What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-01-29 compared with 2023-07-26 · 153 added, 323 removed, 244 unchanged (66% of the section changed)

2 unchanged sentences

This Quarterly Report on Form 10‑Q (“Form 10‑Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

All statements other than statements of historical facts included in this Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans, objectives of management for future operations, contract terms, and financing and funding are forward-looking statements.

In addition, forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “continue,” or the negative thereof or similar terminology.

All statements other than statements of historical facts included in this Form 10-Q are forward-looking statements.

Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “continue,” or the negative thereof or similar terminology.

Forward-looking statements are based upon current plans, estimates, and expectations that are subject to risks, uncertainties, and assumptions.

3 unchanged sentences

These forward-looking statements include, among others, information concerning our possible or assumed future results of operations and statements about the following such as:

• our business strategy;

• our business strategy and underlying assumptions;

• estimates of our revenues, income, earnings per share, and market share;

5 unchanged sentences

• changes in future levels of drilling activity and capital expenditures by our customers, whether as a result of global capital markets and liquidity, changes in prices of oil and natural gas or otherwise, which may cause us to idle or stack additional rigs, or increase our capital expenditures and the construction, upgrade or acquisition of rigs;

• the ongoing effect and impact of public health crises, such as the coronavirus ("COVID-19") pandemic;

• the impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic;

• changes in worldwide rig supply and demand, competition, or technology;

4 unchanged sentences

• environmental or other liabilities, risks, damages or losses, whether related to storms or hurricanes (including wreckage or debris removal), collisions, grounding, blowouts, fires, explosions, other accidents, terrorism or otherwise, for which insurance coverage and contractual indemnities may be insufficient, unenforceable or otherwise unavailable;

• impact of geopolitical developments and tensions, war and uncertainty in oil-producing countries (including the invasion of Ukraine by Russia and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy);

• impact of geopolitical developments and tensions, war and uncertainty involving or in the geographic region of oil-producing countries (including the ongoing armed conflicts between Russia and Ukraine and Israel and Hamas, and any related political or economic responses and counter-responses or otherwise by various global actors or the general effect on the global economy);

Q1FY24 FORM 10-Q | 28

• global economic conditions, such as a general slowdown in the global economy, supply chain disruptions, inflationary pressures, and instability of financial institutions, and their impact on the Company;

• global economic conditions, such as a general slowdown in the global economy, supply chain disruptions, inflationary pressures, currency fluctuations, and instability of financial institutions, and their impact on the Company;

• our financial condition and liquidity;

• tax matters, including our effective tax rates, tax positions, results of audits, changes in tax laws, treaties and regulations, tax assessments and liabilities for taxes;

• the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems;

• the occurrence of security incidents, including breaches of security, or other attack, destruction, alteration, corruption, or unauthorized access to our information technology systems or destruction, loss, alteration, corruption or misuse or unauthorized disclosure of or access to data ("Security Incident");

• potential impacts on our business resulting from climate change, greenhouse gas regulations, and the impact of climate change related changes in the frequency and severity of weather patterns;

7 unchanged sentences

(“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

As of June 30, 2023, our drilling rig fleet included a total of 262 drilling rigs.

Our reportable operating business segments consist of the North America Solutions segment with 233 rigs, the Offshore Gulf of Mexico segment with seven offshore platform rigs and the International Solutions segment with 22 rigs as of June 30, 2023.

At the close of the third quarter of fiscal year 2023, we had 170 active contracted rigs, of which 103 were under a fixed-term contract and 67 were working well-to-well, compared to 192 contracted rigs at September 30, 2022.

As of December 31, 2023, our drilling rig fleet included a total of 262 drilling rigs.

At the close of the first quarter of fiscal year 2024, we had 166 active contracted rigs, of which 95 were under a fixed-term contract and 71 were working well-to-well, compared to 164 contracted rigs at September 30, 2023.

Our long-term strategy remains focused on innovation, technology, safety, operational excellence and reliability.

1 unchanged sentence

Market Outlook

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

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

Our revenues are primarily derived from the capital expenditures of companies involved in the exploration, development and production of crude oil and natural gas.

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

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

6 unchanged sentences

hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability.

Q1FY24 FORM 10-Q | 29

There is a strong customer preference for super-spec rigs not only due to the higher rig specifications that enable more technical drilling but also due to the drilling efficiencies gained in utilizing a super-spec rig.

1 unchanged sentence

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

Q3FY23 FORM 10-Q | 32

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

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

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

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

While overall customer capital budgets for calendar year 2023 appear to be modestly higher than those experienced in calendar year 2022, continued commodity price volatility, particularly the weakness in natural gas prices, has resulted in some customers, typically smaller ones, reducing activity and/or shifting activity to more crude oil-centric basins at least temporarily.

This has led to some idle super-spec rigs being readily available in the market.

That said, we have not seen and do not expect this level of idle supply in the market to have a material impact on overall rig pricing.

We do see the potential for some of this recently idled super-spec capacity, especially as it relates to the Company's idled rigs, to be redeployed later in the calendar year 2023 or early in calendar year 2024.

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

More recently, other non-commodity price related factors, such as customer capital budgets, drilling plans, productions levels and customer consolidations, have also led some customers to release rigs as well.

The Company's rig count sits at 153 as of June 30, 2023 and while we still see further rig releases during our fourth quarter of fiscal year 2023, the magnitude will likely be much more moderate than the 26 rigs that were idled during third quarter of fiscal year 2023.

During fiscal year 2023, the Company has maintained a fiscally prudent approach to deploying capital and prioritizing economic margins over rig utilization, which we believe has been beneficial to the Company's overall financial results.

Going forward, we see the potential for the Company's active rig count to increase in the first and second fiscal quarters of 2024 as customers reset their capital budgets for 2024.

Based upon the crude oil and natural gas pricing environment and many of our customers' desire to at least maintain their current production levels, we expect the average level of capital spending by our customers in calendar year 2024 to remain flat to down by approximately 5% relative to calendar year 2023.

As such, we do not expect much change in activity levels in calendar 2024 from where they are currently;

we exited December 31, 2023 with 151 active rigs in our North America Solutions segment.

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

remains relatively strong and while some readily available idle super-spec capacity exists in the market, we do not believe it is to a level that would have a material negative impact on rig pricing.

We expect this supply-demand dynamic combined with the value proposition we provide our customers through our drilling expertise, high-quality FlexRig® fleet, and automation technology to result in our ability to maintain and possibly improve upon current contract economics.

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

For our fiscal year 2024, we believe our rig activity will increase modestly during the first half of the fiscal year as customers reset their capital budgets for 2024.

We experienced an increase of just four rigs during the first fiscal quarter of 2024 and expect another 3 to 8 incremental adds during the second fiscal quarter of 2024.

From there we believe our rig count will likely remain at a relatively stable level during the second half of the fiscal year.

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

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

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

1 unchanged sentence

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

Currently, activity levels in these business segments look to remain relatively steady at current levels for the foreseeable future.

Recent Developments

Credit Facility Extension

On February 10, 2023, lenders with $680.0 million of commitments under the 2018 Credit Facility exercised their option to extend the maturity of the 2018 Credit Facility from November 11, 2026 to November 12, 2027.

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

Investment in Tamboran

In October 2022, we 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.

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.

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

Refer to Note 14—Subsequent Events to the Unaudited Condensed Consolidated Financial Statements for additional details.

We are currently pursuing an international expansion strategy with the aim to provide growth and diversification for the Company with the understanding that such a strategy will take time and capital to execute.

During fiscal year 2024, we plan to continue to devote capital to our international expansion strategy and, in particular, to a recent preliminary notification of an award for seven super-spec rigs in the Middle East.

We had contemplated the capital spending necessary to prepare these rigs for export as part of our fiscal year 2024 capital expenditure budget.

A majority of these rigs are currently scheduled for delivery during our first half of fiscal year 2025 and thus will have no revenue impact on fiscal year 2024 results.

Currently, activity levels in the International Solutions and Offshore Gulf of Mexico business segments look to remain relatively steady at current levels for the remainder of fiscal year 2024.

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

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

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

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

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

As a consequence of these pressures, we continue to project an increase in our selling, general and administrative expenses during fiscal year 2024.

Q1FY24 FORM 10-Q | 30

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.

Recent Developments

International Revenue Contracts

Subsequent to December 31, 2023, the Company received preliminary notice, subject to finalization of contractural agreements, that it has been awarded seven super-spec FlexRig®'s for work in the Middle East.

These rigs are expected to commence operations shortly after delivery, which is currently scheduled for the first half of fiscal year 2025.

These rigs will be sourced from our idle super-spec rigs in the U.S., converted to walking configurations, and further equipped to suit contractual specifications.

Additionally, in the Middle East we have been successful in contracting one additional super-spec rig in Bahrain.

The rig to be utilized for this work is already located in the region as part of our Middle East hub and is expected to commence operations during the second half of fiscal year 2024.

Contract Backlog

As of June 30, 2023 and September 30, 2022, our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $1.1 billion and $1.2 billion, respectively.

As of December 31, 2023 and September 30, 2023, our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $1.3 billion and $1.4 billion, respectively.

These amounts do not include anticipated contract renewals or expected performance bonuses.

The decrease in backlog at June 30, 2023 from September 30, 2022 is primarily driven by a decrease in the number of fixed term drilling contracts executed.

Approximately 65.3 percent of the June 30, 2023 total backlog is reasonably expected to be fulfilled in fiscal year 2024 and thereafter.

The following table sets forth the total backlog by reportable segment as of June 30, 2023 and September 30, 2022, and the percentage of the June 30, 2023 backlog reasonably expected to be fulfilled in fiscal year 2024 and thereafter:

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

Approximately 42.8 percent of the December 31, 2023 total backlog is reasonably expected to be fulfilled in fiscal year 2025 and thereafter.

The following table sets forth the total backlog by reportable segment as of December 31, 2023 and September 30, 2023, and the percentage of the December 31, 2023 backlog reasonably expected to be fulfilled in fiscal year 2025 and thereafter:

(in billions) December 31, 2023 September 30, 2023 Percentage Reasonably

Expected to be Fulfilled in Fiscal Year 2025

7 unchanged sentences

See Item 1A—"Risk Factors— Our current backlog of drilling services and solutions revenue may decline and may not be ultimately realized as fixed‑term contracts and may, in certain instances, be terminated without an early termination payment ” within our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), regarding fixed term contract risk.

Additionally, see Item 1A—"Risk Factors— The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations" within our 2022 Annual Report on Form 10-K.

Results of Operations for the Three Months Ended June 30, 2023 and 2022

Results of Operations for the Three Months Ended December 31, 2023 and 2022

Consolidated Results of Operations

Net Income We reported income from continuing operations of $95.3 million ($0.93 per diluted share) from operating revenues of $724.0 million for the three months ended June 30, 2023 compared to income from continuing operations of $17.5 million ($0.16 per diluted share) from operating revenues of $550.2 million for the three months ended June 30, 2022.

Included in net income for the three months ended June 30, 2023 is income of $12.6 thousand (with no impact on a per diluted share basis) from discontinued operations.

Including discontinued operations, we recorded net income of $95.3 million ($0.93 per diluted share) for the three months ended June 30, 2023 compared to net income of $17.8 million ($0.16 per diluted share) for the three months ended June 30, 2022.

Operating Revenue Consolidated operating revenues were $724.0 million and $550.2 million for the three months ended June 30, 2023 and 2022, respectively.

The increase is primarily driven by an increase in average rig pricing in our North America Solutions segment and an increase in activity levels in our International Solutions segment.

Net Income We reported income of $95.2 million ($0.94 per diluted share) for the three months ended December 31, 2023 compared to income of $97.1 million ($0.91 per diluted share) for the three months ended December 31, 2022.

Operating Revenue Consolidated operating revenues were $677.1 million and $719.6 million for the three months ended December 31, 2023 and 2022, respectively.

The decrease is primarily driven by lower activity levels in our North America Solutions and Offshore Gulf of Mexico segments.

Refer to segment results below for further details.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $430.2 million and $377.3 million for the three months ended June 30, 2023 and 2022, respectively.

The increase was primarily attributable to a North America Solutions wage increase that became effective at the end of fiscal year 2022, in conjunction with the aforementioned higher activity levels in our International Solutions segment.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $49.3 million during the three months ended June 30, 2023 compared to $44.9 million during the three months ended June 30, 2022.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $404.4 million and $429.4 million for the three months ended December 31, 2023 and 2022, respectively.

The decrease was primarily attributable to the aforementioned lower activity levels.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $56.6 million during the three months ended December 31, 2023 compared to $48.5 million during the three months ended December 31, 2022.

The increase is primarily due to a $7.1 million increase in labor and labor-related expenses.

Q3FY23 FORM 10-Q | 34

Loss on Investment Securities During the three months ended June 30, 2023, we recognized an aggregate loss of $18.5 million on investment securities compared to an aggregate loss of $14.3 million during the three months ended June 30, 2022.

The aggregate loss in both periods primarily consisted of a $17.0 million loss on our equity investment in ADNOC Drilling caused by a decrease in the fair market value of the stock.

During the three months ended June 30, 2022, this loss was offset by a gain of $2.7 million on the sale of our equity investment in Schlumberger, Ltd.

Income Taxes We had income tax expense of $40.7 million for the three months ended June 30, 2023 (which includes discrete tax expense of approximately $2.4 million primarily related to an increase in our deferred state income tax rate and return to provision adjustments) compared to income tax expense of $1.7 million (which includes discrete tax expense of approximately $6.5 million primarily related to an increase in our deferred state income tax rate and return to provision adjustments) for the three months ended June 30, 2022.

Our statutory federal income tax rate for fiscal year 2023 is 21.0 percent (before incremental state and foreign taxes).

North America Solutions

Three Months Ended June 30,

(in thousands, except operating statistics) 2023 2022 % Change

Operating revenues $ 641,612 $ 486,004 32.0 %

Direct operating expenses 364,688 318,400 14.5

Depreciation and amortization 87,209 93,612 (6.8)

Research and development 7,254 6,545 10.8

Selling, general and administrative expense 12,962 10,069 28.7

Restructuring charges — 25 (100.0)

Segment operating income $ 169,499 $ 57,353 195.5

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

$ 276,924 $ 167,604 65.2

Revenue days 3

15,075 15,796 (4.6)

Average active rigs 4

166 174 (4.6)

Number of active rigs at the end of period 5

153 175 (12.6)

Number of available rigs at the end of period 233 236 (35.2)

Reimbursements of "out-of-pocket" expenses $ 82,688 $ 67,218 23.0

(1) These operating metrics and financial data, including average active rigs, are provided to allow investors to analyze the various components of segment financial results in terms of activity, utilization and other key results.

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

(2) Direct margin, which is considered a non-GAAP metric, is defined as operating revenues less direct operating expenses and is included as a supplemental disclosure because we believe it is useful in assessing and understanding our current operational performance, especially in making comparisons over time.

See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.

(3) Defined as the number of contractual days we recognized revenue for during the period.

(4) Active rigs generate revenue for the Company;

accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period.

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).

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

Operating Revenues Operating revenues were $641.6 million and $486.0 million in the three months ended June 30, 2023 and 2022, respectively.

The $155.6 million increase in operating revenue is primarily due to higher pricing levels partially offset by a 4.6 percent decrease in activity levels.

Direct Operating Expenses Direct operating expenses increased to $364.7 million during the three months ended June 30, 2023 as compared to $318.4 million during the three months ended June 30, 2022.

This increase was primarily due to an increase of $23.5 million in labor and labor related expenses driven by increased field wages beginning in late September 2022.

Additionally, materials and supplies expense increased $3.8 million, which were driven by higher pricing levels for consumable inventory issuance.

Depreciation and Amortization Depreciation and amortization expense decreased to $87.2 million during the three months ended June 30, 2023 as compared to $93.6 million during the three months ended June 30, 2022.

This decrease is reflective of the downstream effect of lower capital expenditures over the past several years.

Selling, General and Administrative Expense Selling, general and administrative expense increased to $13.0 million during the three months ended June 30, 2023 as compared to $10.1 million during the three months ended June 30, 2022.

The increase was largely driven by a $1.8 million increase in professional fees.

Q3FY23 FORM 10-Q | 35

Offshore Gulf of Mexico

Three Months Ended June 30,

(in thousands, except operating statistics) 2023 2022 % Change

Operating revenues $ 31,221 $ 32,701 (4.5) %

Direct operating expenses 23,913 23,922 —

Depreciation 1,873 2,328 (19.5)

Selling, general and administrative expense 730 579 26.1

Segment operating income $ 4,705 $ 5,872 (19.9)

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

$ 7,308 $ 8,779 (16.8)

Revenue days 3

Average active rigs 4

Number of active rigs at the end of period 5

Number of available rigs at the end of period 7 7 —

Reimbursements of "out-of-pocket" expenses $ 7,823 $ 7,219 8.4

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.

(3) Defined as the number of contractual days we recognized revenue for during the period.

(4) Active rigs generate revenue for the Company;

accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period.

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).

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

Operating Revenues Operating revenues were $31.2 million and $32.7 million in the three months ended June 30, 2023 and 2022, respectively.

The 4.5 percent decrease in operating revenue is primarily driven by a rig moving from an operating dayrate to a lower demobilization rate.

International Solutions

Three Months Ended June 30,

(in thousands, except operating statistics) 2023 2022 % Change

Operating revenues $ 48,692 $ 29,118 67.2 %

Direct operating expenses 45,390 32,364 40.2

Depreciation 2,171 1,175 84.8

Selling, general and administrative expense 2,528 2,129 18.7

Segment operating loss $ (1,397) $ (6,550) 78.7

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

$ 3,302 $ (3,246) 201.7

Revenue days 3

1,215 718 69.2

Average active rigs 4

Number of active rigs at the end of period 5

Number of available rigs at the end of period 22 28 (21.4)

Reimbursements of "out-of-pocket" expenses $ 2,098 $ 699 200.1

Management uses these metrics to analyze historical segment financial results and as the key inputs for forecasting and budgeting segment financial results.

See — Non-GAAP Measurements below for a reconciliation of segment operating income (loss) to direct margin.

(3) Defined as the number of contractual days we recognized revenue for during the period.

(4) Active rigs generate revenue for the Company;

accordingly, 'average active rigs' represents the average number of rigs generating revenue during the applicable time period.

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 91 days).

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

Q3FY23 FORM 10-Q | 36

Operating Revenues Operating revenues increased to $48.7 million during the three months ended June 30, 2023 compared to $29.1 million during the three months ended June 30, 2022.

This increase is primarily driven by a 69.2 percent increase in activity levels.

Direct Operating Expenses Direct operating expenses increased to $45.4 million during the three months ended June 30, 2023 as compared to $32.4 million during the three months ended June 30, 2022.

This increase was primarily driven by an increase of $7.4 million in labor and labor-related expenses and an increase of $1.7 million in materials and supplies given higher activity levels.

Other Operations

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

Three Months Ended June 30,

(in thousands) 2023 2022 % Change

Operating revenues $ 19,790 $ 17,135 15.5 %

Direct operating expenses 16,790 14,690 14.3

Depreciation 515 480 7.3

Selling, general and administrative expense 381 — —

Operating income $ 2,104 $ 1,965 7.1

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

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, which were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses consisted primarily of $5.5 million and $3.1 million in adjustments to accruals for estimated losses allocated to the Captives 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.

The change to accruals for estimated losses is primarily due to actuarial valuation adjustments by our third-party actuary.

Results of Operations for the Nine Months Ended June 30, 2023 and 2022

Consolidated Results of Operations

Net Income (Loss) We reported income from continuing operations of $355.6 million ($3.38 per diluted share) from operating revenues of $2.2 billion for the nine months ended June 30, 2023 compared to a loss from continuing operations of $38.5 million ($0.37 loss per diluted share) from operating revenues of $1.4 billion for the nine months ended June 30, 2022.

Included in net income for the nine months ended June 30, 2023 is income of $0.9 million ($0.01 per diluted share) from discontinued operations.

Including discontinued operations, we recorded net income of $356.5 million ($3.39 per diluted share) for the nine months ended June 30, 2023 compared to a net loss of $38.6 million ($0.37 loss per diluted share) for the nine months ended June 30, 2022.

Operating Revenue Consolidated operating revenues were $2.2 billion for the nine months ended June 30, 2023 and $1.4 billion for the nine months ended June 30, 2022.

The increase is primarily driven by an increase in average rig pricing and activity levels in our North America Solutions segment and increased activity levels in our International Solutions segment.

Refer to segment results below for further details.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses for the nine months ended June 30, 2023 were $1.3 billion, compared to $1.0 billion for the nine months ended June 30, 2022.

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

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $150.6 million during the nine months ended June 30, 2023 compared to $135.7 million during the nine months ended June 30, 2022.

The increase is primarily due to a $5.1 million increase in professional fees and a $7.4 million increase in labor and labor-related expenses.

Q3FY23 FORM 10-Q | 37

Asset Impairment Charges During the nine months ended June 30, 2023, we recorded $12.1 million in asset impairment charges as the Company initiated a plan to decommission, scrap and/or sell certain assets including four international FlexRig ® drilling rigs, four international conventional drilling rigs, and additional equipment.

Asset Impairment Charges During the three months ended December 31, 2022, we recorded $12.1 million in asset impairment charges as the Company initiated a plan to decommission, scrap and/or sell certain assets including four international FlexRig® drilling rigs, four international conventional drilling rigs, and additional equipment.

The aggregate net book value of these assets of $13.2 million was written down to their estimated scrap value of $1.1 million.

During the nine months ended June 30, 2022, we identified various assets that met the asset held-for-sale criteria and were reclassified as assets held-for-sale within our North America Solutions and International Solutions segment, which resulted in a non-cash impairment charge of $4.4 million for the nine months ended June 30, 2022.

Gain on Investment Securities During the nine months ended June 30, 2023, we recognized an aggregate gain of $6.1 million on investment securities.

This gain is mainly comprised of a $7.4 million gain on our equity investment in ADNOC Drilling, partially offset against a $1.5 million loss on our investment in Tamboran, both of which were a result of fluctuations in the fair market value of the stocks.

During the nine months ended June 30, 2022, we recognized an aggregate gain of $55.7 million.

This gain was primarily driven by a $47.8 million gain on our equity investment in ADNOC Drilling caused by an increase in the fair market value of the stock and a gain of $8.2 million on the sale of our equity investment in Schlumberger, Ltd.

Income Taxes We had income tax expense of $124.2 million for the nine months ended June 30, 2023 (which includes discrete tax expense of $2.3 million primarily related to an increase in our deferred state income tax rate, return to provision adjustments and equity compensation) compared to an income tax benefit of $3.2 million (which included discrete tax expense of $10.0 million primarily related to an increase in our deferred state income tax rate and equity compensation) for the nine months ended June 30, 2022.

Q1FY24 FORM 10-Q | 31

Loss on Investment Securities During the three months ended December 31, 2023, we recognized an aggregate loss of $4.0 million on investment securities.

The loss was mainly comprised of a $10.4 million loss on our equity investment in ADNOC Drilling, partially offset against a $6.3 million gain on our investment in Tamboran Corp.;

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

During the three months ended December 31, 2022, we recognized an aggregate loss of $15.1 million on investment securities.

The loss was mainly comprised of a $18.2 million loss on our equity investment in ADNOC Drilling, partially offset against a $3.1 million gain on our investment in Tamboran Corp.;

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

Income Taxes We had income tax expense of $30.1 million for the three months ended December 31, 2023 (which includes a discrete tax benefit of $0.9 million related to equity compensation) compared to income tax expense of $32.4 million (which includes a discrete tax expense of $0.2 million related to equity compensation) for the three months ended December 31, 2022.

Our statutory federal income tax rate for fiscal year 2024 is 21.0 percent (before incremental state and foreign taxes).

North America Solutions

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands, except operating statistics) 2023 2022 % Change

5 unchanged sentences

Asset impairment charges — 3,948 (100.0)

Restructuring charges — 498 (100.0)

Segment operating income $ 144,490 $ 145,297 (0.6)

5 unchanged sentences

Average active rigs 4

149 180 (17.3)

Number of active rigs at the end of period 5

11 unchanged sentences

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

Operating Revenues Operating revenues were $1.9 billion and $1.2 billion in the nine months ended June 30, 2023 and 2022, respectively.

The $0.7 billion increase in operating revenue is primarily due to higher pricing levels and a 10.7 percent increase in activity levels.

Direct Operating Expenses Direct operating expenses increased to $1.1 billion during the nine months ended June 30, 2023 as compared to $0.9 billion during the nine months ended June 30, 2022.

This increase was primarily driven by a $127.7 million increase in labor and labor-related expenses driven by higher activity levels and increased field wages beginning in late September 2022.

Additionally, materials and supplies expense increased by $24.4 million, which was also primarily driven by higher activity levels.

Q3FY23 FORM 10-Q | 38

Depreciation and Amortization Depreciation and amortization expense decreased to $266.1 million during the nine months ended June 30, 2023 as compared to $283.1 million during the nine months ended June 30, 2022.

This decrease is reflective of the downstream effect of lower capital expenditures over the last several years.

Selling, General and Administrative Expense Selling, general and administrative expense increased to $43.4 million during the nine months ended June 30, 2023 as compared to $31.8 million during the nine months ended June 30, 2022.

The increase was largely driven by a $8.1 million increase in professional fees.

Asset Impairment Charges 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.

Operating Revenues Operating revenues were $594.3 million and $627.2 million in the three months ended December 31, 2023 and 2022, respectively.

The $32.9 million decrease in operating revenue is primarily due to a 17.3 percent decrease in activity levels partially offset by higher average pricing levels.

Direct Operating Expenses Direct operating expenses decreased to $338.2 million during the three months ended December 31, 2023 as compared to $366.9 million during the three months ended December 31, 2022.

This decrease was primarily driven by lower activity levels, partially offset by an increase in per revenue day labor and materials and supplies expense.

Selling, General and Administrative Expense Selling, general and administrative expense increased to $15.9 million during the three months ended December 31, 2023 as compared to $14.2 million during the three months ended December 31, 2022.

The slight increase was driven by a $1.9 million increase in in labor expenses.

Asset Impairment Charges During the three months ended December 31, 2022, assets that were previously classified as Assets held-for-sale 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 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.

During the nine months ended June 30, 2022, we identified two partial rig substructures that met the assets held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets.

This resulted in a non-cash impairment charge of $1.9 million as the book values of these rig substructures were written down to their estimated scrap value of $0.1 million.

Q1FY24 FORM 10-Q | 32

Offshore Gulf of Mexico

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands, except operating statistics) 2023 2022 % Change

22 unchanged sentences

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

Operating Revenues Operating revenues were $101.4 million and $91.2 million during the nine months ended June 30, 2023 and 2022, respectively.

The 11.2 percent increase in operating revenue is primarily driven by pricing increases and wage increase pass-throughs which occurred in the latter portion of fiscal year 2022.

Direct Operating Expenses Direct operating expenses increased to $75.3 million during the nine months ended June 30, 2023 as compared to $65.5 million during the nine months ended June 30, 2022.

The increase was primarily driven by the mix of rigs working at full utilization as opposed to mobilizing or being on standby, in addition to the factors described above.

Operating Revenues Operating revenues were $25.5 million and $35.2 million in the three months ended December 31, 2023 and 2022, respectively.

The $9.7 million decrease in operating revenue is primarily due to a 21.5 percent decrease in activity levels and the mix of rigs being on lower standby rates as opposed to working at full rates during the three months ended December 31, 2023.

Direct Operating Expenses Direct operating expenses decreased to $19.6 million during the three months ended December 31, 2023 as compared to $25.7 million during the three months ended December 31, 2022.

This decrease is primarily driven by a decrease in activity levels as described above.

Q1FY24 FORM 10-Q | 33

International Solutions

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands, except operating statistics) 2023 2022 % Change

23 unchanged sentences

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

Operating Revenues Operating revenues increased to $159.4 million during the nine months ended June 30, 2023 compared to $93.7 million during the nine months ended June 30, 2022.

This increase is primarily driven by a 80.0 percent increase in activity levels.

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

Refer to Note 8 - Revenue from Contracts with Customers for additional details.

Direct Operating Expenses Direct operating expenses increased to $133.6 million during the nine months ended June 30, 2023 as compared to $81.7 million during the nine months ended June 30, 2022.

This increase was primarily driven by an increase of $25.2 million in labor and labor-related expense and an increase of $16.8 million in materials and supplies given higher activity levels.

Asset Impairment Charges 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.

During the nine months ended June 30, 2022, we identified two international FlexRig ® drilling rigs that met the assets held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets.

This resulted in an impairment charge of $2.5 million as the book values of these international drilling rigs were written down to their fair value less estimated cost to sell of $0.9 million.

Q3FY23 FORM 10-Q | 40

Operating Revenues Operating revenues were $54.8 million during both the three months ended December 31, 2023 and 2022.

Revenue remained flat due to increased activity, offset by the mix of rigs working.

Direct Operating Expenses Direct operating expenses increased to $44.5 million during the three months ended December 31, 2023 as compared to $41.0 million during the three months ended December 31, 2022.

This increase was primarily driven by a 2.9 percent increase in activity levels as well as higher per revenue day labor and labor-related expenses.

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

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

The rigs’ aggregate net book value of $8.8 million was written down to the estimated scrap value of $0.7 million, which resulted in a non-cash impairment charge of $8.1 million during the three months ended December 31, 2022.

Other Operations

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

Nine Months Ended June 30,

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

Three Months Ended December 31,

(in thousands) 2023 2022 % Change

3 unchanged sentences

Selling, general and administrative expense 314 188 67.0

Operating income $ 13,604 $ 9,061 50.1

Operating income (loss) $ (67) $ 4,677 (101.4)

Q1FY24 FORM 10-Q | 34

Intercompany premium revenues recorded by the Captives during the nine months ended June 30, 2023 and 2022 amounted to $51.4 million and $41.6 million, respectively, which were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses consisted primarily of $10.2 million and $2.7 million in adjustments to accruals for estimated losses allocated to the Captives and rig and casualty insurance premiums of $30.6 million and $26.2 million during the nine months ended June 30, 2023 and 2022, respectively.

Operating revenues of $17.8 million and $18.9 million during the three months ended December 31, 2023 and 2022, respectively, primarily consisted of $15.2 million and $16.4 million, respectively, in intercompany premium revenues recorded by the Captives.

These revenues were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses of $17.1 million and $13.6 million during the three months ended December 31, 2023 and 2022, respectively, primarily consisted of $3.5 million and $2.9 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $9.1 million and $10.0 million, respectively, and medical stop loss expenses of $4.1 million and $2.8 million, respectively.

The change to accruals for estimated losses is primarily due to actuarial valuation adjustments by our third-party actuary.

10 unchanged sentences

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

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

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

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

3 unchanged sentences

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

Q3FY23 FORM 10-Q | 41

As of June 30, 2023, we had cash and cash equivalents of $220.6 million and short-term investments of $72.6 million.

Our cash flows for the nine months ended June 30, 2023, and 2022 are presented below:

Nine Months Ended June 30,

As of December 31, 2023, we had cash and cash equivalents of $214.1 million, restricted cash of $65.1 million and short-term investments of $84.1 million.

Our cash flows for the three months ended December 31, 2023, and 2022 are presented below:

Three Months Ended December 31,

(in thousands) 2023 2022

4 unchanged sentences

Net increase (decrease) in cash and cash equivalents and restricted cash $ (36,997) $ 2,649

Q1FY24 FORM 10-Q | 35

Operating Activities

Our operating net working capital (non-GAAP) as of June 30, 2023 and September 30, 2022 is presented below:

June 30, September 30,

Our operating net working capital (non-GAAP) as of December 31, 2023 and September 30, 2023 is presented below:

December 31, September 30,

(in thousands) 2023 2023

3 unchanged sentences

Assets held-for-sale — 645

Prepayments - nonrecurring 23,483 21,821

666,972 633,385

1 unchanged sentence

Dividends payable 41,993 25,194

Advance payment for sale of property, plant and equipment — 600

$ 426,993 $ 393,737

Operating net working capital (non-GAAP) $ 239,979 $ 239,648

Cash flows provided by operating activities were approximately $619.0 million and $116.6 million for the nine months ended June 30, 2023 and 2022, respectively.

The change in cash provided by operating activities is primarily driven by higher activity and rates, partially offset by changes in operating net working capital.

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

Operating net working capital was $314.0 million and $281.9 million as of June 30, 2023 and September 30, 2022, respectively.

Cash flows provided by operating activities were approximately $174.8 million and $185.4 million for the three months ended December 31, 2023 and 2022, respectively.

The change in cash provided by operating activities is primarily driven by lower activity levels partially offset by higher average pricing levels.

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

Operating net working capital was $240.0 million and $239.6 million as of December 31, 2023 and September 30, 2023, respectively.

This metric is considered a non-GAAP measure of the Company's liquidity.

2 unchanged sentences

Investing Activities

Capital Expenditures Our capital expenditures during the nine months ended June 30, 2023 were $281.8 million compared to $175.0 million during the nine months ended June 30, 2022.

The increase in capital expenditures is driven by higher activity and increased costs associated with rig upgrades.

Net Sales of Short-Term Investments Our net sales of short-term investments during the nine months ended June 30, 2023 were $46.5 million compared to $52.4 million during the nine months ended June 30, 2022.

The activity in both periods is driven by our ongoing liquidity management.

Net Purchases of Long-Term Investments Our net purchases of long-term investments during the nine months ended June 30, 2023 were $18.8 million compared to $25.2 million during the nine months ended June 30, 2022.

During the nine months ended June 30, 2023, our activity was primarily driven by our purchase of $14.1 million equity investment in Tamboran Resources Limited and $4.1 million in debt and equity security investments in various geothermal energy companies.

The activity during the nine months ended June 30, 2022 was driven by our purchase of a $33.0 million cornerstone investment, through a convertible note, in Galileo Holdco 2, in addition to purchases of geothermal investments of $14.2 million, offset by the $22.0 million of proceeds received from the liquidation of our remaining equity securities in Schlumberger, Ltd.

Q3FY23 FORM 10-Q | 42

Sale of Assets Our proceeds from asset sales during the nine months ended June 30, 2023 were $63.0 million compared to proceeds of $50.3 million during the nine months ended June 30, 2022.

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

Capital Expenditures Our capital expenditures during the three months ended December 31, 2023 were $136.4 million compared to $96.0 million during the three months ended December 31, 2022.

The increase in capital expenditures is driven by the timing of procurement associated with equipment overhauls and certain long-term projects.

Net Purchases & Sales of Short-Term Investments Our net sales of short-term investments during the three months ended December 31, 2023 were $11.7 million compared to net purchases of $0.9 million during the three months ended December 31, 2022.

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

Purchases of Long-Term Investments Our purchases of long-term investments during the three months ended December 31, 2023 were $0.3 million compared to $16.2 million during the three months ended December 31, 2022.

During the three months ended December 31, 2023, our activity was driven by $0.3 million in purchases of various equity securities.

The activity during the three months ended December 31, 2022 was driven by our $14.1 million equity investment in Tamboran Corp.

Sale of Assets Our proceeds from asset sales during the three months ended December 31, 2023 were $11.9 million compared to proceeds of $31.0 million during the three months ended December 31, 2022.

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

Financing Activities

Dividends We paid dividends of $1.46 per share, comprised of a base cash dividend of $0.75 and a supplemental cash dividend of $0.71, during the nine months ended June 30, 2023.

Comparatively, during the nine months ended June 30, 2022, we paid dividends of $0.75 per share.

Total dividends paid were $152.6 million and $80.7 million during the nine months ended June 30, 2023 and 2022, respectively.

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.

The declaration and amount of future dividends is at the discretion of the Board and subject to our financial condition, results of operations, cash flows, and other factors the Board deems relevant.

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

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

The Company financed the redemption of the 2025 Notes with the net proceeds from the offering of the 2031 Notes, together with cash on hand.

Additional details are fully discussed in Note 5—Debt.

Dividends We paid dividends of $0.42 per share, comprised of a base cash dividend of $0.25 and a supplemental cash dividend of $0.17, during the three months ended December 31, 2023.

Comparatively, during the three months ended December 31, 2022, we paid dividends of $0.485 per share, comprising of a base cash dividend of $0.25 and a supplemental cash dividend of $0.235.

Total dividends paid were $42.3 million and $51.8 million during the three months ended December 31, 2023 and 2022, respectively.

Q1FY24 FORM 10-Q | 36

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

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

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

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

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

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

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.

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.

2.90% Senior Notes due 2031 On September 29, 2021, we issued $550.0 million aggregate principal amount of the 2.90 percent 2031 Notes in an offering to persons reasonably believed to be qualified institutional buyers in the United States pursuant to Rule 144A under the Securities Act (“Rule 144A”) and to certain non-U.S.

persons in transactions outside the United States pursuant to Regulation S under the Securities Act (“Regulation S”).

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

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.

All of the 2031 Notes were exchanged in the Registered Exchange Offer.

The indenture governing the 2031 Notes contains certain covenants that, among other things and subject to certain exceptions, limit the ability of the Company and its subsidiaries to incur certain liens;

engage in sale and lease-back transactions;

and consolidate, merge or transfer all or substantially all of the assets of the Company.

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

Credit Facility

7 unchanged sentences

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

As of June 30, 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.

Q1FY24 FORM 10-Q | 37

persons in transactions outside the United States pursuant to Regulation S under the Securities Act (“Regulation S”).

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

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

All of the 2031 Notes were exchanged in the Registered Exchange Offer.

engage in sale and lease-back transactions;

and consolidate, merge or transfer all or substantially all of the assets of the Company.

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

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

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

On September 27, 2021, the Company delivered a conditional notice of optional full redemption for all of the outstanding 2025 Notes at a redemption price calculated in accordance with the indenture governing the 2025 Notes, plus accrued and unpaid interest on the 2025 Notes to be redeemed.

The Company financed the redemption of the 2025 Notes with the net proceeds from the offering of the 2031 Notes, together with cash on hand.

The Company’s obligation to redeem the 2025 Notes was conditioned upon the prior consummation of the issuance of the 2031 Notes, which was satisfied on September 29, 2021.

On October 27, 2021, we redeemed all of the outstanding 2025 Notes.

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

Future Cash Requirements

Our operating cash requirements, scheduled debt repayments, interest payments, any declared dividends, and estimated capital expenditures for fiscal year 2023 and 2024 are expected to be funded through current cash and cash to be provided from operating activities.

Our operating cash requirements, scheduled debt repayments, interest payments, any declared dividends, and estimated capital expenditures for fiscal year 2024 are expected to be funded through current cash and cash to be provided from operating activities.

However, there can be no assurance that we will continue to generate cash flows at current levels.

1 unchanged sentence

We currently do not anticipate the need to draw on the 2018 Credit Facility.

Our indebtedness under our unsecured senior notes totaled $550.0 million at June 30, 2023 and matures on September 29, 2031.

As of June 30, 2023, we had a $541.4 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

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

Our indebtedness under our unsecured senior notes totaled $550.0 million at December 31, 2023 and matures on September 29, 2031.

As of December 31, 2023, we had a $510.0 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

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

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

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

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.

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.

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

The long‑term debt to total capitalization ratio was 16.9 percent at June 30, 2023 and 16.6 percent at September 30, 2022.

A base cash dividend of $0.25 per share and a quarterly supplemental cash dividend of $0.17 per share were declared in December 2023 and 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.

The long‑term debt to total capitalization ratio was 16.6 percent at December 31, 2023 and September 30, 2023.

For additional information regarding debt agreements, refer to Note 5—Debt to the Unaudited Condensed Consolidated Financial Statements.

There were no other significant changes in our financial position since September 30, 2023.

Q3FY23 FORM 10-Q | 44

Material Commitments

Material commitments as reported in our 2022 Annual Report on Form 10-K have not changed significantly as of June 30, 2023, other than those disclosed in Note 12—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

Material commitments as reported in our 2023 Annual Report on Form 10-K have not changed significantly as of December 31, 2023, other than those disclosed in Note 12—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

2 unchanged sentences

Recently Issued Accounting Standards

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

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

Non-GAAP Measurements

4 unchanged sentences

Direct margin is not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.

The following table reconciles direct margin to segment operating income (loss), which we believe is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to direct margin.

Three Months Ended June 30, 2023

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

Segment operating income (loss) $ 169,499 $ 4,705 $ (1,397)

Depreciation and amortization 87,209 1,873 2,171

Research and development 7,254 — —

Selling, general and administrative expense 12,962 730 2,528

Direct margin (Non-GAAP) $ 276,924 $ 7,308 $ 3,302

Three Months Ended June 30, 2022

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

Segment operating income (loss) $ 57,353 $ 5,872 $ (6,550)

Depreciation and amortization 93,612 2,328 1,175

Research and development 6,545 — —

Selling, general and administrative expense 10,069 579 2,129

Restructuring charges 25 — —

Direct margin (Non-GAAP) $ 167,604 $ 8,779 $ (3,246)

Q1FY24 FORM 10-Q | 38

Nine Months Ended June 30, 2023

The following table reconciles direct margin to segment operating income, which we believe is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to direct margin.

Three Months Ended December 31, 2023

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

3 unchanged sentences

Selling, general and administrative expense 15,876 832 2,476

Asset impairment charges 3,948 — 8,149

Direct margin (Non-GAAP) $ 256,074 $ 5,952 $ 10,233

Nine Months Ended June 30, 2022

Three Months Ended December 31, 2022

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

4 unchanged sentences

Asset impairment charges 3,948 — 8,149

Restructuring charges 498 — —

Direct margin (Non-GAAP) $ 260,308 $ 9,473 $ 13,824

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 2. Management’s Discussion and Analysis