption, the guidance will be applied on a retrospective basis to all periods presented.

The update is effective for annual periods beginning after December 15, 2020.

October 1, 2021

We are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures.

We plan to adopt this ASU, as required, in the first quarter of fiscal year 2022.

Although we are currently evaluating the impact the new guidance may have on our consolidated financial statements and disclosures, we do not believe the adoption will have a material effect thereon.

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Allowance for Credit Losses

On October 1, 2020, we adopted ASU 2016-13 on a modified retrospective basis through a cumulative-effect adjustment without restating comparative periods, as permitted under the adoption provisions.

Upon adoption, we recognized a $ 1.6 million increase to our allowance for credit losses and a corresponding cumulative adjustment to reduce retained earnings, net of income taxes, of $ 1.3 million.

This transition adjustment reflects the development of our models to estimate expected credit losses over the life of our financial assets, which primarily consist of our accounts receivable.

Pursuant to ASU 2016-13, we have evaluated our customers’ financial strength and liquidity based on aging of accounts receivable, payment history, and other relevant information, including ratings agency, credit ratings and alerts, and publicly available reports.

Concentration of Credit Risk

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However, we believe that the credit risk posed by this industry concentration is offset by the creditworthiness of our customer base.

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

(in thousands)

EOG Resources, Inc.

In fiscal years 2020 and 2019, no individual customers constituted 10 percent or more of our total revenues.

In fiscal years 2021, 2020 and 2019, no individual customers constituted 10 percent or more of our total consolidated revenues.

We place temporary cash investments in the United States with established financial institutions and invest in a diversified portfolio of highly rated, short-term money market instruments.

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Self-Insurance

We have accrued a liability for estimated workers’ compensation and other casualty claims incurred based upon cash reserves plus an estimate of loss development and incurred but not reported claims.

We have accrued a liability for estimated workers’ compensation and other casualty claims incurred based upon case reserves plus an estimate of loss development and incurred but not reported claims.

The estimate is based upon historical trends.

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Insurance is purchased over deductibles to reduce our exposure to catastrophic events.

Estimates are recorded for incurred outstanding liabilities for workers’ compensation, general liability claims and claims that are incurred but not reported.

Estimates are recorded for incurred outstanding liabilities for workers’ compensation, general, and automobile liability claims that are incurred but not reported.

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

We have also engaged a third-party actuary to perform a review of our domestic casualty losses as well as losses in our captive insurance companies.

We have also engaged a third-party actuary to perform a review of our casualty losses as well as losses in our captive insurance companies.

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.

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

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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.

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.

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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.

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

The Company and the Captives 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 Captives, typically on a monthly basis, for the estimated losses based on an external actuarial analysis.

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

Direct operating costs consisted primarily of adjustments to accruals for estimated losses of $ 12.6 million and $ 16.4 million allocated to the Captives 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.

These operating costs were recorded within drilling services operating expenses in our Consolidated Statement of Operations.

Intercompany premium revenues recorded by the Captives 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.

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 .

Starting in the second quarter of fiscal year 2020, the Captives 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.

Our medical stop loss operating expenses for the fiscal year ended September 30, 2021 and 2020 were $ 12.0 million and $ 8.0 million, respectively.

International Solutions Drilling Risks

International Solutions drilling operations may significantly contribute to our revenues and net operating income.

International Solutions drilling operations may significantly contribute to our revenues and net operating income (loss).

There can be no assurance that we will be able to successfully conduct such operations, and a failure to do so may have an adverse effect on our financial position, results of operations, and cash flows.

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Additionally, in the event that extended labor strikes occur or a country experiences significant political, economic or social instability, we could experience shortages in labor and/or material and supplies necessary to operate some of our drilling rigs, thereby potentially causing an adverse material effect on our business, financial condition and results of operations.

Many of the countries in which we operate have implemented measures in response to the COVID-19 pandemic.

These measures, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby, resulting in lower demand for crude oil.

We have also experienced certain risks related to our Argentine operations.

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Argentina also has a history of implementing currency controls which restrict the conversion and repatriation of U.S.

dollars, including controls that were implemented in September 2019.

In September 2020, Argentina implemented additional currency controls in an effort to preserve Argentina's U.S.

From September 2019 through 2021, Argentina implemented additional currency controls in an effort to preserve Argentina's U.S.

dollar reserves.

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In addition, in March 2020, the Argentine government introduced labor regulations that prohibit employee dismissals or suspensions without just cause, for lack of (or reduction in) work or due to force majeure, subject to certain exceptions that may result in the payment of compensation to suspended employees and/or increased severance costs to the company.

These prohibitions have resulted in significant challenges for our Argentine operations during fiscal year 2020 and it remains uncertain for how long they will be in effect.

Further, there are additional concerns regarding Argentina's debt burden, notwithstanding Argentina's recent restructuring deal with international bondholders in August 2020, as Argentina attempts to manage its substantial sovereign debt issues.

These prohibitions have resulted in significant challenges for our Argentine operations and it remains uncertain for how long they will be in effect.

Further, there are additional concerns regarding Argentina's debt burden, notwithstanding Argentina's restructuring deal with international bondholders in August 2020, as Argentina attempts to manage its substantial sovereign debt issues.

These concerns could further negatively impact Argentina's economy and adversely affect our Argentine operations.

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While we believe that neither operating through such entities nor pursuant to such arrangements would have a material adverse effect on our operations or revenues, there can be no assurance that we will in all cases be able to structure or restructure our operations to conform to local law (or the administration thereof) on terms acceptable to us.

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Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the fiscal year ended September 30, 2021, approximately 5.0 percent of our operating revenues were generated from international locations in our drilling services business compared to 8.3 percent during the fiscal year ended September 30, 2020.

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The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations.

NOTE 3 BUSINESS COMBINATIONS

Fiscal Year 2019 Acquisitions

On August 21, 2019, we completed an acquisition of an unaffiliated company, DrillScan Energy SAS and its subsidiaries ("DrillScan ® "), which is now a wholly-owned subsidiary of the Company, for total consideration of approximately $ 32.7 million , which includes $ 17.7 million of contingent consideration.

The fair value of total assets acquired, and liabilities assumed, as of the acquisition date, were $ 36.3 million and $ 3.6 million , respectively, including goodwill of $ 14.9 million .

Of the total assets acquired, $ 19.1 million was allocated to identifiable intangible assets.

DrillScan ® is a leading provider of proprietary drilling engineering software, well engineering services and training for the oil and gas industry.

The operations of DrillScan ® are included in the North America Solutions reportable segment.

The acquisition of DrillScan ® was accounted for as a business combination in accordance with FASB ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values.

In accordance with GAAP, an entity is allowed a reasonable period of time (not to exceed one year) to obtain the information necessary to identify and measure the fair value of the assets acquired and liabilities assumed in a business combination.

During the second quarter of fiscal year 2020, as a result of new information identified related to the acquisition of DrillScan ® , the acquisition date fair value of the contingent consideration and goodwill increased by approximately $ 1.2 million .

This acquisition's measurement period closed during the quarter ended June 30, 2020 and, as a result, the purchase price accounting was finalized.

On November 1, 2018, we completed an acquisition of an unaffiliated company, Angus Jamieson Consulting (“AJC”), which is now a wholly-owned subsidiary of the Company, for total consideration of approximately $ 3.4 million .

AJC is a software-based training and consultancy company based in Inverness, Scotland and is widely recognized as an industry leader in wellbore positioning.

The operations of AJC are included in the North America Solutions reportable segment.

The acquisition of AJC has been accounted for as a business combination in accordance with FASB ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their acquisition date fair values.

The allocation of the purchase price included goodwill of $ 3.1 million .

NOTE 3 DISCONTINUED OPERATIONS

Current and noncurrent liabilities from discontinued operations consist of municipal and income taxes payable and social obligations due within the country of Venezuela.

Noncurrent liabilities from discontinued operations consist of an uncertain tax liability related to the country of Venezuela.

Expenses incurred for in-country obligations are reported as discontinued operations within our Consolidated Statements of Operations.

The activity for the fiscal year ended September 30, 2020 was primarily due to the remeasurement of uncertain tax liabilities as a result of the devaluation of the Venezuela Bolivar.

The activity for the fiscal year ended September 30, 2021 was primarily due to the remeasurement of an uncertain tax liability as a result of the devaluation of the Venezuela Bolivar.

Early in 2018, the Venezuelan government announced that it changed the existing dual-rate foreign currency exchange system by eliminating its heavily subsidized foreign exchange rate, which was 10 Bolivars per United States dollar, and relaunched an exchange system known as DICOM.

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The DICOM floating rate was approximately 4,181,782 , 436,677 , and 21,028 Bolivars per United States dollar at September 30, 2021, 2020 and 2019, respectively.

The DICOM floating rate might not reflect the barter market exchange rates.

The DICOM floating rate may not reflect the barter market exchange rates.

NOTE 4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of September 30, 2021 and 2020 consisted of the following:

(in thousands)

Estimated Useful Lives

September 30, 2020

September 30, 2019

Drilling services equipment

Real estate properties

10 - 45 years

(in thousands) Estimated Useful Lives September 30, 2021 September 30, 2020

Drilling services equipment 4 - 15 years

$ 6,229,011 7,313,234

Tubulars 4 years

573,900 615,281

Real estate properties 10 - 45 years

43,302 43,389

Other 2 - 23 years

459,741 464,704

Construction in progress 1

47,587 49,592

7,353,541 8,486,200

Accumulated depreciation ( 4,226,254 ) ( 4,839,859 )

Property, plant and equipment, net $ 3,127,287 $ 3,646,341

Assets held-for-sale $ 71,453 $ —

(1) Included in construction in progress are costs for projects in progress to upgrade or refurbish certain rigs in our existing fleet.

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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.

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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.

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Due to the downsizing of our domestic and international FlexRig ® 4 asset groups, at June 30, 2019, we performed impairment testing on these two asset groups.

We concluded that the net book values of the asset groups are recoverable through estimated undiscounted cash flows with a surplus.

We concluded that the net book values of the asset groups were recoverable through estimated undiscounted cash flows with a surplus.

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

The assumptions are consistent with the Company's internal forecasts for future years.

Although we believe the assumptions used in our analysis are reasonable and appropriate and the probability-weighted average of expected future undiscounted net cash flows exceed the net book value for each of the domestic and international FlexRig ® 4 asset groups as of June 30, 2019, different assumptions and estimates could materially impact the analysis and our resulting conclusion.

Impairments - Fiscal Year 2018

During the fourth quarter of fiscal year 2018, after ceasing operations in Ecuador, we entered into a sales negotiation with respect to the six conventional rigs, within a separate international conventional rigs’ asset group, with net book values of $ 20.8 million , present in the country, pursuant to which the rigs, together with associated equipment and machinery, were sold to a third party to be recycled.

Certain components of these rigs, with an $ 8.5 million net book value, that were not subject to the sale agreement were transferred to the United States to be utilized on other FlexRig ® drilling rigs with high activity and demand.

The sales transaction was completed in November 2018.

We recorded a non-cash impairment charge within our International Solutions segment of $ 9.2 million , which is included in Asset Impairment Charge on the Consolidated Statement of Operations for the fiscal year ended September 30, 2018.

As a result, the remaining rig within the same asset group, not to be disposed of, was written down resulting in an additional impairment charge of $ 1.4 million .

The assets were recorded at fair value based on the sales agreement and as such are classified as Level 2 within the fair value hierarchy.

Furthermore, during the fourth quarter of fiscal year 2018, within our North America Solutions segment, management committed to a plan to auction several previously decommissioned rigs during fiscal year 2019.

As a result, we wrote them down to their estimated fair values.

We recorded a non-cash impairment charge of $ 5.7 million , which is included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2018.

The assets were recorded at fair value based on the auction price and as such are classified as Level 2 of the fair value hierarchy.

Decommissioning

While the crude oil market imbalance is a global phenomenon, it has more acutely impacted the U.S.

market as a result of storage limitations during the last two quarters of fiscal year 2020.

The abruptness of and the overall size of the decrease in demand for refined products, such as gasoline and diesel, has created an abundance of supply for such products which has caused the inventory levels of crude oil and its related refined products to become greatly elevated, reaching the high end of storage capabilities.

This has greatly reduced the need, or in some cases, entirely eliminated the ability of refineries to use crude oil as a feedstock.

As such, exploration and production ("E&P") companies, our customers, may have limited opportunities to offload their production and even then, the selling price could be at very low, uneconomical prices.

Consequently, some E&P companies have chosen to shut-in and stop production, not complete additional wells drilled and/or not drill any more wells until the market imbalance corrects and it is economical to resume production and drilling wells.

During the fiscal year ended September 30, 2020, we decommissioned two rigs and 35 rigs from our legacy Domestic Conventional asset group and FlexRig ® 3 asset group, respectively.

The decommissioned rigs were impaired as of March 31, 2020.

Depreciation in the Consolidated Statements of Operations of $ 474.7 million , $ 556.9 million and $ 578.4 million includes abandonments of $ 4.0 million , $ 11.4 million and $ 27.7 million for fiscal years 2020 , 2019 and 2018 , respectively.

Depreciation in the Consolidated Statements of Operations of $ 412.5 million, $ 474.7 million and $ 556.9 million includes abandonments of $ 2.0 million, $ 4.0 million and $ 11.4 million for the fiscal years 2021, 2020 and 2019, respectively.

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Assets Held-for-Sale

The following table summarizes the balance (in thousands) of our assets held-for-sale at the dates indicated below:

Balance at September 30, 2020

Asset additions 77,929

Sale of assets held-for-sale ( 6,476 )

Balance at September 30, 2021

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 their fair value less estimated cost to sell, and were reclassified as held-for-sale in the second and third quarters 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 fiscal 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 quarters of fiscal year 2021.

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 Company P.J.S.C.

("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.

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 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.

As a result, these rigs are classified as held-for-sale in the Consolidated Balance Sheets until each rig is delivered, at which time any related gain/loss on the sale will be recognized in the Consolidated Statement of Operations.

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.

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.

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.

The significant assumptions utilized in the held-for-sale valuations were based on our intended method of disposal, historical sales of similar assets, and market quotes and are classified as Level 2 and Level 3 inputs by ASC Topic 820, Fair Value Measurement and Disclosures.

Although we believe the assumptions used in our analysis are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion.

Gain on Sale of Assets

We had a gain on sale of assets of $ 46.8 million , $ 39.7 million and $ 22.7 million in fiscal years 2020 , 2019 and 2018 , respectively.

These gains were related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations.

Additionally, 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.

We had an aggregate gain on sale of assets of $ 1.0 million, $ 46.8 million and $ 39.7 million in fiscal years 2021, 2020 and 2019, respectively, which are included within Gain on Sale of Assets on the Consolidated Statement of Operations.

During the fiscal year ended September 30, 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.

Additionally during the fiscal year ended September 30, 2021, we sold excess drilling equipment and spares, which resulted in a loss of $ 31.2 million and we also sold assets previously classified as held-for-sale, which resulted in a $ 3.1 million gain.

Furthermore, we recognized a $ 14.4 million gain on asset sales related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations during the fiscal year ended September 30, 2021.

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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.

Additionally, we recorded a gain of $ 27.0 million related to the customer reimbursement for replacement value of lost or damaged drill pipe.

During the fiscal year ended September 30, 2019, our $ 39.7 million gain on sale of assets was primarily related to customer reimbursement for the replacement value of lost or damaged drill pipe.

NOTE 5 LEASES

ASC 842 Adoption

On October 1, 2019, we adopted ASC 842, retrospectively through a cumulative-effect adjustment without restating comparative periods for the 2019 and 2018 fiscal years as permitted under the specific transitional provisions in ASC 842.

The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening balance sheet on October 1, 2019.

Upon the adoption of ASC 842, we recognized lease liabilities in relation to leases that had previously been classified as operating leases under the principles of ASC 840.

These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of October 1, 2019, as most of our contracts do not provide an implicit rate.

The weighted average lessee’s incremental borrowing rate applied to the operating lease liabilities on October 1, 2019 was approximately 2.9 % .

The change in accounting policy affected the following items in the balance sheet on October 1, 2019:

(in thousands)

September 30, 2019

October 1, 2019

Other Noncurrent Assets:

Operating lease right-of-use asset

Current Liabilities:

Accrued Liabilities

Noncurrent Liabilities:

As of September 30, 2020 , segment assets and liabilities have all increased from September 30, 2019 as a result of the change in accounting policy.

All reportable segments were affected by the change in policy.

In applying ASC 842 for the first time, we have used the following practical expedients permitted by the topic:

The use of a single discount rate to a portfolio of leases with reasonably similar characteristics,

Not to reassess whether a contract is, or contains a lease at the date of initial application;

instead, for contracts entered into before the transition date, we relied on our assessment in which we applied ASC 840 prior to the adoption date,

The option to not reassess initial direct cost for existing leases, and

The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

We have made the accounting policy election to not recognize a right-of-use asset and corresponding liability for leases with a term of 12 months or less and leases of low-value.

Additionally, ASC 842 provides lessors with a practical expedient, by class of underlying asset, to not separate lease and non-lease components and account for the combined component under ASC 606 when the non-lease component is the predominant element of the combined component.

The lessor practical expedient is limited to circumstances in which the lease, if accounted for separately, would be classified as an operating lease under ASC 842.

With respect to our drilling service contracts that commenced or were amended during the fiscal year ended September 30, 2020 , we concluded that our drilling contracts contain a lease component and that the non-lease component is the predominant element of the combined component of such contracts.

As such, we elected to apply the practical expedient to not separate the lease and non-lease components and account for the combined component under ASC 606.

Therefore, we do not expect any change in our revenue recognition patterns or disclosures as a result of our adoption of ASC 842.

Lease Position

(in thousands)

October 1, 2019

September 30, 2020

(in thousands) September 30, 2021 September 30, 2020

Operating lease commitments, including probable extensions 1

$ 56,667 $ 48,695

Discounted using the lessee's incremental borrowing rate at the date of initial application $ 52,372 $ 46,706

short-term leases recognized on a straight-line basis as expense $ ( 1,761 ) ( 1,456 )

Low value lease contracts $ ( 123 ) —

Lease liability recognized $ 50,488 $ 45,250

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The recognized right-of-use assets relate to the following types of assets:

(in thousands)

October 1, 2019

September 30, 2020

(in thousands) September 30, 2021 September 30, 2020

Properties $ 48,176 $ 42,448

Equipment 935 1,394

Total right-of-use assets $ 49,187 $ 44,583

The right-of-use assets were measured at the amount equal to the lease liability, adjusted for the amount of any prepaid or accrued lease payments recognized on the balance sheet at September 30, 2019.

The following table presents certain information related to the lease costs for our operating leases:

Year ended September 30,

(in thousands) 2021 2020

September 30, 2020

Operating lease cost $ 13,686 $ 16,953

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The table below presents certain information related to the weighted average remaining lease terms and weighted average discount rates for our operating leases as of September 30, 2021.

September 30, 2020

September 30, 2021 September 30, 2020

Weighted average remaining lease term 6.7 4.9

Weighted average discount rate 2.5 % 2.7 %

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Lease Obligations

Future minimum rental payments required under operating leases having initial or remaining non-cancelable lease terms in excess of one year at September 30, 2021 (in thousands) are as follows:

Fiscal Year Amount

2022 $ 10,596

Thereafter 7,008

(1) Our future minimal rental payments exclude optional extensions that have not been exercised but are probable to be exercised in the future, those probable extensions are included in the operating lease liability balance.

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The future minimum lease payments for our Tulsa corporate office and our Tulsa industrial facility represent a material portion of the amounts shown in the table above.

The lease agreement for our Tulsa corporate office commenced on May 30, 2003 and has subsequently been amended, most recently on March 12, 2018.

The lease agreement for our Tulsa corporate office commenced on May 30, 2003 and has subsequently been amended, most recently on April 1, 2021.

The agreement will expire on January 31, 2025;

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however, we have two two-year renewal options which were recognized as part of our right-of-use assets and lease liabilities.

During the fiscal year ended September 30, 2021, we downsized and relocated our Houston assembly facility to a new location.

Refer to Note 18—Restructuring Charges for additional details.

As a result, and during fiscal year 2021, we entered into a lease agreement for a new assembly facility located in Galena Park, Texas.

This lease agreement commenced on January 1, 2021 and will expire on December 31, 2030;

however, we have one unpriced renewal option for a minimum of five years and a maximum of 10 years, which was not recognized as part of our right-of-use assets and lease liabilities.

This contract was accounted for as an operating lease resulting in an operating lease right-of-use asset of $ 16.0 million and minimum lease liability of $ 16.2 million as of September 30, 2021.

NOTE 6 GOODWILL AND INTANGIBLE ASSETS

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The following is a summary of changes in goodwill (in thousands):

September 30, 2017

September 30, 2018

September 30, 2019

September 30, 2020

Balance at September 30, 2019

Additions 1,200

Impairment ( 38,333 )

Balance at September 30, 2020

Balance at September 30, 2021

During fiscal year 2020, as a result of new information identified related to the acquisition of DrillScan ® , the acquisition date fair value of the contingent consideration and goodwill increased by approximately $ 1.2 million.

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Intangible Assets

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Intangible assets consisted of the following:

September 30, 2020

September 30, 2019

(in thousands)

Weighted Average Estimated Useful Lives

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

September 30, 2021 September 30, 2020

(in thousands) Weighted Average Estimated Useful Lives Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

Finite-lived intangible asset:

Developed technology

Intellectual property

Customer relationships

Amortization expense in the Consolidated Statements of Operations was $ 7.2 million , $ 5.8 million and $ 5.4 million for fiscal years 2020 , 2019 and 2018 , respectively, and is estimated to be $ 7.2 million for each of the next two succeeding fiscal years, approximately $ 6.5 million for fiscal year 2023 and approximately $ 6.4 million for fiscal years 2024 and 2025.

Developed technology 15 years $ 89,096 $ 22,182 $ 66,914 $ 89,096 $ 16,222 $ 72,874

Intellectual property 13 years 1,500 216 1,284 1,500 103 1,397

Trade name 20 years 5,865 1,158 4,707 5,865 842 5,023

Customer relationships 5 years 4,000 3,067 933 4,000 2,267 1,733

$ 100,461 $ 26,623 $ 73,838 $ 100,461 $ 19,434 $ 81,027

Amortization expense in the Consolidated Statements of Operations was $ 7.2 million, $ 7.2 million and $ 5.8 million for fiscal years 2021, 2020 and 2019, respectively, and is estimated to be $ 7.2 million for fiscal year 2022, approximately $ 6.5 million for fiscal year 2023 and approximately $ 6.4 million for fiscal years 2024, 2025 and 2026.

Impairment - Fiscal Year 2020

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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.

Impairment - Fiscal Year 2018

During the fourth quarter of fiscal year 2018, and as part of our annual goodwill impairment test, we performed a detailed assessment of the TerraVici reporting unit, where $ 4.7 million of goodwill was allocated.

We determined that the estimated fair value of this reporting unit was less than its carrying amount and we recorded goodwill impairment losses of $ 4.7 million .

In addition, we recorded an intangible assets impairment loss of $ 0.9 million .

These impairment losses are included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2018.

Our goodwill impairment analysis performed on our remaining technology reporting units in the fourth quarter of fiscal year 2018 did not result in an impairment charge.

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We had the following unsecured long-term debt outstanding with maturities shown in the following table:

September 30, 2020

September 30, 2019

(in thousands)

Unamortized Discount and Debt Issuance Cost

September 30, 2021 September 30, 2020

(in thousands) Face Amount Unamortized Discount and Debt Issuance Cost Book Value Face Amount Unamortized Discount and Debt Issuance Cost Book Value

Unsecured senior notes:

Due March 15, 2025 1

Less long-term debt due within one year

$ 487,148 $ ( 3,662 ) $ 483,486 $ 487,148 $ ( 6,421 ) $ 480,727

Due September 29, 2031 550,000 ( 8,003 ) 541,997 — — —

Total notes payable 1,037,148 ( 11,665 ) 1,025,483 487,148 ( 6,421 ) 480,727

long-term debt due within one year $ ( 487,148 ) 3,662 ( 483,486 ) — — —

Long-term debt $ 550,000 $ ( 8,003 ) $ 541,997 $ 487,148 $ ( 6,421 ) $ 480,727

HPIDC 2025 Notes

On March 19, 2015, our subsidiary, HPIDC issued $ 500.0 million of 4.65 percent unsecured senior notes due 2025 of HPIDC (the "HPIDC 2025 Notes"), which were redeemed in full on September 27, 2019 as described under "––Exchange Offer, Consent Solicitation and Redemption." Interest on the HPIDC 2025 Notes was payable semi-annually on March 15 and September 15.

The debt discount was being amortized to interest expense using the effective interest method.

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

Exchange Offer, Consent Solicitation and Redemption

On December 20, 2018, we settled an offer to exchange (the “Exchange Offer”) any and all outstanding 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.

(1) Debt was extinguished prior to maturity date.

Refer to 'Senior Notes' section below.

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 per annum.

The indenture governing the 2031 Notes 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 indenture governing the 2031 Notes 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 was payable semi-annually on March 15 and September 15 of each year, commencing on March 15, 2019.

The debt issuance cost was 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.

As a result, these notes were included in the current portion of long-term debt on our Consolidated Balance Sheets as of September 30, 2021.

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.

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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.

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 .

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

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.

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.

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Year ending September 30,

Thereafter - Due 2031 550,000

NOTE 8 INCOME TAXES

Income Tax Benefit and Rate

Income Tax (Benefit) Provision and Rate

The components of the benefit for income taxes are as follows:

1 unchanged sentence

(in thousands) 2021 2020 2019

Federal $ ( 15,466 ) $ 15,431 $ 21,745

Foreign 772 1,495 732

State 725 523 3,365

( 13,969 ) 17,449 25,842

Federal ( 81,760 ) ( 127,096 ) ( 35,809 )

Foreign 4,106 ( 12,390 ) 2,804

State ( 12,098 ) ( 18,069 ) ( 11,549 )

( 89,752 ) ( 157,555 ) ( 44,554 )

Total benefit $ ( 103,721 ) $ ( 140,106 ) $ ( 18,712 )

The amounts of domestic and foreign income (loss) before income taxes are as follows:

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The amounts of domestic and foreign loss before income taxes are as follows:

Year Ended September 30,

(in thousands) 2021 2020 2019

Domestic $ ( 412,556 ) $ ( 458,364 ) $ ( 45,118 )

Foreign ( 28,624 ) ( 178,134 ) ( 6,104 )

$ ( 441,180 ) $ ( 636,498 ) $ ( 51,222 )

Effective income tax rates as compared to the U.S.

1 unchanged sentence

Year Ended September 30,

2021 2020 2019

Federal income tax rate 21.0 % 21.0 % 21.0 %

1 unchanged sentence

State income taxes, net of federal tax benefit 2.6 2.8 17.2

Remeasurement of deferred tax related to Tax Cuts and Jobs Act

Other impact of foreign operations — ( 0.5 ) 0.9

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Contingent consideration adjustment — — 4.5

Other 0.7 ( 0.4 ) ( 4.8 )

Effective income tax rate 23.5 % 22.0 % 36.5 %

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Marketable securities 1,669 1,957

Other 26,244 26,138

Total deferred tax liabilities 626,711 713,484

Deferred tax assets:

Marketable securities

Pension reserves 5,791 7,369

2 unchanged sentences

Financial accruals 31,910 32,481

Other 17,963 15,632

Total deferred tax assets 89,000 99,589

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The change in our net deferred tax assets and liabilities is impacted by foreign currency remeasurement.

As of September 30, 2020 , we had federal, state and foreign tax net operating loss carryforwards of $ 7.3 million , $ 25.7 million and $ 39.9 million , respectively, and foreign tax credit carryforwards of approximately $ 23.9 million (of which $ 19.1 million is reflected as a deferred tax asset in our Consolidated Financial Statements prior to consideration of our valuation allowance) which will expire in fiscal years 2021 through 2040.

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As of September 30, 2021, we had federal, state and foreign tax net operating loss carryforwards of approximately $ 7.3 million, $ 56.2 million and $ 32.0 million, respectively, federal and foreign research and development tax credits of approximately $ 1.0 million and $ 0.3 million, respectively, and foreign tax credit carryforwards of approximately $ 10.6 million (of which $ 9.3 million is reflected as a deferred tax asset in our Consolidated Balance Sheets prior to consideration of our valuation allowance), which will expire in fiscal years 2022 through 2041 and some of which can be carried forward indefinitely.

Certain of these carryforwards are subject to various rules which impose limitations on their utilization.

The valuation allowance is primarily attributable to foreign net operating loss carryforwards of $ 9.5 million, foreign tax credit carryforwards of $ 9.3 million, equity compensation of $ 5.4 million, and foreign minimum tax credit carryforwards of $ 1.4 million which more likely than not will not be utilized.

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and international operations that could result in increases or decreases of our unrecognized tax benefits.

However, we do not expect the increases or decreases to have a material effect on our results of operations or financial position.

However, we do not expect any such increases or decreases to have a material effect on our results of operations or financial position.

We file a consolidated U.S.

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

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 .

During the fiscal year ended September 30, 2021, we purchased no common shares.

We purchased 1.5 million and 1.0 million common shares at an aggregate cost of $ 28.5 million and $ 42.8 million, which are held as treasury shares, during the fiscal years ended September 30, 2020 and 2019, respectively.

As of September 30, 2021, we declared $ 109.2 million in cash dividends.

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As a result, we recorded a Dividend Payable of $ 27.3 million on our Consolidated Balance Sheets as of September 30, 2021.

Accumulated Other Comprehensive Income (Loss)

Components of accumulated other comprehensive income (loss) were as follows:

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Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss were as follows:

September 30,

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Pre-tax amounts:

Unrealized appreciation on securities (1)

Unrealized actuarial loss ( 26,268 ) ( 33,923 ) ( 37,084 )

$ ( 26,268 ) $ ( 33,923 ) $ ( 37,084 )

After-tax amounts:

Unrealized appreciation on securities (1)

Unrealized actuarial loss ( 20,244 ) ( 26,188 ) ( 28,635 )

We adopted ASU No.

2016-01 on October 1, 2018.

The standard requires that changes in the fair value of our equity investments must be recognized in net income.

$ ( 20,244 ) $ ( 26,188 ) $ ( 28,635 )

The following is a summary of the changes in accumulated other comprehensive loss, net of tax, by component for the fiscal year ended September 30, 2021:

(in thousands)

Defined Benefit Pension Plan

(in thousands) Defined Benefit Pension Plan

Balance at September 30, 2020 $ ( 26,188 )

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During the fiscal years ended September 30, 2021, 2020 and 2019, early termination revenue associated with term contracts was approximately $ 7.7 million, $ 73.4 million and $ 11.3 million, respectively.

During the fiscal years ended September 30, 2020 , 2019 and 2018 , notification fee revenue related to well-to-well contracts was approximately $ 2.9 million , $ 1.2 million and $ 0.2 million , respectively.

During the fiscal year ended September 30, 2021, we recognized no notification fee revenue related to well-to-well contracts.

During the fiscal years ended September 30, 2020 and 2019, notification fee revenue related to well-to-well contracts was approximately $ 2.9 million and $ 1.2 million, respectively.

We also act as a principal for certain reimbursable services and auxiliary equipment provided by us to our clients, for which we incur costs and earn revenues.

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These revenues are deferred and recognized ratably over the related contract term that drilling services are provided.

For any contracts that include a provision for pooled term days at contract inception, followed by the assignment of days to specific rigs throughout the contract term, we have elected, as a practical expedient, to recognize revenue in the amount to which the entity has a right to invoice, as permitted by ASC 606.

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Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term.

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The following table summarizes the balances of our contract assets and liabilities at the dates indicated:

(in thousands)

September 30, 2020

September 30, 2019

(in thousands) September 30, 2021 September 30, 2020

Contract assets $ 4,513 $ 2,367

(in thousands)

September 30, 2020

(in thousands) September 30, 2021

Contract liabilities balance at October 1, 2019 $ 23,354

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Contract liabilities balance at September 30, 2021 $ 9,286

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NOTE 11 STOCK-BASED COMPENSATION

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2020 Omnibus Incentive Plan (the “2020 Plan”) was approved by our stockholders.

The 2020 Plan replaces our stockholder-approved Helmerich & Payne, Inc.

2016 Omnibus Incentive Plan (the "2016 Plan").

The 2020 Plan is a stock and cash-based incentive plan that, among other things, authorizes the Board or Human Resources Committee of the Board to grant executive officers, employees and non-employee directors stock options, stock appreciation rights, restricted shares and restricted share units (including performance share units), share bonuses, other share-based awards and cash awards.

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Awards outstanding under the Helmerich & Payne, Inc.

2005 Long-Term Incentive Plan, the Helmerich & Payne, Inc.

2010 Long-Term Incentive Plan and the 2016 Plan remain subject to the terms and conditions of those plans.

2010 Long-Term Incentive Plan and the Helmerich & Payne, Inc.

2016 Omnibus Incentive Plan (the "2016 Plan") remain subject to the terms and conditions of those plans.

Beginning with fiscal year 2019, we replaced stock options with performance share units as a component of our executives' long-term equity incentive compensation.

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We have also eliminated stock options as an element of our non-employee director compensation program.

The Board has determined to award stock-based compensation to non-employee directors solely in the form of restricted stock.

During the fiscal year ended September 30, 2020 , 727,009 shares of restricted stock awards and 258,857 performance share units were granted under the 2016 Plan and 54,118 shares of restricted stock awards were granted under the 2020 Plan.

A summary of compensation cost for stock-based payment arrangements recognized in drilling services operating expense, research and development expense and selling, general and administrative expense in fiscal years 2020 , 2019 and 2018 is as follows:

At September 30, 2021, we had 2.7 million outstanding stock options and 2.5 million exercisable stock options with weighted-average exercise prices of $ 63.34 and $ 63.57 , respectively.

During the fiscal year ended September 30, 2021, 700,982 shares of restricted stock awards and 312,600 performance share units were granted under the 2020 Plan.

A summary of compensation cost for stock-based payment arrangements recognized in drilling services operating expense, research and development expense and selling, general and administrative expense on our Consolidated Statements of Operations, in fiscal years 2021, 2020 and 2019 is as follows:

September 30,

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Stock-based compensation expense

Stock options

Restricted stock

Performance share units

Stock-based compensation benefit included in restructuring charges

Of the total stock-based compensation expense, $ 9.1 million was recorded in drilling services operating expense, $ 0.8 million was recorded in research and development expense, $ 29.9 million in selling, general and administrative expense and $( 3.5 ) million was recorded in restructuring charges during the year ended September 30, 2020 on our Consolidated Statements of Operations.

Stock Options

Vesting requirements for stock options are determined by the Human Resources Committee of the Board.

Options currently outstanding began vesting one year after the grant date with 25 percent of the options vesting for four consecutive years.

We use the Black-Scholes formula to estimate the fair value of stock options granted to employees.

The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods.

Risk-free interest rate (1)

Expected stock volatility (2)

Dividend yield (3)

Expected term (in years) (4)

The risk-free interest rate is based on U.S.

Treasury securities for the expected term of the option.

Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the option.

The dividend yield is based on our current dividend yield.

The expected term of the options granted represents the period of time that they are expected to be outstanding.

We estimate term of option granted based on historical experience with grants and exercise.

Based on these calculations, the weighted-average fair value per option granted to acquire a share of common stock was $ 13.17 per share for fiscal year 2018 .

The following summary reflects the stock option activity for our common stock and related information for fiscal years 2020 , 2019 and 2018 :

(shares in thousands)

Weighted-Average Exercise Price

Outstanding at October 1,

Forfeited/Expired

Outstanding on September 30,

Exercisable on September 30,

The following table summarizes information about stock options at September 30, 2020 (shares in thousands):

Outstanding Stock Options

Exercisable Stock Options

Range of Exercise Prices

Weighted-Average Remaining Life

Weighted-Average Exercise Price

$40.00 to $55.00

$55.00 to $70.00

$70.00 to $85.00

At September 30, 2020 , the weighted-average remaining life of exercisable stock options was 4.16 years and the aggregate intrinsic value was zero with a weighted-average exercise price of $ 62.38 per share.

The number of options vested or expected to vest at September 30, 2020 was 347,093 with an aggregate intrinsic value of zero and a weighted-average exercise price of $ 62.63 per share.

As of September 30, 2020 , the unrecognized compensation cost related to the stock options was $ 1.2 million .

That cost is expected to be recognized over a weighted-average period of 1.22 years.

The total intrinsic value of options exercised during fiscal years 2020 , 2019 and 2018 was $ 0.3 million , $ 7.9 million and $ 9.9 million , respectively.

The grant date fair value of shares vested during fiscal years 2020 , 2019 and 2018 was $ 6.0 million , $ 8.0 million and $ 8.8 million , respectively.

Drilling services operating $ 5,927 $ 9,086 $ 7,132

Research and development 1,271 765 328

Selling, general and administrative 20,660 29,960 26,832

Restructuring charges — ( 3,482 ) —

$ 27,858 $ 36,329 $ 34,292

Restricted Stock

Restricted stock awards consist of our common stock and are time-vested over four years .

Restricted stock awards consist of our common stock.

Awards granted prior to September 30, 2020 are time-vested over four years , and awards granted after September 30, 2020 are time vested over three years .

Non-forfeitable dividends are paid on non-vested shares of restricted stock.

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A summary of the status of our restricted stock awards as of September 30, 2021, and of changes in restricted stock outstanding during the fiscal years ended September 30, 2021, 2020 and 2019, is as follows:

(shares in thousands)

Weighted-Average Grant Date Fair Value per Share

2021 2020 2019

(shares in thousands) Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share

Non-vested restricted stock outstanding at October 1, 1,280 $ 49.81 1,085 $ 61.28 1,001 $ 63.74

701 25.61 781 39.99 475 58.45

( 534 ) 51.79 ( 501 ) 59.46 ( 371 ) 64.32

Forfeited ( 35 ) 35.76 ( 85 ) 48.98 ( 20 ) 60.85

Non-vested restricted stock outstanding at September 30, 1,412 $ 37.36 1,280 $ 49.81 1,085 $ 61.28

The number of restricted stock awards granted includes phantom shares that confer the benefits of owning company stock without the actual ownership or transfer of any shares.

There were 20,616 phantom shares granted during fiscal year 2020 .

(1) Restricted stock shares include restricted phantom stock units under our Director Deferred Compensation Plan.

These phantom stock units confer the economic benefits of owning company stock without the actual ownership, transfer or issuance of any shares.

During the fiscal year ended September 30, 2021 , 18,906 restricted phantom stock units were granted and 20,616 restricted phantom stock units vested during the same period.

(2) The number of restricted stock awards vested includes shares that we withheld on behalf of our employees to satisfy the statutory tax withholding requirements.

Performance Share Units

We have made awards to certain employees that are subject to market-based performance conditions ("performance share units").

Subject to the terms and conditions set forth in the applicable performance share unit award agreements and the 2016 Plan, grants of performance share units are subject to a vesting period of three years (the “Vesting Period”) that is dependent on the achievement of certain performance goals.

Such performance share unit awards consist of two separate components.

Performance share units that comprise the first component are subject to a three -year performance cycle.

Performance share units that comprise the second component are further divided into three separate tranches, each of which is subject to a separate one -year performance cycle within the full three -year performance cycle.

The vesting of the performance share units is generally dependent on (i) the achievement of the Company’s total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Group”) over the applicable performance cycle, and (ii) the continued employment of the recipient of the performance share unit award throughout the Vesting Period.

At the end of the Vesting Period, recipients receive dividend equivalents, if any, with respect to the number of vested performance share units.

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Performance Units

We have made awards to certain employees that are subject to market-based performance conditions ("performance units").

Subject to the terms and conditions set forth in the applicable performance share unit award agreements and the 2020 Plan, grants of performance units are subject to a vesting period of three years (the “Vesting Period”) that is dependent on the achievement of certain performance goals.

Such performance unit grants consist of two separate components.

Performance units that comprise the first component are subject to a three-year performance cycle.

Performance units that comprise the second component are further divided into three separate tranches, each of which is subject to a separate one-year performance cycle within the full three-year performance cycle.

The vesting of the performance units is generally dependent on (i) the achievement of the Company’s total shareholder return (“TSR”) performance goals relative to the TSR achievement of a peer group of companies (the “Peer Group”) over the applicable performance cycle, and (ii) the continued employment of the recipient of the performance unit award throughout the Vesting Period.

At the end of the Vesting Period, recipients receive dividend equivalents, if any, with respect to the number of vested performance units.

The vesting of units ranges from zero to 200 percent of the units granted depending on the Company’s TSR relative to the TSR of the Peer Group on the vesting date.

The grant date fair value of performance share units was determined through use of the Monte Carlo simulation method.

The grant date fair value of performance units was determined through use of the Monte Carlo simulation method.

The Monte Carlo simulation method requires the use of highly subjective assumptions.

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The valuation model assumes dividends are immediately reinvested.

As of September 30, 2020 , there was $ 6.6 million of unrecognized compensation cost related to unvested performance share units.

As of September 30, 2021, there was $ 9.5 million of unrecognized compensation cost related to unvested performance units.

That cost is expected to be recognized over a weighted-average period of 1.9 years.

A summary of the status of our performance share units as of September 30, 2020 and changes in non-vested performance share units outstanding during the fiscal year ended September 30, 2020 is presented below:

(in thousands, except per share amounts)

Weighted-Average Grant Date Fair Value per Share

Non-vested performance share units outstanding at September 30, 2019

Non-vested performance share units outstanding at September 30, 2020

The weighted-average fair value calculations for performance share units granted within the fiscal period are based on the following weighted-average assumptions set forth in the table below.

A summary of the status of our performance units as of September 30, 2021, 2020 and 2019 and changes in non-vested performance units outstanding during the fiscal years ended September 30, 2021, 2020 and 2019 is presented below:

2021 2020 2019

(in thousands, except per share amounts) Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share Shares Weighted-Average Grant Date Fair Value per Share

Non-vested performance units outstanding at October 1, 337 $ 51.09 145 $ 62.66 $ — $ —

Granted 313 29.77 259 43.40 145 62.66

Dividend rights performance units credited 60 49.64 — — — —

Forfeited ( 11 ) 43.40 ( 67 ) 46.35 — —

Non-vested performance units outstanding September 30, 1

699 $ 41.55 337 $ 51.09 $ 145 $ 62.66

(1) Of the total non-vested performance units at the end of the period, specified performance criteria has been achieved with respect to 88,440 performance units which is calculated based on the payout percentage for the completed performance period.

The vesting and number of the remainder of non-vested performance units reflected at the end of the period is contingent upon our achievement of specified target performance criteria.

If we meet the specified maximum performance criteria, approximately 547,392 additional performance units could vest or become eligible to vest.

The weighted-average fair value calculations for performance units granted within the fiscal period are based on the following weighted-average assumptions set forth in the table below.

2021 2020 2019

Risk-free interest rate 1

0.2 % 1.6 % 2.7 %

Expected stock volatility 2

62.3 % 34.8 % 35.9 %

Expected term (in years) 3.1 3.2 3.0

(1) The risk-free interest rate is based on U.S.

Treasury securities for the expected term of the performance share units.

Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the performance share units.

NOTE 13 EARNINGS (LOSSES) PER COMMON SHARE

Treasury securities for the expected term of the performance units.

(2) Expected volatilities are based on the daily closing price of our stock based upon historical experience over a period which approximates the expected term of the performance units.

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NOTE 12 EARNINGS (LOSS) PER COMMON SHARE

ASC 260, Earnings per Share, requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per share.

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Basic earnings per share is computed utilizing the two-class method and is calculated based on the weighted-average number of common shares outstanding during the periods presented.

Diluted earnings per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options, nonvested restricted stock and performance share units.

Under the two-class method of calculating earnings per share, dividends paid and a portion of undistributed net income, but not losses, are allocated to unvested restricted stock grants that receive dividends, which are considered participating securities.

The following table sets forth the computation of basic and diluted earnings per share:

The following table sets forth the computation of basic and diluted earnings (loss) per share:

September 30,

(in thousands, except per share amounts) 2021 2020 2019

Income (loss) from continuing operations

Loss from continuing operations $ ( 337,459 ) $ ( 496,392 ) $ ( 32,510 )

Income (loss) from discontinued operations 11,309 1,895 ( 1,146 )

Net income (loss)

Adjustment for basic earnings per share

Earnings allocated to unvested shareholders

Net loss ( 326,150 ) ( 494,497 ) ( 33,656 )

Adjustment for basic earnings (loss) per share

Losses allocated to unvested shareholders ( 1,350 ) ( 2,647 ) ( 3,102 )

Numerator for basic earnings (loss) per share:

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From discontinued operations 11,309 1,895 ( 1,146 )

Adjustment for diluted earnings (loss) per share:

Effect of reallocating undistributed earnings of unvested shareholders

( 327,500 ) ( 497,144 ) ( 36,758 )

Numerator for diluted earnings (loss) per share:

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From discontinued operations 11,309 1,895 ( 1,146 )

$ ( 327,500 ) $ ( 497,144 ) $ ( 36,758 )

Denominator for basic earnings (loss) per share - weighted-average shares 107,818 108,009 109,216

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Basic earnings (loss) per common share:

Income (loss) from continuing operations

Loss from continuing operations $ ( 3.14 ) $ ( 4.62 ) $ ( 0.33 )

Income (loss) from discontinued operations 0.10 0.02 ( 0.01 )

Net income (loss)

Net loss $ ( 3.04 ) $ ( 4.60 ) $ ( 0.34 )

Diluted earnings (loss) per common share:

Income (loss) from continuing operations

Loss from continuing operations $ ( 3.14 ) $ ( 4.62 ) $ ( 0.33 )

Income (loss) from discontinued operations 0.10 0.02 ( 0.01 )

Net income (loss)

Net loss $ ( 3.04 ) $ ( 4.60 ) $ ( 0.34 )

We had a net loss for fiscal years 2021, 2020, and 2019.

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The following potentially dilutive average shares attributable to outstanding equity awards were excluded from the calculation of diluted earnings (losses) per share because their inclusion would have been anti-dilutive:

2021 FORM 10-K | 89

(in thousands, except per share amounts) 2021 2020 2019

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This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The assets held in a Non-Qualified Supplemental Savings Plan are carried at fair value and totaled $ 19.8 million and $ 15.7 million at September 30, 2020 and 2019 , respectively.

The assets are comprised of mutual funds that are measured using Level 1 inputs.

Short-term investments include securities classified as trading securities.

Both realized and unrealized gains and losses on trading securities are included in other income (expense) in the Consolidated Statements of Operations.

The securities are recorded at fair value.

Our non-financial assets, such as intangible assets, goodwill and property, plant and equipment, are recorded at fair value when acquired in a business combination or when an impairment charge is recognized.

At September 30, 2021, our financial instruments measured at fair value utilizing Level 1 inputs include cash equivalents, U.S.

agency issued debt securities, equity securities with active markets and money market funds.

For these items, quoted current market prices are readily available.

Our restricted assets consist of cash equivalents with the current portion included in prepaid expenses and other, and the noncurrent portion included in other assets.

At September 30, 2021, assets measured at fair value using Level 2 inputs include corporate bonds measured using broker quotations that utilize observable market inputs.

Our financial instruments measured using Level 3 unobservable inputs primarily consist of potential earnout payments associated with our business acquisitions in fiscal year 2019.

Our non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value when acquired in a business combination or when an impairment charge is recognized.

If measured at fair value in the Consolidated Balance Sheets, these would generally be classified within Level 2 or 3 of the fair value hierarchy.

The majority of cash equivalents are invested in highly-liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S.

Government and in federally insured deposit accounts.

The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

Refer to Note 4—Property, Plant and Equipment for additional disclosure on the fair value of our assets classified as held-for-sale as of September 30, 2021.

The carrying value of other current assets, accrued liabilities and other liabilities approximated fair value at September 30, 2021 and 2020.

The following table summarizes our assets and liabilities measured at fair value presented in our Consolidated Balance Sheet:

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The following table summarizes our assets and liabilities measured at fair value presented in our Consolidated Balance Sheets:

September 30, 2021

(in thousands)

(in thousands) Fair Value Level 1 Level 2 Level 3

Recurring fair value measurements:

Cash and cash equivalents $ 917,534 $ 917,534 $ — $ —

Short-term investments:

Certificates of deposit

Corporate and municipal debt securities

Corporate debt securities 192,950 — 192,950 —

government and federal agency securities 5,750 5,750 — —

Total short-term investments 198,700 5,750 192,950 —

Other current assets 18,350 18,350 — —

Non-qualified supplemental savings plan 18,221 18,221 — —

Debt and equity securities 17,223 13,858 — 3,365

Cornerstone investment in ADNOC Drilling 100,000 100,000 — —

Total investments 135,444 132,079 — 3,365

Other assets 832 832 — —

Total assets measured at fair value $ 1,270,860 $ 1,074,545 $ 192,950 $ 3,365

Contingent consideration $ 2,996 $ — $ — $ 2,996

September 30, 2020

(in thousands) Fair Value Level 1 Level 2 Level 3

Recurring fair value measurements:

Cash and cash equivalents $ 487,884 $ 487,884 $ — $ —

Short-term investments:

Certificates of deposit 1,370 — 1,370 —

Corporate debt securities 78,156 — 78,156 —

government and federal agency securities 7,817 7,817 — —

Other 1,992 1,992 — —

Total short-term investments 89,335 9,809 79,526 —

Other current assets 45,577 45,577 — —

Non-qualified supplemental savings plan 19,819 19,819 — —

Debt and equity securities 11,766 7,274 3,992 500

Total investments 31,585 27,093 3,992 500

Other assets 3,286 3,286 — —

Total assets measured at fair value $ 657,667 $ 573,649 $ 83,518 $ 500

Contingent earnout liability

At September 30, 2020 , our financial instruments measured at fair value utilizing Level 1 inputs include cash equivalents, U.S.

Agency issued debt securities, equity securities with active markets, and money market funds that are classified as restricted assets.

The current portion of restricted amounts are included in prepaid expenses and other, and the noncurrent portion is included in other assets.

For these items, quoted current market prices are readily available.

At September 30, 2020 , assets measured at fair value using Level 2 inputs include certificates of deposit, municipal bonds and corporate bonds measured using broker quotations that utilize observable market inputs.

Our financial instruments measured using Level 3 unobservable inputs primarily consist of potential earnout payments primarily associated with our business acquisitions in fiscal year 2019.

Contingent consideration $ 9,123 $ — $ — $ 9,123

Cash Equivalents and Investments (Short and Long-Term)

The majority of cash equivalents are invested in highly liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S.

Government and in federally insured deposit accounts.

The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

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Short-term investments include securities classified as trading securities.

Both realized and unrealized gains and losses on trading securities are included in other income (expense) in the Consolidated Statements of Operations.

The securities are recorded at fair value.

Our long-term investments include equity securities and assets held in a Non-Qualified Supplemental Savings Plan ("Savings Plan").

Our assets that we hold in the Savings Plan are comprised of mutual funds that are measured using Level 1 inputs.

Additionally, we hold equity securities in Schlumberger, Ltd., which is classified as Level 1 and based on the quoted stock price.

We also hold various other equity securities without readily determinable fair values that are classified as Level 3.

These equity securities are measured at cost, less any impairments.

As a result of the change in the fair value of our long-term investments, we recorded a gain of $ 6.7 million for the year ended September 30, 2021.

During September 2021, the Company made a $ 100.0 million cornerstone investment in ADNOC Drilling in advance of its announced IPO.

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.

Our investment is subject to a three-year lockup period and is classified as a long-term investment within Investments in our Consolidated Balance Sheets.

As of September 30, 2021, this investment was classified as a Level 1 investment.

Contingent Consideration

The following table presents a reconciliation of changes in the fair value of our financial liabilities classified as Level 3 fair value measurements in the fair value hierarchy for fiscal years 2021 and 2020:

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Net liabilities at beginning of period $ 9,123 $ 18,373

Additions — 1,500

Total gains or losses:

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Settlements 1

( 7,250 ) ( 8,250 )

Net liabilities at end of period $ 2,996 $ 9,123

(1) Settlements represent earnout payments that have been earned or paid during the period.

The following table provides quantitative information (in thousands) about our Level 3 unobservable inputs related to our financial liabilities at September 30, 2020 :

Valuation Technique

Unobservable Input

Weighted Average (1)

Monte Carlo simulation

Discount rate

Revenue Volatility

Risk free rate

Probability Analysis

Discount rate

Payment amounts

$5,250 - $7,000

Probabilities

The weighted average of the payment amounts and the probabilities (Level 3 unobservable inputs), associated with the contingent consideration valued using probability analysis, were weighted by the relative undiscounted fair value of payment amounts and of probability payment amounts, respectively.

The above significant unobservable inputs are subject to change based on changes in economic and market conditions.

The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date.

The significant unobservable inputs used in the fair value measurement of the contingent consideration using Monte Carlo simulation are (i) discount rate, (ii) revenue volatility and (iii) risk-free rate.

Significant increases or decreases in the discount rate and risk-free rate in isolation would result in a significantly lower or higher fair value measurement.

Significant changes in revenue volatility in isolation would result in a significantly lower or higher fair value measurement.

The significant unobservable inputs used in the fair value measurement of the contingent consideration using probability analysis are (i) discount rate, (ii) payment amounts and (iii) probabilities.

Significant increases or decreases in the discount rate in isolation would result in a significantly lower or higher fair value measurement.

Significant increases or decreases in the payment amounts or probabilities in isolation would result in a significantly higher or lower fair value measurement.

It is not possible for us to predict the effect of future economic or market conditions on our estimated fair values.

The following information presents the supplemental fair value information about long-term fixed-rate debt at September 30, 2020 and 2019 :

Supplemental Fair Value Information

The following information presents the supplemental fair value information about current and long-term fixed-rate debt at September 30, 2021 and 2020:

September 30,

(in millions) 2021 2020 1

Carrying value of long-term fixed-rate debt

Fair value of long-term fixed-rate debt

The fair value for the $ 534.5 million fixed-rate debt was based on broker quotes at September 30, 2020 .

Current portion of long-term debt

Carrying value $ 483.5 $ —

Fair value $ 541.6 $ —

Long-term debt, net

Carrying value $ 542.0 $ 480.7

Fair value $ 554.3 $ 534.5

(1) As of September 30, 2021 we reclassified the outstanding 2025 Notes to Current Portion of Long-Term Debt on our Consolidated Balance Sheets.

On October 27, 2021, we redeemed these notes.

See Note 7—Debt to our Consolidated Financial Statements.

The fair value for the $ 541.6 million current portion of fixed-rate debt and the $ 554.3 million of long-term fixed-rate debt are based on broker quotes at September 30, 2021.

The notes are classified within Level 2 of the fair value hierarchy as they are not actively traded in markets.

The estimated fair value of our investments, reflected on our Consolidated Balance Sheets as Investments, is primarily based on Level 1 inputs.

As a result of the change in the fair value of our investments, we recorded a loss of $ 8.7 million for the fiscal year ended September 30, 2020 .

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 .

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NOTE 14 EMPLOYEE BENEFIT PLANS

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Interest cost 2,925 3,598

Actuarial (gain) loss

Actuarial loss 7,111 4,310

Benefits paid ( 15,749 ) ( 11,607 )

Other ( 81 ) —

Projected benefit obligation at end of year $ 110,352 $ 116,146

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Funded status of the plan at end of year $ ( 23,097 ) $ ( 30,043 )

The amounts recognized in the Consolidated Balance Sheets at September 30, 2020 and 2019 are as follows (in thousands):

Fluctuations in actuarial losses during the period are primarily due to changes in the discount rate, interest rates, and the mortality table.

The mortality table issued by the Society of Actuaries in October 2020 was used for the September 30, 2021 pension calculation.

The amounts recognized in the Consolidated Balance Sheets at September 30, 2021 and 2020 are as follows:

(in thousands) 2021 2020

Accrued liabilities $ — $ ( 18 )

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Net amount recognized $ ( 23,097 ) $ ( 30,043 )

The amounts recognized in Accumulated Other Comprehensive Income (Loss) at September 30, 2020 and 2019 , and not yet reflected in net periodic benefit cost, are as follows (in thousands):

The amounts recognized in Accumulated Other Comprehensive Loss at September 30, 2021 and 2020, and not yet reflected in net periodic benefit cost, are as follows:

(in thousands) 2021 2020

Net actuarial loss $ 26,268 $ 33,923

The amount recognized in Accumulated Other Comprehensive Income (Loss) and not yet reflected in periodic benefit cost expected to be amortized in next year’s periodic benefit cost is a net actuarial loss of $ 2.4 million .

The weighted average assumptions used for the pension calculations were as follows:

September 30,

2021 2020 2019

Discount rate for net periodic benefit costs 2.66 % 3.16 % 4.27 %

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Expected return on plan assets 3.50 % 4.65 % 5.60 %

The mortality table issued by the Society of Actuaries in October 2019 was used for the September 30, 2020 pension calculation.

We did not make any contributions to the Pension Plan in fiscal year 2020 .

We made a voluntary contribution of $ 5.0 million in fiscal year 2021.

In fiscal year 2022, we do not expect minimum contributions required by law to be needed.

However, we may make contributions in fiscal year 2022 if needed to fund unexpected distributions in lieu of liquidating pension assets.

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Components of the net periodic pension expense were as follows:

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Recognized net actuarial loss 3,205 2,718 1,229

Settlement 3,448 3,001 1,953

Other ( 81 ) — —

Net pension expense $ 5,775 $ 4,533 $ 2,048

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Year Ended September 30,

2022 2023 2024 2025 2026 2027 – 2031 Total

$ 7,316 $ 7,731 $ 8,483 $ 7,018 $ 7,406 $ 30,990 $ 68,944

Included in the Pension Plan is an unfunded supplemental executive retirement plan.

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The expected long-term rate of return on Pension Plan assets is based on historical and projected rates of return for current and planned asset classes in the Pension Plan’s investment portfolio after analyzing historical experience and future expectations of the return and volatility of various asset classes.

During the 2021 fiscal year, we implemented a glide-path strategy with a goal to reduce risk as certain funded levels are achieved and began aligning our fixed income exposure with our pension liabilities.

The target allocation for 2022 and the asset allocation for the Pension Plan at the end of fiscal years 2021 and 2020, by asset category, follows:

Target Allocation

September 30,

Target Allocation September 30,

Asset Category 2022 2021 2020

equities 17 % 46 % 42 %

International equities 12 17 22

Fixed income 71 37 36

Total 100 % 100 % 100 %

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The fair value of Pension Plan assets at September 30, 2021 and 2020, summarized by level within the fair value hierarchy described in Note 13—Fair Value Measurement of Financial Instruments, are as follows:

September 30, 2021

(in thousands)

(in thousands) Total Level 1 Level 2 Level 3

Short-term investments $ 2,444 $ 2,444 $ — $ —

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Domestic stock funds 35,212 35,212 — —

Bond funds 17,679 17,679 — —

Balanced funds 17,520 17,520 — —

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Oil and gas properties 21 — — 21

Total $ 87,255 $ 87,234 $ — $ 21

September 30, 2020

(in thousands)

(in thousands) Total Level 1 Level 2 Level 3

Short-term investments $ 1,541 $ 1,541 $ — $ —

1 unchanged sentence

Domestic stock funds 35,660 35,660 — —

Bond funds 17,328 17,328 — —

Balanced funds 17,447 17,447 — —

1 unchanged sentence

Total mutual funds 84,479 84,479 — —

Domestic common stock

Oil and gas properties 83 — — 83

Total $ 86,103 $ 86,020 $ — $ 83

As of September 30, 2021 and 2020, the Pension Plan’s financial assets utilizing Level 1 inputs are valued based on quoted prices in active markets for identical securities.

As of September 30, 2019, the Pension Plan’s Level 2 financial assets include domestic common stock.

As of September 30, 2021 and 2020, the Pension Plan’s assets utilizing Level 3 inputs consist of oil and gas properties.

The fair value of oil and gas properties is determined by Wells Fargo Bank, N.A., based upon actual revenue received for the previous twelve-month period and experience with similar assets.

The following table sets forth a summary of changes in the fair value of the Pension Plan’s Level 3 assets for the fiscal years ended September 30, 2020 and 2019 :

Oil and Gas Properties

Year Ended September 30,

(in thousands)

Balance, beginning of year

Unrealized gains (losses) relating to property still held at the reporting date

Balance, end of year

Defined Contribution Plan

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NOTE 15 SUPPLEMENTAL BALANCE SHEET INFORMATION

The following reflects the activity in our reserve for bad debt for fiscal years 2020 , 2019 and 2018 :

The following reflects the activity in our reserve for expected credit losses on trade receivables for fiscal years 2021, 2020 and 2019:

(in thousands) 2021 2020 2019

Reserve for bad debt:

Reserve for credit losses:

Balance at October 1, $ 1,820 $ 9,927 $ 6,217

Provision for bad debt

(Write-off) recovery of bad debt

Provision for credit loss 203 2,203 2,321

(Write-off) recovery of credit loss 45 ( 10,310 ) 1,389

Balance at September 30, $ 2,068 $ 1,820 $ 9,927

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Accounts receivable, prepaid expenses and other current assets, accrued liabilities and long-term liabilities at September 30, 2021 and 2020 consist of the following:

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Prepaid maintenance and rent 5,540 7,273

Accrued demobilization

Accrued demobilization, net 4,513 2,367

Prepaid operating expenses 17,959 —

Other 20,837 13,421

Total prepaid expenses and other current assets $ 85,928 $ 89,305

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Deferred income 8,546 9,266

Advance payment for sale of property, plant and equipment 86,524 —

Deferred mobilization revenue 4,662 5,705

Accrued income taxes 881 —

Escrow 138 138

Litigation and claims 1,463 393

Contingent earnout liability

Contingent liability 5,985 4,926

Operating lease liability 12,624 11,364

Accrued interest 930 937

Other 6,167 8,423

Total accrued liabilities $ 283,492 $ 155,442

2 unchanged sentences

Self-insurance liabilities 40,910 37,369

Contingent earnout liability

Contingent liability 1,759 4,197

Deferred revenue 1,003 2,955

2 unchanged sentences

Payroll tax deferral 1

15,424 10,205

Other 956 1,630

Total noncurrent liabilities — other $ 147,757 $ 147,180

Deferral related to the provisions within the Coronavirus Aid, Relief, and Economic Security Act, passed on March 27, 2020, which allows for the deferral of the employer share of Social Security tax.

(1) Deferral related to the provisions within the Coronavirus Aid, Relief, and Economic Security Act, enacted on March 27, 2020, which allows for the deferral of the employer share of Social Security tax.

NOTE 16 COMMITMENTS AND CONTINGENCIES

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At September 30, 2021, we had purchase commitments for equipment, parts and supplies of approximately $ 48.1 million.

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Lease Obligations

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While there exists the possibility of realizing a recovery, we are currently unable to determine the timing or amounts we may receive, if any, or the likelihood of recovery.

In January 2018, an employee of HPIDC suffered personal injury and subsequently brought a lawsuit against the operator and H&P.

Pursuant to the terms of the drilling contract between HPIDC and the operator, HPIDC indemnified the operator in the lawsuit, subject to certain limitations.

H&P has settled this matter on behalf of itself and the operator with $ 21.0 million of the settlement amount to be paid by the Company.

The settlement was paid out during the fiscal year ended September 30, 2019.

While we believe we had meritorious defenses to the matter, we determined that settlement was a reasonable alternative to the uncertainty and expense associated with a jury trial.

In October 2017, an employee of HPIDC suffered personal injury and subsequently brought a lawsuit against the operator.

Pursuant to the terms of the drilling contract between HPIDC and the operator, HPIDC indemnified the operator in the lawsuit, subject to certain limitations.

A settlement agreement was reached with the operator.

As of September 30, 2019, we accrued $ 9.5 million for this lawsuit, which was subsequently paid out during the fiscal year ended September 30, 2020.

The Company and its subsidiaries are parties to various other pending legal actions arising in the ordinary course of our business.

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We are a performance-driven drilling solutions and technologies company based in Tulsa, Oklahoma with operations in all major U.S.

onshore basins as well as South America and the Middle East.

onshore oil and gas producing basins as well as South America and the Middle East.

Our drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies.

We believe we are the recognized industry leader in drilling as well as technological innovation.

During the third quarter of fiscal year 2020, as part of our restructuring efforts (see Note 19—Restructuring Charges ) 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:

We focus on offering our customers an integrated solutions-based approach by combining proprietary rig technology, automation software, and digital expertise into our rig operations rather than a product-based offering, such as a rig or separate technology package.

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.

Each reportable operating segment is a strategic business unit that is managed separately, and consolidated revenues and expenses reflect the elimination of all material intercompany transactions.

Other includes additional non-reportable operating segments.

External revenues included in "Other" primarily consist of rental income.

Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other." External revenues included in “Other” primarily consist of rental income.

Segment Performance

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• Depreciation and amortization

Allocated general and administrative cost s

• Allocated general and administrative costs

• Asset impairment charges

• Restructuring charges

but excludes gain on sale of assets and corporate selling, general and administrative costs, corporate depreciation, and corporate restructuring charges.

General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which we believe to be a reasonable reflection of the utilization of services provided.

but excludes (gain) loss on sale of assets and corporate selling, general and administrative costs, corporate depreciation, and corporate restructuring charges.

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General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, other methods may be used which we believe to be a reasonable reflection of the utilization of services provided.

Summarized financial information of our reportable segments for the fiscal years ended September 30, 2021, 2020 and 2019 is shown in the following tables:

September 30, 2021

(in thousands)

North America Solutions

Offshore Gulf of Mexico

International Solutions

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

External sales $ 1,026,364 $ 126,399 $ 57,917 $ 7,888 $ — $ 1,218,568

Intersegment — — — 35,416 ( 35,416 ) —

Total sales 1,026,364 126,399 57,917 43,304 ( 35,416 ) 1,218,568

Segment operating income (loss) ( 287,176 ) 15,969 ( 21,003 ) ( 9,704 ) ( 1,580 ) ( 303,494 )

1 unchanged sentence

September 30, 2020

(in thousands)

North America Solutions (1)

Offshore Gulf of Mexico

International Solutions

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

External sales $ 1,474,380 $ 143,149 $ 144,185 $ 12,213 $ — $ 1,773,927

Segment operating income

Intersegment — — — 36,901 ( 36,901 ) —

Total sales 1,474,380 143,149 144,185 49,114 ( 36,901 ) 1,773,927

Segment operating income (loss) ( 393,902 ) 7,478 ( 162,368 ) 4,403 — ( 544,389 )

Depreciation and amortization 438,039 11,681 17,531 1,241 — 468,492

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

September 30, 2019

(in thousands)

North America Solutions (1)

Offshore Gulf of Mexico

International Solutions

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

External sales $ 2,426,191 $ 147,635 $ 211,731 $ 12,933 $ — $ 2,798,490

Segment operating income (loss)

Intersegment — — — — — —

Total sales 2,426,191 147,635 211,731 12,933 — 2,798,490

Segment operating income 80,898 19,594 5,366 3,375 — 109,233

Depreciation and amortization 504,466 10,010 35,466 1,523 — 551,465

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

The following table reconciles segment operating income (loss) per the tables above to income (loss) from continuing operations before income taxes as reported on the Consolidated Statements of Operations:

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Gain on sale of subsidiary — 14,963 —

Other ( 5,657 ) ( 5,384 ) ( 1,596 )

Total unallocated amounts ( 12,631 ) ( 16,311 ) ( 71,804 )

Income (loss) from continuing operations before income taxes

Loss from continuing operations before income taxes $ ( 441,180 ) $ ( 636,498 ) $ ( 51,222 )

2021 FORM 10-K | 98

The following table reconciles segment total assets to total assets as reported on the Consolidated Balance Sheets:

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International Solutions 269,820 181,181

Other 95,398 22,144

3,868,367 4,109,544

Investments and corporate operations 1,165,761 720,077

Total assets from continuing operations $ 5,034,128 $ 4,829,621

Discontinued operations

(1) Assets by segment exclude investments in subsidiaries and intersegment activity.

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

The following table presents revenues from external customers by country based on the location of service provided:

3 unchanged sentences

United States $ 1,158,230 $ 1,626,407 $ 2,585,008

Argentina 27,855 84,402 165,718

Bahrain 27,435 28,653 11,528

United Arab Emirates 957 24,716 4,728

Colombia 1,674 6,414 29,757

Other foreign 2,417 3,335 1,751

Total $ 1,218,568 $ 1,773,927 $ 2,798,490

The following table presents property, plant and equipment by country based on the location of service provided:

3 unchanged sentences

United States $ 3,042,140 $ 3,562,525

Argentina 50,944 49,419

Colombia 22,959 21,740

Other foreign 11,244 12,657

Total $ 3,127,287 $ 3,646,341

NOTE 18 RESTRUCTURING CHARGES

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.

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.

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

During fiscal year 2021, we incurred 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.

These charges are included in other restructuring expenses within the tables below.

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The following table summarizes the Company's restructuring charges incurred during the year ended September 30, 2021:

Year Ended September 30, 2021

(in thousands) North America Solutions International Solutions Corporate Total

Employee termination benefits $ 54 $ 207 $ 1,215 $ 1,476

Other restructuring expenses 3,815 — 635 $ 4,450

Total restructuring charges $ 3,869 207 $ 1,850 $ 5,926

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.

1 unchanged sentence

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.

Costs incurred, as of September 30, 2020 , in connection with the restructuring are comprised of one-time severance benefits to employees who were voluntarily or involuntarily terminated, benefits related to forfeitures and costs related to modification of stock-based compensation awards.

The following table summarizes the Company's restructuring charges incurred during the fiscal year ended September 30, 2020 :

(in thousands)

North America Solutions

Offshore Gulf of Mexico

International Solutions

Corporate G&A

Costs incurred as of September 30, 2020 in connection with the restructuring were primarily comprised of one-time severance benefits to employees who were voluntarily or involuntarily terminated, benefits related to forfeitures and costs related to modification of stock-based compensation awards.

The following table summarizes the Company's restructuring charges incurred during the year ended September 30, 2020:

Year Ended September 30, 2020

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Corporate G&A Total

Employee termination benefits $ 10,041 $ 1,432 $ 2,991 $ 321 $ 4,745 $ 19,530

1 unchanged sentence

Total restructuring charges $ 7,005 $ 1,254 $ 2,980 $ 260 $ 4,548 $ 16,047

The following table summarizes the Company's accrual for restructuring charges for the fiscal year ended September 30, 2020 :

(in thousands)

Employee Termination Benefits

Accrued restructuring charges at September 30, 2019

Cash payments

Accrued restructuring charges at September 30, 2020

These expenses are recorded within restructuring charges on our Consolidated Statements of Operations for the fiscal year ended September 30, 2020 and the related liability is recorded within accounts payable on our Consolidated Balance Sheets at September 30, 2020 .

NOTE 20 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Fiscal Year 2020 Quarters Ended

(in thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Operating revenues

Operating income (loss)

Income (loss) from continuing operations

Net income (loss)

Basic earnings per common share:

Income (loss) from continuing operations

Net income (loss)

Diluted earnings per common share:

Income (loss) from continuing operations

Net income (loss)

The sum of earnings per share for the four quarters may not equal the total earnings per share for the fiscal year due to changes in the average number of common shares outstanding.

Fiscal Year 2020 Quarters Ended

(in thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Included within net income (loss):

Gain from the sale of assets, after tax

Asset impairment charges, after tax

Restructuring charges, after tax

Effect on diluted earnings per common share:

Gain from the sale of assets, after tax

Asset impairment charges, after tax

Restructuring charges, after tax

Fiscal Year 2019 Quarters Ended

(in thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Operating revenues

Operating income (loss)

Income (loss) from continuing operations

Net income (loss)

Basic earnings per common share:

Income (loss) from continuing operations

Net income (loss)

Diluted earnings per common share:

Income (loss) from continuing operations

Net income (loss)

The sum of earnings per share for the four quarters may not equal the total earnings per share for the year due to changes in the average number of common shares outstanding.

Fiscal Year 2019 Quarters Ended

(in thousands, except per share amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Included within net income (loss):

Gain from the sale of assets, after tax

Asset impairment charges, after tax

Effect on diluted earnings per common share:

Gain from the sale of assets, after tax

Asset impairment charges, after tax

These expenses are recorded within restructuring charges on our Consolidated Statements of Operations for the fiscal years ended September 30, 2021 and 2020.

NOTE 19 SUBSEQUENT EVENTS

On October 27, 2021, we redeemed all of the outstanding 2025 Notes, which resulted in the principal payment of $ 487.1 million, a make-whole premium and accrued interest payment of $ 58.1 million and the write off of unamortized discount and debt issuance costs of $ 3.7 million, which will be recognized during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 redemption.

Additional details are fully discussed in Note 7—Debt.

Subsequent to September 30, 2021, we sold the assets associated with two lower margin service offerings, trucking and casing running services, which contributed approximately 2.8 percent to our consolidated revenues during fiscal year 2021, in two separate transactions.

On November 12, 2021, we settled a drilling contract dispute with YPF S.A.

The settlement requires that YPF make a one-time cash payment to H&P in the amount of approximately $ 11.0 million and enter into drilling service contracts for three drilling rigs, each with multi-year terms.

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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data