What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-01-30 compared with 2022-07-27 · 300 added, 365 removed, 560 unchanged (54% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, September 30,

(in thousands except share data and share amounts) 2022 2021

December 31, September 30,

(in thousands except share data and per share amounts) 2022 2022

Current Assets:

Cash and cash equivalents $ 229,186 $ 232,131

Restricted cash 42,472 36,246

Short-term investments 118,457 117,101

18 unchanged sentences

Dividends payable 51,540 26,693

Current portion of long-term debt, net — 483,486

Accrued liabilities 272,247 241,151

8 unchanged sentences

Shareholders' Equity:

Common stock, $ .10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of both June 30, 2022 and September 30, 2021, and 105,290,017 and 107,898,859 shares outstanding as of June 30, 2022 and September 30, 2021, respectively

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of December 31, 2022 and September 30, 2022, and 104,898,566 and 105,293,662 shares outstanding as of December 31, 2022 and September 30, 2022, respectively

11,222 11,222

3 unchanged sentences

Accumulated other comprehensive loss ( 11,816 ) ( 12,072 )

Treasury stock, at cost, 6,932,848 shares and 4,324,006 shares as of June 30, 2022 and September 30, 2021, respectively

Treasury stock, at cost, 7,324,299 shares and 6,929,203 shares as of December 31, 2022 and September 30, 2022, respectively

( 261,295 ) ( 235,528 )

2 unchanged sentences

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

Q1FY23 FORM 10-Q | 3

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

June 30, Nine Months Ended

Three Months Ended December 31,

(in thousands, except per share amounts) 2022 2021

9 unchanged sentences

Selling, general and administrative 48,455 43,715

Asset impairment charge — 2,130 4,363 56,414

Asset impairment charges 12,097 4,363

Restructuring charges — 742

14 unchanged sentences

Income (loss) from discontinued operations before income taxes 718 ( 31 )

Income tax provision — — — —

Income tax expense — —

Income (loss) from discontinued operations 718 ( 31 )

12 unchanged sentences

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

Q1FY23 FORM 10-Q | 4

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

June 30, Nine Months Ended

Three months ended December 31,

(in thousands) 2022 2021

1 unchanged sentence

Other comprehensive income, net of income taxes:

Net change related to employee benefit plans, net of income taxes of $( 41.7 ) thousand and $( 0.3 ) million for the three and nine months ended June 30, 2022, respectively, and $( 0.2 ) million and $( 0.5 ) million for the three and nine months ended June 30, 2021.

389 460 1,177 1,374

Net change related to employee benefit plans, net of income taxes of $( 0.1 ) million for the three months ended December 31, 2022 and 2021

Other comprehensive income 256 394

1 unchanged sentence

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

Q1FY23 FORM 10-Q | 5

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three and Nine Months Ended June 30, 2022

(in thousands, except per share amounts) Common Stock Additional

Capital Retained

Earnings Accumulated

Three Months Ended December 31, 2022 and 2021

Common Stock Additional

Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Treasury Stock

Shares Amount Shares Amount Total

Balance, September 30, 2021 112,222 $ 11,222 $ 529,903 $ 2,573,375 $ ( 20,244 ) 4,324 $ ( 181,638 ) $ 2,912,618

Comprehensive loss:

Net loss — — — ( 51,362 ) — — — ( 51,362 )

Other comprehensive income — — — — 394 — — 394

Dividends declared ($ 0.25 per share)

— — — ( 26,807 ) — — — ( 26,807 )

Vesting of restricted stock awards, net of shares withheld for employee taxes — — ( 21,152 ) — — ( 381 ) 17,040 ( 4,112 )

Stock-based compensation — — 6,218 — — — — 6,218

Share repurchases — — — — — 2,548 ( 60,358 ) ( 60,358 )

Balance, December 31, 2021 112,222 $ 11,222 $ 514,969 $ 2,495,206 $ ( 19,850 ) 6,491 $ ( 224,956 ) $ 2,776,591

Comprehensive loss:

Net loss — — — ( 4,976 ) — — — ( 4,976 )

Other comprehensive income — — — — 394 — — 394

Dividends declared ($ 0.25 per share)

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

Balance at September 30, 2022

112,222 $ 11,222 $ 528,278 $ 2,473,572 $ ( 12,072 ) 6,929 $ ( 235,528 ) $ 2,765,472

Vesting of restricted stock awards, net of shares withheld for employee taxes — — ( 7,197 ) — — ( 161 ) 5,805 ( 1,392 )

Stock-based compensation — — 7,945 — — — — 7,945

Share repurchases — — — — — 607 ( 16,641 ) ( 16,641 )

Other — — ( 946 ) — — — — ( 946 )

Balance, March 31, 2022 112,222 $ 11,222 $ 514,771 $ 2,463,665 $ ( 19,456 ) 6,937 $ ( 235,792 ) $ 2,734,410

Comprehensive income:

1 unchanged sentence

Other comprehensive income — — — — 256 — — 256

Dividends declared ($ 0.25 per share)

Dividends declared ($ 0.25 base per share, $ 0.235 supplemental per share)

— — — ( 76,611 ) — — — ( 76,611 )

1 unchanged sentence

Stock-based compensation — — 8,273 — — — — 8,273

Share repurchases — — — — — 844 ( 39,060 ) ( 39,060 )

Other — — ( 847 ) — — — — ( 847 )

Balance, June 30, 2022 112,222 $ 11,222 $ 521,439 $ 2,454,726 $ ( 19,067 ) 6,932 $ ( 235,652 ) $ 2,732,668

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

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three and Nine Months Ended June 30, 2021

(in thousands, except per share amounts) Common Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive Loss Treasury Stock

Shares Amount Shares Amount Total

Balance, September 30, 2020 112,151 $ 11,215 $ 521,628 $ 3,010,012 $ ( 26,188 ) 4,663 $ ( 198,153 ) $ 3,318,514

Comprehensive loss:

Net loss — — — ( 70,431 ) — — — ( 70,431 )

Other comprehensive income — — — — 457 — — 457

Dividends declared ($ 0.25 per share)

Balance at December 31, 2022

112,222 $ 11,222 $ 512,928 $ 2,494,106 $ ( 11,816 ) 7,324 $ ( 261,295 ) $ 2,745,145

Vesting of restricted stock awards, net of shares withheld for employee taxes 72 7 ( 16,742 ) — — ( 295 ) 14,618 ( 2,117 )

Stock-based compensation — — 7,451 — — — — 7,451

Cumulative effect adjustment for adoption of ASU No.

Common Stock Additional

Capital Retained Earnings Accumulated

Comprehensive

Income (Loss) Treasury Stock

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

Balance at September 30, 2021

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

Other — — ( 381 ) — — — — ( 381 )

Balance, December 31, 2020 112,223 $ 11,222 $ 511,956 $ 2,911,006 $ ( 25,731 ) 4,368 $ ( 183,535 ) $ 3,224,918

Comprehensive loss:

Comprehensive income (loss):

Net loss — — — ( 51,362 ) — — — ( 51,362 )

4 unchanged sentences

Stock-based compensation — — 6,218 — — — — 6,218

Other — — ( 234 ) — — — — ( 234 )

Balance, March 31, 2021 112,223 $ 11,222 $ 516,870 $ 2,762,735 $ ( 25,274 ) 4,329 $ ( 181,857 ) $ 3,083,696

Comprehensive loss:

Net loss — — — ( 55,555 ) — — — ( 55,555 )

Other comprehensive income — — — — 460 — — 460

Dividends declared ($ 0.25 per share)

Share repurchases — — — — — 2,548 ( 60,358 ) ( 60,358 )

Balance at December 31, 2021

112,222 $ 11,222 $ 514,969 $ 2,495,206 $ ( 19,850 ) 6,491 $ ( 224,956 ) $ 2,776,591

Vesting of restricted stock awards, net of shares withheld for employee taxes — — ( 257 ) — — ( 5 ) 216 ( 41 )

Stock-based compensation — — 6,963 — — — — 6,963

Other — — ( 295 ) — — — — ( 295 )

Balance, June 30, 2021 112,223 $ 11,222 $ 523,281 $ 2,679,859 $ ( 24,814 ) 4,324 $ ( 181,641 ) $ 3,007,907

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

Q1FY23 FORM 10-Q | 6

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended June 30,

Three months ended December 31,

(in thousands) 2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

NET LOSS $ ( 38,586 ) $ ( 246,989 )

Net income (loss) $ 97,145 $ ( 51,362 )

Adjustment for (income) loss from discontinued operations ( 718 ) 31

Loss from continuing operations ( 38,480 ) ( 257,925 )

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

Income (loss) from continuing operations 96,427 ( 51,331 )

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

Depreciation and amortization 96,655 100,437

Asset impairment charge 4,363 56,414

Asset impairment charges 12,097 4,363

Amortization of debt discount and debt issuance costs 322 239

2 unchanged sentences

Stock-based compensation 8,273 6,218

Gain on investment securities ( 55,684 ) ( 7,853 )

(Gain) loss on investment securities 15,091 ( 47,862 )

Gain on reimbursement of drilling equipment ( 15,724 ) ( 5,254 )

Other (gain) loss on sale of assets ( 2,379 ) 1,029

Deferred income tax benefit ( 36,614 ) ( 66,102 )

Deferred income tax expense (benefit) 188 ( 17,750 )

Other 7,692 ( 4,489 )

8 unchanged sentences

Other noncurrent liabilities 4,224 ( 18,675 )

Net cash provided by operating activities from continuing operations 116,701 89,862

Net cash provided by (used in) operating activities from continuing operations 185,397 ( 3,705 )

Net cash used in operating activities from discontinued operations ( 22 ) ( 13 )

Net cash provided by operating activities 116,641 89,821

Net cash provided by (used in) operating activities 185,375 ( 3,718 )

CASH FLOWS FROM INVESTING ACTIVITIES:

4 unchanged sentences

Proceeds from sale of short-term investments 40,758 37,777

Proceeds from sale of long-term investments 22,042 —

Proceeds from asset sales 30,978 21,483

Other ( 7,500 ) —

Net cash used in investing activities ( 82,169 ) ( 44,729 )

6 unchanged sentences

Share repurchases ( 39,060 ) ( 60,358 )

Other ( 587 ) ( 719 )

Net cash used in financing activities ( 100,557 ) ( 635,610 )

Net decrease in cash and cash equivalents and restricted cash ( 714,127 ) ( 114,875 )

Net increase (decrease) in cash and cash equivalents and restricted cash 2,649 ( 684,057 )

Cash and cash equivalents and restricted cash, beginning of period 269,009 936,716

Cash and cash equivalents and restricted cash, end of period $ 271,658 $ 252,659

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

Q1FY23 FORM 10-Q | 7

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Three months ended December 31,

(in thousands) 2022 2021

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period:

Cash paid (received) during the period:

Interest paid $ 915 $ 2,673

3 unchanged sentences

Non-cash operating and investing activities:

Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment ( 4,260 ) ( 746 )

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 )

Change in accounts payable and accrued liabilities related to purchases of property, plant and equipment ( 650 ) ( 1,820 )

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

Q1FY23 FORM 10-Q | 8

HELMERICH & PAYNE, INC.

6 unchanged sentences

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 13—Business Segments and Geographic Information for further details on our reportable segments.

Our North America Solutions operations are primarily located in Texas, but traditionally also operate in other states, depending upon demand.

Our North America Solutions operations are primarily located in Texas, but also traditionally operate in other states, depending on demand.

Such states include:

Colorado, Louisiana, New Mexico, Nevada, North Dakota, Oklahoma, Pennsylvania, Utah, West Virginia and Wyoming.

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

federal waters in the Gulf of Mexico and in our International Solutions we have operations in four international locations:

Argentina, Bahrain, Colombia and United Arab Emirates.

We also own and operate limited commercial real estate properties.

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

Colorado, Louisiana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah, West Virginia and Wyoming.

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

federal waters in the Gulf of Mexico and our International Solutions operations have rigs and/or services primarily located in four international locations:

Argentina, Bahrain, Colombia and the United Arab Emirates.

Our operations in Australia are expected to begin in the latter half of fiscal year 2023.

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.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES

Interim Financial Information

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information.

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information.

Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2022 Annual Report on Form 10-K and other current filings with the SEC.

5 unchanged sentences

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 Unaudited Condensed Consolidated Statements of Operations and Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Specifically, income, expenses and other comprehensive income or loss of a subsidiary acquired or disposed of during the fiscal year are included in the Unaudited Condensed Consolidated Statements of Operations and Unaudited Condensed Consolidated Statements of Comprehensive Income 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 upon consolidation.

2 unchanged sentences

Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits.

We had restricted cash of $ 33.9 million and $ 51.3 million at June 30, 2022 and 2021, respectively, and $ 19.2 million and $ 48.9 million at September 30, 2021 and 2020, respectively.

Of the total restricted cash at June 30, 2022 and September 30, 2021, $ 1.1 million and $ 1.5 million, respectively, is related to the acquisition of drilling technology companies, and $ 32.8 million and $ 17.7 million, respectively, represents an amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies.

We had restricted cash of $ 42.5 million and $ 18.5 million at December 31, 2022 and 2021, respectively, and $ 36.9 million and $ 19.2 million at September 30, 2022 and 2021, respectively.

Of the total at December 31, 2022 and September 30, 2022, $ 0.7 million and $ 1.1 million, respectively, is related to the acquisition of drilling technology companies, and $ 41.8 million and $ 35.8 million, respectively, represents an 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 cash, cash equivalents, and restricted cash are reflected within the following line items on the Unaudited Condensed Consolidated Balance Sheets:

June 30, September 30,

Q1FY23 FORM 10-Q | 9

Cash, cash equivalents, and restricted cash are reflected on the Unaudited Condensed Consolidated Balance Sheets as follows:

December 31, September 30,

(in thousands) 2022 2021 2022 2021

1 unchanged sentence

Restricted cash 42,472 17,681 36,246 18,350

Prepaid expenses and other, net 33,242 48,434 18,350 45,577

Restricted cash - long-term:

Other assets, net — 782 632 832

Total cash, cash equivalents, and restricted cash $ 271,658 $ 252,659 $ 269,009 $ 936,716

During the nine months ended June 30, 2022, our cash, cash equivalents, and restricted cash balance decreased approximately $ 714.1 million compared to our balance at September 30, 2021.

This change was primarily driven by the redemption of all the outstanding 2025 Notes, resulting in a cash outflow of $ 487.1 million during the nine months ended June 30, 2022.

Additionally, the associated make-whole premium of $ 56.4 million was paid during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 debt extinguishment.

Recently Issued Accounting Updates

3 unchanged sentences

ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company.

The following table provides a brief description of a recently adopted accounting pronouncement and our analysis of the effects on our financial statements:

Effect on the Financial Statements or Other Significant Matters

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

Standard Description Date of

Adoption Effect on the Financial

Statements or Other Significant Matters

Recently Adopted Accounting Pronouncements

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

Simplifying the Accounting for Income Taxes

This ASU simplifies the accounting for income taxes by removing certain exceptions related to Topic 740.

The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

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

Early adoption of the amendment is permitted, including adoption in any interim period for public entities for periods for which financial statements have not yet been issued.

An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

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.

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

October 1, 2021

We adopted this ASU during the first quarter of fiscal year 2022.

The adoption did not have a material effect on our Unaudited Condensed Consolidated Financial Statements and disclosures.

Standards that are not yet adopted as of June 30, 2022

2020-06, Debt with conversion and other options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s own equity (subtopic 815-40):

Accounting For Convertible Instruments and Contracts In An Entity’s Own Equity

This ASU reduces the complexity of accounting for convertible debt and other equity-linked instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

Accounting for Convertible Instruments and Contracts In An Entity’s Own Equity This ASU reduces the complexity of accounting for convertible debt and other equity-linked instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP.

1 unchanged sentence

This update is effective for annual and interim periods beginning after December 15, 2021.

Early adoption of the amendment is permitted.

October 1, 2022 We plan to adopt this ASU, as required, during the first quarter of fiscal year 2023.

Although we are currently evaluating the impact the new guidance may have on our Unaudited Condensed Consolidated Financial Statements and disclosures, we do not believe the adoption will have a material effect thereon.

October 1, 2022 We adopted this ASU, as required, during the first quarter of fiscal year 2023.

The adoption did not have a material effect on our Unaudited Condensed Consolidated Financial Statements and disclosures.

2022-03, Fair Value Measurement (Topic 820):

4 unchanged sentences

This update is effective for annual and interim periods beginning after December 15, 2023.

Early adoption of the amendment is permitted for both interim and annual financial statements.

October 1, 2022 We plan to early adopt this ASU during the first quarter of fiscal year 2023.

October 1, 2022 We early adopted this ASU during the first quarter of fiscal year 2023.

The adoption did not have a material effect on our Unaudited Condensed Consolidated Financial Statements and disclosures.

Q1FY23 FORM 10-Q | 10

Self-Insurance

Our wholly-owned insurance captives ("Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $ 3.1 million and $ 6.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ 2.7 million and $ 8.8 million for the nine months ended June 30, 2022 and 2021, respectively, and rig casualty insurance premiums of $ 9.4 million and $ 5.6 million for the three months ended June 30, 2022 and 2021, respectively, and $ 26.2 million and $ 13.1 million for the nine months ended June 30, 2022 and 2021, respectively, and were recorded within drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations.

Intercompany premium revenues recorded by the Captives amounted to $ 14.7 million and $ 9.4 million during the three months ended June 30, 2022 and 2021, respectively, and $ 41.6 million and $ 25.2 million during the nine months ended June 30, 2022 and 2021, respectively, which were eliminated upon consolidation.

Our wholly-owned insurance captives (the "Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $ 2.9 million and $( 2.2 ) million and rig and casualty insurance premiums of $ 10.0 million and $ 8.8 million during the three months ended December 31, 2022 and 2021 respectively.

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

Intercompany premium revenues recorded by the Captives during the three months ended December 31, 2022 and 2021 amounted to $ 16.4 million and $ 13.6 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 Captives 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 Captive insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $ 50,000 .

This program is reviewed at the end of each policy year by an outside actuary.

Our medical stop loss operating expenses for the three months ended June 30, 2022 and 2021 were $ 3.8 million and $ 3.2 million, respectively, and $ 10.6 million and $ 8.7 million for the nine months ended June 30, 2022 and 2021, respectively.

Our medical stop loss operating expenses for the three months ended December 31, 2022 and 2021 were $ 2.8 million and $ 3.2 million, respectively.

International Solutions Drilling Risks

24 unchanged sentences

dollars with gains and losses resulting from foreign currency transactions included in current results of operations.

We recorded aggregate foreign currency losses of $ 1.2 million and $ 0.7 million for the three months ended June 30, 2022 and 2021, and $ 4.5 million and $ 4.9 million for the nine months ended June 30, 2022 and 2021, respectively.

We recorded aggregate foreign currency losses of $ 0.2 million and $ 1.0 million for the three months ended December 31, 2022 and 2021 respectively.

In the future, we may incur larger currency devaluations, foreign exchange restrictions or other difficulties repatriating U.S.

dollars from Argentina or elsewhere, which could have a material adverse impact on our business, financial condition and results of operations.

As of June 30, 2022, our cash balance in Argentina was $ 3.8 million.

As of December 31, 2022, our cash balance in Argentina was $ 19.7 million.

Because of the impact of local laws, our future operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities.

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.

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three and nine months ended June 30, 2022, approximately 5.4 percent and 6.7 percent of our operating revenues were generated from international locations in our drilling business compared to 4.8 percent during both the three and nine months ended June 30, 2021.

During the three and nine months ended June 30, 2022, approximately 82.6 percent and 78.4 percent of operating revenues from international locations were from operations in South America, compared to 52.2 percent and 43.1 percent during the three and nine months ended June 30, 2021, respectively.

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three months ended December 31, 2022, approximately 7.7 percent of our operating revenues were generated from international locations compared to 9.3 percent during the three months ended December 31, 2021.

During the three months ended December 31, 2022, approximately 90.5 percent of operating revenues from international locations were from operations in South America compared to 77.1 percent during the three months ended December 31, 2021.

Substantially all of the South American operating revenues were from Argentina and Colombia.

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 DISCONTINUED OPERATIONS

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

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

The activity for the three and nine months ended June 30, 2022 and 2021 was primarily due to the remeasurement of an uncertain tax liability as a result of the devaluation of the Venezuelan 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.

The Venezuelan government also established a new currency called the “Sovereign Bolivar,” which was determined by the elimination of five zeros from the old currency.

The DICOM floating rate was approximately 4,181,782 and 3,220,598 Bolivars per United States dollar at September 30, 2021, and June 30, 2021, respectively.

In October 2021, the Venezuelan government launched another monetary overhaul by cutting six zeros from the Bolivar in response to hyperinflation and to simplify accounting.

As such, as of June 30, 2022, the DICOM floating rate was approximately six Bolivars per United States dollar.

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

Q1FY23 FORM 10-Q | 11

NOTE 3 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of June 30, 2022 and September 30, 2021 consisted of the following:

(in thousands) Estimated Useful Lives June 30, 2022 September 30, 2021

Property, plant and equipment as of December 31, 2022 and September 30, 2022 consisted of the following:

(in thousands) Estimated Useful Lives December 31, 2022 September 30, 2022

Drilling services equipment 4 - 15 years

1 unchanged sentence

Tubulars 4 years

570,833 569,496

Real estate properties 10 - 45 years

9 unchanged sentences

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

Additionally, we include other capital maintenance purchase orders that are open/in process.

Additionally, we include other advances for capital maintenance purchase-orders that are open/in process.

As these various projects are completed, the costs are then classified to their appropriate useful life category.

Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $ 97.5 million and $ 102.7 million, including $ 1.4 million and $ 1.3 million in abandonments, for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $ 293.5 million and $ 312.4 million, including $ 5.2 million and $ 1.7 million in abandonments for the nine months ended June 30, 2022 and 2021, respectively.

Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $ 94.9 million and $ 98.6 million including abandonments of $ 1.2 million and $ 1.3 million for the three months ended December 31, 2022 and 2021, respectively.

I n November 2022, a fire at a wellsite caused substantial damage to one of our super spec-rigs within our North America Solutions segment.

The major components were destroyed beyond repair and considered a total loss, and, as a result, these assets were written off and the rig was removed from our available rig count.

At the time of the loss, the rig was fully insured under replacement cost insurance.

The insurance recovery is expected to exceed the net book value of the components written off.

The loss of $ 9.2 million is recorded as abandonment expense within Depreciation and Amortization in our Unaudited Condensed Consolidated Statement of Operations for the three months ended December 31, 2022 and is offset by an insurance recovery that was also recognized within Depreciation and Amortization for the same amount as the loss.

Any insurance proceeds in excess of the loss will be recognized once it is collected.

Assets Held-for-Sale

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

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

Balance at September 30, 2022

Additions 1,459

Sales ( 47,308 )

Balance at June 30, 2022

In March 2021, the Company's leadership continued the execution of the current strategy 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 represented their fair value less estimated costs to sell, and were reclassified as held-for-sale in the second and third quarters of fiscal year 2021.

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.

Additionally, during the nine months ended June 30, 2022, we completed the sale of a portion of the remaining assets with a net book value of $ 1.9 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 are being delivered and commissioned in stages over a twelve-month period subject to acceptance upon successful completion of final inspection on customary terms and conditions.

As of June 30, 2022, ADNOC Drilling accepted delivery of five rigs with an aggregate net book value of $ 34.5 million and, as a result, we recognized a gain of $ 1.1 million, after incurring $ 15.7 million of selling costs, during the nine months ended June 30, 2022.

Upon final acceptance of delivery, these rigs were removed from assets classified as held-for-sale as of June 30, 2022.

The gains are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended June 30, 2022.

The remaining cash proceeds received in advance of rig delivery and acceptance of $ 35.3 million is recorded in Accrued Liabilities within our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022.

Additionally, the three remaining rigs not yet delivered and accepted are classified as held-for-sale in the Unaudited Condensed Consolidated Balance Sheets until each rig is delivered and accepted, at which time any related gain/loss on the sale will be recognized in the Unaudited Condensed Consolidated Statement of Operations.

Estimated cost to sell related to the remaining rigs is approximately $ 12.9 million, including approximately $ 6.9 million of expenses incurred during the nine months ended June 30, 2022, and approximately $ 6.0 million of expenses to be incurred in future periods.

We paid approximately $ 18.2 million in cash charges related to costs to sell for the eight rigs during the nine months ended June 30, 2022.

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 assets, which contributed approximately 2.8 percent to our consolidated revenues 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 during the fourth quarter of fiscal year 2021.

During the nine months ended June 30, 2022, we closed on the sale of these assets in two separate transactions.

The sale of our trucking assets was completed on November 3, 2021 while the sale of our casing running assets was completed on November 15, 2021 for total consideration less costs to sell of $ 6.0 million, in addition to the possibility of future earnout revenue, resulting in a loss of $ 3.4 million.

Losses related to the sale of these assets are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

During the first quarter of fiscal year 2022, we identified two partial rig substructures that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets.

The combined net book value of the rig substructures of $ 2.0 million were written down to their estimated scrap value of $ 0.1 million, resulting in a non-cash impairment charge of $ 1.9 million within our North America Solutions segment and recorded in the Unaudited Condensed Consolidated Statement of Operations for the nine months ended June 30, 2022.

During the second quarter of fiscal year 2022, we completed the sale of a portion of the assets with a net book value of approximately $ 0.1 million, resulting in no gain or loss as a result of the sale.

During the first quarter of fiscal year 2022, we identified two international FlexRig ® drilling rigs located in Colombia that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets.

In conjunction with establishing a plan to sell the two international FlexRig ® drilling rigs, we recognized a non-cash impairment charge of $ 2.5 million within our International Solutions segment and recorded in the Unaudited Condensed Consolidated Statement of Operations during the nine months ended June 30, 2022, as the rigs aggregate net book value of $ 3.4 million exceeded the fair value of the rigs less estimated cost to sell of $ 0.9 million.

During the second quarter of fiscal year 2022, we completed the sale of the two international FlexRig ® drilling rigs for total consideration of $ 0.9 million, resulting in no gain or loss as a result of the sale.

The significant assumptions utilized in the valuation of assets held-for-sale 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.

Asset additions 767

Sale of assets held-for-sale ( 816 )

Impairment expense ( 2,733 )

Balance at December 31, 2022

Fiscal Year 2023 Activity

During the three months ended December 31, 2022, the Company initiated a plan to decommission and scrap four international FlexRig ® drilling rigs and four conventional drilling rigs located in Argentina that are not suitable for unconventional drilling.

As a result, these rigs were reclassified to Assets Held-for-Sale on our Unaudited Condensed Consolidated Balance Sheets as of December 31, 2022.

The rigs’ aggregate net book value of $ 8.8 million was written down to the estimated scrap value of $ 0.7 million, which resulted in a non-cash impairment charge of $ 8.1 million within our International Solutions segment and recorded in our Unaudited Condensed Consolidated Statement of Operations during the three months ended December 31, 2022.

Q1FY23 FORM 10-Q | 12

During the three months ended December 31, 2022, our North America Solutions assets that were previously classified as Assets Held-for-Sale at September 30, 2022 were either sold or written down to scrap value.

The aggregate net book value of these remaining assets was $ 3.0 million, which exceeded the estimated scrap value of $ 0.3 million, resulting in a non-cash impairment charge of $ 2.7 million during the three months ended December 31, 2022.

During the three months ended December 31, 2022, we also identified additional equipment that met the asset held-for-sale criteria and was reclassified as Assets Held-for-Sale on our Unaudited Condensed Consolidated Balance Sheets.

The aggregate net book value of the equipment of $ 1.4 million was written down to its estimated scrap value of $ 0.1 million, resulting in a non-cash impairment charge of $ 1.3 million during the three months ended December 31, 2022.

These impairment charges are recorded within our North America Solutions segment in our Unaudited Condensed Consolidation Statement of Operations.

Fiscal Year 2022 Activity

During the three months ended December 31, 2021, we closed on the sale of our trucking and casing running assets for total consideration less costs to sell of $ 6.0 million, in addition to the possibility of future earnout proceeds, resulting in a loss of $ 3.4 million.

We identified two partial rig substructures that met the asset held-for-sale criteria and were reclassified as Assets Held-for-Sale on our Unaudited Condensed Consolidated Balance Sheets.

Two international FlexRig ® drilling rigs located in Colombia were identified that met the asset held-for-sale criteria and were reclassified as Assets Held-for-Sale on our Unaudited Condensed Consolidated Balance Sheets.

In conjunction with establishing a plan to sell the two international FlexRig ® drilling rigs, we recognized a non-cash impairment charge of $ 2.5 million within our International Solutions segment and recorded in the Unaudited Condensed Consolidated Statement of Operations during the three months ended December 31, 2021, as the rigs aggregate net book value of $ 3.4 million exceeded the fair value of the rigs less estimated cost to sell of $ 0.9 million.

The significant assumptions utilized in the valuations of held-for-sale 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)/Loss on Sale of Assets

We had a gain of $ 9.9 million and $ 21.6 million, during the three and nine months ended June 30, 2022, respectively, and $ 4.3 million and $ 10.2 million, during the three and nine months ended June 30, 2021, respectively, related to customer reimbursement for the replacement value of lost or damaged drill pipe.

Gain on Reimbursement of Drilling Equipment

During the three months ended December 31, 2022 and 2021 we recognized a gain of $ 15.7 million and $ 5.3 million respectively, related to customer reimbursement for the current replacement value of lost or damaged drill pipe.

Gains related to these asset sales are recorded in Gains on Reimbursement of Drilling Equipment within our Unaudited Condensed Consolidated Statements of Operations.

During the three and nine months ended June 30, 2022, we had a gain of $ 3.1 million and $ 2.8 million, respectively, related to the sale of rig equipment and other capital assets.

During the first quarter of fiscal year 2022, we closed on the sale of our trucking and casing running assets resulting in a loss of $ 3.4 million, as mentioned above.

During the second quarter of fiscal year 2022, ADNOC Drilling accepted delivery of two rigs resulting in a gain of $ 1.2 million.

During the third quarter of fiscal year 2022, ADNOC Drilling accepted delivery of three rigs which resulted in a nominal loss of $ 26.6 thousand.

The (gain) loss related to the sale of these assets are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

During the three and nine months ended June 30, 2021, we had a loss of $ 0.8 million and $ 13.0 million, respectively, related to sale of rig equipment and other capital assets.

During the first quarter of fiscal year 2021, we completed the sale of an offshore platform rig within our Offshore Gulf of Mexico operating segment resulting in a gain of $ 9.2 million.

During the second quarter of fiscal year 2021, we sold excess drilling equipment and spares, which resulted in a net loss of $ 23.0 million.

The gains and losses related to these asset sales were recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

Other (Gain)/Loss on Sale of Assets

During the three months ended December 31, 2022 and 2021 we recognized a (gain) loss of $( 2.4 ) million and $ 1.0 million, respectively, related to the sale of rig equipment and other capital assets.

These amounts are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

Fiscal Year 2023 During the first quarter of fiscal year 2023 , we recognized a gain of $ 1.1 million in earnout proceeds associated with the sale of our trucking and casing services assets during the fiscal year ended September 30, 2022, as mentioned above.

Fiscal Year 2022 During the first quarter of fiscal year 2022, we closed on the sale of our former trucking and casing running assets resulting in a loss of $ 3.4 million, as mentioned above.

NOTE 4 GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price over the fair values of the assets acquired and liabilities assumed in a business combination, at the date of acquisition.

Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis, or when indications of potential impairment exist.

Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis in the fourth fiscal quarter, or when indications of potential impairment exist.

All of our goodwill is within our North America Solutions reportable segment.

During the three and nine months ended June 30, 2022, we had no additions or impairments to goodwill.

As of June 30, 2022 and September 30, 2021, the goodwill balance was $ 45.7 million .

During the three months ended December 31, 2022, we had no additions or impairments to goodwill.

As of December 31, 2022 and September 30, 2022, the goodwill balance was $ 45.7 million.

Q1FY23 FORM 10-Q | 13

Intangible Assets

Finite-lived intangible assets are amortized using the straight-line method over the period in which these assets contribute to our cash flows and are evaluated for impairment in accordance with our policies for valuation of long-lived assets.

All of our intangible assets are within our North America Solutions reportable segment.

Intangible assets consist of the following:

June 30, 2022 September 30, 2021

(in thousands) Weighted Average Estimated Useful Lives Gross

Amount Accumulated

Amortization Net Gross

Amount Accumulated

Amortization Net

All of our intangible assets are within our North America Solutions reportable segment and consist of the following:

December 31, 2022 September 30, 2022

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

Finite-lived intangible asset:

4 unchanged sentences

$ 100,961 $ 35,563 $ 65,398 $ 100,961 $ 33,807 $ 67,154

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.8 million for both the three months ended June 30, 2022 and 2021, and $ 5.4 million for both the nine months ended June 30, 2022 and 2021.

A mortization is estimated to be approximately $ 1.8 million for the remainder of fiscal year 2022, approximately $ 6.6 million for fiscal year 2023, and approximately $ 6.4 million for fiscal years 2024, 2025 and 2026.

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.8 million for both the three months ended December 31, 2022 and 2021 and is estimated to be approximately $ 4.8 million for the remainder of fiscal year 2023 , and approximately $ 6.4 million for fiscal year 2024 through 2027.

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

June 30, 2022 September 30, 2021

(in thousands) Face

Amount Unamortized

Discount and Debt Issuance

Amount Unamortized

Discount and Debt Issuance

December 31, 2022 September 30, 2022

(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 19, 2025 $ — $ — $ — $ 487,148 $ ( 3,662 ) $ 483,486

Due September 29, 2031 $ 550,000 $ ( 7,068 ) $ 542,932 $ 550,000 $ ( 7,390 ) $ 542,610

550,000 ( 7,068 ) 542,932 550,000 ( 7,390 ) 542,610

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

long-term debt due within one year — — — — — —

Long-term debt $ 550,000 $ ( 7,068 ) $ 542,932 $ 550,000 $ ( 7,390 ) $ 542,610

2.90 % Senior Notes due 2031 On September 29, 2021, we issued $ 550.0 million aggregate principal amount of 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.

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”).

1 unchanged sentence

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

In June 2022, we settled a registered exchange offer (the “Registered Exchange Offer”) to exchange the 2031 Notes for new, SEC-registered notes that are substantially identical to the terms of the 2031 Notes, except that the offer and issuance of the new notes have been registered under the Securities Act and certain transfer restrictions, registration rights and additional interest provisions relating to the 2031 Notes do not apply to the new notes.

One hundred percent of the 2031 Notes were exchanged in the Registered Exchange Offer.

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;

2 unchanged sentences

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, the associated make-whole premium of $ 56.4 million and the write off of the unamortized discount and debt issuance costs of $ 3.7 million were recognized during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 debt extinguishment and recorded in Loss on Extinguishment of Debt on our Unaudited Condensed Consolidated Statements of Operations during the nine months ended June 30, 2022.

Q1FY23 FORM 10-Q | 14

4.65 % Senior Notes due 2025 On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

Credit Facilities

1 unchanged sentence

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.

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.

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

Additionally, on March 8, 2022, we entered into the second amendment to the 2018 Credit Facility, which, among other things, raised the number of potential future extensions of the maturity date applicable to extending lenders from one to two such potential extensions and replaced provisions in respect of interest rate determinations that were based on the London Interbank Offered Rate with provisions based on the Secured Overnight Financing Rate.

2 unchanged sentences

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.

As of June 30, 2022, there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility.

As of December 31, 2022, there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility.

For a full description of the 2018 Credit Facility, see Note 7—Debt to the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K.

As of June 30, 2022, we had four separate bi-lateral credit facilities with banks with an aggregate outstanding balance of $ 33.8 million.

As of June 30, 2022, 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, $ 5.8 million of financial guarantees were outstanding as of June 30, 2022.

As of December 31, 2022, we had $ 95.0 million in uncommitted bilateral credit facilities, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds.

Of the $ 95.0 million, $ 40.0 million was outstanding as of December 31, 2022.

Separately, we had $ 2.1 million in standby letters of credit and bank guarantees outstanding.

In total, we had $ 42.1 million outstanding as of December 31, 2022.

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.

At June 30, 2022, we were in compliance with all debt covenants.

At December 31, 2022, we were in compliance with all debt covenants.

NOTE 6 INCOME TAXES

Although in the second quarter of fiscal year 2022 we anticipated using the discrete effective tax method to calculate income taxes for the remainder of the fiscal year, we used the estimated annual effective tax rate to calculate the income tax provision for the three and nine months ended June 30, 2022 as the estimated annual effective tax rate provides a reliable estimate.

We use an estimated annual effective tax rate for purposes of determining the income tax provision during interim reporting periods.

In calculating our estimated annual effective tax rate, we consider forecasted annual pre-tax income and estimated permanent book versus tax differences.

Adjustments to the effective tax rate and estimates could occur during the year as information and assumptions change, including, but not limited to, changes to the forecasted amounts, estimates of permanent book versus tax differences, and changes to tax laws and rates.

Our income tax expense (benefit) from continuing operations for the three months ended June 30, 2022 and 2021 was $ 1.7 million and $( 23.7 ) million, respectively, resulting in effective tax rates of 9.0 percent and 29.4 percent, respectively.

Our income tax expense (benefit) from continuing operations for the nine months ended June 30, 2022 and 2021 was $( 3.2 ) million and $( 78.4 ) million, respectively, resulting in effective tax rates of 7.6 percent and 23.3 percent, respectively.

Adjustments to the effective tax rate and estimates could occur during the year as information and assumptions change which could include, but are not limited to, changes to forecasted amounts, estimates of permanent book versus tax differences, and changes to tax laws and rates.

Our income tax expense (benefit) from continuing operations for the three months ended December 31, 2022 and 2021 was $ 32.4 million and $( 7.6 ) million, respectively, resulting in effective tax rates of 25.1 percent and 12.8 percent, respectively.

Effective tax rates differ from the U.S.

federal statutory rate of 21.0 percent for the three and nine months ended June 30, 2022 and 2021 primarily due to state and foreign income taxes, permanent non-deductible items and discrete adjustments.

The discrete adjustments for the nine months ended June 30, 2022 and 2021 are primarily due to changes in our deferred state income tax rate, return to provision adjustments, and equity compensation.

federal statutory rate of 21.0 percent for the three months ended December 31, 2022 and 2021 primarily due to state and foreign income taxes, permanent non-deductible items and discrete adjustments.

The discrete adjustments for the three months ended December 31, 2022 and 2021 are primarily due to tax expense related to equity compensation of $ 0.2 million and $ 3.5 million, respectively.

For the next 12 months, we cannot predict with certainty whether we will achieve ultimate resolution of any uncertain tax positions associated with our U.S.

2 unchanged sentences

NOTE 7 SHAREHOLDERS’ EQUITY

The Company has an evergreen authorization from the Board of Directors (the "Board") for the repurchase of up to four million common shares in any calendar year.

The Company has an evergreen authorization from the Board of Directors for the repurchase of up to four million common shares in any calendar year.

In December 2022, the Board of Directors increased the maximum number of shares authorized to be repurchased in calendar year 2023 to five million common shares, effective on January 1, 2023.

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

During the nine months ended June 30, 2022, we repurchased 3.2 million common shares at an aggregate cost of $ 77.0 million, respectively, which are held as treasury shares.

There were no repurchases of common shares during the nine months ended June 30, 2021.

A cash dividend of $ 0.25 per share was declared on March 2, 2022 for shareholders of record on May 13, 2022, and was paid on May 27, 2022.

An additional cash dividend of $ 0.25 per share was declared on May 31, 2022 for shareholders of record on August 17, 2022, payable on September 1, 2022.

As a result, we recorded a dividend payable of $ 26.7 million within Dividends Payable on our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2022.

During the three months ended December 31, 2022 and 2021, we repurchased 0.8 million common shares at an aggregate cost of $ 39.1 million and 2.5 million common shares at an aggregate cost of $ 60.4 million, respectively, which are held as treasury shares.

Q1FY23 FORM 10-Q | 15

A cash dividend of $ 0.25 per share was declared on September 7, 2022 and a supplemental dividend of $ 0.235 per share was declared on October 17, 2022, both for shareholders of record on November 15, 2022, and was paid on December 1, 2022.

On December 9, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.25 per share and a quarterly supplemental cash dividend of $ 0.235 per share for shareholders of record on February 14, 2023, payable on February 28, 2023.

As a result, we recorded Dividends Payable of $ 51.5 million on our Unaudited Condensed Consolidated Balance Sheets as of December 31, 2022.

Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss were as follows:

(in thousands) June 30,

2022 September 30,

December 31, September 30,

(in thousands) 2022 2022

Pre-tax amounts:

Unrecognized net actuarial loss $ ( 24,747 ) $ ( 26,268 )

( 24,747 ) ( 26,268 )

Unrealized actuarial loss $ ( 15,372 ) $ ( 15,703 )

After-tax amounts:

Unrecognized net actuarial loss ( 19,067 ) ( 20,244 )

$ ( 19,067 ) $ ( 20,244 )

The following is a summary of the changes in accumulated other comprehensive loss, net of tax, related to the defined benefit pension plan for the three and nine months ended June 30, 2022:

(in thousands) Three Months Ended June 30, 2022 Nine Months Ended June 30, 2022

Balance at beginning of period $ ( 19,456 ) $ ( 20,244 )

Unrealized actuarial loss $ ( 11,816 ) $ ( 12,072 )

The following is a summary of the changes in accumulated other comprehensive loss, net of tax, related to the defined benefit pension plan for the three months ended December 31, 2022:

(in thousands) Defined Benefit Pension Plan

Balance at September 30, 2022

Activity during the period

1 unchanged sentence

Net current-period other comprehensive income 256

Balance at June 30, 2022 $ ( 19,067 ) $ ( 19,067 )

Balance at December 31, 2022 $ ( 11,816 )

NOTE 8 REVENUE FROM CONTRACTS WITH CUSTOMERS

Drilling Services Revenue

The releases for rigs under term contracts result in early termination compensation owed to us.

During the three months ended June 30, 2022 and 2021, we recognized no early termination revenue associated with term contracts, compared to $ 0.7 million and $ 7.7 million recognized during the nine months ended June 30, 2022 and 2021 respectively.

With most drilling contracts, we also receive payments contractually designated for the mobilization and demobilization of drilling rigs and other equipment to and from the client’s drill site.

With most drilling contracts, we receive payments contractually designated for the mobilization and demobilization of drilling rigs and other equipment to and from the client’s drill site.

Revenue associated with the mobilization and demobilization of our drilling rigs to and from the client’s drill site do not relate to a distinct good or service.

4 unchanged sentences

The settlement required that YPF make a one-time cash payment to H&P in the amount of $ 11.0 million and enter into drilling service contracts for three drilling rigs, each with multi-year terms.

In addition, both parties were released of all outstanding claims against each other, and as a result, H&P recognized $ 5.4 million in revenue primarily due to accrued contingent liabilities for disputed amounts.

Total revenue recognized as a result of the settlement in the amount of $ 16.4 million is included in Drilling Services Revenue within the International Solutions segment on our Unaudited Condensed Consolidated Statements of Operations for the nine months ended June 30, 2022.

In addition, both parties were released of all outstanding claims against each other, and as a result, H&P recognized $ 5.4 million in revenue primarily due to accrued disputed amounts.

Contract Costs

We had capitalized fulfillment costs of $ 7.9 million and $ 4.3 million as of June 30, 2022 and September 30, 2021, respectively.

We had capitalized fulfillment costs of $ 9.4 million and $ 6.3 million as of December 31, 2022 and September 30, 2022, respectively.

Q1FY23 FORM 10-Q | 16

Remaining Performance Obligations

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of June 30, 2022 was approximately $ 862.2 million, of which approximately $ 338.7 million is expected to be recognized during the remainder of fiscal year 2022, approximately $ 408.6 million during fiscal year 2023, and approximately $ 114.9 million during fiscal year 2024 and thereafter.

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of December 31, 2022 was approximately $ 1.4 billion, of which approximately $ 1.0 billion is expected to be recognized during the remainder of fiscal year 2023 , approximately $ 0.3 billion during fiscal year 2024, and approximately $ 0.1 billion in fiscal year 2025 and thereafter.

These amounts do not include anticipated contract renewals.

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

Our contracts are subject to cancellation or modification at the election of the customer, but also carry certain early termination provisions customers abide by in cases of cancellation or modification.

Due to the level of capital deployed by our customers on underlying projects, we have not been materially adversely affected by contract cancellations or modifications in the past.

Our contracts are subject to cancellation or modification at the election of the customer;

however, due to the level of capital deployed by our customers on underlying projects, we have not been materially adversely affected by contract cancellations or modifications in the past.

Contract Assets and Liabilities

The following tables summarize the balances of our contract assets (net of allowance for estimated credit losses) and liabilities at the dates indicated below:

(in thousands) June 30, 2022 September 30, 2021

The following table summarizes the balances of our contract assets (net of allowance for estimated credit losses) and liabilities at the dates indicated:

(in thousands) December 31, 2022 September 30, 2022

Contract assets, net $ 8,179 $ 6,319

(in thousands) June 30, 2022

(in thousands)

Contract liabilities balance at September 30, 2022 $ 20,646

1 unchanged sentence

Revenue recognized during the period ( 15,080 )

Contract liabilities balance at June 30, 2022

Contract liabilities balance at December 31, 2022 $ 25,681

NOTE 9 STOCK-BASED COMPENSATION

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 Unaudited Condensed Consolidated Statements of Operations is as follows:

Three Months Ended June 30, Nine Months Ended June 30,

A summary of compensation expense for stock-based payment arrangements recognized in Drilling Services Operating Expense, Research and Development Expense and Selling, General and Administrative Expense on our Unaudited Condensed Consolidated Statements of Operations, is as follows:

Three Months Ended December 31,

(in thousands) 2022 2021

5 unchanged sentences

Restricted Stock

A summary of the status of our restricted stock awards as of June 30, 2022 and changes in non-vested restricted stock outstanding during the nine months then ended is presented below:

(in thousands, except per share amounts) Shares (1)

A summary of the status of our restricted stock awards as of December 31, 2022 and changes in non-vested restricted stock outstanding during the three months then ended is presented below:

(shares in thousands) Shares 1

Weighted-Average Grant Date Fair Value per Share

4 unchanged sentences

Forfeited ( 3 ) 24.87

Non-vested restricted stock outstanding at June 30, 2022

1,497 $ 30.85

Non-vested restricted stock outstanding at December 31, 2022 1,385 $ 35.02

(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 nine months ended June 30, 2022, 14,199 restricted phantom stock units were granted and 18,906 restricted phantom stock units vested during the same period.

Phantom stock units are subject to a vesting period of one year from the grant date.

During the three months ended December 31, 2022, no restricted phantom stock units were granted and no restricted phantom stock units vested.

(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.

Q1FY23 FORM 10-Q | 17

Performance Units

A summary of the status of our performance-vested restricted share units ("performance units") as of June 30, 2022 and changes in non-vested performance units outstanding during the nine months ended is presented below:

(in thousands, except per share amounts) Performance Units Weighted Average Grant Date Fair Value per Performance Unit

A summary of the status of our performance-vested restricted share units ("performance units") as of December 31, 2022 and changes in non-vested performance units outstanding during the three months ended is presented below:

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

Non-vested performance units outstanding at September 30, 2022

Granted 144 54.30

( 161 ) 62.66

Dividend equivalent right performance units credited 11 32.47

Forfeited ( 54 ) 34.16

Non-vested performance units outstanding at June 30, 2022 (2)

(1) The number of performance units vested includes units that we withheld on behalf of our employees to satisfy the statutory tax withholding requirements.

(2) Of the total non-vested performance units at the end of the period, specified performance criteria has been achieved with respect to 96,197 performance units which is calculated based on the payout percentage for the completed performance cycle.

Dividend rights performance units credited 7 33.67

Non-vested performance units outstanding at December 31, 2022 1

(1) Of the total non-vested performance units at the end of the period, specified performance criteria has been achieved with respect to 466,635 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 717,407 additional performance units could vest or become eligible to vest.

Subject to the terms and conditions set forth in the applicable performance 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.

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.

2 unchanged sentences

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 over the applicable performance cycle, and (ii) the continued employment of the recipient of the performance unit award throughout the Vesting Period.

The Vesting Period for performance units granted in December 2018 ended on December 31, 2021 and the performance units earned were settled in shares of common stock during the second quarter of fiscal year 2022.

The Vesting Period for performance units granted in November 2019 ended on December 31, 2022 and the performance units eligible to vest were settled in shares of common stock in January 2023.

Stock-based compensation expense related to these grants has been fully recognized as of December 31, 2022.

NOTE 10 EARNINGS (LOSSES) PER COMMON SHARE

7 unchanged sentences

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.

Q1FY23 FORM 10-Q | 18

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

Three Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2022 2021

3 unchanged sentences

Adjustment for basic earnings (loss) per share

Earnings allocated to unvested shareholders ( 368 ) ( 348 ) ( 1,138 ) ( 1,002 )

Losses allocated to unvested shareholders ( 992 ) ( 374 )

Numerator for basic earnings (loss) per share:

7 unchanged sentences

Denominator for basic earnings (loss) per share - weighted-average shares 105,248 107,571

Effect of dilutive shares from stock options, restricted stock and performance units 732 — — —

Effect of dilutive shares from stock options, restricted stock and performance share units 856 —

Denominator for diluted earnings (loss) per share - adjusted weighted-average shares 106,104 107,571

2 unchanged sentences

Income from discontinued operations 0.01 —

Net loss $ 0.16 $ ( 0.52 ) $ ( 0.37 ) $ ( 2.30 )

Net income (loss) $ 0.92 $ ( 0.48 )

Diluted earnings (loss) per common share:

1 unchanged sentence

Income from discontinued operations 0.01 —

Net loss $ 0.16 $ ( 0.52 ) $ ( 0.37 ) $ ( 2.30 )

We had a net loss for all periods presented above except for the three months ended June 30, 2022.

Accordingly, our diluted loss per share calculation for these periods were equivalent to our basic loss per share calculation since diluted loss per share excluded any assumed exercise of equity awards.

Net income (loss) $ 0.91 $ ( 0.48 )

We had a net loss for the three months ended December 31, 2021.

Accordingly, our diluted earnings per share calculation for that period was equivalent to our basic earnings per share calculation since diluted earnings per share excluded any assumed exercise of equity awards.

These were excluded because they were deemed to be anti-dilutive, meaning their inclusion would have reduced the reported net loss per share in the applicable period.

1 unchanged sentence

Three Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2022 2021

2022 2021 2022 2021

Potentially dilutive shares excluded as anti-dilutive 2,274 2,891

5 unchanged sentences

• Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

Q1FY23 FORM 10-Q | 19

• Level 2 — Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets;

6 unchanged sentences

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which we classify the fair value measurement.

June 30, 2022

December 31, 2022

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

4 unchanged sentences

Non-qualified supplemental savings plan 15,627 15,627 — —

Debt securities 3,524 — — 3,524

Equity investment in ADNOC Drilling 129,130 129,130 — —

Equity investment in Tamboran 17,228 17,228 — —

Debt security investment in Galileo 33,000 — — 33,000

Other debt securities 107 — — 107

Total investments 195,092 161,985 — 33,107

7 unchanged sentences

Non-qualified supplemental savings plan 14,301 14,301 — —

Equity and debt securities 14,358 13,858 — 500

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

Equity investment in ADNOC Drilling 147,370 147,370 —

Debt security investment in Galileo 33,000 — 33,000

Other debt securities 565 565

Total investments 195,236 161,671 — 33,565

Contingent consideration $ 4,022 $ — $ — $ 4,022

Short-term Investments Short-term investments include securities classified as trading securities.

Q1FY23 FORM 10-Q | 20

Short-term Investments

Short-term investments primarily include securities classified as trading securities.

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

The securities are recorded at fair value.

These securities are recorded at fair value.

Level 1 inputs include U.S.

1 unchanged sentence

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

Level 2 inputs included corporate bonds measured using broker quotations that utilize observable market inputs.

Long-term Investments Our long-term investments include debt and equity securities and assets held in a Non-Qualified Supplemental Savings Plan ("Savings Plan") and are recorded within Investments on our Unaudited Condensed Consolidated Balance Sheets.

Level 2 inputs include corporate bonds measured using broker quotations that utilize observable market inputs.

Long-term Investments

Equity Securities Our long-term investments include debt and equity securities and assets held in a Non-Qualified Supplemental Savings Plan ("Savings Plan") and are recorded within Investments on our Unaudited Condensed Consolidated Balance Sheets.

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

During the three months ended June 30, 2022, the Company made a $ 33.0 million cornerstone investment in Galileo Holdco 2 Limited Technologies ("Galileo Holdco 2"), part of the group of companies known as Galileo Technologies (“Galileo”) in the form of a convertible note.

During September 2021, the Company made a $ 100.0 million cornerstone investment in ADNOC Drilling in advance of its announced initial public offering, representing 159.7 million shares of ADNOC Drilling, equivalent to a one percent ownership stake and subject to a three-year lockup period.

ADNOC Drilling’s initial public offering was completed on October 3, 2021, and its shares are listed and traded on the Abu Dhabi Securities Exchange.

Our investment is classified as a long-term equity investment within Investments in our Unaudited Condensed Consolidated Balance Sheets and measured at fair value with any gains or losses recognized through net income (loss) and recorded within Gain (Loss) on Investment Securities on our Unaudited Condensed Consolidated Statement of Operations.

During the three months ended December 31, 2022, we early adopted ASU No.

2022-03 which states that the contractual restriction on the sale of an equity security that is publicly traded is not considered in measuring fair value.

The provisions of ASU No.

2022-03 were consistent with our historical accounting for our investment in ADNOC Drilling.

During the three months ended December 31, 2022, we recognized a loss of $ 18.2 million on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment compared to a gain of $ 47.8 million during the three months ended December 31, 2021.

As of December 31, 2022, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

Equity Securities with Fair Value Option In October 2022, we purchased a $ 14.1 million equity investment, representing 106.0 million common shares (approximately 7.5 percent ownership stake), in Tamboran Resources Limited ("Tamboran"), a publicly traded company on the Australian Securities Exchange Ltd under the ticker "TBN." Tamboran is focused on playing a constructive role in the global energy transition towards a lower carbon future, by developing a significantly low CO 2 gas resource within Australia's Beetaloo Sub-basin.

Concurrent with the investment agreement, we entered into a fixed-term drilling services agreement with the same investee for which mobilization is expected to commence later this fiscal year.

Approximately $ 30.3 million in revenue is expected to be earned over the term of the contract, and, as such, this amount is included within our contract backlog as of December 31, 2022.

We believe we have a significant influence but not control or joint control over the investee due to several factors, including our ownership percentage, operational involvement and our role as an observer on the investee's board of directors.

We consider this investment to have a readily determinable fair value and have elected to account for this investment using the fair value option with any changes in fair value recognized through net income (loss).

Our investment is classified as a long-term equity investment within Investments in our Unaudited Condensed Consolidated Balance Sheet as of December 31, 2022.

Under the guidance, Topic 820, Fair Value Measurement, this investment is classified as a Level 1 investment based on the quoted stock price which is publicly available.

During the three months ended December 31, 2022, we recognized a gain of $ 3.1 million recorded within Gain (Loss) on Investment Securities on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment during the period.

Debt Securities During April 2022, the Company made a $ 33.0 million cornerstone investment in Galileo Holdco 2 Limited Technologies ("Galileo Holdco 2"), part of the group of companies known as Galileo Technologies (“Galileo”) in the form of a convertible note.

Galileo specializes in liquification, natural gas compression and re-gasification modular systems and technologies to make the production, transportation, and consumption of natural gas, biomethane, and hydrogen more economically viable.

1 unchanged sentence

If the conversion option is exercised, the note would convert into common shares of the parent of Galileo Holdco 2.

All of our long-term debt securities, including our investment in Galileo, are classified as available-for-sale and considered a Level 3 input based on the absence of market activity.

We do not intend to sell this investment prior to its maturity date or an exit event.

As of December 31, 2022, the fair value of the convertible note was approximately equal to the cost basis.

Q1FY23 FORM 10-Q | 21

All of our long-term debt securities, including our investment in Galileo, are classified as available-for-sale and are measured using Level 3 unobservable inputs based on the absence of market activity.

The following table reconciles changes in the fair value of our Level 3 assets for the periods presented below:

Three Months Ended

June 30, Nine Months Ended

Three Months Ended December 31,

(in thousands) 2022 2021

Assets at beginning of period $ 33,565 $ 500

Additions 33,024 — 36,024 —

Purchases 42 3,000

Transfers out 1

Assets at end of period $ 33,107 $ 3,500

During the three months ended June 30, 2022, we sold our remaining equity securities of approximately 467.5 thousand shares in Schlumberger, Ltd.

and received proceeds of approximately $ 22.0 million.

For the three months ended June 30, 2022, we recorded a gain of $ 2.7 million related to this investment, which included a $ 0.5 million gain recognized upon the sale of our investment and a $ 2.2 million gain related to valuation adjustments.

This activity is reported in Gain (loss) on investment securities in our Unaudited Condensed Consolidated Statement of Operations.

This investment was classified as Level 1 and based on the quoted stock price.

During September 2021, the Company made a $ 100.0 million cornerstone investment in ADNOC Drilling in advance of its announced IPO, representing 159.7 million shares of ADNOC Drilling, equivalent to a one percent ownership stake and subject to a three-year lockup period.

ADNOC Drilling's IPO was completed on October 3, 2021, and its shares are listed and traded on the Abu Dhabi Securities Exchange (ADX).

Our investment is classified as a long-term equity investment within Investments in our Unaudited Condensed Consolidated Balance Sheets.

We have applied the guidance in Topic 820, Fair Value Measurement, in the initial accounting of the transaction and the subsequent revaluation of the investment balance, concluding that the contractual restriction on the sale of an equity security that is publicly traded is not considered in measuring fair value.

During the three and nine months ended June 30, 2022, we recognized a gain (loss) of $( 17.0 ) million and $ 47.8 million, respectively, in our Unaudited Condensed Consolidated Statement of Operations.

As of June 30, 2022, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

During the three months ended June 30, 2022, we also received dividends in the amount of $ 3.2 million as a result of this investment.

Contingent Consideration Our financial liabilities measured using Level 3 unobservable inputs primarily consist of potential earnout payments associated with our business acquisitions in fiscal year 2019 and certain consulting services.

The contingent considerations are recorded in Accrued Liabilities and Other Noncurrent Liabilities in the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of milestone achievements.

(1) We reclassified a portion of our long-term debt securities to short-term notes receivable and is recorded in Accounts Receivable on the Unaudited Condensed Consolidated Balance Sheets.

The following table provides quantitative information (in thousands) about our Level 3 unobservable significant inputs related to our debt security investment with Galileo at December 31, 2022 and September 30, 2022:

Fair Value Valuation Technique Unobservable Inputs

$ 33,000 Black-Scholes-Merton model Discount rate 22.4 %

Risk-free rate 4.0 %

Equity volatility 92.5 %

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.

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

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

Contingent Consideration

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

Contingent consideration is recorded in Accrued Liabilities and Other Noncurrent Liabilities on the Unaudited Condensed Consolidated Balance Sheets based on the expected timing of milestone achievements.

The following table reconciles changes in the fair value of our Level 3 liabilities for the periods presented below:

Three Months Ended

June 30, Nine Months Ended

Three Months Ended December 31,

(in thousands) 2022 2021

13 unchanged sentences

Further details on any changes in valuation of these assets is provided in their respective footnotes.

Q1FY23 FORM 10-Q | 22

Other Equity Securities

We also hold various other equity securities without readily determinable fair values.

These equity securities are measured at cost, less any impairments, on a nonrecurring basis.

As of June 30, 2022 and June 30, 2021, the aggregate balance of these equity securities was $ 14.1 million and $ 2.9 million, respectively.

During the three and nine months ended June 30, 2022, we did not record any impairments on these investments.

As of December 31, 2022 and 2021, the aggregate balance of these equity securities was $ 25.8 million and $ 8.9 million, respectively.

During the three months ended December 31, 2022 and 2021, we did not record any impairments on these investments.

The following table reconciles changes in the balance of our equity securities, without readily determinable fair values, for the periods presented below:

Three Months Ended

June 30, Nine Months Ended

Three Months Ended December 31,

(in thousands) 2022 2021

Assets at beginning of period $ 23,745 $ 2,865

Additions 62 1,865 11,187 2,865

Purchases 2,055 6,016

Assets at end of period $ 25,800 $ 8,881

Geothermal Investments

As of June 30, 2022 and September 30, 2021 the aggregate balance of our debt and equity security investments in geothermal energy was $ 17.0 million and $ 2.7 million, respectively.

All of our geothermal investments are considered a Level 3 input based on the absence of market activity.

These investments include assets measured on both a recurring and nonrecurring basis.

As of December 31, 2022 and September 30, 2022 the aggregate balance of our debt and equity security investments in geothermal energy was $ 25.3 million and $ 23.7 million, respectively.

These investments include assets measured on both a recurring and nonrecurring basis (discussed in the subsections above).

In circumstances where we are required to revalue these investments based on observable changes in fair market value, these investments would be classified Level 3 based on the absence of market activity.

Other Financial Instruments

2 unchanged sentences

Government and in federally insured deposit accounts.

The carrying value of accounts receivables, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at June 30, 2022 and September 30, 2021.

The following information presents the supplemental fair value information for our current and long-term fixed-rate debt at June 30, 2022 and September 30, 2021:

(in millions) June 30, 2022

September 30, 2021

Current portion of long-term debt, net 1

Carrying value $ — $ 483.5

Fair value — 541.6

The carrying value of accounts receivable, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at December 31, 2022 and September 30, 2022.

The following information presents the supplemental fair value information for our long-term fixed-rate debt at December 31, 2022 and September 30, 2022:

(in millions) December 31, 2022 September 30, 2022

Long-term debt, net

1 unchanged sentence

Fair value 446.5 430.7

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

See Note 6—Debt.

The fair values of the current and long-term fixed-rate debt is based on broker quotes as of June 30, 2022 and September 30, 2021.

The fair values of the long-term fixed-rate debt is based on broker quotes at December 31, 2022 and September 30, 2022.

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

2 unchanged sentences

Equipment, parts and supplies are ordered in advance to promote efficient construction and capital improvement progress.

At June 30, 2022, we had purchase commitments for equipment, parts and supplies of approximately $ 106.6 million.

At December 31, 2022, we had purchase commitments for equipment, parts and supplies of approximately $ 159.9 million.

Guarantee Arrangements

1 unchanged sentence

We have agreed to indemnify the sureties for any payments made by them in respect of such bonds.

Q1FY23 FORM 10-Q | 23

Contingencies

3 unchanged sentences

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

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

and PDVSA Petroleo, S.A., seeking damages for the taking of their Venezuelan drilling business in violation of international law and for breach of contract.

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.

("HPIDC"), and Helmerich & Payne de Venezuela, C.A.

filed a lawsuit in the United States District Court for the District of Columbia on September 23, 2011 against the Bolivarian Republic of Venezuela, Petroleos de Venezuela, S.A.

and PDVSA Petroleo, S.A., seeking damages for the seizure of their Venezuelan drilling business in violation of international law and for breach of contract.

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

In May 2018, an employee of our subsidiary, HPIDC, was involved in a car accident in his personal vehicle while not clocked in for work.

4 unchanged sentences

In April 2022, the Company and its insurers filed post-trial motions, none of which were granted by the trial judge.

However, on June 23, 2022, Plaintiffs' counsel filed a Voluntary Remittitur with the trial court, which formally reduced the verdict to $ 60.0 million.

However, in June 2022, Plaintiffs' counsel filed a Voluntary Remittitur with the trial court, which formally reduced the verdict to $ 60.0 million.

The Company and its insurers are currently filing motions to appeal the judgement.

Accordingly, the Company cannot make an estimate of the possible loss at this time.

As of June 30, 2022, we have accrued a total of $ 3.0 million, and currently have incurred some expense, mainly legal fees, against the insurance deductible.

As of December 31, 2022, we have incurred expenses, mainly legal fees, against the insurance deductible.

At this time, we believe our insurance policies will be responsive to the amounts over our $ 3.0 million insurance deductible and that foreseeable exposures to the Company exceeding the deductible will be recovered through insurance.

6 unchanged sentences

We disclose contingencies where an adverse outcome may be material, or in the judgment of management, we conclude the matter should otherwise be disclosed.

Significant Lease Not Yet Commenced

During the three months ended December 31, 2022, we entered into a new lease agreement for our new Tulsa corporate office.

This lease is expected to commence sometime during the first half of calendar year 2024.

The initial lease term is approximately 12 years with two unpriced five -year extension options.

The aggregate future non-cancelable lease payments are estimated to be approximately $ 15.1 million.

NOTE 13 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

9 unchanged sentences

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.

Q1FY23 FORM 10-Q | 24

Segment Performance

8 unchanged sentences

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 three and nine months ended June 30, 2022 and 2021 is shown in the following tables:

Three Months Ended June 30, 2022

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

External sales $ 486,004 $ 32,701 $ 29,118 $ 2,410 $ — $ 550,233

Intersegment — — — 14,725 ( 14,725 ) —

Total sales 486,004 32,701 29,118 17,135 ( 14,725 ) 550,233

Segment operating income (loss) 57,353 5,872 ( 6,550 ) 1,965 ( 2,140 ) 56,500

Three Months Ended June 30, 2021

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

External sales $ 281,132 $ 33,364 $ 15,278 $ 2,439 $ — $ 332,213

Intersegment — — — 9,379 ( 9,379 ) —

Total sales 281,132 33,364 15,278 11,818 ( 9,379 ) 332,213

Segment operating income (loss) ( 43,743 ) 5,707 ( 3,538 ) ( 4,670 ) ( 3,298 ) ( 49,542 )

Nine Months Ended June 30, 2022

Summarized financial information of our reportable segments for the three months ended December 31, 2022 and 2021 is shown in the following tables:

Three Months Ended December 31, 2022

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

2 unchanged sentences

Total sales 627,163 35,164 54,801 18,911 ( 16,402 ) 719,637

Segment operating income (loss) 29,757 16,616 651 9,061 ( 5,453 ) 50,632

Nine Months Ended June 30, 2021

Segment operating income 145,297 6,746 1,574 4,677 2,310 160,604

Three Months Ended December 31, 2021

(in thousands) North America Solutions Offshore Gulf of Mexico International Solutions Other Eliminations Total

4 unchanged sentences

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 Unaudited Condensed Consolidated Statements of Operations:

Three Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2022 2021

12 unchanged sentences

Income (loss) from continuing operations before income taxes $ 128,822 $ ( 58,899 )

The following table reconciles segment total assets as reported on the Unaudited Condensed Consolidated Balance Sheets:

(in thousands) June 30,

2022 September 30,

Q1FY23 FORM 10-Q | 25

The following table reconciles segment total assets to total assets as reported on the Unaudited Condensed Consolidated Balance Sheets:

(in thousands) December 31, 2022 September 30, 2022

Total assets 1

8 unchanged sentences

The following table presents revenues from external customers by country based on the location of service provided:

Three Months Ended June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2022 2021

8 unchanged sentences

Refer to Note 8—Revenue from Contracts with Customers for additional information regarding the recognition of revenue.

NOTE 14 SUBSEQUENT EVENTS

The Company has an evergreen authorization from the Board of Directors for the repurchase of up to four million common shares in any calendar year.

In December 2022, the Board of Directors increased the maximum number of shares authorized to be repurchased in calendar year 2023 to five million common shares, effective on January 1, 2023.

From January 1, 2023 through January 27, 2023, the Company repurchased approximately 0.4 million common shares at an aggregate cost of approximately $ 20.5 million, which are held as treasury shares.

Q1FY23 FORM 10-Q | 26

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-Q

Item 1. Financial Statements