Item 1. Business
ITEM 1. BUSINESS
Overview
Helmerich & Payne, Inc. ("H&P," which, together with its subsidiaries, is identified as the “Company,” “we,” “us” or “our,” except where stated or the context requires otherwise) was incorporated under the laws of the State of Delaware on February 3, 1940 and is successor to a business originally organized in 1920. We provide performance-driven drilling solutions that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies. We are an important vendor for a number of oil and gas exploration and production companies, but we focus primarily on the drilling segment of the oil and gas production value chain. Our technology services focus on developing, promoting and commercializing technologies designed to improve the efficiency and accuracy of drilling operations, as well as wellbore quality and placement.
Our global business is composed of three reportable business segments: North America Solutions, Offshore Gulf of Mexico, and International Solutions. During the fiscal year ended September 30, 2021, our North America Solutions operations were primarily located in Colorado, Louisiana, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. Our Offshore Gulf of Mexico operations were conducted in Louisiana and in U.S. federal waters in the Gulf of Mexico. Our International Solutions operations had rigs located in four international locations during fiscal year 2021: Argentina, Bahrain, Colombia and United Arab Emirates (“U.A.E.”).
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 containing approximately 390,000 leasable square feet and approximately 176 acres of undeveloped real estate. Our research and development endeavors include both internal development and external acquisition of developing technologies. Our wholly-owned captive insurance companies (the “Captives”) are used to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs. 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 real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other."
2021 FORM 10-K | 5
Table of Contents
Drilling Fleet
The following map shows the number of working rigs by basin in our North America Solutions reportable segment as of September 30, 2021:
The following table sets forth certain information concerning our North America Solutions drilling rigs as of September 30, 2021:
NORTH AMERICA SOLUTIONS FLEET
Location Super-Spec FlexRig ® 1
Non Super-Spec FlexRig ® 2
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
TX 139 66 3 — 142 66
NM 36 26 — — 36 26
OK 25 10 1 — 26 10
ND 8 6 — — 8 6
LA 5 5 — — 5 5
OH 4 1 — — 4 1
PA 4 2 — — 4 2
UT 3 3 — — 3 3
CO 1 1 2 2 3 3
WV 2 2 — — 2 2
MT 1 1 — — 1 1
NV 1 1 — — 1 1
WY 1 1 — — 1 1
Totals 230 125 6 2 236 127
(1) AC drive, minimum of 1,500 horsepower drawworks, minimum of 750,000 lbs. hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability.
(2) AC drive, 1,500 horsepower drawworks, 500,000 or 750,000 lbs. hookload rating, 5,000 or 7,500 psi mud circulating system, may or may not have multiple-well pad capability.
2021 FORM 10-K | 6
Table of Contents
The following table sets forth certain information concerning our Offshore Gulf of Mexico drilling rigs as of September 30, 2021:
OFFSHORE GULF OF MEXICO FLEET
Location Shallow Water 1
Deep Water 1
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
Louisiana 2
3 — — — 3 —
Gulf of Mexico 1 1 3 3 4 4
Totals 4 1 3 3 7 4
(1) Deep water rigs operate on floating facilities and shallow water rigs operate on fixed facilities.
(2) Rigs are idle, stacked on land and not in state waters.
The following table sets forth certain information concerning our International Solutions drilling rigs as of September 30, 2021:
INTERNATIONAL SOLUTIONS FLEET
Location AC (FlexRig ® 3) 1
AC (FlexRig ® 4) 2
Other AC SCR 3
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
Argentina 12 3 4 — — — 4 — 20 3
Colombia 2 — 2 — 1 — 2 — 7 —
Bahrain — — 3 3 — — — — 3 3
Totals 14 3 9 3 1 — 6 — 30 6
(1) Other than four super–spec rigs in Argentina, the FlexRig ® 3 is equipped with an AC drive, 1,500 horsepower drawworks, and a 750,000 lb. hookload rating. It can be equipped with an optional skid or walking system, third mud pump, and 7,500 psi high pressure mud system. The other eight rigs in Argentina are equipped with skid systems.
(2) The FlexRig ® 4 model has a small footprint and is designed to be highly mobile. The rig is equipped with a 300,000 lb. mast, 400HP top drive and two mud pumps. Range 3 drill pipe is used without setback. The rig is capable of horizontal and vertical drilling, but is primarily used for vertical drilling.
(3) A silicon-controlled-rectifier (“SCR”) system converts alternate current (“AC”) produced by one or more AC generator sets into direct current (“DC”). Of the six SCR rigs, one is equipped with 2,100 horsepower drawworks and the remaining five are equipped with 3,000 horsepower drawworks to drill deep conventional wells.
Drilling Services and Solutions
General
We are the largest provider of super-spec AC drive land rigs in the Western Hemisphere. Operating principally in North and South America, we specialize in shale and unconventional resource plays, drilling challenging and complex wells in oil and gas producing basins in the United States and in international locations. In the United States, we have a diverse mix of customers consisting of large independent, major, mid-sized and small cap oil companies and private independent companies (including private equity-backed companies) that are primarily focused on unconventional shale basins. In South America and the Middle East, our customers primarily include major international and national oil companies.
We did not have any individual customers that represented 10% or more of our total consolidated revenues in fiscal years 2021, 2020, or 2019.
2021 FORM 10-K | 7
Table of Contents
The following table presents our average active rigs per day (a measure of activity and utilization over the fiscal year) and average utilization for the fiscal years 2021, 2020, and 2019:
Year Ended September 30,
North America Solutions Offshore Gulf of Mexico International Solutions
2021
2020
2019
2021
2020
2019
2021
2020
2019
Average active rigs per day 1
107.4 134.3 224.1 4.3 5.3 5.9 5.0 12.6 17.6
Average utilization 2
43 % 47 % 67 % 59 % 66 % 74 % 16 % 40 % 55 %
(1) Includes the impact of downsizing our fleet and/or rigs that have been reclassified to assets held-for-sale. See Note 4—Property, Plant and Equipment to our Consolidated Financial Statements.
(2) A rig is considered to be utilized when it is operating (or otherwise deployed for a customer) or being moved, assembled or dismantled pursuant to a drilling contract, or stacked under contract.
Our Segments
North America Solutions Segment
We believe we operate the largest and most technologically advanced AC drive drilling rig fleet in North America and have a presence in most of the U.S. shale and unconventional basins. We have the leading market share in at least three of the most active oil basins, which include the Permian Basin, Eagle Ford Shale, and Woodford Shale. Nearly all of our active rigs are drilling horizontal or directional wells. As of September 30, 2021, we had approximately 22 percent of the total market share in U.S. land drilling and approximately 32 percent of the super-spec market share in U.S. land drilling. In the United States, we have the industry's largest super-spec fleet wit h 230 rigs, of which 125 were under contract at September 30, 2021. In total, 127 of our 236 marketed rigs were under contract, 73 were under fixed‑term contracts, and 54 were working well-to-well as of September 30, 2021.
Our drilling technology within this segment enables a solutions-based approach that provides performance-driven drilling services designed to help deliver greater levels of accuracy, consistency, optimization and a reduction of human error to create higher quality wellbores with lower overall risk. This technology is intended to address our customers' unique challenges and should result in less wellbore tortuosity and reduce positional uncertainty in the directional drilling process.
Our North America Solutions segment contributed approximately 84.2 percent ($1.0 billion) of our consolidated operating revenues during fiscal year 2021, compared to approximately 83.1 percent ($1.5 billion) and 86.7 percent ($2.4 billion) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. In North America, our customers are primarily from the major integrated oil companies, large independent oil companies, small cap oil companies and private independent companies (including private equity-backed companies). Revenue from drilling services performed for our largest North America Solutions drilling customer totaled approximately 11.5 percent ($118.4 million) of the North America Solutions segment revenues during fiscal year 2021.
Offshore Gulf of Mexico Segment
Our Offshore Gulf of Mexico segment has been in operation since 1968 and currently consists of seven platform rigs in the Gulf of Mexico. We supply the rig equipment and crews and the operator, who owns the platform, will typically provide production equipment or other necessary facilities. Our offshore rig fleet operates on conventional fixed leg platforms and floating platforms attached to the sea floor with mooring lines, such as Spars and Tension Leg Platforms. Additionally, we provide management contract services to customer platforms where the customer owns the drilling rig.
As of September 30, 2021, four of the seven offshore rigs were under contract. Our Offshore Gulf of Mexico operations contributed approximately 10.4 percent ($126.4 million) of our consolidated operating revenues during fiscal year 2021, compared to approximately 8.1 percent ($143.1 million) and 5.3 percent ($147.6 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. Revenues from drilling services performed for our largest offshore drilling customer totaled approximately 77.9 percent ($98.4 million) of offshore revenues during fiscal year 2021.
International Solutions Segment
Our International Solutions segment primarily conducts operations in Argentina, Colombia, Bahrain and U.A.E. As of September 30, 2021, we had six land rigs contracted for work in locations outside of the United States. Our International Solutions operations contributed approximately 4.8 percent ($57.9 million) of our consolidated operating revenues during fiscal year 2021, compared to approximately 8.1 percent ($144.2 million) and 7.6 percent ($211.7 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively.
2021 FORM 10-K | 8
Table of Contents
Argentina As of September 30, 2021, we had 20 rigs in Argentina. Revenues generated by Argentine drilling operations contributed approximately 2.3 percent ($27.9 million) of our consolidated operating revenues during fiscal year 2021 compared to approximately 4.8 percent ($84.4 million) and 5.9 percent ($165.7 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. Revenues from drilling services performed for our two largest customers in Argentina totaled approximately 2.2 percent of our consolidated operating revenues and approximately 45.2 percent of our international operating revenues during fiscal year 2021. The Argentine drilling contracts are primarily with large international or national oil companies.
Colombia As of September 30, 2021, we had seven rigs in Colombia. Revenues generated by Colombian drilling operations contributed approximately 0.1 percent ($1.7 million) of our consolidated operating revenues in fiscal year 2021, compared to approximately 0.4 percent ($6.4 million) and 1.1 percent ($29.8 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. Revenues from drilling services performed for our two largest customers in Colombia totaled approximately 0.1 percent of our consolidated operating revenues and approximately 2.9 percent of our international operating revenues during fiscal year 2021. The Colombian drilling contracts are primarily with large international or national oil companies.
Bahrain As of September 30, 2021, we had three rigs in Bahrain. Revenues generated by Bahrain drilling operations contributed approximately 2.3 percent ($27.4 million) of our consolidated operating revenues in fiscal year 2021, compared to approximately 1.6 percent ($28.7 million) and 0.4 percent ($11.5 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. All of our revenues in Bahrain are from a partner of the local national oil company.
United Arab Emirates In September 2021, we sold two rigs we had in country as part of a larger rig package sale to ADNOC Drilling Company P.J.S.C. As a result of this transaction, we did not have any rigs located in the U.A.E. as of September 30, 2021. See Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” and Note 4—Property, Plant and Equipment to our Consolidated Financial Statements included in this Form 10‑K for additional information. Prior to the sale, revenues generated by our U.A.E. drilling operations contributed approximately 0.1 percent ($1.0 million) of our consolidated operating revenues in fiscal year 2021, compared to approximately 1.4 percent ($24.7 million) and 0.2 percent ($4.7 million) of our consolidated operating revenues during fiscal years 2020 and 2019, respectively. All of our revenues in U.A.E. are from a subsidiary of the national oil company.
Other Operations
Other Operations include additional non-reportable operating segments. We 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.
On October 1, 2019, we elected to utilize the Captives to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs. Casualty claims occurring prior to October 1, 2019 will remain recorded within each of the operating segments and future adjustments to these claims will continue to be reflected within the operating segments. Reserves for legacy claims occurring prior to October 1, 2019, will remain as liabilities in our operating segments until they have been resolved. Changes in those reserves will be reflected in segment earnings as they occur. We will continue to utilize the 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 the 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. 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. The Company did not previously purchase any stop-loss coverage.
During fiscal year 2019, the Company established an incubator program for new research and development projects, the results of which have been included in "Other" within our segment disclosures.
Rigs, Equipment, R&D, and Facilities
During the late 1990’s, we undertook a strategic initiative to develop a new generation drilling rig that would be the safest, fastest-moving and highest performing rig in the land drilling market. Our first FlexRig ® drilling rig entered the market in 1998. We continued to innovate and in 2002 introduced our first AC drive rigs, which incorporated new drilling technology and improved safety and environmental design. These rigs found immediate success by delivering higher value wells to the customer and marked the beginning of the AC land rig revolution.
2021 FORM 10-K | 9
Table of Contents
We also changed our pricing and contracting strategy, and beginning in 2005, predominantly all new FlexRig ® drilling rigs were built supported by a firm contract and attractive returns. To date, we have built over 200 FlexRig ® rigs that align with this strategy. An important part of our strategy was to design a rig that could support continuous improvement through upgrade capability of the hardware and software on the rigs to take advantage of technology improvements and lengthening the industry rig replacement cycle. These upgrades included, but were not limited to, enhanced drilling control systems and software, skid and walking systems for drilling multiple well pads, 7,500 psi mud systems, set back capacity to accommodate the pipe that the longer laterals demanded, and additional mud system capacity.
In 2011, we introduced a FlexRig ® design for long lateral drilling of multiple wells from a single location and for drilling horizontally in unconventional shale reservoirs. The new design preserved the key performance features of earlier designs but added a bi-directional skidding system and equipment capacities suitable for drilling long lateral wells.
In 2016, we saw the further progression of longer lateral wells, which brought additional technical challenges. At that time, we began delivering rigs to the market that were equipped and capable of drilling these longer lateral wells. The industry would later refer to these rigs as super-spec rigs, which have the following specific characteristics: AC drive, minimum 1,500 horsepower drawworks, minimum of 750,000 lbs. hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability. Additionally, our competency in design and construction as well as our financial strength enabled us to efficiently upgrade our other existing rigs to super-spec, resulting in what we believe to be the largest fleet of super-spec rigs in the world. As of September 30, 2021, we had 230 super-spec rigs.
In 2017, we introduced our first walking rig by reconfiguring some of our uni-directional skid designed FlexRig ® drilling rigs. Since then, we have reconfigured, converted, and upgraded a total of 49 FlexRig ® drilling rigs to super-spec walking rigs.
Years of designing and building our fleet of AC drive FlexRig ® drilling rigs has given us many competitive benefits. One key advantage is fleet uniformity. We have overseen the design and assembly of all of our AC FlexRig ® drilling rigs, and our different rig classes share many common components. We co-designed the control systems for our rigs and have the right to make any changes or modifications to those systems that we desire. A uniform fleet creates an adaptive environment to reach maximum efficiency for employees, equipment and technology and is critical to our ability to provide consistent, safe and reliable operations in increasingly complex basins. In addition, our fleet has greater scale than any other competitor, which enables us to upgrade our existing FlexRig ® drilling rigs to super-spec in a capital efficient way. High levels of uniformity in crew training and rotation and our ability to control and remove safety exposures across a more standard fleet allow us to deliver higher performance in a safer and more reliable manner for the customer. Further, our fleet is supported by a cost-effective Company-owned supply chain that provides standardized materials directly to the rigs from our regional warehouses.
A long-standing challenge in our industry is providing high quality and consistent results. In addressing this challenge, we utilize process excellence techniques that are developed internally. We provide experienced drilling and maintenance support for our operations, which provides value by reducing nonproductive time in our operations and improving drilling performance through our Rig Systems Monitoring and Support Center (“RSMS”) and Remote Operations Centers ("ROCs"). Our RSMS and ROCs are manned 24 hours a day, seven days a week, with the ability to monitor and detect trends in drilling and drilling services performance onboard our rigs. Our monitoring group within the RSMS provides real-time help and feedback to our wellsite employees, as well as our customers, to fully optimize our operational performance. Additionally, our RSMS and ROCs have staffs of engineers and industry experts that work with our customers to enhance wellbore positioning, drilling program execution and overall drilling performance. The monitoring group and our performance engineers capture our drilling work steps to help provide high quality and reliable results for our customers.
We currently have two facilities that provide vertically integrated solutions for drilling rig manufacturing, upgrades, retrofits and modifications, as well as overhauling, recertification, and repairs as it relates to our rigs and equipment. These facilities utilize lean manufacturing processes to enhance quality and efficiency as well as provide important insights in the maintenance and wear of equipment on our rigs. Our facility located in Galena Park, Texas is primarily utilized for overall rig assembly, overhaul, recommissioning and recertification while our facility near Tulsa, Oklahoma is primarily utilized for modular rig component overhauls and repairs.
During fiscal year 2021, we continued to see adoption and growth with our technologically enabled automation solutions. We designed our automation solutions to address challenges within our customers’ businesses as much of the drilling process is heavily dependent on human decision making to design, execute and optimize crude oil and natural gas extraction. Utilizing these technologies, we are able to deploy a more science-based solution compared to human decisions and execution, thereby reducing variability and the costs around achieving optimal outcomes. These solutions continue to provide differentiated value for our customers through enhanced wellbore quality and placement, improved cost performance and well economics, and better consistency at reduced risk. Our automation focused solutions and applications are enabled by our uniform digital fleet and are designed to provide additional value to our customers' well programs by providing a platform for machine-human collaboration during the drilling process to improve efficiency. Our path to autonomous drilling continues to evolve with several solutions in various stages of commercial testing. All of our technologies play an important role in developing our strategy as we head towards autonomous drilling.
2021 FORM 10-K | 10
Table of Contents
We have historically offered ancillary services, which are now referred to as FlexServices ® . These services include trucking, surface equipment, casing running services and pipe rental. 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. 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.
Markets and Competition
Our business largely depends on the level of capital spending by oil and gas companies for exploration and production activities. The level of capital spending is correlated to oil and gas prices. Oil and gas prices can be volatile at times depending upon both near and long-term supply and demand factors. Sustained increases or decreases in the prices of oil and natural gas generally have a material impact on the exploration and production activities of our customers. As such, significant declines in the prices of oil and natural gas may have a material adverse effect on our business, financial condition and results of operations. As of September 30, 2021, we had 137 rigs under contract, compared to 79 and 218 rigs under contract as of September 30, 2020 and 2019, respectively. For further information concerning risks associated with our business, including volatility surrounding oil and natural gas prices and the impact of low oil prices on our business, see Item 1A— “Risk Factors” and Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10‑K.
Our industry is highly competitive, and we strive to differentiate our services based upon the quality of our FlexRig ® drilling rigs and our engineering design expertise, operational efficiency, software technologies, and safety and environmental awareness. The number of available rigs generally exceeds demand in many of our markets, resulting in significant price competition. We compete against many drilling companies, some of whom are present in more than one of our operating regions. In the United States, we compete with Nabors Industries Ltd., Patterson-UTI Energy, Inc. and many other competitors with regional operations. Internationally, we compete directly with various contractors at each location where we operate. In the Gulf of Mexico platform rig market, we primarily compete with Nabors Industries Ltd. and Blake International Rigs, LLC.
Drilling Contracts
Our drilling contracts are obtained through competitive bidding or as a result of direct negotiations with customers. Our contracts vary in their terms and rates depending on the nature of the operations to be performed, the duration of the work, the amount and type of equipment and services provided, the geographic areas involved, market conditions and other variables. In many instances, our contracts cover multi‑well or pad and multi‑year projects. Except for a limited number of rigs operated under master agreements, each drilling rig operates under a separate drilling contract.
The duration of our drilling contracts are generally either “well‑to‑well/pad-to-pad” or for a fixed term. “Well‑to‑well” contracts can be terminated at the option of either party upon the completion of drilling of any one well. Fixed-term contracts generally have a minimum term of at least six months up to multiple years. These contracts customarily provide for termination at the election of the customer but may include an “early termination payment” to be paid to us if the contract is terminated prior to the expiration of the fixed term. However, under certain limited circumstances such as destruction of a drilling rig, bankruptcy, sustained unacceptable performance by us or delivery of a rig beyond certain grace and/or liquidated damage periods, no early termination payment would be paid to us.
Contracts generally contain renewal or extension provisions exercisable at the option of the customer at prices mutually agreeable to us and the customer. In most instances, contracts provide for additional payments for mobilization and demobilization of the rig.
Daywork Contracts
Daywork contracts are contracts under which we charge a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market. During fiscal year 2021, a majority of our drilling services were performed on a “daywork” contract basis.
Footage Contracts
Footage contracts are contracts where we charge a fixed rate per foot of hole drilled to a stated depth, with a fixed rate per day for the remainder of the hole. Contracts performed on a "footage" basis generally involve a greater element of risk to the Company compared to contracts performed on a "daywork" basis.
Lump-sum Contracts
Lump-sum contract are contracts under which we charge a fixed sum to deliver a hole to a stated depth and agree to furnish services such as testing, coring and casing the hole which are not normally done on a "footage" basis. "Lump-sum" contracts entail varying degrees of risk greater than the usual "footage" contract.
2021 FORM 10-K | 11
Table of Contents
Performance-based Contracts
Performance-based contracts are contracts pursuant to which we are compensated based upon our performance against a mutually agreed upon set of predetermined targets. These contract types are relatively new to the industry and typically have a lower base dayrate, but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets agreed to by our customers. For example, some performance targets are set based upon days to drill a well or the number of lateral feet drilled in zone per day. We often use our automated technology solutions to assist in achieving the performance targets. The risks associated with these contracts relate to the failure to reach the agreed upon performance targets. If we do not meet these targets, we will not receive additional compensation above what we have received utilizing a "daywork" contract. Based on our operational track record throughout fiscal year 2021 and drilling expertise, our performance-based contracts have produced a positive risk-reward outcome. We are seeing a growing adoption of performance contracts by our customers and we expect this trend to continue.
Contract Backlog
As of September 30, 2021 and 2020, our drilling contract backlog was $572.0 million and $658.0 million, respectively. Approximately 22.9 percent of the September 30, 2021 backlog is reasonably expected to be fulfilled in fiscal year 2023 and thereafter. See Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations — Contract Backlog" included in this Form 10-K for additional information pertaining to backlog.
Employees
As of September 30, 2021, we had 5,444 employees within the United States and 488 employees in our international operations. The number of employees fluctuates depending on the current and expected demand for our services. We consider our employee relations to be robust. None of our U.S. employees are represented by a union. However, some of our international employees are unionized.
Human Capital Objectives and Programs
We strive to create a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together can help us gain a competitive advantage.
Core Values and Culture
"The H&P Way" defines our purpose, core values, and the behaviors that drive our culture. What we endeavor to do is anchored in our purpose, improving lives through efficient and responsible energy. Fostering and maintaining a strong, healthy culture is a key strategic focus. Our core values serve to inform who we are and the way our employees interact with one another, our customers, partners and shareholders. Our core value of Actively C.A.R.E. means that we treat one another with respect. We care about each other, and from a safety perspective, our employees are committed to Controlling and Removing Exposures ("C.A.R.E.") for themselves and others. Our core value of Service Attitude means that we do our part and more for those around us. We consider the needs of others and provide solutions to meet their needs. Our core value of Innovative Spirit means that we constantly work to improve and are willing to try new approaches. We make decisions with the long-term view in mind. Our core value of teamwork means that we listen to one another and work across teams toward a common goal. We collaborate to achieve results and focus on success for our customers and shareholders. Finally, we strive to do the right thing. That means we are honest and transparent. We tackle tough situations, make decisions, and speak up when needed.
Talent Attraction & Retention
Our recruiting practices and decisions on whom we hire are among our most important activities. Our Workforce Staffing team provides full staffing services to ensure consistent staffing levels on our rigs. This team sources, hires, onboards, trains, assigns and reassigns rig-based employees. In downturn years, we maintain relationships with former employees and prioritize recalling our most experienced people for field positions. In fiscal year 2021, we recalled approximately 1,800 employees. In addition, we utilize social media, local job fairs, employee referral bonuses, and educational organizations across the United States to find diverse, motivated and responsible employees.
2021 FORM 10-K | 12
Table of Contents
Education and Training
We are dedicated to the continual training and development of our employees, especially of those in field operations, to ensure we can develop future managers and leaders from within our organization. Our training starts right at the beginning with on-boarding procedures that focus on safety, responsibility, ethical conduct and inclusive teamwork.
H&P’s strong commitment to our employees’ growth is demonstrated through our formal organizational development team, which oversees talent management, training and development. In addition to career and safety training efforts, the team creates, manages and implements enhancements to development and succession plans, change management initiatives and diversity, equity and inclusion ("DE&I") programs.
H&P offers a variety of training programs ranging from job specific programs to leadership development. Some of the prominent training programs that we offer are:
• New Employment Safety Training - onboarding program for new hires in safety sensitive positions. The purpose of the program is to prepare employees to work safely on our rigs and provide necessary certifications to do so; including all Occupational Safety and Health Administration ("OSHA") and IADC training, as well as Company culture education.
• Short Service Employee - specialized training program that is a continuation of New Employment Introduction basics and is intended to provide the technical on-the-job training guided by a mentor.
• Ethics and Compliance Training – comprised of several specific training programs, including Code of Conduct, Insider Trading, Anti-Discrimination & Harassment, Data Privacy, Trade Compliance, and Anti-Corruption.
• Change Champions - teaches employees to solve complex problems using structured processes, tools and data to drive results while emphasizing leadership and public speaking.
• Leadership Series - accessible online to all leaders and covers a variety of topics related to leading The H&P Way.
Safety Training and Serious Injury and/or Fatality ("SIF") Reduction Program
We are committed to creating a culture highlighted by an Actively Caring workforce. We strive to Actively C.A.R.E. for:
• our own safety and health;
• the safety and health of others; and
• the protection of our environment.
Fundamental to our Actively C.A.R.E. culture is every individual's willingness to provide immediate open feedback to others regarding safe and unsafe work practices and to proactively correct recognized exposures that threaten one's health and safety. Through training and accountability, H&P educates our employees on the negative consequences of taking health and safety risks. Our success will only be determined by demonstrated action and continuous improvement.
Safety Leadership
For more than 20 years, H&P measured safety success the same way other companies in our industry did – the absence of OSHA recordable injuries, declining lost time, restricted duty and medical treatment cases, declining total recordable injury rates ("TRIR") and the number of active rig years worked without an OSHA recordable injury or lost-time injury. We now believe that measuring safety in this manner can be destructive to management’s efforts to build trust with field employees. We have redefined safety success as the Control and Removal of Exposures (C.A.R.E.) for self and others and encourage employees to report near miss incidents with serious, life-altering or fatal injury potential, identifying and reporting serious injury exposures for which employees are personally recognized and rewarding monetarily for exemplifying our Actively C.A.R.E culture. We believe trust is key to organizational health, as well as safety and operational success.
2021 FORM 10-K | 13
Table of Contents
SIF Strategy
We are committed to controlling and removing SIF exposures on any H&P location or operation. H&P safety data shows that approximately 10 to 15 percent of all OSHA recordable injuries are events in which valuable lessons learned are produced and inform mitigation efforts to reduce potential serious injury in the future. The remaining recordable cases may not provide the necessary learning opportunities to prevent future serious injury. Similarly, the data also indicates that SIF potential incidents, all of which provide information to help prevent future serious injury or fatality, occur approximately 1.5 times more than the traditional TRIR. We continue to track traditional safety metrics like TRIR and lost time injury rates in order to be responsive to client requests and to benchmark against existing industry data but we will have a proportionate response to these antiquated metrics. Our safety success at H&P will be based on key performance indicators related to the controlling and removing of SIF exposure, such as SIF potential and SIF mitigated rates, and our vision for the future of safety at H&P will be guided by these principles.
Diversity, Equity & Inclusion
We believe that creating an environment where our employees feel valued and respected drives engagement, better leverages the unique talents and perspectives of our people to innovate and enhances our ability to attract and retain a diverse workforce. H&P has employed a DE&I specialist, implemented a thriving Women of H&P Employee Resource Group, and established a DE&I Advisory Council with global employee representation. Our commitments are evidenced by formalized policies regarding equal opportunity and a discrimination-free workplace. We are actively tracking diversity data to better understand demographics within the organization.
Employee Benefits, Health and Wellness
H&P values its employees and believes benefit packages are essential to prioritizing the well-being of its staff and offering competitive compensation. Select highlights of our benefits programs include:
• Medical, dental and vision insurance for all full-time employees, and all part-time employees working more than 20 hours per week, and their dependents;
• A 401(k) plan with Company match incentive for all full-time employees, and all part-time employees working more than 20 hours per week;
• Employer paid life insurance benefits, which include a life assistance program, identity theft protection, and travel assistance plan;
• The Employee Assistance Plan, which offers wellness support with counseling, legal assistance, financial coaching, and identity theft resolution;
• The H&P Way Fund, which provides financial assistance to H&P employees during unavoidable emergencies;
• Employee discounts for phone, computer, personal vehicle, car rental, and hotel purchases; and
• An Educational Assistance Plan, which offers reimbursement of tuition fees for any employee pursuing an undergraduate degree and, in some cases, post-graduate degrees.
Insurance and Risk Management
Our operations are subject to a number of operational risks, including personal injury and death, environmental, cyber, and weather risks, which could expose us to significant losses and damage claims. We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us. Furthermore, if a significant accident or other event occurs and is not fully covered by insurance or an enforceable or recoverable indemnity from a customer, it could have a material adverse effect on our business, financial condition and results of operations.
We have indemnification agreements with many of our customers and we also maintain liability and other forms of insurance. In general, our drilling contracts contain provisions requiring our customers to indemnify us for, among other things, pollution and reservoir damage. However, our contractual rights to indemnification may be unenforceable or limited due to negligent or willful acts by us, or subcontractors and/or suppliers or by reason of state anti-indemnity laws. Our customers and other third parties may also dispute these indemnification provisions, or we may be unable to transfer these risks to our drilling customers or other third parties by contract or indemnification agreements.
We insure working land rigs and related equipment at values that approximate the current replacement costs on the inception date of the policies. However, we self-insure large deductibles under these policies. We also carry insurance with varying deductibles and coverage limits with respect to stacked rigs, offshore platform rigs, and “named wind storm” risk in the Gulf of Mexico.
2021 FORM 10-K | 14
Table of Contents
We have insurance coverage for comprehensive general liability, automobile liability, workers’ compensation and employer’s liability, and certain other specific risks. Insurance is purchased over deductibles to reduce our exposure to catastrophic events. We retain a significant portion of our expected losses under our workers’ compensation, general liability and automobile liability programs. We self-insure a number of other risks including loss of earnings and business interruption. We are unable to obtain significant amounts of insurance to cover risks of underground reservoir damage.
Our insurance may not in all situations provide sufficient funds to protect us from all liabilities that could result from our operations. Our coverage includes aggregate policy limits. As a result, we retain the risk for any loss in excess of these limits. No assurance can be given that all or a portion of our coverage will not be canceled, that insurance coverage will continue to be available at rates considered reasonable or that our coverage will respond to a specific loss. Further, we may experience difficulties in collecting from our insurers or our insurers may deny all or a portion of our claims for insurance coverage.
Government Regulations
Our operations are affected from time to time and in varying degrees by foreign and domestic political developments and a variety of federal, state, foreign, regional and local laws, rules and regulations, including those relating to:
• drilling of oil and natural gas wells;
• directional drilling services;
• protection of the environment;
• workplace health and safety;
• labor and employment;
• data privacy;
• taxation;
• exportation or importation of equipment, technology and software; and
• currency conversion and repatriation.
Environmental laws and regulations that apply to our operations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act (each, as amended) and similar laws that provide for responses to, and liability for, air emissions, water discharges or releases of oil or hazardous substances into the environment, including damages to natural resources. Applicable environmental laws and regulations also include similar foreign, state or local counterparts to the above-mentioned federal laws, which regulate air emissions, water discharges, and management of hazardous substances and waste. Environmental laws can have a material adverse effect on the drilling industry, including our operations, and compliance with such laws may require us to make significant capital expenditures, such as the installation of costly equipment or operational changes, and may affect the resale values or useful lives of our drilling rigs.
The Occupational Safety and Health Act (“OSHA”) and other similar laws and regulations govern the protection of the health and safety of employees. The OSHA hazard communication standard, the Environmental Protection Agency community right-to-know regulations under Title III of CERCLA, the Emergency Planning and Community Right-to-Know Act and similar state statutes and local regulations require that information be maintained about hazardous materials used in our operations and that this information be provided to employees, state and local governments, emergency responders and citizens.
A number of countries actively regulate and control the importation and/or exportation of oil and gas and other aspects of the oil and gas industries in their countries. In addition, government actions and initiatives by OPEC+ may continue to contribute to oil price volatility. In some areas of the world, government activity has adversely affected the amount of exploration and development work done by oil and gas companies and influenced their need for drilling services, and likely will continue to do so.
In addition, we are subject to a variety of other U.S. and foreign laws and regulations, including, but not limited to, the U.S. Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws. The U.S. Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines, penalties or other sanctions. For more information, see Item 1A— “Risk Factors — Failure to comply with the U.S. Foreign Corrupt Practices Act or foreign anti‑bribery legislation could adversely affect our business. ”
2021 FORM 10-K | 15
Table of Contents
We are also subject to the jurisdiction of the U.S. Treasury Department’s Office of Foreign Assets Control, the U.S. Commerce Department’s Bureau of Industry and Security, the U.S. Customs and Border Protection and other U.S. and non-U.S. laws and regulations governing the international trade of goods, services and technology. Such regulations regarding exports and imports of covered goods or dealings with sanctioned countries, persons or entities include licensing, recordkeeping and reporting requirements. Failure to comply with applicable laws and regulations relating to customs, tariffs, sanctions and export controls may subject us to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets. For more information, see Item 1A— “Risk Factors — Government policies, mandates, and regulations specifically affecting the energy sector and related industries, regulatory policies or matters that affect a variety of businesses, taxation polices, and political instability could adversely affect our financial condition and results of operations. ”
We are also subject to regulation by numerous other regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. In addition, we are subject to certain requirements to contribute to retirement funds or other benefit plans, and laws in some jurisdictions restrict our ability to dismiss employees.
We monitor our compliance with applicable governmental rules and regulations in each country of operation. We have made and will continue to make the required expenditures to comply with current and future regulatory requirements. We do not anticipate that compliance with currently applicable rules and regulations and required controls will significantly change our competitive position, capital spending or earnings during 2022. We believe we are in material compliance with applicable rules and regulations and, to date, the cost of such compliance has not been material to our business or financial condition. However, future events such as additional laws and regulations, changes in existing laws and regulations or their interpretation or more vigorous enforcement policies of regulatory agencies, may require additional expenditures by us, which may be material. Specifically, the expansion of the scope of laws or regulations protecting the environment has accelerated in recent years, particularly outside the United States, and we expect this trend to continue. Accordingly, there can be no assurance that we will not incur significant compliance costs in the future. See Item 1A— “Risk Factors — Failure to comply with or changes to governmental and environmental laws could adversely affect our business.”
Sustainability
H&P has helped its customers supply energy for more than a century, and we continue to innovate and improve the ways in which we can provide energy safely, reliably, and efficiently. Through our work and the work of our customers, we have used our unique position and expertise to advance energy production, reliability, and affordability to people across the globe. The Company continues to evolve and refine its comprehensive sustainability strategy rooted in our core value to "do the right thing," as discussed under "— Human Capital Objectives and Programs — Core Values and Culture." Our sustainability strategy uses data to better understand our impacts in areas like emissions, diversity, and safety.
Improving Lives Through Efficient and Responsible Energy
We believe efficient and responsible energy improves lives globally. With a focus on leading-edge technology, we strive to deliver industry-leading efficiency, safety, and value while continuing to reduce our environmental impact.
Society’s general well-being relies on the energy industry to supply the power that sustains and drives our lives. People have relied upon and harnessed energy from resources like fire, water, wind, animals both domesticated and wild, fossil fuels, nuclear, solar, and more, with each having its own unique societal benefits and costs.
Over time, the continued growth of the world’s population highlighted a need to capture more concentrated forms of energy, making a reliance on fossil fuels increasingly central. Over the last several decades, those responsible for producing fossil fuels gained more expertise and became more specialized. A “service sector” developed to supply the most scientific and technologically specialized needs of the oil and gas sector. We provide highly specialized services in this narrow segment of the very broad and constantly evolving energy sector. We continue to innovate in an effort to increase efficiency for our customers and provide continued societal benefits with less impact to the environment.
Focused on Safer and More Efficient Drilling
We provide performance-driven drilling solutions that are intended to make oil and gas recovery safer and more economical or our customers. Focused on the drilling segment of the oil and gas production value chain, we provide the expertise, technology and equipment to drill oil and gas wells for our customers - the exploration and production ("E&P") companies. Our E&P customers then determine if and when to extract those resources from the ground, following completion of the well.
H&P and the Fossil Fuel Value Chain
While we do play an important role in helping our customers make overall production as safe and efficient as possible, our most critical responsibility is ensuring the safety of our employees and the employees of our customers. Although many of the environmental and safety risks associated with the oil and gas sector fall outside of our operations, we remain committed to utilizing our expertise and advancing our technologies to aid our customers in minimizing personal and environmental risks and maximizing industry sustainability efforts. Our customers are looking specifically to our expertise and technologies to help them minimize their environmental impact, reduce risks, and achieve their ESG performance targets.
2021 FORM 10-K | 16
Table of Contents
Below is a description of the roles that H&P plays, in the oil and gas value chain, as a drilling solutions provider in comparison to the roles that participants in other sectors of the oil and gas industry play.
H&P:
• makes drilling for oil safer and more efficient;
• builds and renovates drilling rigs at two industrial facilities in Texas and Oklahoma;
• oversees drilling operations on its rigs on customer sites;
• drills predominantly on-shore in the United States (86 percent of available rigs are on onshore);
• makes significant and impactful investments in research and development and new technologies;
OTHER SECTORS OF THE OIL AND GAS INDUSTRY:
• buy, lease, prepare, manage or restore land or are responsible for the protection of wildlife on or biodiversity of property;
• engage in hydraulic fracturing;
• pump oil or gas from the ground;
• procure, transport or pump water underground, or treat or remove wastewater from the site, or arrange for its disposal;
• assume responsibility for the prevention of fugitive releases or emissions associated with the oil and gas production process;
• engage in oil and gas transport, refining or storage; and
• engage in downstream operations.
Human Capital
For a description of our recruiting practices, education and training for employees, and employee benefits, see "— Human Capital Objectives and Programs" above.
Available Information
Our website is located at www.helmerichpayne.com. Annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to those reports, earnings releases, and financial statements are made available free of charge on the investor relations section of our website as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission ("SEC"). The information contained on our website, or accessible from our website, is not incorporated into, and should not be considered part of, this Form 10‑K or any other documents we file with, or furnish to, the SEC. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Annual reports, quarterly reports, current reports, amendments to those reports, earnings releases, financial statements and our various corporate governance documents are also available free of charge upon written request.
Investors and others should note that we announce material financial information to our investors using our investor relations website (https://ir.helmerichpayne.com/websites/helmerichandpayne/English/0/investor-relations.html), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with our stockholders and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.
2021 FORM 10-K | 17
Table of Contents