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Item 1. Financial Statements

2024-01-29 compared with 2023-07-26 · 306 added, 414 removed, 542 unchanged (57% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, September 30,

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

December 31, September 30,

(in thousands except share data) 2023 2023

Current Assets:

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Shareholders' Equity:

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

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of December 31, 2023 and September 30, 2023, and 98,623,747 and 99,426,526 shares outstanding as of December 31, 2023 and September 30, 2023, respectively

11,222 11,222

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Accumulated other comprehensive loss ( 7,847 ) ( 7,981 )

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

Treasury stock, at cost, 13,599,118 shares and 12,796,339 shares as of December 31, 2023 and September 30, 2023, respectively

( 494,195 ) ( 464,382 )

6 unchanged sentences

Three Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022

10 unchanged sentences

Asset impairment charges — 12,097

Restructuring charges — 33 — 838

Gain on reimbursement of drilling equipment ( 7,494 ) ( 15,724 )

Other (gain) loss on sale of assets 4,504 ( 3,075 ) ( 394 ) ( 2,762 )

Other gain on sale of assets ( 2,443 ) ( 2,379 )

553,679 575,414

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS 148,742 33,722 468,170 ( 31,506 )

OPERATING INCOME 123,468 144,223

Other income (expense)

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Interest expense ( 4,372 ) ( 4,355 )

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

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

Loss on investment securities ( 4,034 ) ( 15,091 )

Other ( 543 ) 58

1,785 ( 14,683 )

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

Income tax expense (benefit) 40,663 1,730 124,187 ( 3,166 )

Income (loss) from continuing operations 95,280 17,475 355,608 ( 38,480 )

Income (loss) from discontinued operations before income taxes 13 277 870 ( 106 )

Income before income taxes 125,253 129,540

Income tax expense 30,080 32,395

Income (loss) from discontinued operations 13 277 870 ( 106 )

NET INCOME (LOSS) $ 95,293 $ 17,752 $ 356,478 $ ( 38,586 )

Basic earnings (loss) per common share:

Income (loss) from continuing operations $ 0.93 $ 0.16 $ 3.39 $ ( 0.37 )

Income from discontinued operations — — 0.01 —

Net income (loss) $ 0.93 $ 0.16 $ 3.40 $ ( 0.37 )

Diluted earnings (loss) per common share:

Income (loss) from continuing operations $ 0.93 $ 0.16 $ 3.38 $ ( 0.37 )

Income from discontinued operations — — 0.01 —

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

NET INCOME $ 95,173 $ 97,145

Basic earnings per common share $ 0.95 $ 0.92

Diluted earnings per common share:

$ 0.94 $ 0.91

Weighted average shares outstanding:

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HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022

Net income (loss) $ 95,293 $ 17,752 $ 356,478 $ ( 38,586 )

Net income $ 95,173 $ 97,145

Other comprehensive income, net of income taxes:

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

Net change related to employee benefit plans, net of income taxes of $( 39.5 ) thousand and $( 75.1 ) thousand for the three months ended December 31, 2023 and 2022, respectively

Other comprehensive income 134 256

Comprehensive income (loss) $ 95,548 $ 18,141 $ 357,245 $ ( 37,409 )

Comprehensive income $ 95,307 $ 97,401

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

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three and Nine Months Ended June 30, 2023

Three Months Ended December 31, 2023

Common Stock Additional

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Balance at December 31, 2023 112,222 $ 11,222 $ 506,672 $ 2,743,794 $ ( 7,847 ) 13,599 $ ( 494,195 ) $ 2,759,646

Comprehensive income:

Net income — — — 164,040 — — — 164,040

Other comprehensive income — — — — 256 — — 256

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

— — — ( 50,046 ) — — — ( 50,046 )

Vesting of restricted stock awards, net of shares withheld for employee taxes — — ( 11,769 ) — — ( 229 ) 6,842 ( 4,927 )

Stock-based compensation — — 7,431 — — — — 7,431

Share repurchases — — — — — 2,543 ( 106,708 ) ( 106,708 )

Other — — 615 — — — — 615

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.

Q3FY23 FORM 10-Q | 6

HELMERICH & PAYNE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

Three and Nine Months Ended June 30, 2022

Three Months Ended December 31, 2022

Common Stock Additional

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

Comprehensive income (loss):

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

Other comprehensive income — — — — 394 — — 394

Dividends declared ($ 0.25 base per share)

— — — ( 26,807 ) — — — ( 26,807 )

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

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

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

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

Comprehensive income (loss):

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

Other comprehensive income — — — — 394 — — 394

Dividends declared ($ 0.25 base per share)

— — — ( 26,565 ) — — — ( 26,565 )

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

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

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

Other — — ( 946 ) — — — ( 946 )

Balance 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):

Comprehensive income:

Net income — — — 97,145 — — — 97,145

Other comprehensive income — — — — 256 — — 256

Dividends declared ($ 0.25 base per share)

Dividends declared ($ 0.25 base per share, $ 0.47 supplemental per share)

— — — ( 76,611 ) — — — ( 76,611 )

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

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

Other — — ( 847 ) — — — — ( 847 )

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

Balance at December 31, 2022 112,222 $ 11,222 $ 512,928 $ 2,494,106 $ ( 11,816 ) 7,324 $ ( 261,295 ) $ 2,745,145

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

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 356,478 $ ( 38,586 )

Adjustment for (income) loss from discontinued operations ( 870 ) 106

Income (loss) from continuing operations 355,608 ( 38,480 )

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

Net income $ 95,173 $ 97,145

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

Depreciation and amortization 93,991 96,655

Asset impairment charges — 12,097

Amortization of debt discount and debt issuance costs 931 880

Loss on extinguishment of debt — 60,083

Provision for credit loss 1,309 3,358

Stock-based compensation 7,672 8,273

Gain on investment securities ( 6,123 ) ( 55,684 )

Loss on investment securities 4,034 15,091

Gain on reimbursement of drilling equipment ( 7,494 ) ( 15,724 )

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Other noncurrent liabilities ( 5,966 ) 4,224

Net cash provided by operating activities from continuing operations 619,057 116,701

Net cash used in operating activities from discontinued operations ( 57 ) ( 60 )

Net cash provided by operating activities 174,798 185,375

1 unchanged sentence

Capital expenditures ( 136,411 ) ( 96,027 )

Other capital expenditures related to assets held-for-sale — ( 18,228 )

Purchase of short-term investments ( 46,250 ) ( 41,641 )

1 unchanged sentence

Proceeds from sale of short-term investments 57,956 40,758

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

Proceeds from asset sales 11,929 30,978

Other — ( 7,500 )

Net cash used in investing activities ( 113,067 ) ( 82,169 )

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Payment of contingent consideration from acquisition of business ( 250 ) ( 250 )

Payments for early extinguishment of long-term debt — ( 487,148 )

Make-whole premium payment — ( 56,421 )

Share repurchases ( 47,364 ) ( 39,060 )

Other ( 540 ) ( 587 )

Net cash used in financing activities ( 98,728 ) ( 100,557 )

6 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2023 2022

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

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

Argentina, Bahrain, Colombia and the United Arab Emirates.

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

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

Argentina, Australia, Bahrain, Colombia, and the United Arab Emirates.

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

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

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED RISKS AND UNCERTAINTIES

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RELATED RISKS AND UNCERTAINTIES

Interim Financial Information

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The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

Income from discontinued operations was presented as a separate line item on our Unaudited Condensed Consolidated Statements of Operations during the three months ended December 31, 2022.

To conform with the current fiscal year presentation, we reclassified amounts previously presented in Income from discontinued operations, which were not material, to Other within Other income (expense) on our Unaudited Condensed Consolidated Statements of Operations for the three months ended December 31, 2022.

Principles of Consolidation

The Unaudited Condensed Consolidated Financial Statements include the accounts of Helmerich & Payne, Inc.

and its domestic and foreign subsidiaries.

The Unaudited Condensed Consolidated Financial Statements include the accounts of H&P and its domestic and foreign subsidiaries.

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

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

All intercompany accounts and transactions have been eliminated upon consolidation.

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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 $ 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.

Q1FY24 FORM 10-Q | 9

We recorded restricted cash of $ 65.1 million and $ 42.5 million at December 31, 2023 and 2022, respectively, and $ 59.1 million and $ 36.9 million at September 30, 2023 and 2022, respectively.

All restricted cash at December 31, 2023 represents an amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies.

Of the total at September 30, 2023, $ 0.7 million is related to the acquisition of drilling technology companies, and $ 58.4 million 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.

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

June 30, September 30,

December 31, September 30,

(in thousands) 2023 2022 2023 2022

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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.

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

In December 2023, all shares of Tamboran Resources were transferred to Tamboran Resources Corporation ("Tamboran Corp.") in exchange for depository interests in Tamboran Corp.

Tamboran Corp.

is publicly traded on the Australian Securities Exchange under the ticker "TBN" and is focused on developing a natural gas resource in Australia's Beetaloo Sub-basin.

One of our executive officers serves as a director of Tamboran Corp.

pursuant to nomination rights in the investment agreement.

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

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

As of December 31, 2023, we recorded $ 2.8 million in receivables, $ 8.0 million in other assets and $ 5.8 million in contract liabilities on our Unaudited Condensed Consolidated Balance Sheets.

As of September 30, 2023, we recorded $ 2.8 million in receivables, $ 8.0 million in other assets and $ 6.6 million in contract liabilities on our Consolidated Balance Sheets.

We recorded $ 4.3 million in revenue on our Unaudited Condensed Consolidated Statement of Operations during the three months ended December 31, 2023 related to the drilling services agreement with Tamboran Resources, which commenced drilling services during the fourth fiscal quarter of 2023.

We expect to earn $ 32.2 million in revenue over the remainder of term of the contract, and, as such, this amount is included within our contract backlog as of December 31, 2023.

Recently Issued Accounting Updates

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Q1FY24 FORM 10-Q | 10

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

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

Standard Description Date of

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Statements or Other Significant Matters

Recently Adopted Accounting Pronouncements

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

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

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

Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.

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

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

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

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

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions The amendments in this update clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value (i.e., the entity would not apply a discount related to the contractual sale restriction).

Furthermore, an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

The following disclosures for equity securities subject to contractual sale restrictions will be required:

(1) the fair value of the equity securities subject to contractual sale restrictions reflected in the balance sheet, (2) the nature and remaining duration of the restriction(s), and (3) the circumstances that could cause a lapse in the restriction(s).

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

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

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

Standards that are not yet adopted as of December 31, 2023

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this update enhance annual and interim disclosure requirements, determine significant segment expense, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

This update is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption of the amendments is permitted.

Upon adoption, the amendments shall be applied retrospectively to all prior periods presented in the financial statements.

October 1, 2024 We plan to adopt this ASU, as required, during fiscal year 2025.

We are currently evaluating the impact of this ASU on our Consolidated Financial Statements and disclosures.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures This ASU enhances income tax disclosure requirements.

Under the ASU, public business entities must annually (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).

Specific categories that must be included in the reconciliation for each annual reporting period are specified in the amendment.

This update is effective for annual periods beginning after December 15, 2024.

Early adoption of the amendments is permitted.

Upon adoption, the amendments shall be applied on a prospective basis.

Retrospective application is permitted.

October 1, 2025 We plan to adopt this ASU, as required, during fiscal year 2026.

We are currently evaluating the impact of this ASU on our Consolidated Financial Statements and disclosures.

Self-Insurance

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.

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 property programs.

Our operating subsidiaries are paying premiums to the Captives, typically on a monthly basis, for the estimated losses based on an external actuarial analysis.

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

Direct operating costs primarily consisted of adjustments to accruals for estimated losses of $ 3.5 million and $ 2.9 million and rig and casualty insurance premiums of $ 9.1 million and $ 10.0 million during the three months ended December 31, 2023 and 2022, respectively.

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

Intercompany premium revenues recorded by the Captives during the three months ended 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.

Starting in the second quarter of fiscal year 2020, the Captive insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $ 50,000 .

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

Our medical stop loss operating expenses for the three months ended June 30, 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.

Intercompany premium revenues recorded by the Captives during the three months ended December 31, 2023 and 2022 amounted to $ 15.2 million and $ 16.4 million, respectively, which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, Offshore Gulf of Mexico, and International Solutions reportable operating segments and are reflected as intersegment sales within "Other." Our medical stop loss operating expenses for the three months ended December 31, 2023 and 2022 were $ 4.1 million and $ 2.8 million, respectively.

Q1FY24 FORM 10-Q | 11

International Solutions Drilling Risks

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

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

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

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, 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.

These contingencies include general and regional economic conditions, geopolitical developments and tensions, war and uncertainty in oil-producing countries, 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.

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dollars, we are paid the equivalent in Argentine pesos.

The Argentine branch of one of our second-tier subsidiaries remits U.S.

dollars to its U.S.

parent by converting the Argentine pesos into U.S.

dollars through the Argentine Foreign Exchange Market and repatriating the U.S.

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

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

dollar reserves.

As a result of these currency controls, our ability to remit funds from our Argentine subsidiary to its U.S.

parent has been limited.

The Central Bank of Argentina maintains certain currency controls that limit our ability to access U.S.

dollars and remit funds from our Argentine operations.

In the past, the Argentine government has also instituted price controls on crude oil, diesel and gasoline prices and instituted an exchange rate freeze in connection with those prices.

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Argentina’s economy is considered highly inflationary, which is defined as cumulative inflation rates exceeding 100 percent in the most recent three-year period based on inflation data published by the respective governments.

Nonetheless, all of our foreign subsidiaries use the U.S.

All of our foreign subsidiaries use the U.S.

dollar as the functional currency and local currency monetary assets and liabilities are remeasured into U.S.

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

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.

We recorded aggregate foreign currency losses of $ 1.8 million and $ 0.2 million for the three months ended December 31, 2023 and 2022, respectively.

The aggregate foreign currency loss for the three months ended December 31, 2023 was primarily due to Argentina's devaluation of its peso relative to the U.S.

dollar by approximately 55 percent during the quarter.

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

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

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

As of December 31, 2023, our cash balance in Argentina was the U.S.

dollar equivalent of $ 6.9 million in Argentine Pesos.

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

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.

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three months ended December 31, 2023, approximately 8.2 percent of our operating revenues were generated from international locations compared to 7.7 percent during the three months ended December 31, 2022.

During the three months ended December 31, 2023, approximately 78.5 percent of operating revenues from international locations were from operations in South America compared to 90.5 percent during the three months ended December 31, 2022.

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

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NOTE 3 PROPERTY, PLANT AND EQUIPMENT

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

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

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

Drilling services equipment 4 - 15 years

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

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.

Depreciation expense during the three months ended December 31, 2023 and 2022 was $ 92.4 million and $ 94.9 million, including abandonments of $ 0.5 million and $ 1.2 million, respectively.

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

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

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.

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

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 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

Asset additions 1,177

Sale of assets held-for-sale ( 1,789 )

Impairment expense ( 2,733 )

Balance at June 30, 2023

Impairment Charges

Fiscal Year 2024 Activity

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.

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 nine months ended June 30, 2023.

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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 nine months ended June 30, 2023.

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

We did not record any impairment charges during the three months ended December 31, 2023.

Fiscal Year 2023 Activity

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.

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

During the 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.

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

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

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

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

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

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

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Gain on Reimbursement of Drilling Equipment

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.

We recognized gains of $ 7.5 million and $ 15.7 million during the three months ended December 31, 2023 and 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.

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

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.

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

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

Intangible Assets

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

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

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

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Trade name 20 years 5,865 1,870 3,995 5,865 1,791 4,074

Customer relationships 5 years 4,000 4,000 — 4,000 3,867 133

$ 96,961 $ 37,993 $ 58,968 $ 96,961 $ 36,386 $ 60,575

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 in the Unaudited Condensed Consolidated Statements of Operations was $ 1.6 million and $ 1.8 million for the three months ended December 31, 2023 and 2022, respectively.

Amortization expense is estimated to be approximately $ 4.8 million for the remainder of fiscal year 2024, and approximately $ 6.4 million for fiscal year 2025 through 2028.

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

June 30, 2023 September 30, 2022

December 31, 2023 September 30, 2023

(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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Due September 29, 2031 $ 550,000 $ ( 4,708 ) $ 545,292 $ 550,000 $ ( 4,856 ) $ 545,144

550,000 ( 5,004 ) 544,996 550,000 ( 7,390 ) 542,610

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

Long-term debt $ 550,000 $ ( 4,708 ) $ 545,292 $ 550,000 $ ( 4,856 ) $ 545,144

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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 per annum.

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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.

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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 nine months ended June 30, 2022.

Credit Facility

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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 June 30, 2023, there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility.

As of December 31, 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 in our 2023 Annual Report on Form 10-K.

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.

As of December 31, 2023, we had $ 102.0 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 $ 102.0 million, $ 40.0 million was outstanding as of December 31, 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 June 30, 2023.

In total, we had $ 42.1 million outstanding as of December 31, 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 June 30, 2023, we were in compliance with all debt covenants.

At December 31, 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.

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.

Our income tax expense for the three months ended December 31, 2023 and 2022 was $ 30.1 million and $ 32.4 million, respectively, resulting in effective tax rates of 24.0 percent and 25.0 percent, respectively.

Effective tax rates differ from the U.S.

federal statutory rate of 21.0 percent for the three and nine months ended June 30, 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.

federal statutory rate of 21.0 percent for the three months ended December 31, 2023 and 2022 primarily due to state and foreign income taxes, permanent non-deductible items and discrete adjustments.

The discrete adjustments for the three months ended December 31, 2023 and 2022 are primarily due to tax expense (benefit) related to equity compensation of $( 0.9 ) million and $ 0.2 million, respectively.

As of December 31, 2023, we have recorded approximately $ 3.4 million of unrecognized tax benefits, interest, and penalties.

We believe it is reasonably possible that up to $ 2.8 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.

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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.

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 and again on June 7, 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.

We repurchased 1.3 million common shares at an aggregate cost of $ 47.7 million, including excise tax of $ 0.3 million, during the three months ended December 31, 2023, compared to 0.8 million common shares at an aggregate cost of $ 39.1 million during the three months ended December 31, 2022.

During calendar year 2023 we repurchased substantially all of the seven million total shares authorized for repurchase.

During the three months ended December 31, 2023, we declared $ 59.1 million in cash dividends consisting of two $ 0.17 per share supplemental dividends and a base cash dividend of $ 0.25 per share.

One of the supplemental dividends, declared in October 2023, was paid in December 2023.

The second supplemental dividend and base cash dividend, declared in December 2023, is payable in February 2024, resulting in a Dividend payable of $ 42.0 million on our Unaudited Condensed Consolidated Balance Sheets as of December 31, 2023.

Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss were as follows:

June 30, September 30,

December 31, September 30,

(in thousands) 2023 2023

Pre-tax amounts:

Unrealized actuarial loss $ ( 14,710 ) $ ( 15,703 )

Unrealized pension actuarial loss $ ( 10,233 ) $ ( 10,407 )

$ ( 10,233 ) $ ( 10,407 )

After-tax amounts:

Unrealized actuarial loss $ ( 11,305 ) $ ( 12,072 )

Unrealized pension actuarial loss $ ( 7,847 ) $ ( 7,981 )

$ ( 7,847 ) $ ( 7,981 )

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

Fluctuations in actuarial gains and losses are primarily due to changes in the discount rate and investment returns related to the defined benefit pension plan.

The following is a summary of the changes in accumulated other comprehensive loss, net of tax, related to the defined benefit pension plan for the three months ended December 31, 2023:

(in thousands) Three Months Ended December 31, 2023

Balance at beginning of period $ ( 7,981 )

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Net current-period other comprehensive income 134

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

Balance at December 31, 2023 $ ( 7,847 )

NOTE 8 REVENUE FROM CONTRACTS WITH CUSTOMERS

Drilling Services Revenue

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

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

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

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

The majority of our drilling services are performed on a “daywork” contract basis, under which we charge a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market.

These drilling services, including our technology solutions, represent a series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer.

Because our customers benefit equally throughout the service period and our efforts in providing drilling services are incurred relatively evenly over the period of performance, revenue is recognized over time using a time-based input measure as we provide services to the customer.

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

(Argentina) ("YPF").

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

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

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

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

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

The variable consideration that we expect to receive is estimated at the most likely amount, and constrained to an amount such that it is probable a significant reversal of revenue previously recognized will not occur based on the performance targets.

Total revenue recognized from performance contracts, including performance bonuses, was $ 298.2 million and $ 270.0 million during the three months ended December 31, 2023 and 2022, respectively, of which, $ 15.2 million and $ 10.1 million was related to performance bonuses recognized due to the achievement of performance targets during the three months ended December 31, 2023 and 2022, respectively.

Contracts generally contain renewal or extension provisions exercisable at the option of the customer at prices mutually agreeable to us and the customer.

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

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

During the three months ended December 31, 2023 and 2022, early termination revenue associated with term contracts was $ 5.4 million and $ 0.7 million, respectively.

Contract Costs

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

We had capitalized fulfillment costs of $ 12.4 million and $ 11.4 million as of December 31, 2023 and September 30, 2023, respectively.

Remaining Performance Obligations

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.

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of December 31, 2023 was approximately $ 1.3 billion, of which approximately $ 0.7 billion is expected to be recognized during the remainder of fiscal year 2024, approximately $ 0.4 billion during fiscal year 2025, and approximately $ 0.2 billion in fiscal year 2026 and thereafter.

These amounts do not include anticipated contract renewals or expected performance bonuses as part of its calculation.

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

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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) June 30, 2023 September 30, 2022

(in thousands) December 31, 2023 September 30, 2023

Contract assets, net $ 7,006 $ 6,560

(in thousands) June 30, 2023

(in thousands) December 31, 2023

Contract liabilities balance at September 30, 2023 $ 28,882

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Revenue recognized during the period ( 17,542 )

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

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Contract liabilities balance at December 31, 2023 $ 25,735

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 June 30, Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands) 2023 2022

4 unchanged sentences

$ 7,672 $ 8,273

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Restricted Stock

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:

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

(in thousands, except per share amounts) Shares 1

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Forfeited ( 1 ) 44.65

Non-vested restricted stock outstanding at June 30, 2023

Non-vested restricted stock outstanding at December 31, 2023

1,373 $ 36.25

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

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

During the three months ended December 31, 2023, no restricted phantom stock units were granted and no restricted phantom stock units vested.

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

Performance Units

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:

A summary of the status of our performance-vested restricted share units ("performance units") as of December 31, 2023 and changes in non-vested performance units outstanding during the three 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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Granted 223 39.86

Vested ( 286 ) 43.40

Dividend equivalent rights performance units credited and performance factor adjustment 1

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

( 115 ) 35.11

Non-vested performance units outstanding at December 31, 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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The vesting and number of the remainder of non-vested performance units reflected at the end of the period is contingent upon our achievement of specified target performance criteria.

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

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If we meet the specified relative TSR performance criteria at target, approximately 503,371 additional performance units could vest or become eligible to vest.

Beginning with performance units granted in December 2022, performance units include an additional return on invested capital (“ROIC”) performance metric.

Based on the Company's ROIC performance over a full three-year performance period, the Human Resources Committee may increase or decrease by 25 percent the number of performance units that otherwise would be paid out solely based on the achievement of relative TSR performance over a full three-year performance period (the "ROIC Modifier").

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

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

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

NOTE 10 EARNINGS (LOSSES) PER COMMON SHARE

The vesting of the performance units is generally dependent on (i) the achievement of the Company's TSR performance goals relative to the TSR achievement of a peer group of companies (over the applicable performance cycle), (ii) the continued employment of the recipient of the performance unit award throughout the Vesting Period, and (iii) for performance units granted beginning in December 2022, the application of the ROIC Modifier.

The Vesting Period for performance units granted in December 2020 ended on December 31, 2023 and the performance units eligible to vest were settled in shares of common stock in January 2024.

Stock-based compensation expense related to these grants has been fully recognized as of December 31, 2023.

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NOTE 10 EARNINGS PER COMMON SHARE

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

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

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

During the first quarter of fiscal year 2023, Income from discontinued operations was presented as a separate line item on our Unaudited Condensed Consolidated Statements of Operations.

To conform with the current fiscal year presentation, basic and diluted earnings per share for continuing and discontinued operations are presented in the aggregate, for the three months ended December 31, 2022, as presented below.

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

Three Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022

Income (loss) from continuing operations $ 95,280 $ 17,475 $ 355,608 $ ( 38,480 )

Income (loss) from discontinued operations 13 277 870 ( 106 )

Net income (loss) 95,293 17,752 356,478 ( 38,586 )

Adjustment for basic earnings (loss) per share

Net income $ 95,173 $ 97,145

Adjustment for basic earnings per share

Earnings allocated to unvested shareholders ( 1,248 ) ( 992 )

Numerator for basic earnings (loss) per share:

From continuing operations 93,997 17,107 350,798 ( 39,618 )

From discontinued operations 13 277 870 ( 106 )

94,010 17,384 351,668 ( 39,724 )

Adjustment for diluted earnings (loss) per share

Numerator for basic earnings per share 93,925 96,153

Adjustment for diluted earnings per share

Effect of reallocating undistributed earnings of unvested shareholders 2 —

Numerator for diluted earnings (loss) per share:

From continuing operations 93,999 17,107 350,807 ( 39,618 )

From discontinued operations 13 277 870 ( 106 )

$ 94,012 $ 17,384 $ 351,677 $ ( 39,724 )

Denominator for basic earnings (loss) per share - weighted-average shares 101,163 105,289 103,464 106,092

Numerator for diluted earnings per share $ 93,927 $ 96,153

Denominator for basic earnings per share - weighted-average shares $ 99,143 $ 105,248

Effect of dilutive shares from restricted stock and performance share units 485 856

Denominator for diluted earnings (loss) per share - adjusted weighted-average shares 101,550 106,021 103,852 106,092

Basic earnings (loss) per common share:

Income (loss) from continuing operations $ 0.93 $ 0.16 $ 3.39 $ ( 0.37 )

Income from discontinued operations — — 0.01 —

Net income (loss) $ 0.93 $ 0.16 $ 3.40 $ ( 0.37 )

Diluted earnings (loss) per common share:

Income (loss) from continuing operations $ 0.93 $ 0.16 $ 3.38 $ ( 0.37 )

Income from discontinued operations — — 0.01 —

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

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.

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

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

Denominator for diluted earnings per share - adjusted weighted-average shares $ 99,628 $ 106,104

Basic earnings per common share:

$ 0.95 $ 0.92

Diluted earnings per common share:

$ 0.94 $ 0.91

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

Three Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2023 2022

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Weighted-average price per share $ 57.21 $ 63.51

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NOTE 11 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

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Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.

We use the fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs:

We use the following fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs:

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

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The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

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 as of the dates indicated below:

June 30, 2023

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Fair Value Measurements

The following tables summarize our financial assets and liabilities measured at fair value and indicate the level in the fair value hierarchy in which we classify the fair value measurement as of the dates indicated below:

December 31, 2023

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

Short-term investments:

Corporate debt securities $ 51,721 $ — $ 51,721 $ —

Corporate and municipal debt securities $ 37,843 $ — $ 37,843 $ —

government and federal agency securities 46,278 46,278 — —

Total short-term investments 72,609 20,888 51,721 —

Total 84,121 46,278 37,843 —

Long-term Investments:

Recurring fair value measurements:

Equity securities:

Non-qualified supplemental savings plan 16,478 16,478 — —

Equity investment in ADNOC Drilling 154,770 154,770 — —

Equity investment in Tamboran 12,623 12,623 — —

Debt security investment in Galileo 35,001 — — 35,001

Other debt securities 2,181 — — 2,181

Total investments 219,758 182,576 — 37,182

Investment in ADNOC Drilling 164,339 164,339 — —

Investment in Tamboran 16,237 16,237 — —

Debt securities:

Investment in Galileo 35,868 — — 35,868

Geothermal debt securities 2,000 — — 2,000

Total 234,922 197,054 — 37,868

Nonrecurring fair value measurements 1 :

Other equity securities 2

2,721 — — 2,721

Total 2,721 — — 2,721

Total 237,643 197,054 — 40,589

Contingent consideration $ 8,350 $ — $ — $ 8,350

(1) As of December 31, 2023, our equity security investments in geothermal energy totaled $ 25.2 million.

None of these investments were marked to fair value during the period.

The investments are measured at cost, less any impairments.

(2) As of December 31, 2023, our other equity securities subject to measurement at fair value on a nonrecurring basis totaled $ 3.3 million, of which $ 2.7 million has been marked to fair value.

The remaining $ 0.6 million is measured at cost, less any impairments.

Q1FY24 FORM 10-Q | 21

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government and federal agency securities 44,836 44,836 — —

Total short-term investments 117,101 18,837 98,264 —

Total 93,600 44,836 48,764 —

Long-term investments:

Recurring fair value measurements:

Equity securities:

Non-qualified supplemental savings plan 14,597 14,597 — —

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

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

Other debt securities 565 — — 565

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

Investment in ADNOC Drilling 174,758 174,758 — —

Investment in Tamboran 9,920 9,920 — —

Debt securities:

Investment in Galileo 35,434 — — 35,434

Geothermal debt securities 2,006 — — 2,006

Total 236,715 199,275 — 37,440

Nonrecurring fair value measurements 1 :

Other equity securities 2

2,430 — — 2,430

Total 2,430 — — 2,430

Total $ 239,145 $ 199,275 $ — $ 39,870

Contingent consideration $ 9,455 $ — $ — $ 9,455

(1) As of September 30, 2023, our equity security investments in geothermal energy totaled $ 25.2 million.

None of these investments were marked to fair value during the period.

The investments are measured at cost, less any impairments.

(2) As of September 30, 2023, our other equity securities subject to measurement at fair value on a nonrecurring basis totaled $ 3.0 million, of which $ 2.4 million has been marked to fair value.

The remaining $ 0.6 million is measured at cost, less any impairments.

Recurring Fair Value Measurements

Short-term Investments

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

Our investment is classified as a long-term equity investment within Investments 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 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.

The provisions of ASU No.

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

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.

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 and recorded within Loss on investment securities on our Unaudited Condensed Consolidated Statements of Operations.

Consistent with the provisions of ASU No.

2022-03, contractual sale restrictions are not considered in the fair value measurement of our investment in ADNOC Drilling.

During the three months ended December 31, 2023 and 2022, we recognized losses of $ 10.4 million and $ 18.2 million, respectively, on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment.

As of December 31, 2023, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

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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 (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 June 30, 2023.

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 Resources Limited.

In December 2023, all shares of Tamboran Resources were transferred to Tamboran Resources Corporation in exchange for depository interests in Tamboran Corp.

Tamboran Corp.

is publicly traded on the Australian Securities Exchange under the ticker "TBN" and is focused on developing a natural gas resource in Australia's Beetaloo Sub-basin.

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 5.1 percent as of December 31, 2023), operational involvement and role on the investee's board of directors.

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

During the three months ended December 31, 2023 and 2022, we recognized gains of $ 6.3 million and $ 3.1 million, respectively, recorded within 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.

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 5.0 percent 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.

During the fiscal year ended September 30, 2023, our convertible note agreement was amended to include any interest which has accrued but not yet compounded or issued as a note.

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

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

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

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

The following table provides quantitative information (in thousands) about our Level 3 unobservable significant inputs related to our debt security investment with Galileo at the dates included below:

December 31, 2023

Fair Value Valuation Technique Unobservable Inputs

$ 35,868 Black-Scholes-Merton model Discount rate 19.2 %

Risk-free rate 4.3 %

Equity volatility 92.0 %

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

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

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

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

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

June 30, Nine Months Ended

(in thousands) 2023 2022

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Accrued interest 433 —

2,001 — 2,001 —

Transfers out — ( 500 )

— — ( 500 ) —

Reserves ( 5 ) $ —

Assets at end of period $ 37,868 $ 33,107

(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

$ 35,001 Black-Scholes-Merton model Discount rate 22.4 %

Risk-free rate 4.0 %

Equity volatility 92.5 %

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

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

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

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

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

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

Nonrecurring Fair Value Measurements

We have certain assets that are subject to measurement at fair value on a nonrecurring basis.

For these nonfinancial assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired.

These assets generally include property, plant and equipment, goodwill, intangible assets, and operating lease right-of-use assets.

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

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

Equity Securities

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

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

All of our long-term equity securities are measured using Level 3 unobservable inputs based on the absence of market activity.

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 December 31,

(in millions) 2023 2022

Assets at beginning of period $ 28,232 $ 23,745

Purchases 291 2,055

Assets at end of period $ 28,523 $ 25,800

Contingent Consideration

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

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

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

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

Three Months Ended December 31,

(in thousands) 2023 2022

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

Nonrecurring Fair Value Measurements

We have certain assets that are subject to measurement at fair value on a nonrecurring basis.

For these nonfinancial assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired.

These assets generally include property, plant and equipment, goodwill, intangible assets, and operating lease right-of-use assets.

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

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

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

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 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).

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

Other Financial Instruments

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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 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

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

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

(in millions) December 31, 2023 September 30, 2023

Long-term debt, net

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Fair value 471.6 435.5

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

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

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

Lease Obligations

During the three months ended December 31, 2023, we amended the lease for our Tulsa industrial facility.

As a result, we extended the lease term, now continuing through June 30, 2035 with two five year renewal options.

We recognized one of the five year renewal options as part of our right-of-use assets and lease liabilities.

This contract was accounted for as an operating lease resulting in an increase of $ 18.1 million to the right-of-use assets and lease liability on our Unaudited Condensed Consolidated Balance Sheet as of December 31, 2023.

Purchase Commitments

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

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

At December 31, 2023, we had purchase commitments for equipment, parts and supplies of approximately $ 121.7 million.

Guarantee Arrangements

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

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

The accident resulted in a fatality of a passenger in the other vehicle.

The estate of the victim, his widow and children subsequently brought a lawsuit against the employee and HPIDC in Texas State District Court in January 2020.

In February 2022, trial began in the matter and the jury reached a verdict against HPIDC and our employee for approximately $ 126.0 million, including interest.

In March 2022, the court entered a judgment consistent with the findings of the jury.

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

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 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.

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

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

Significant Lease Not Yet Commenced

During the 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.

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

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

Q3FY23 FORM 10-Q | 27

NOTE 13 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

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We are a performance-driven drilling solutions and technologies company based in Tulsa, Oklahoma with operations in all major U.S.

onshore oil and gas producing basins as well as South America and the Middle East.

onshore oil and gas producing basins as well as South America, the Middle East and Australia.

Our drilling operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies.

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Our real estate operations, our incubator program for new research and development projects, and our wholly-owned captive insurance companies are included in "Other." External revenues included in “Other” primarily consist of rental income.

Q1FY24 FORM 10-Q | 25

Segment Performance

We evaluate segment performance based on income or loss from continuing operations (segment operating income (loss)) before income taxes which includes:

We evaluate segment performance based on income (segment operating income (loss)) before income taxes which includes:

• Revenues from external and internal customers

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• Asset impairment charges

but excludes gain on reimbursement of drilling equipment, other (gain) loss on sale of assets, corporate selling, general and administrative costs, corporate depreciation, and corporate restructuring charges.

but excludes gain on reimbursement of drilling equipment, other gain on sale of assets, corporate selling, general and administrative costs, and corporate depreciation.

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

Summarized financial information of our reportable segments for the three and nine months ended June 30, 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

External sales $ 641,612 $ 31,221 $ 48,692 $ 2,431 $ — $ 723,956

Intersegment — — — 17,359 ( 17,359 ) —

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

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

Three Months Ended June 30, 2022

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

Three Months Ended December 31, 2023

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

3 unchanged sentences

Segment operating income (loss) $ 144,490 $ 3,052 $ 5,423 $ ( 67 ) $ 334 $ 153,232

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

External sales $ 1,944,555 $ 101,364 $ 159,383 $ 7,513 $ — $ 2,212,815

Intersegment — — — 51,423 ( 51,423 ) —

Total sales 1,944,555 101,364 159,383 58,936 ( 51,423 ) 2,212,815

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

Nine Months Ended June 30, 2022

Three Months Ended December 31, 2022

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

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

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:

The following table reconciles segment operating income (loss) per the tables above to income before income taxes as reported on the Unaudited Condensed Consolidated Statements of Operations:

Three Months Ended

June 30, Nine Months Ended

(in thousands) 2023 2022

1 unchanged sentence

Gain on reimbursement of drilling equipment 7,494 15,724

Other gain (loss) on sale of assets ( 4,504 ) 3,075 394 2,762

Corporate selling, general and administrative costs, corporate depreciation and corporate restructuring charges ( 36,777 ) ( 35,748 ) ( 107,496 ) ( 106,497 )

Operating income (loss) from continuing operations 148,742 33,722 468,170 ( 31,506 )

Other gain on sale of assets 2,443 2,379

Corporate selling, general and administrative costs and corporate depreciation ( 39,701 ) ( 34,484 )

Operating income 123,468 144,223

Other income (expense)

1 unchanged sentence

Interest expense ( 4,372 ) ( 4,355 )

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

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

Loss on investment securities ( 4,034 ) ( 15,091 )

Other ( 543 ) 58

Total unallocated amounts 1,785 ( 14,683 )

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

Income before income taxes $ 125,253 $ 129,540

Q1FY24 FORM 10-Q | 26

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

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

(in thousands) December 31, 2023 September 30, 2023

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

June 30, Nine Months Ended

(in thousands) 2023 2022

2 unchanged sentences

Argentina 35,876 33,834

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

Colombia 7,703 16,369

Bahrain 4,497 2,269

United Arab Emirates 2,365 2,337

Australia 4,312 —

Other foreign 777 655

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.

Q1FY24 FORM 10-Q | 27

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