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Item 1. Financial Statements

2023-07-26 compared with 2023-04-26 · 201 added, 167 removed, 755 unchanged (33% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, September 30,

June 30, September 30,

(in thousands except share data and share amounts) 2023 2022

31 unchanged sentences

Shareholders' Equity:

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of March 31, 2023 and September 30, 2022, and 102,584,517 and 105,293,662 shares outstanding as of March 31, 2023 and September 30, 2022, respectively

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of June 30, 2023 and September 30, 2022, and 99,426,526 and 105,293,662 shares outstanding as of June 30, 2023 and September 30, 2022, respectively

11,222 11,222

3 unchanged sentences

Accumulated other comprehensive loss ( 11,305 ) ( 12,072 )

Treasury stock, at cost, 9,638,348 shares and 6,929,203 shares as of March 31, 2023 and September 30, 2022, respectively

Treasury stock, at cost, 12,796,339 shares and 6,929,203 shares as of June 30, 2023 and September 30, 2022, respectively

( 464,382 ) ( 235,528 )

6 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022 2023 2022

18 unchanged sentences

Interest expense ( 4,324 ) ( 4,372 ) ( 12,918 ) ( 14,876 )

Gain on investment securities 39,752 22,132 24,661 69,994

Gain (loss) on investment securities ( 18,538 ) ( 14,310 ) 6,123 55,684

Loss on extinguishment of debt — — — ( 60,083 )

24 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income, net of income taxes:

Net change related to employee benefit plans, net of income taxes of $( 0.1 ) million and $( 0.2 ) million for the three and six months ended March 31, 2023, respectively, and $( 0.1 ) million and $( 0.2 ) million for the three and six months ended March 31, 2022, respectively

Net change related to employee benefit plans, net of income taxes of $( 59.6 ) thousand and $( 209.8 ) thousand for the three and nine months ended June 30, 2023, respectively, and $( 41.7 ) thousand and $( 268.4 ) thousand for the three and nine months ended June 30, 2022, respectively

255 389 767 1,177

5 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three and Six Months Ended March 31, 2023

Three and Nine Months Ended June 30, 2023

Common Stock Additional

25 unchanged sentences

Balance at March 31, 2023 112,222 $ 11,222 $ 509,205 $ 2,608,100 $ ( 11,560 ) 9,638 $ ( 361,161 ) $ 2,755,806

Comprehensive income:

Net income — — — 95,293 — — — 95,293

Other comprehensive income — — — — 255 — — 255

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

— — — ( 48,106 ) — — — ( 48,106 )

Stock-based compensation — — 8,180 — — — — 8,180

Share repurchases — — — — — 3,158 ( 103,221 ) ( 103,221 )

Other — — ( 126 ) — — — — ( 126 )

Balance at June 30, 2023 112,222 $ 11,222 $ 517,259 $ 2,655,287 $ ( 11,305 ) 12,796 $ ( 464,382 ) $ 2,708,081

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

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

Three and Six Months Ended March 31, 2022

Three and Nine Months Ended June 30, 2022

Common Stock Additional

24 unchanged sentences

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

Comprehensive income (loss):

Net income — — — 17,752 — — — 17,752

Other comprehensive income — — — — 389 — — 389

Dividends declared ($ 0.25 base per share)

— — — ( 26,691 ) — — — ( 26,691 )

Vesting of restricted stock awards, net of shares withheld for employee taxes — ( 136 ) — — ( 5 ) 140 4

Stock-based compensation — — 7,051 — — — — 7,051

Other — — ( 247 ) — — — — ( 247 )

Balance at 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.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31,

Nine Months Ended June 30,

(in thousands) 2023 2022

12 unchanged sentences

Gain on reimbursement of drilling equipment ( 37,940 ) ( 21,597 )

Other (gain) loss on sale of assets ( 4,898 ) 313

Other gain on sale of assets ( 394 ) ( 2,762 )

Deferred income tax expense (benefit) 4,197 ( 36,614 )

18 unchanged sentences

Proceeds from sale of short-term investments 148,651 161,766

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

Proceeds from asset sales 63,048 50,260

Other — ( 7,500 )

Net cash used in investing activities ( 191,044 ) ( 123,146 )

8 unchanged sentences

Net cash used in financing activities ( 414,992 ) ( 707,622 )

Net decrease in cash and cash equivalents and restricted cash ( 56,106 ) ( 707,340 )

Net increase (decrease) in cash and cash equivalents and restricted cash 12,964 ( 714,127 )

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

4 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Six Months Ended March 31,

Nine Months Ended June 30,

(in thousands) 2023 2022

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period:

Cash paid/(received) during the period:

Interest paid $ 8,958 $ 10,889

21 unchanged sentences

Argentina, Bahrain, Colombia and the United Arab Emirates.

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

Our operations in Australia are expected to begin in the fourth quarter of fiscal year 2023.

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

11 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, 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.

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 (Loss) from the date the Company gains control until the date when the Company ceases to control the subsidiary.

All intercompany accounts and transactions have been eliminated 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 $ 53.2 million and $ 27.2 million at March 31, 2023 and 2022, respectively, and $ 36.9 million and $ 19.2 million at September 30, 2022 and 2021, respectively.

Of the total at March 31, 2023 and September 30, 2022, $ 0.6 million and $ 1.1 million, respectively, is related to the acquisition of drilling technology companies, and $ 52.6 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.

We had restricted cash of $ 61.4 million and $ 33.9 million at June 30, 2023 and 2022, respectively, and $ 36.9 million and $ 19.2 million at September 30, 2022 and 2021, respectively.

Of the total at June 30, 2023 and September 30, 2022, $ 0.7 million and $ 1.1 million, respectively, is related to the acquisition of drilling technology companies, and $ 60.7 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.

1 unchanged sentence

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

March 31, September 30,

June 30, September 30,

(in thousands) 2023 2022 2022 2021

4 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 281,973 $ 222,589 $ 269,009 $ 936,716

Related Party Transactions

In October 2022, we made a $ 14.1 million equity investment, representing 106.0 million common shares in 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.

Mobilization of the rig commenced during the three months ended June 30, 2023, and, as a result, we recorded $ 6.7 million in receivables and $ 5.7 million as a contract liability on our Unaudited Condensed Consolidated Balance Sheet as of June 30, 2023.

We expect to earn $ 35.2 million in revenue over the term of the contract, and, as such, this amount is included within our contract backlog as of June 30, 2023.

Drilling services are expected to commence in the fourth fiscal quarter of 2023.

Refer to Note 11—Fair Value Measurement of Financial Instruments for additional information related to our investment.

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.

Q3FY23 FORM 10-Q | 11

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

18 unchanged sentences

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

Q2FY23 FORM 10-Q | 11

Self-Insurance

Our wholly-owned insurance captives (the "Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $ 1.7 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively, and $ 4.7 million and $( 0.4 ) million for the six months ended March 31, 2023 and 2022, respectively, and rig and casualty insurance premiums of $ 10.9 million and $ 7.9 million during the three months ended March 31, 2023 and 2022 respectively, and $ 20.9 million and $ 16.7 million for the six months ended March 31, 2023 and 2022.

Our wholly-owned insurance captives (the "Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $ 5.5 million and $ 3.1 million for the three months ended June 30, 2023 and 2022, respectively, and $ 10.2 million and $ 2.7 million for the nine months ended June 30, 2023 and 2022, respectively, and rig and casualty insurance premiums of $ 9.7 million and $ 9.4 million during the three months ended June 30, 2023 and 2022 respectively, and $ 30.6 million and $ 26.2 million for the nine months ended June 30, 2023 and 2022.

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 March 31, 2023 and 2022 amounted to $ 17.7 million and $ 13.2 million respectively, and $ 34.1 million and $ 26.9 million during the six months ended March 31, 2023 and 2022, respectively, which were eliminated upon consolidation.

Intercompany premium revenues recorded by the Captives during the three months ended June 30, 2023 and 2022 amounted to $ 17.4 million and $ 14.7 million, respectively, and $ 51.4 million and $ 41.6 million during the nine months ended June 30, 2023 and 2022, 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.

1 unchanged sentence

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 March 31, 2023 and 2022 were $ 2.5 million and $ 3.6 million, respectively, and $ 5.3 million and $ 6.9 million for the six months ended March 31, 2023 and 2022, respectively.

Our medical stop loss operating expenses for the three months ended June 30, 2023 and 2022 were $ 2.1 million and $ 3.8 million, respectively, and $ 7.4 million and $ 10.6 million for the nine months ended June 30, 2023 and 2022, respectively.

Q3FY23 FORM 10-Q | 12

International Solutions Drilling Risks

2 unchanged sentences

Also, the success of our International Solutions operations will be subject to numerous contingencies, some of which are beyond management’s control.

These contingencies include general and regional economic conditions, fluctuations in currency exchange rates, modified exchange controls, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws.

These contingencies include general and regional economic conditions, geopolitical developments and tensions, war and uncertainty in oil-producing companies, fluctuations in currency exchange rates, modified exchange controls, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws.

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

19 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 $ 0.1 million and $ 0.3 million for the three and six months ended March 31, 2023 respectively, and $ 2.4 million and $ 3.3 million for the three and six months ended March 31, 2022 , respectively.

We recorded aggregate foreign currency losses of $ 1.4 million and $ 1.7 million for the three and nine months ended June 30, 2023, respectively, and $ 1.2 million and $ 4.5 million for the three and nine months ended June 30, 2022 , 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 March 31, 2023, our cash balance in Argentina was $ 16.3 million.

As of June 30, 2023, our cash balance in Argentina was the U.S.

dollar equivalent of $ 24.0 million in Argentine Pesos.

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.

Q2FY23 FORM 10-Q | 12

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three and six months ended March 31, 2023, approximately 7.4 percent and 7.5 percent of our operating revenues were generated from international locations compared to 5.9 percent and 7.5 percent during the three and six months ended March 31, 2022, respectively.

During the three and six months ended March 31, 2023, approximately 86.3 percent and 88.4 percent of operating revenues from international locations were from operations in South America compared to 75.8 percent and 76.6 percent during the three and six months ended March 31, 2022, respectively.

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, 2023, approximately 6.8 percent and 7.3 percent of our operating revenues were generated from international locations compared to 5.4 percent and 6.7 percent during the three and nine months ended June 30, 2022, respectively.

During the three and nine months ended June 30, 2023, approximately 84.8 percent and 87.3 percent of operating revenues from international locations were from operations in South America compared to 82.6 percent and 78.4 percent during the three and nine months ended June 30, 2022, respectively.

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 .

Q3FY23 FORM 10-Q | 13

NOTE 3 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2023 and September 30, 2022 consisted of the following:

(in thousands) Estimated Useful Lives March 31, 2023 September 30, 2022

Property, plant and equipment as of June 30, 2023 and September 30, 2022 consisted of the following:

(in thousands) Estimated Useful Lives June 30, 2023 September 30, 2022

Drilling services equipment 4 - 15 years

15 unchanged sentences

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 $ 94.6 million and $ 101.1 million including abandonments of $ 1.0 million and $ 2.5 million for the three months ended March 31, 2023 and 2022, respectively.

Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $ 189.5 million and $ 199.8 million including abandonments of $ 2.1 million and $ 3.8 million for the six months ended March 31, 2023 and 2022, respectively.

Depreciation expense during the three months ended June 30, 2023 and 2022 was $ 93.2 million and $ 97.5 million, including abandonments of $ 0.2 million and $ 1.4 million, respectively.

Depreciation expense during the nine months ended June 30, 2023 and 2022 was $ 282.7 million and $ 293.5 million including abandonments of $ 2.4 million and $ 5.2 million, respectively.

These expenses are recorded within Depreciation and amortization on our Unaudited Condensed Consolidated Statements of Operations.

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.

2 unchanged sentences

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 six months ended March 31, 2023 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.

The loss of $ 9.2 million and an offsetting insurance recovery for the same amount are recorded within Depreciation and amortization in our Unaudited Condensed Consolidated Statement of Operations for the nine months ended June 30, 2023.

During the third quarter of fiscal year 2023 we collected $ 7.8 million of the total expected insurance proceeds.

Future proceeds in excess of the recognized loss will be recognized once all contingencies related to the insurance claim have been resolved.

Assets Held-for-Sale

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

The following is a summary of the changes in the balance (in thousands) of our assets held-for-sale for the period indicated below:

Balance at September 30, 2022

2 unchanged sentences

Impairment expense ( 2,733 )

Balance at March 31, 2023

Q2FY23 FORM 10-Q | 13

Balance at June 30, 2023

Fiscal Year 2023 Activity

During the six months ended March 31, 2023, 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 March 31, 2023.

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 six months ended March 31, 2023.

During the six months ended March 31, 2023, 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.

During the nine months ended June 30, 2023, 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.

Q3FY23 FORM 10-Q | 14

During the nine months ended June 30, 2023, 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 same period, 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 six months ended March 31, 2023.

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

Fiscal Year 2022 Activity

During the six months ended March 31, 2022, 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 recorded in Other (gain) loss on sale of assets within our Unaudited Condensed Consolidated Statements of Operations.

During the six months ended March 31, 2022 and 2023 we recognized $ 0.3 million and $ 1.2 million, respectively, in earnout proceeds associated with the sale of our trucking services assets within Other (gain) loss on sale of assets on the Unaudited Condensed Consolidated Statements of Operations.

During the six months ended March 31, 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 six months ended March 31, 2022.

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

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 six months ended March 31, 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.

During the six months ended March 31, 2022, ADNOC Drilling accepted delivery of two rigs located in the U.A.E.

with a net book value of $ 4.1 million and, as a result, we recognized a gain of $ 1.2 million, after incurring $ 2.4 million of selling costs, during the three months ended March 31, 2022 and the rigs were removed from assets classified as held-for-sale as of March 31, 2022.

The gain of $ 1.2 million is recorded in Other (gain) loss on sale of assets within our Unaudited Condensed Consolidated Statement of Operations for the three and six months ended March 31, 2022.

During the nine months ended June 30, 2022, 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 recorded in Other (gain) loss on sale of assets within our Unaudited Condensed Consolidated Statements of Operations.

We recognized earnout proceeds associated with the sale of our trucking and casing running assets of $ 1.4 million and $ 0.9 million during the nine months ended June 30, 2023 and 2022, respectively, in Other (gain) loss on sale of assets on the Unaudited Condensed Consolidated Statements of Operations.

During the nine months ended June 30, 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.

During the same period, we completed the sale of these 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 same period, 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 nine months ended June 30, 2022, we completed the sale of these assets for total consideration of $ 0.9 million, resulting in no gain or loss as a result of the sale.

During the nine months ended June 30, 2022, ADNOC Drilling accepted delivery of five rigs with an aggregate net book value of $ 34.5 million.

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 in Other (gain) loss on sale of assets within our Unaudited Condensed Consolidated Statement of Operations.

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

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.

Q2FY23 FORM 10-Q | 14

(Gain)/Loss on Sale of Assets

Gain on Reimbursement of Drilling Equipment

During the three and six months ended March 31, 2023 and 2022 we recognized a gain of $ 11.6 million, $ 27.3 million, $ 6.4 million, and $ 11.7 million, respectively, related to customer reimbursement for the current replacement value of lost or damaged drill pipe.

We recognized gains of $ 10.6 million and $ 37.9 million during the three and nine months ended June 30, 2023, respectively, and $ 9.9 million and $ 21.6 million during the three and nine months ended June 30, 2022, 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.

Other (Gain)/Loss on Sale of Assets

During the three and six months ended March 31, 2023 and 2022 we recognized a (gain) loss of $( 2.5 ) million, $( 4.9 ) million, $( 0.7 ) million, and $ 0.3 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.

NOTE 4 GOODWILL AND INTANGIBLE ASSETS

2 unchanged sentences

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

During the three and six months ended March 31, 2023, we had no additions or impairments to goodwill.

As of March 31, 2023 and September 30, 2022, the goodwill balance was $ 45.7 million.

During the three and nine months ended June 30, 2023, we had no additions or impairments to goodwill.

As of June 30, 2023 and September 30, 2022, the goodwill balance was $ 45.7 million.

Q3FY23 FORM 10-Q | 15

Intangible Assets

1 unchanged sentence

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

March 31, 2023 September 30, 2022

June 30, 2023 September 30, 2022

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

5 unchanged sentences

$ 100,961 $ 38,778 $ 62,183 $ 100,961 $ 33,807 $ 67,154

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.6 million and $ 1.8 million for the three months ended March 31, 2023 and 2022 respectively and $ 3.4 million and $ 3.6 million for the six months ended March 31, 2023 and 2022 respectively.

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.6 million and $ 1.8 million for the three months ended June 30, 2023 and 2022 respectively and $ 5.0 million and $ 5.4 million for the nine months ended June 30, 2023 and 2022 respectively.

Amortization expense is estimated to be approximately $ 1.6 million for the remainder of fiscal year 2023, and approximately $ 6.4 million for fiscal year 2024 through 2027.

Q2FY23 FORM 10-Q | 15

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

March 31, 2023 September 30, 2022

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

June 30, 2023 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

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

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4.65 % Senior Notes due 2025 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 six months ended March 31, 2022.

Credit Facility

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

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

As of March 31, 2023, there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility.

As of June 30, 2023, 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 March 31, 2023, 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 March 31, 2023.

As of June 30, 2023, 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 June 30, 2023.

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 March 31, 2023.

In total, we had $ 42.1 million outstanding as of June 30, 2023.

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 March 31, 2023, we were in compliance with all debt covenants.

At June 30, 2023, we were in compliance with all debt covenants.

NOTE 6 INCOME TAXES

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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 the forecasted amounts, estimates of permanent book versus tax differences, and changes to tax laws and rates.

For the three and six months ended March 31, 2022 we used a discrete effective tax rate method to calculate income taxes as it was determined the estimated annual effective tax rate method would not provide a reliable estimate.

Our income tax provision from continuing operations for the three months ended March 31, 2023 and 2022 was $ 51.1 million and $ 2.7 million, respectively, resulting in effective tax rates of 23.8 percent and ( 136.9 ) percent, respectively.

Our income tax provision (benefit) from continuing operations for the six months ended March 31, 2023 and 2022 was $ 83.5 million and $( 4.9 ) million, respectively, resulting in effective tax rates of 24.3 percent and 8.0 percent, respectively.

Effective tax rates differ from the U.S.

federal statutory rate of 21.0 percent for the three and six months ended March 31, 2023 primarily due to state and foreign income taxes, and permanent non-deductible items.

Additionally, the effective tax rate for the six months ended March 31, 2023 differs from the U.S.

federal statutory rate of 21.0 percent due to a discrete tax adjustment of $ 0.2 million related to equity compensation.

Our income tax expense from continuing operations for the three months ended June 30, 2023 and 2022 was $ 40.7 million and $ 1.7 million, respectively, resulting in effective tax rates of 29.9 percent and 9.0 percent, respectively.

Our income tax expense (benefit) from continuing operations for the nine months ended June 30, 2023 and 2022 was $ 124.2 million and $( 3.2 ) million, respectively, resulting in effective tax rates of 25.9 percent and 7.6 percent, respectively.

Effective tax rates differ from the U.S.

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

Additionally, the effective tax rate for the three months ended March 31, 2022 differs from the statutory rate due to the adjustments required to reflect the change in methodology to calculate the provision for income taxes as discussed above.

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.

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

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

federal statutory rate of 21.0 percent for the three and nine months ended June 30, 2023 and 2022 primarily due to state and foreign income taxes, permanent non-deductible items and discrete adjustments.

The discrete adjustments for the three and nine months ended June 30, 2023 and 2022 are primarily due to changes in our deferred state income tax rate, return to provision adjustments, and equity compensation.

As of June 30, 2023, we have recorded approximately $ 3.2 million of unrecognized tax benefits, interest, and penalties.

We believe it is reasonably possible up to $ 2.6 million of the unrecognized tax benefits, interest, and penalties will be recognized as of June 30, 2024 as a result of a lapse of the statute of limitations.

We cannot predict with certainty if we will achieve ultimate resolution of any additional uncertain tax positions associated with our U.S.

and international operations resulting in additional material increases or decreases of our unrecognized tax benefits for the next twelve months.

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NOTE 7 SHAREHOLDERS’ EQUITY

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 January 1, 2023.

The repurchases may be made using our cash and cash equivalents or other available sources and are held as treasury shares on our Unaudited Condensed Consolidated Balance Sheets.

During the three and six months ended March 31, 2023, we repurchased 2.5 million and 3.4 million common shares, at an aggregate cost of $ 106.7 million and $ 145.8 million (including excise tax of $ 0.8 million), respectively.

We repurchased 0.6 million and 3.2 million common shares at an aggregate cost of $ 16.6 million and $ 77.0 million, respectively, during the three and six months ended March 31, 2022.

A base cash dividend of $ 0.25 per share and a supplemental dividend of $ 0.235 per share was declared on December 9, 2022 for shareholders of record on February 14, 2023, and was paid on February 28, 2023.

On March 1, 2023, the Board of Directors declared a base cash dividend of $ 0.25 per share and a supplemental cash dividend of $ 0.235 per share for shareholders of record on May 18, 2023, payable on June 1, 2023.

As a result, we recorded Dividends Payable of $ 50.4 million on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023.

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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.

On June 7, 2023, the Board of Directors further increased the maximum number of shares authorized to be repurchased in calendar year 2023 to seven million shares.

The repurchases are made using our cash and cash equivalents or other available sources and are held as treasury shares on our Unaudited Condensed Consolidated Balance Sheets.

During the three and nine months ended June 30, 2023, we repurchased 3.2 million and 6.5 million common shares, at an aggregate cost of $ 103.2 million and $ 249.0 million, including excise tax of $ 1.0 million and $ 1.8 million, respectively.

We repurchased 3.2 million common shares at an aggregate cost of $ 77.0 million during the nine months ended June 30, 2022.

We did not repurchase any common shares during the three months ended June 30, 2022.

A base cash dividend of $ 0.25 per share and a supplemental dividend of $ 0.235 per share was declared on March 1, 2023 for shareholders of record on May 18, 2023, and was paid on June 1, 2023.

On June 7, 2023, the Board of Directors declared a base cash dividend of $ 0.25 per share and a supplemental cash dividend of $ 0.235 per share for shareholders of record on August 17, 2023, payable on August 31, 2023.

As a result, we recorded Dividends payable of $ 48.9 million on our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023.

Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss were as follows:

March 31, September 30,

June 30, September 30,

(in thousands) 2023 2022

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$ ( 11,305 ) $ ( 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 and six months ended March 31, 2023:

(in thousands) Three Months Ended March 31, 2023 Six Months Ended March 31, 2023

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, 2023:

(in thousands) Three Months Ended June 30, 2023 Nine Months Ended June 30, 2023

Balance at beginning of period $ ( 11,560 ) $ ( 12,072 )

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Net current-period other comprehensive income 255 767

Balance at March 31, 2023 $ ( 11,560 ) $ ( 11,560 )

Balance at June 30, 2023 $ ( 11,305 ) $ ( 11,305 )

NOTE 8 REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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Performance-based contracts are contracts pursuant to which we are compensated based upon our performance against a mutually agreed upon set of predetermined targets.

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

We often use our automated technology solutions to assist in achieving the performance targets.

Total revenue recognized from performance contracts, including performance bonuses, was $ 316.2 million and $ 191.2 million during the three months ended June 30, 2023 and 2022, respectively, and $ 883.3 million and $ 483.6 million during the nine months ended June 30, 2023 and 2022, respectively.

On November 12, 2021, we settled a drilling contract dispute related to drilling services provided from fiscal years 2016 through 2019 with YPF S.A.

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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.

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 six months ended March 31, 2022.

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.

Contract Costs

We had capitalized fulfillment costs of $ 12.6 million and $ 6.3 million as of March 31, 2023 and September 30, 2022, respectively.

We had capitalized fulfillment costs of $ 14.3 million and $ 6.3 million as of June 30, 2023 and September 30, 2022, respectively.

Remaining Performance Obligations

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of March 31, 2023 was approximately $ 1.3 billion, of which approximately $ 0.7 billion is expected to be recognized during the remainder of fiscal year 2023, approximately $ 0.5 billion during fiscal year 2024, and approximately $ 0.1 billion in fiscal year 2025 and thereafter.

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of June 30, 2023 was approximately $ 1.1 billion, of which approximately $ 0.4 billion is expected to be recognized during the remainder of fiscal year 2023, approximately $ 0.6 billion during fiscal year 2024, and approximately $ 0.1 billion in fiscal year 2025 and thereafter.

These amounts do not include anticipated contract renewals.

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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.

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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:

(in thousands) March 31, 2023 September 30, 2022

(in thousands) June 30, 2023 September 30, 2022

Contract assets, net $ 6,905 $ 6,319

(in thousands) March 31, 2023

(in thousands) June 30, 2023

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

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Revenue recognized during the period ( 49,955 )

Contract liabilities balance at March 31, 2023 $ 34,677

Contract liabilities balance at June 30, 2023 $ 34,726

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NOTE 9 STOCK-BASED COMPENSATION

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 March 31, Six Months Ended March 31,

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

(in thousands) 2023 2022 2023 2022

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Restricted Stock

A summary of the status of our restricted stock awards as of March 31, 2023 and changes in non-vested restricted stock outstanding during the six months then ended is presented below:

A summary of the status of our restricted stock awards as of June 30, 2023 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

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Forfeited ( 11 ) 36.53

Non-vested restricted stock outstanding at March 31, 2023

Non-vested restricted stock outstanding at June 30, 2023

1,366 $ 35.10

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

During the six months ended March 31, 2023, 12,591 restricted phantom stock units were granted and 14,199 restricted phantom stock units vested.

During the nine months ended June 30, 2023, 12,591 restricted phantom stock units were granted and 14,199 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.

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Performance Units

A summary of the status of our performance-vested restricted share units ("performance units") as of March 31, 2023 and changes in non-vested performance units outstanding during the six months then ended is presented below:

A summary of the status of our performance-vested restricted share units ("performance units") as of June 30, 2023 and changes in non-vested performance units outstanding during the nine months then ended is presented below:

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

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Dividend equivalent rights performance units credited and performance factor adjustment 1

Non-vested performance units outstanding at March 31, 2023 2

Non-vested performance units outstanding at June 30, 2023 2

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

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If we meet the specified maximum performance criteria, approximately 386,073 additional performance units could vest or become eligible to vest.

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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.

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Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022 2023 2022

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Net income (loss) $ 0.93 $ 0.16 $ 3.39 $ ( 0.37 )

We had a net loss for the three and six months ended March 31, 2022.

We recorded a net loss during the nine months ended June 30, 2022.

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 vesting of equity awards.

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Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022 2023 2022

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Recurring Fair Value Measurements

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.

March 31, 2023

June 30, 2023

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

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Our investment is classified as a long-term equity investment within Investments on 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 Statements of Operations.

During the six months ended March 31, 2023, we early adopted ASU No.

During the nine months ended June 30, 2023, 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.

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

During the three and six months ended March 31, 2023, we recognized a gain of $ 42.6 million and $ 24.4 million respectively, 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 $ 16.7 million and $ 64.5 million during the three and six months ended March 31, 2022 respectively.

As of March 31, 2023, 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 made 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 March 31, 2023.

During the three and nine months ended June 30, 2023, we recognized a gain (loss) of $( 17.0 ) million and $ 7.4 million, respectively, on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment compared to a gain (loss) of $( 17.0 ) million and $ 47.8 million during the three and nine months ended June 30, 2022, respectively.

As of June 30, 2023, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

During the nine 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.

For the nine months ended June 30, 2022, we recorded a gain of $ 8.2 million related to this investment, which included a $ 0.5 million gain recognized upon the sale of our investment and a $ 7.7 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.

Equity Securities with Fair Value Option In October 2022, we made a $ 14.1 million equity investment, representing 106.0 million common shares in 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.

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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 role on the investee's board of directors.

We believe we have a significant influence, but not control or joint control over the investee, due to several factors, including our ownership percentage (approximately 6.2 percent as of June 30, 2023), operational involvement and role 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 on our Unaudited Condensed Consolidated Balance Sheet as of March 31, 2023.

Our investment is classified as a long-term equity investment within Investments on our Unaudited Condensed Consolidated Balance Sheet as of June 30, 2023.

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 and six months ended March 31, 2023, we recognized a gain (loss) of $( 3.0 ) million and $ 0.1 million, respectively, recorded within Gain 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.

During the three and nine months ended June 30, 2023, we recognized a loss of $ 1.6 million and $ 1.5 million, respectively, 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.

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

As of March 31, 2023, the fair value of the convertible note was approximately equal to the cost basis.

As of June 30, 2023, the fair value of the convertible note was approximately equal to the cost basis.

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.

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Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022 2023 2022

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Purchases 41 33,024 2,116 36,024

Accrued interest 1

2,001 — 2,001 —

Transfers out 2

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Assets at end of period $ 37,182 $ 36,524 $ 37,182 $ 36,524

(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 March 31, 2023:

(1) During the nine months ended June 30, 2023, our convertible note agreement with Galileo was amended to include any interest which has accrued but not yet compounded or issued as a note.

As a result, we have included accrued interest in our total investment balance.

(2) 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 as of June 30, 2023.

The following table provides quantitative information (in thousands) about our Level 3 unobservable significant inputs related to our debt security investment with Galileo at June 30, 2023:

Fair Value Valuation Technique Unobservable Inputs

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

Three Months Ended March 31, Six Months Ended March 31,

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

(in thousands) 2023 2022 2023 2022

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Other Equity Securities We also hold various other equity securities without readily determinable fair values, primarily comprised of geothermal investments.

These equity securities are measured at cost, less any impairments, and will be marked to fair value when observable price changes in identical or similar investments from the same issuer occur.

As of March 31, 2023 and 2022, and September 30, 2022, the aggregate balance of these equity securities was $ 26.3 million, $ 14.0 million, and $ 23.7 million, respectively.

During the three and six months ended March 31, 2023 and 2022, 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 March 31, Six Months Ended March 31,

(in thousands) 2023 2022 2023 2022

Assets at beginning of period $ 25,800 $ 8,881 $ 23,745 $ 2,865

Purchases 501 5,109 2,556 11,125

Assets at end of period $ 26,301 $ 13,990 $ 26,301 $ 13,990

These equity securities are initially measured at cost, less any impairments, and will be marked to fair value when observable price changes in identical or similar investments from the same issuer occur.

As of June 30, 2023 and September 30, 2022, the aggregate balance of these equity securities was $ 26.3 million and $ 23.7 million, respectively, which includes an investment with a balance of $ 10.7 million as of both June 30, 2023 and September 30, 2022, that was marked to fair value during the fourth fiscal quarter of 2022.

This investment is classified as Level 3 based on the absence of market activity.

During the three and nine months ended June 30, 2023 and 2022, we did not record any impairments on these investments.

Geothermal Investments

As of March 31, 2023 and September 30, 2022 the aggregate balance of our debt and equity security investments in geothermal energy was $ 27.3 million and $ 23.7 million, respectively.

As of June 30, 2023 and September 30, 2022 the aggregate balance of our debt and equity security investments in geothermal energy was $ 27.4 million and $ 23.7 million, respectively.

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

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government and in federally insured deposit accounts.

The carrying value of accounts receivable, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at March 31, 2023 and September 30, 2022.

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The following information presents the supplemental fair value information for our long-term fixed-rate debt at March 31, 2023 and September 30, 2022:

(in millions) March 31, 2023 September 30, 2022

The carrying value of accounts receivable, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at June 30, 2023 and September 30, 2022.

The following information presents the supplemental fair value information for our long-term fixed-rate debt at June 30, 2023 and September 30, 2022:

(in millions) June 30, 2023 September 30, 2022

Long-term debt, net

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Fair value 443.3 430.7

The fair values of the long-term fixed-rate debt is based on broker quotes at March 31, 2023 and September 30, 2022.

The fair values of the long-term fixed-rate debt is based on broker quotes at June 30, 2023 and September 30, 2022.

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

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NOTE 12 COMMITMENTS AND CONTINGENCIES

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

At March 31, 2023, we had purchase commitments for equipment, parts and supplies of approximately $ 145.8 million.

At June 30, 2023, we had purchase commitments for equipment, parts and supplies of approximately $ 134.2 million.

Guarantee Arrangements

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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 March 31, 2023, we have incurred expenses, mainly legal fees, against the insurance deductible.

The Company and its insurers filed motions to appeal the judgement.

As of June 30, 2023, 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.

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

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Significant Lease Not Yet Commenced

During the six months ended March 31, 2023, we entered into a lease agreement for our new Tulsa corporate office.

During the nine months ended June 30, 2023, we entered into a lease agreement for our new Tulsa corporate office.

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

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

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NOTE 13 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

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General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, other methods may be used which we believe to be a reasonable reflection of the utilization of services provided.

Summarized financial information of our reportable segments for the three and six months ended March 31, 2023 and 2022 is shown in the following tables:

Three Months Ended March 31, 2023

Summarized financial information of our reportable segments for the three and nine months ended June 30, 2023 and 2022 is shown in the following tables:

Three Months Ended June 30, 2023

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

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Total sales 641,612 31,221 48,692 19,790 ( 17,359 ) 723,956

Segment operating income $ 182,149 $ 6,687 $ 3,955 $ 6,823 $ ( 2,267 ) $ 197,347

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Three Months Ended March 31, 2022

Segment operating income (loss) $ 169,499 $ 4,705 $ ( 1,397 ) $ 2,104 $ 4,470 $ 179,381

Three Months Ended June 30, 2022

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

3 unchanged sentences

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

Six Months Ended March 31, 2023

Q3FY23 FORM 10-Q | 28

Nine Months Ended June 30, 2023

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

3 unchanged sentences

Segment operating income $ 496,945 $ 18,138 $ 4,132 $ 13,604 $ 4,513 $ 537,332

Six Months Ended March 31, 2022

Nine Months Ended June 30, 2022

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

2 unchanged sentences

Total sales 1,235,852 91,162 93,699 48,476 ( 41,577 ) 1,427,612

Segment operating income (loss) $ ( 27,596 ) $ 10,744 $ 7,201 $ 7,096 $ ( 3,313 ) $ ( 5,868 )

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

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

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022 2023 2022

Segment operating income (loss) $ 197,347 $ 6,863 $ 357,951 $ ( 5,868 )

Segment operating income $ 179,381 $ 56,500 $ 537,332 $ 50,632

Gain on reimbursement of drilling equipment 10,642 9,895 37,940 21,597

5 unchanged sentences

Interest expense ( 4,324 ) ( 4,372 ) ( 12,918 ) ( 14,876 )

Gain on investment securities 39,752 22,132 24,661 69,994

Gain (loss) on investment securities ( 18,538 ) ( 14,310 ) 6,123 55,684

Loss on extinguishment of debt — — — ( 60,083 )

2 unchanged sentences

Income (loss) from continuing operations before income taxes $ 135,943 $ 19,205 $ 479,795 $ ( 41,646 )

Q2FY23 FORM 10-Q | 28

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

(in thousands) March 31, 2023 September 30, 2022

(in thousands) June 30, 2023 September 30, 2022

Total assets 1

7 unchanged sentences

(1) Assets by segment exclude investments in subsidiaries and intersegment activity.

Q3FY23 FORM 10-Q | 29

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

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

Argentina 32,388 18,615 101,712 63,216

Columbia 9,433 5,977 39,454 11,974

Bahrain 4,458 2,338 10,925 14,797

United Arab Emirates 2,401 2,188 7,280 3,711

Colombia 13,652 5,622 30,021 5,997

Other foreign 618 669 2,311 2,186

1 unchanged sentence

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

NOTE 14 SUBSEQUENT EVENTS

Subsequent to the fiscal quarter ended June 30, 2023, we entered into a $ 9.0 million convertible note with Tamboran.

The convertible note will be utilized to relieve Tamboran's outstanding accounts receivable balance owed to the Company, and therefore no cash was exchanged as part of the transaction.

The convertible note bears interest at 5.5 percent per annum and matures in July 2028 and will be included in our Investments balance on our Consolidated Balance Sheet.

If the conversion option is exercised, the note would convert to common shares of Tamboran in an amount equal to principal plus accrued interest.

Q3FY23 FORM 10-Q | 30

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