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Item 7. Management’s Discussion and Analysis

2023-11-08 compared with 2022-11-17 · 151 added, 184 removed, 365 unchanged (48% of the section changed)

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Our revenues are primarily derived from the capital expenditures of companies involved in the exploration, development and production of crude oil and natural gas (“E&Ps”).

Generally, the level of capital expenditures is dictated by current and expected future prices of crude oil and natural gas, which are determined by various supply and demand factors.

Generally, the level of capital expenditures is dictated by capital budgets set to achieve respective production targets in relation to current and expected future prices of crude oil and natural gas, which are determined by various supply and demand factors.

Both commodities have historically been, and we expect them to continue to be, cyclical and highly volatile.

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We are the largest provider of super-spec rigs in the industry and, accordingly, we believe we are well positioned to respond to various market conditions.

Historically there has been a strong correlation between crude oil and natural gas prices and the demand for drilling rigs with the rig count increasing and decreasing with the up and down movements in the commodity prices.

However, beginning in 2021, rig activity has not moved in tandem with crude oil prices to the same extent it had historically as a large portion of our customers instituted a more disciplined approach to their operations and capital spending in order to enhance their own financial returns.

While that correlation remains for a segment of the market, beginning in 2021, a portion of rig activity has not moved in tandem with crude oil prices to the same extent as a large portion of our customers instituted a more disciplined approach to their operations and capital spending in order to enhance their own financial returns.

Those customers established capital budgets based upon commodity price assumptions for the upcoming year and adhered to them, not adjusting activity plans as commodity prices moved.

The capital budgets for calendar year 2024 have not yet been established by many of our customers;

however, based upon the crude oil and natural gas pricing environment and many of our customers' desire to at least maintain their current production levels, we expect the level of capital spending and activity in calendar year 2023 to be similar to modestly higher than that experienced in calendar year 2022.

In recent years the U.S.

demand for super-spec rigs has strengthened.

Despite this increased demand for super-spec rigs there is still idle super-spec rig capacity in the market;

however, much of that idle capacity represents rigs that have not been active during the preceding two years and in some cases even longer.

Consequently, there have been additional costs incurred to bring those long-idled rigs back into working condition, which contributed to upward pricing for super-spec rigs.

This supply-demand dynamic combined with the value proposition we provide our customers through our drilling expertise, high-quality FlexRig ® fleet, and automation technology resulted in an improvement in our underlying contract economics.

Our North America Solutions active rig count has more than tripled from COVID pandemic lows of 47 rigs in August 2020 to 176 rigs at September 30, 2022.

Given the current market dynamics, our disciplined approach to deploying capital, and our fiscal year 2023 capital budget of $425 to $475 million, we project that our active rig count could reach 192 rigs during the first half of calendar 2023.

While H&P stands ready to respond to the future demand for its super-spec rigs, we will do so by applying the same disciplined approach, focusing on financial returns.

That said, the market for our rigs and others like them in the industry will likely remain tight as supply-chain challenges and labor constraints experienced across the energy industry may inhibit the industry’s ability overall to supply a significant quantity of super-specs rigs.

As the largest provider of super-spec rigs in the U.S., H&P is not immune from supply-chain challenges or potential labor constraints, or inflationary pressures that can arise as a result of these matters.

However, we believe we are well positioned to address these challenges and do not believe they are a limiting factor relative to our activity plans for fiscal 2023 nor believe they will have a significant adverse impact on our financial results.

As a result of increased customer demand and limited supply additions given high required rig reactivation expenditures and supply chain constraints, we expect the momentum of the upward pressure on pricing to continue into fiscal 2023.

however, based upon the crude oil and natural gas pricing environment and many of our customers' desire to at least maintain their current production levels, we expect the level of capital spending and activity in calendar year 2024 to be similar to that experienced in calendar year 2023.

The overall demand for super-spec rigs in the U.S.

remains relatively strong and while some readily available idle super-spec capacity exists in the market, it is not to a level that has materially impacted pricing as it could be quickly reabsorbed into the market.

This supply-demand dynamic combined with the value proposition we provide our customers through our drilling expertise, high-quality FlexRig® fleet, and automation technology is expected to result in an improvement in our underlying contract economics.

With regards to our North America Solutions segment, volatility in natural gas prices and the related reduced rig demand contributed to an increased level of rig releases in the market during the first half of calendar year 2023.

During the second half of calendar year 2023, other non-commodity price related factors, such as customer capital budgets, drilling plans, productions levels and customer consolidations, also led some customers to release rigs as well.

Heading into our fiscal year 2024, we expect our rig activity to increase modestly during the first half of the fiscal year as customers reset their capital budgets for 2024 and will likely remain at a relatively stable level during the back half of the fiscal year.

This is similar to the rig activity patterns we have experienced during the last few years as well.

During fiscal year 2023, the Company employed a fiscally prudent approach to deploying capital and prioritizing economic margins over rig utilization, and we plan to maintain this approach in fiscal 2024.

Furthermore, we still believe the supply and demand dynamics surrounding our North America Solutions segment remain constructive for future activity and pricing levels.

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

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

While we do not expect much activity change in our Offshore Gulf of Mexico segment, we do expect margin improvements based on recent rate increases.

Regarding our International Solutions segment, we see opportunities for improvement in activity and the related corresponding margin improvement, but those will likely occur on a more extended timeline compared to what we have experienced in the North America Solutions segment.

During fiscal 2024, we plan to continue to devote capital to our international expansion strategy.

While we understand this strategy will take time and capital to execute, we believe it is important in terms of growth and diversification for the Company.

Currently, activity levels in the International Solutions and Offshore Gulf of Mexico business segments look to remain relatively steady at current levels for the foreseeable future.

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Over the past two years, the Company has experienced inflationary pressures related to labor and consumable inventory and more recently as a result of cost-acceleration related to running our rig fleet harder to achieve the well designs, lateral lengths and drilling efficiencies our customers demand.

The inflationary forces have abated, and the financial impacts were partially mitigated by pass-through mechanisms in our contracts.

However, the performance and efficiency gains we achieve require us to continue to push the service intensity of our rigs and equipment.

Accordingly, we expect operational expenses to remain at elevated levels compared to recent years.

Additionally, we are also experiencing inflationary pressures in our non-operational expenses particularly around labor and third-party services.

As a consequence of these pressures, we are projecting an increase in our selling, general and administrative expenses during fiscal 2024.

Recent Developments

Credit Facility Extension

On February 10, 2023, 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 11, 2026 to November 12, 2027.

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.

Investment in Tamboran

In October 2022, we purchased a $14.1 million equity investment, representing approximately 106 million shares, in Tamboran Resources Limited ("Tamboran").

Tamboran's shares are listed and publicly traded on the Australian Securities Exchange.

Additionally, during September 2022, we entered into a fixed-term drilling services agreement with Tamboran.

The expected $30.3 million of revenue to be earned over the term of the contract is included within our contract backlog as of September 30, 2022, as mobilization is expected to commence in fiscal year 2023.

Investments in Geothermal Energy

During the fiscal year ended September 30, 2022, we purchased an additional $18.2 million in geothermal energy investments consisting of both debt and equity securities.

Investments were made in five separate companies that are pursuing technological concepts to make unconventional geothermal energy a viable economic renewable energy source.

These companies are developing enhanced geothermal system ("EGS") and closed loop concepts.

The EGS concepts use one or more of the following:

horizontal drilling, induced permeability, and fiber optic sensing.

The closed loop concepts use multilateral wellbores, proprietary working fluid, or coaxial pipe configurations.

All of these concepts are designed to harvest geothermal heat to create carbon-free, 24/7 geothermal energy.

The aggregate balance of our investments in geothermal energy companies was $23.7 million and $2.7 million at September 30, 2022 and 2021, respectively .

At this time, we expect the quantity and pace of our geothermal investments to be reduced relative to fiscal year 2022.

Investment in ADNOC Drilling

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.

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

During the fiscal year ended September 30, 2022, we recognized a gain of $47.4 million on our Consolidated Statements of Operations, as a result of the change in fair value of the investment during the period.

As of September 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 fiscal year ended September 30, 2022, we also received dividends in the amount of $6.6 million as a result of this investment.

Investment in Galileo Technologies

During the fiscal year ended September 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.

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.

The convertible note bears interest at 5% per annum with a maturity date of the earlier of April 2027 or an exit event (as defined in the agreement as either an initial public offering or a sale of Galileo).

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

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

Two of our Directors are independent directors of Galileo Parent.

Neither Director has a direct or indirect material interest in the transaction.

Pension Plan Lump-sum Distribution

During March 2022, the Company's domestic noncontributory defined benefit pension plan was amended to include a limited lump sum distribution option and a special eligibility window to be available to certain participants.

During the period beginning on May 2, 2022 and ending on June 30, 2022, these participants could elect the limited lump sum distribution.

This one-time lump sum was subsequently paid in August 2022 and resulted in a pension settlement charge of $7.8 million during the year ended September 30, 2022.

2022 FORM 10-K | 39

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

During the year ended September 30, 2023, we recognized a loss of $4.2 million, recorded within Gain (loss) on investment securities on our Consolidated Statements of Operations, as a result of the change in fair value of the investment during the period.

Concurrent with the investment agreement, we entered into a fixed-term drilling services agreement with Tamboran.

During the fourth fiscal quarter of 2023, drilling services commenced.

See Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties to our Consolidated Financial Statements for additional related party disclosures.

Significant Lease Commenced

During the fiscal year ended September 30, 2023, we entered into a lease agreement to relocate our Tulsa corporate headquarters to a new office space.

This lease commenced during the fourth fiscal quarter of 2023 and resulted in a $17.6 million increase to right-of-use assets and lease liability on our Consolidated Balance Sheets.

In addition, we began amortizing the right of use asset over the initial lease term of approximately 12 years.

Contract Backlog

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As of September 30, 2023 and 2022, our contract drilling backlog was $1.4 billion and $1.2 billion, respectively.

The increase in backlog at September 30, 2022 from September 30, 2021 is primarily due to an increase in the number of fixed term drilling contracts executed.

The increase in backlog at September 30, 2023 from 2022 is primarily due to an increase in the number of contracts executed under FlexPool agreements.

Approximately 33.8 percent of the September 30, 2023 total backlog is reasonably expected to be fulfilled in fiscal year 2025 and thereafter.

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The following table sets forth the total backlog by reportable segment as of September 30, 2023 and 2022, and the percentage of the September 30, 2023 backlog reasonably expected to be fulfilled in fiscal year 2025 and thereafter:

(in millions) September 30, 2022 September 30, 2021 Percentage Reasonably

(in billions) September 30, 2023 September 30, 2022 Percentage Reasonably

Expected to be Fulfilled in Fiscal Year 2025

3 unchanged sentences

International Solutions $ 0.3 $ 0.3 52.7

$ 1,172.4 $ 572.0

The early termination of a contract may result in a rig being idle for an extended period of time, which could adversely affect our financial condition, results of operations and cash flows.

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Consolidated Results of Operations

Net Income (Loss) We reported income from continuing operations of $6.6 million ($0.05 per diluted share) from operating revenues of $2.1 billion for the fiscal year ended September 30, 2022 compared to a loss from continuing operations of $337.5 million ($3.14 loss per diluted share) from operating revenues of $1.2 billion for the fiscal year ended September 30, 2021.

Included in net income for the fiscal year ended September 30, 2022 is income of $0.4 million (with no impact on a per diluted share basis) from discontinued operations.

Including discontinued operations, we recorded net income of $7.0 million ($0.05 per diluted share) for the fiscal year ended September 30, 2022 compared to a net loss of $326.2 million ($3.04 loss per diluted share) for the fiscal year ended September 30, 2021.

Operating Revenue Consolidated operating revenues were $2.1 billion in fiscal year 2022 and $1.2 billion in fiscal year 2021, including early termination revenue of $0.7 million and $7.7 million in each respective fiscal year.

Excluding early termination revenue, operating revenue increased $0.8 billion in fiscal year 2022 compared to fiscal year 2021.

The increase in fiscal year 2022 from fiscal year 2021 was primarily driven by an increase in average rig pricing and activity levels in our North America Solutions segment and increased activity levels in our International Solutions segment.

Net Income We recorded net income of $434.1 million ($4.16 per diluted share) for the fiscal year ended September 30, 2023 compared to net income of $7.0 million ($0.05 per diluted share) for the fiscal year ended September 30, 2022.

Operating Revenue Consolidated operating revenues were $2.9 billion and $2.1 billion during fiscal years 2023 and 2022, respectively.

The $0.8 billion increase in fiscal year 2023 from fiscal year 2022 was primarily driven by an increase in average rig pricing and activity levels in our North America Solutions segment and increased activity levels in our International Solutions segment.

Refer to segment results below for further details.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses in fiscal year 2022 were $1.4 billion, compared with $1.0 billion in fiscal year 2021.

The increase in fiscal year 2022 from fiscal year 2021 was primarily attributable to the previously mentioned higher activity levels.

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Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses in fiscal year 2023 were $1.7 billion, compared to direct operating expenses of $1.4 billion in fiscal year 2022.

The increase in fiscal year 2023 from fiscal year 2022 was primarily attributable to the previously mentioned higher activity levels as well as a North America Solutions wage increase that became effective at the end of fiscal year 2022.

Depreciation and Amortization Depreciation and amortization expense was $382.3 million in fiscal year 2023 and $403.2 million in fiscal year 2022.

The decrease in depreciation and amortization during the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021 was primarily attributable to the termination of depreciation on eight rigs that were included in the ADNOC sale during the fourth quarter of fiscal year 2021 coupled with ongoing relatively low levels of capital expenditures.

Depreciation and amortization includes amortization of intangible assets of $7.2 million in fiscal years 2022 and 2021, and abandonments of equipment of $6.6 million and $2.0 million in fiscal years 2022 and 2021, respectively.

The decrease is reflective of lower capital expenditures over the last several years.

Depreciation and amortization includes amortization of intangible assets of $6.6 million and $7.2 million in fiscal years 2023 and 2022, and abandonments of equipment of $3.3 million and $6.6 million in fiscal years 2023 and 2022, respectively.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $206.7 million in the fiscal year ended September 30, 2023 compared to $182.4 million in the fiscal year ended September 30, 2022.

The $10.2 million increase in fiscal year 2022 compared to fiscal year 2021 is primarily due to a $6.0 million increase in IT infrastructure spending, and a $5.6 million increase in labor and travel expense.

Asset Impairment Charges During the fiscal year ended September 30, 2022, we identified various assets that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Consolidated Balance Sheets.

The combined net book value of these assets was $5.4 million and were written down to their estimated fair value less cost to sell of $1.0 million, resulting in a non-cash impairment charge of $4.4 million, within our North America Solutions and International Solutions segments.

The $24.3 million increase in fiscal year 2023 is primarily due to an increase in professional fees of $12.0 million and an increase in labor and labor-related expenses of $8.6 million.

Asset Impairment Charges During the fiscal year ended September 30, 2023, the Company initiated a plan to decommission, scrap and/or sell certain assets including four international FlexRig ® drilling rigs, four international conventional drilling rigs, and additional equipment.

The aggregate net book value of these assets of $13.2 million was written down to their estimated scrap value of $1.1 million, resulting in non-cash impairment charges of $12.1 million for the fiscal year ended September 30, 2023, of which $8.1 million of the charge is recorded within the International Solutions segment.

The remaining $4.0 million is recorded within the North America Solutions segment.

The impairment charge was recorded in the Consolidated Statement of Operations for the fiscal year ended September 30, 2023.

Comparatively, during the fiscal year ended September 30, 2021, the Company developed 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, which resulted in an impairment charge of $56.4 million.

Also, during the fiscal year ended September 30, 2021, we formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running services, all within our North America Solutions segment, which resulted in a non-cash impairment charge of $14.4 million.

Comparatively, during the fiscal year ended September 30, 2022, we identified various assets that met the asset held-for-sale criteria and were reclassified as assets held-for-sale within our North America Solutions and International Solutions segments, which resulted in a non-cash impairment charge of $4.4 million, of which $2.5 million of the charge is recorded within the International Solutions segment.

The remaining $1.9 million is recorded within the North America Solutions segment.

The impairment charge was recorded in the Consolidated Statement of Operations for the fiscal year ended September 30, 2022.

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Gain on Investment Securities During the fiscal year ended September 30, 2023, we recognized an aggregate gain of $11.3 million on investment securities.

This gain was primarily comprised of a $47.4 million gain on our equity investment in ADNOC Drilling caused by an increase in the fair market value of the stock.

In September 2021, the Company made a cornerstone equity investment consisting of 159.7 million shares for $100.0 million as part of ADNOC Drilling's initial public offering.

This investment is subject to a three-year lock-up period.

Additionally, during the fiscal year ended September 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.

We recognized an aggregate gain of $8.2 million related to this investment, which included a $0.5 million gain recognized upon the sale and a $7.7 million gain as a result of the change in the fair value of the investment during the fiscal year ended September 30, 2022.

Restructuring Charges During the fiscal years ended September 30, 2022 and 2021, we incurred $0.8 million and $5.9 million, respectively, in restructuring charges.

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

This gain was mainly comprised of a $27.4 million gain on our equity investment in ADNOC Drilling, partially offset against a $4.2 million loss on our investment in Tamboran;

both of which were a result of fluctuations in the fair market value of the stocks.

Additionally, the aggregate gain was offset by a $12.2 million loss on investment recognized during the fiscal year ended September 30, 2023 as a result of a Blue Chip Swap transaction that occurred during the period.

See—Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks for additional information related to the Blue Chip Swap.

During the fiscal year ended September 30, 2022, we recognized an aggregate gain of $57.9 million on investment securities.

This gain was mainly comprised of a $47.4 million gain on our equity investment in ADNOC Drilling, caused by an increase in the fair market value of the stock, and a gain of $8.2 million on the sale of our equity investment in Schlumberger, Ltd.

Interest and Dividend Income Interest and dividend income was $28.4 million and $18.1 million in fiscal years 2023 and 2022, respectively.

The increase in interest and dividend income in fiscal year 2022 was primarily due to $6.6 million of dividend income received as a result of our investment in ADNOC drilling.

The increase in interest and dividend income in fiscal year 2023 was primarily due to higher market interest rates.

Interest Expense Interest expense totaled $17.3 million in fiscal year 2023 and $19.2 million in fiscal year 2022.

The decrease in interest expense is primarily attributable to a lower interest rate on our 2.90% Senior Notes due 2031 (issued in September 2021) as compared to our 4.65% Senior Notes due 2025, which was fully redeemed in October 2021.

Income Taxes We had an income tax expense of $24.4 million in fiscal year 2022 compared to an income tax benefit of $103.7 million in fiscal year 2021.

The decrease in interest expense is primarily attributable to the fiscal year 2022 interest expense associated with our 4.65% Senior Notes due 2025 which were redeemed on October 27, 2021.

Income Taxes We had an income tax expense of $159.3 million in fiscal year 2023 compared to an income tax expense of $24.4 million in fiscal year 2022.

The effective income tax rate was 26.8 percent in fiscal year 2023 compared to 77.8 percent in fiscal year 2022.

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Discontinued Operations Income from discontinued operations was $0.4 million and $11.3 million in fiscal years 2022 and 2021, respectively.

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

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.

We are seeking damages for the seizure of our 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.

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

Activity within discontinued operations for both fiscal years 2022 and 2021 is caused by exchange rate fluctuations due to the remeasurement of an uncertain tax liability.

North America Solutions

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Restructuring charges — 498 (100.0)

Segment operating income (loss) $ 121,893 $ (287,176) (142.4)

Segment operating income $ 625,467 $ 121,893 413.1

Financial Data and Other Operating Statistics 1 :

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Number of active rigs at the end of period 5

147 176 (16.5)

Number of available rigs at the end of period 233 236 (1.3)

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Operating Revenues Operating revenues were $2.5 billion and $1.8 billion in fiscal year 2023 and 2022, respectively.

Operating revenues increased $0.8 billion in fiscal year 2022 compared to fiscal year 2021.

This increase is primarily driven by higher pricing and higher activity levels.

Operating revenues increased $0.7 billion in fiscal year 2023 primarily due to higher pricing and a 3.6 percent increase in activity levels.

Direct Operating Expenses Direct operating expenses increased to $1.4 billion during the fiscal year ended September 30, 2023 as compared to $1.2 billion during the fiscal year ended September 30, 2022.

This increase was primarily driven by an increase of $241.0 million in labor expense and an increase of $87.0 million in materials and supplies as we experienced higher activity levels and had an increase in field wages beginning in December 2021.

Depreciation and Amortization Depreciation expense decreased to $375.3 million during the fiscal year ended September 30, 2022 as compared to $392.4 million during the fiscal year ended September 30, 2021.

The decrease was primarily attributable to the termination of depreciation on eight rigs located in the U.S.

that were included in the ADNOC sale during the fourth quarter of fiscal year 2021 coupled with ongoing relatively low levels of capital expenditures during the 2022 fiscal year.

Selling, General and Administrative Expenses We had a $7.3 million decrease in selling, general and administrative costs during the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021.

This decrease was primarily driven by a $5.3 million decrease in professional services fees.

This increase was primarily driven by an increase of $137.3 million in labor and labor-related expenses driven by higher activity levels and increased field wages beginning in late September 2022.

Additionally, materials and supplies expense increased by $19.3 million, which was also primarily driven by higher activity levels.

Depreciation and Amortization Depreciation and amortization expense decreased to $354.0 million during the fiscal year ended September 30, 2023 as compared to $375.3 million during the fiscal year ended September 30, 2022.

The decrease is reflective of lower capital expenditures over the last several years.

Selling, General and Administrative Expenses Selling, general and administrative expenses increased to $58.4 million during the fiscal year ended September 30, 2023 as compared to $43.8 million during the fiscal year ended September 30, 2022.

This increase was largely driven by a $10.8 million increase in professional services fees.

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Asset Impairment Charges During the fiscal year ended September 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 Consolidated Balance Sheets.

The combined net book value of these assets 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 during the fiscal year ended September 30, 2022 in the Consolidated Statement of Operations.

This resulted in an impairment charge of $56.4 million during the year ended September 30, 2021.

During the same period, we also formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running services, all within our North America Solutions segment, which resulted in a non-cash impairment charge of $14.4 million during the year ended September 30, 2021.

Restructuring Charges For the fiscal years ended September 30, 2022 and 2021, we incurred $0.5 million and $3.9 million, respectively, in restructuring charges.

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

Offshore Gulf of Mexico

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Operating Revenues Operating revenues were $130.2 million and $125.5 million in the fiscal year ended September 30, 2023 and 2022, respectively.

The 0.7 percent decrease in operating revenue is primarily driven by lower reimbursable expenses and the mix of rigs working at full rates as opposed to being on lower standby or mobilization rates, partially offset by pricing increases which occurred in the later portion of the 2022 fiscal year.

Direct Operating Expenses Direct operating expenses decreased to $90.4 million during the fiscal year ended September 30, 2022 as compared to $97.2 million during the fiscal year ended September 30, 2021.

The decrease was primarily driven by a $6.3 million favorable adjustment in self-insurance liabilities related to prior period claims coupled with the factors described above.

The 3.8 percent increase in operating revenue was largely driven by pricing increases and wage increase pass-throughs which occurred in the latter portion of fiscal year 2022 partially offset by the mix of rigs being on lower standby or mobilization rates as opposed to working at full rates.

Direct Operating Expenses Direct operating expenses increased to $96.8 million during the fiscal year ended September 30, 2023 as compared to $90.4 million during the fiscal year ended September 30, 2022.

The increase was primarily driven by the factors described above.

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Asset impairment charges 8,149 2,495 226.6

Restructuring charges — 207 (100.0)

Segment operating loss $ (891) $ (138) (545.7)

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(5) Defined as the number of rigs generating revenue at the applicable end date of the time period.

Operating Revenues Operating revenues increased $78.2 million in fiscal year 2022 compared to fiscal year 2021.

This increase is primarily driven by higher activity levels.

Additionally, in the first quarter of fiscal year 2022, we recognized $16.4 million in revenue related to the settlement of a contract drilling dispute related to drilling services provided from fiscal years 2016 through 2019 with YPF S.A.

Operating Revenues Operating revenues were $212.6 million and $136.1 million in the fiscal years ended September 30, 2023 and 2022, respectively.

The $76.5 million increase in fiscal year 2023 from fiscal year 2022 was primarily driven by a 57.7 percent increase in activity levels.

Additionally, during the year ended September 30, 2022, we recognized $16.4 million in revenue related to the settlement of a contract drilling dispute related to drilling services provided from fiscal year 2016 through 2019 with YPF S.A.

Refer to Note 9 - Revenue from Contracts with Customers for additional details.

Operating Expenses Direct operating expenses increased to $187.3 million during the fiscal year ended September 30, 2023 as compared to $120.8 million during the fiscal year ended September 30, 2022.

This increase was primarily driven by an increase of $25.9 million in labor expense and an increase of $25.4 million in materials and supplies as we experienced higher activity levels.

Asset Impairment Charges During the fiscal year ended September 30, 2022, we identified two international FlexRig® drilling rigs that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Consolidated Balance Sheets.

In conjunction with establishing a plan to sell these rigs we recognized a non-cash impairment charge of $2.5 million during the fiscal year ended September 30, 2022 in the Consolidated Statement of Operations, 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 fiscal year ended September 30, 2021, we recorded no impairment charges.

This increase was primarily driven by an increase of $33.3 million in labor and labor-related expense and an increase of $17.6 million in materials and supplies as a result of higher activity levels.

Asset Impairment Charges During the fiscal year ended September 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 Consolidated Balance Sheets.

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 recorded in Asset impairment charges within our Consolidated Statement of Operations during the fiscal year ended September 30, 2023.

During the fiscal year ended September 30, 2022, we identified two international FlexRig® drilling rigs that met the asset held-for-sale criteria and were reclassified to Assets held-for-sale on our Consolidated Balance Sheets.

This resulted in a non-cash impairment charge of $2.5 million recorded in Asset impairment charges within our Consolidated Statement of Operations during the fiscal year ended September 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.

2023 FORM 10-K | 44

Other Operations

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

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

(in thousands) 2023 2022 % Change

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Depreciation 2,014 1,701 18.4

Research and development — 127 (100.0)

Selling, general and administrative expense 1,462 1,183 23.6

Restructuring charges — 186 (100.0)

Operating income (loss) $ 12,720 $ (9,704) (231.1)

Operating income $ 15,876 $ 12,720 24.8

Operating Revenues We continue to use our Captive insurance companies to insure the deductibles for our domestic workers’ compensation, general liability, automobile liability claims programs, and medical stop-loss program and to insure the deductibles from the Company's international casualty and rig property programs.

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

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

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

These investments can include U.S.

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However, in some international locations we may make short-term investments that are less conservative, as equivalent highly rated investments are unavailable.

See—Note 2—Summary of Significant Accounting Policies, Risks and Uncertainties—International Solutions Drilling Risks.

See—Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties—International Solutions Drilling Risks.

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

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

2022 FORM 10-K | 45

Our cash flows fluctuate depending on a number of factors, including, among others, the number of our drilling rigs under contract, the revenue we receive under those contracts, the efficiency with which we operate our drilling rigs, the timing of collections on outstanding accounts receivable, the timing of payments to our vendors for operating costs, and capital expenditures.

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

To date, general inflationary trends have not had a material effect on our operating margins or cash flows as we have been able to more than offset these cumulative cost trends with rate increases.

To date, general inflationary trends have not had a material effect on our operating margins or cash flows as we have been able to offset these cumulative cost trends with rate increases.

2023 FORM 10-K | 45

As of September 30, 2023 and 2022, we had cash and cash equivalents of $257.2 million and $232.1 million and short-term investments of $93.6 million and $117.1 million, respectively.

During the fiscal year ended September 30, 2022, our cash, cash equivalents, and restricted cash balance decreased approximately $667.7 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 during the fiscal year ended September 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.

Our cash flows for the fiscal years ended September 30, 2023, 2022 and 2021 are presented below:

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Assets held-for-sale 645 4,333 71,453

Prepaid property, plant and equipment 21,821 10,091 —

633,385 639,288 398,879

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Cash flows provided by operating activities were approximately $833.7 million, $233.9 million, and $136.4 million for the fiscal year ended September 30, 2023, 2022, and 2021 respectively.

The change in cash provided by operating activities between fiscal years 2022 and 2021 is primarily driven by higher activity and rates, partially offset by changes in working capital.

The decrease in cash provided by operating activities between fiscal years 2021 and 2020 was primarily driven by lower operating activity and lower pricing.

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

2022 FORM 10-K | 46

The increase in cash provided by operating activities between fiscal years 2023 and 2022 is primarily driven by higher activity and pricing.

The increase in cash provided by operating activities between fiscal years 2022 and 2021 was primarily driven by higher activity and pricing, and is partially offset by changes in operating net working capital.

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

Operating net working capital was $239.6 million, $271.8 million and $129.9 million as of September 30, 2023, 2022 and 2021, respectively.

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Likewise, the Company believes that operating net working capital is useful to investors because it provides a means to evaluate the operating performance of the business using criteria that are used by our internal decision makers.

The increase in operating net working capital between fiscal years 2022 and 2021 was primarily driven by higher rig activity and rates.

Included in accounts receivable as of September 30, 2022 was $27.8 million of income tax receivables, of which $24.9 million was received subsequent to fiscal year end.

The remainder is expected to be collected within the next fiscal year.

Investing Activities

Capital Expenditures Our capital expenditures were $395.5 million, $250.9 million and $82.1 million in fiscal years 2023, 2022 and 2021, respectively.

The increase in capital expenditures between fiscal years 2022 and 2021 is driven by higher activity and spending on walking rig conversions.

The decrease in capital expenditures between fiscal years 2021 and 2020 was driven by lower maintenance capital expenditures as a result of lower activity.

The increase in capital expenditures is largely driven by higher activity levels and increased costs associated with rig upgrades, including walking rig conversions.

Our fiscal year 2024 capital spending is currently estimated to be between $450 million and $500 million.

This estimate includes normal capital maintenance requirements, information technology spending, skidding to walking conversions for a limited number of rigs and plans to reactivate several super-spec rigs.

Purchases & Sales of Short-Term Investments Our net sales of short-term investments during fiscal year 2022 were $79.6 million compared to net purchases of $107.4 million and $40.0 million in fiscal years 2021 and 2020, respectively.

The change is driven by our ongoing liquidity management.

Purchases of Long-Term Investments Our net purchases of long-term investments were $29.2 million, $102.5 million and $0.6 million in fiscal years 2022, 2021 and 2020, respectively.

This estimate includes normal capital maintenance requirements, information technology spending, and skidding to walking conversions for up to 14 rigs.

2023 FORM 10-K | 46

Net Purchases & Sales of Short-Term Investments Our net sales of short-term investments during fiscal year 2023 were $14.3 million compared to net sales of $79.6 million and net purchases $107.4 million in fiscal years 2022 and 2021, respectively.

The change in activity is driven by our ongoing liquidity management.

Additionally, the Central Bank of Argentina maintains currency controls that limit our ability to access U.S.

dollars in Argentina and remit cash from our Argentine operations.

The execution of certain trades known as Blue Chip Swaps effectively results in a parallel U.S.

dollar exchange rate.

During the fiscal year ended 2023, we entered into a Blue Chip Swap transaction, which resulted in a $12.2 million loss on investment recorded in Gain on investment securities within our Consolidated Statements of Operations.

As a result of the Blue Chip Swap transaction, $9.8 million of net cash was repatriated to the U.S.

during the period.

Net Purchases of Long-Term Investments Our net purchases of long-term investments were $20.7 million, $29.2 million and $102.5 million in fiscal years 2023, 2022 and 2021, respectively.

During the fiscal year ended September 30, 2023, our activity was primarily driven by a $14.1 million equity investment in Tamboran Resources Limited, $4.1 million in debt and equity security investments in various geothermal energy companies, and $2.5 million investments in other equity securities.

The decrease in net purchases between fiscal years 2022 and 2021 is primarily driven by our $100.0 million cornerstone investment in ADNOC Drilling purchased during fiscal year 2021, the $22.0 million of proceeds received from the liquidation of our remaining equity securities in Schlumberger, Ltd, during the fiscal year ended September 30, 2022, offset by the purchase of a $33.0 million cornerstone investment in a convertible note in Galileo Holdco 2 and the purchase of $18.2 million in various geothermal investments during fiscal year 2022.

The increase in net purchases between fiscal years 2021 and 2020 is primarily driven by our purchase of ADNOC Drilling equity securities (as mentioned above) during fiscal year 2021 and the absence of such activity in fiscal year 2020.

Sale of Assets Our proceeds from asset sales totaled $70.1 million, $62.3 million and $43.5 million in fiscal year 2023, 2022 and 2021, respectively.

The increase in proceeds between fiscal years 2022 and 2021 is mainly driven by higher rig activity which drives higher reimbursement from customers for lost or damaged drill pipe.

The increase is also attributable to the sale of our casing running and trucking assets that occurred during the fiscal year ended September 30, 2022.

During the fiscal year ended September 30, 2020, we closed on the sale of a portion of our real estate investment portfolio, including six industrial sites, for total consideration, net of selling related expenses, of $40.7 million, which was the primary driver in the decrease in proceeds between fiscal years 2021 and 2020.

The increase in proceeds is largely driven by higher rig activity which drives higher reimbursement from customers for lost or damaged drill pipe and other used drilling equipment.

Additionally, in fiscal year 2022, we sold our casing running and trucking assets.

Insurance Proceeds from Involuntary Conversion 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.

During the fiscal year ended September 30, 2023, we collected $9.2 million of the total expected insurance proceeds.

Advance Payment for Sale of Property, Plant and Equipment During September 2021, the Company agreed to sell eight FlexRig land rigs with an aggregate net book value of $55.6 million to ADNOC Drilling for $86.5 million.

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

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

Financing Activities

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

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

During the fiscal year ended September 30, 2022 and 2020, we repurchased 3.2 million common shares at an aggregate cost of $77.0 million and 1.5 million common shares at an aggregate cost of $28.5 million, respectively, which are held as treasury shares.

Repurchase of Shares 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.

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

During the fiscal year ended September 30, 2023, we repurchased 6.5 million common shares at an aggregate cost of $249.0 million, including accrued excise tax of $1.8 million, resulting in a net cash outflow of $247.2 million.

During the fiscal year ended September 30, 2022, we repurchased 3.2 million common shares at an aggregate cost of $77.0 million.

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

Dividends We paid dividends of $1.00 per share during fiscal years 2022 and 2021 compared to $2.38 per share during fiscal year 2020.

Dividends We paid dividends of $1.94 per share, comprised of a base cash dividend of $1.00 and a supplemental cash dividend of $0.94 during the fiscal year 2023.

Comparatively, we paid dividends of $1.00 per share in 2022 and 2021.

Total dividends paid were $201.5 million, $107.4 million and $109.1 million in fiscal years 2023, 2022 and 2021, respectively.

A cash dividend of $0.25 per share was declared on September 7, 2022 for shareholders of record on November 15, 2022, payable on December 1, 2022.

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

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

2022 FORM 10-K | 47

Redemption of 4.65% Senior Notes due 2025 On October 27, 2021, we redeemed all of the outstanding 2025 Notes, resulting in a cash outflow of $487.1 million.

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Additional details are fully discussed in Note 6—Debt.

Credit Facilities

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

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

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

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.

Lenders with $680.0 million of commitments under the 2018 Credit Facility also exercised their option to extend the maturity of the 2018 Credit Facility from November 12, 2025 to November 11, 2026.

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

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

As of September 30, 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.

As of September 30, 2022, we had $55.0 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 $55.0 million, $38.1 million of financial guarantees were outstanding as of September 30, 2022.

Separately, we had $2.0 million in standby letters of credit and bank guarantees outstanding.

In total, we had $40.1 million outstanding as of September 30, 2022.

In October 2022, we increased one of our standby letters of credit by $1.9 million.

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 September 30, 2022, we were in compliance with all debt covenants and we anticipate that we will continue to be in compliance during the next quarter of fiscal year 2023.

2023 FORM 10-K | 47

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.

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

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

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.

All 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;

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

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

The debt issuance cost were 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.

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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.

2022 FORM 10-K | 48

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 Consolidated Statements of Operations during the fiscal year ended September 30, 2022.

Credit Facility

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

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.

Additionally, 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 12, 2025 to November 11, 2026.

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

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

As of September 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 6—Debt to the Consolidated Financial Statements.

As of September 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 September 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 September 30, 2023.

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

2023 FORM 10-K | 48

Future Cash Requirements

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As of September 30, 2023, we had a $517.8 million deferred tax liability on our Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

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

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

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

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

At September 30, 2022, we had $3.9 million recorded for uncertain tax positions and related interest and penalties.

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

The long‑term debt to total capitalization ratio was 16.6 percent at September 30, 2022 compared to 15.9 percent at September 30, 2021.

At September 30, 2023, we have recorded approximately $3.1 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.

Any further reversals or payments of the liability cannot be estimated at this time.

The long‑term debt to total capitalization ratio was 16.6 percent as of September 30, 2023 and 2022.

For additional information regarding debt agreements, refer to Note 6—Debt to the Consolidated Financial Statements.

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Critical Accounting Policies and Estimates

Accounting policies that we consider significant are summarized in Note 2—Summary of Significant Accounting Policies, Risks and Uncertainties to our Consolidated Financial Statements included in Part II, Item 8—"Financial Statements and Supplementary Data" of this Form 10-K.

Accounting policies that we consider significant are summarized in Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties to our Consolidated Financial Statements included in Part II, Item 8—"Financial Statements and Supplementary Data" of this Form 10-K.

The preparation of our financial statements in conformity with U.S.

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Property, plant and equipment, including renewals and betterments, are capitalized at cost, while maintenance and repairs are expensed as incurred.

The interest expense applicable to the construction of qualifying assets is capitalized as a component of the cost of such assets.

We account for the depreciation of property, plant and equipment using the straight‑line method over the estimated useful lives of the assets considering the estimated salvage value of the property, plant and equipment.

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

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

We self‑insure a significant portion of expected losses relating to workers’ compensation, general liability, employer’s liability, auto liability, as well as other insurance coverages.

Generally, deductibles range from $1 million to $10 million per occurrence depending on the coverage and whether a claim occurs outside or inside of the United States.

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New Accounting Standards

See Note 2—Summary of Significant Accounting Policies, Risks and Uncertainties to our Consolidated Financial Statements for recently adopted accounting standards and new accounting standards not yet adopted.

See Note 2—Summary of Significant Accounting Policies, Related Risks and Uncertainties to our Consolidated Financial Statements for recently adopted accounting standards and new accounting standards not yet adopted.

Non-GAAP Measurements

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Asset impairment charges 3,948 — 8,149

Restructuring charges 498 — —

Direct margin (Non-GAAP) $ 1,072,215 $ 33,463 $ 25,274

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis