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Item 1. Financial Statements

2024-07-25 compared with 2024-04-24 · 239 added, 153 removed, 695 unchanged (36% of the section changed)

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, September 30,

June 30, September 30,

(in thousands except share data) 2024 2023

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Shareholders' Equity:

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of March 31, 2024 and September 30, 2023, and 98,752,018 and 99,426,526 shares outstanding as of March 31, 2024 and September 30, 2023, respectively

Common stock, $ 0.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of June 30, 2024 and September 30, 2023, and 98,755,412 and 99,426,526 shares outstanding as of June 30, 2024 and September 30, 2023, respectively

11,222 11,222

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Accumulated other comprehensive loss ( 8,499 ) ( 7,981 )

Treasury stock, at cost, 13,470,847 shares and 12,796,339 shares as of March 31, 2024 and September 30, 2023, respectively

Treasury stock, at cost, 13,467,453 shares and 12,796,339 shares as of June 30, 2024 and September 30, 2023, respectively

( 489,393 ) ( 464,382 )

6 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2024 2023 2024 2023

14 unchanged sentences

OPERATING INCOME

111,313 148,742 345,353 468,170

Other income (expense)

18 unchanged sentences

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands) 2024 2023 2024 2023

Net income $ 88,685 $ 95,293 $ 268,689 $ 356,478

Other comprehensive income, net of income taxes:

Net change related to employee benefit plans, net of income taxes of $( 39.5 ) thousand and $( 79.0 ) thousand for the three and six months ended March 31, 2024, respectively, and $( 75.0 ) thousand and $( 150.1 ) thousand for the three and six months ended March 31, 2023, respectively

Other comprehensive income (loss), net of income taxes:

Net change related to employee benefit plans, net of income taxes of $( 39.5 ) thousand and $( 118.5 ) thousand for the three and nine months ended June 30, 2024, respectively, and $( 59.6 ) thousand and $( 209.8 ) thousand for the three and nine months ended June 30, 2023, respectively

134 255 402 767

Other comprehensive income 134 256 268 512

Unrealized loss on available-for-sale debt security, net of income taxes of $ 270.9 thousand for the three and nine months ended June 30, 2024, respectively

( 920 ) — ( 920 ) —

Other comprehensive income (loss)

( 786 ) 255 ( 518 ) 767

Comprehensive income $ 87,899 $ 95,548 $ 268,171 $ 357,245

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Three and Six Months Ended March 31, 2024

Three and Nine Months Ended June 30, 2024

Common Stock Additional

25 unchanged sentences

Balance at March 31, 2024 112,222 $ 11,222 $ 502,586 $ 2,786,495 $ ( 7,713 ) 13,471 $ ( 489,516 ) $ 2,803,074

Comprehensive income:

Net income — — — 88,685 — — — 88,685

Other comprehensive loss

— — — — ( 786 ) — — ( 786 )

Dividends declared ($ 0.25 base per share.

$ 0.17 supplemental per share)

— — — ( 42,044 ) — — — ( 42,044 )

Vesting of restricted stock awards, net of shares withheld for employee taxes — — ( 123 ) — — ( 4 ) 123 —

Stock-based compensation — — 7,676 — — — — 7,676

Other — — 240 — — — — 240

Balance at June 30, 2024

112,222 $ 11,222 $ 510,379 $ 2,833,136 $ ( 8,499 ) 13,467 $ ( 489,393 ) $ 2,856,845

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

Q3 FY24 FORM 10-Q | 6

Three and Six Months Ended March 31, 2023

Three and Nine Months Ended June 30, 2023

Common Stock Additional

25 unchanged sentences

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

Comprehensive income:

Net income — — — 95,293 — — — 95,293

Other comprehensive income — — — — 255 — — 255

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

— — — ( 48,106 ) — — — ( 48,106 )

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

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

Other — — ( 126 ) — — — — ( 126 )

Balance at June 30, 2023

112,222 $ 11,222 $ 517,259 $ 2,655,287 $ ( 11,305 ) 12,796 $ ( 464,382 ) $ 2,708,081

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

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended March 31,

Nine Months Ended June 30,

(in thousands) 2024 2023

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Stock-based compensation 23,777 23,884

(Gain) loss on investment securities 287 ( 24,661 )

Gain on investment securities

( 102 ) ( 6,123 )

Gain on reimbursement of drilling equipment ( 24,687 ) ( 37,940 )

Other gain on sale of assets ( 12 ) ( 4,898 )

Other (gain) loss on sale of assets

2,718 ( 394 )

Deferred income tax expense (benefit) ( 23,634 ) 4,197

21 unchanged sentences

Payments for employee taxes on net settlement of equity awards ( 12,176 ) ( 14,410 )

Payment of contingent consideration from acquisition of business ( 6,250 ) ( 250 )

Share repurchases ( 51,302 ) ( 247,213 )

1 unchanged sentence

Net cash used in financing activities ( 196,145 ) ( 414,992 )

Net decrease in cash and cash equivalents and restricted cash

Net increase (decrease) in cash and cash equivalents and restricted cash

( 34,236 ) 12,964

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Our drilling services operations are organized into the following reportable operating business segments:

North America Solutions, Offshore Gulf of Mexico and International Solutions.

North America Solutions, International Solutions and Offshore Gulf of Mexico.

Our real estate operations, our incubator program for new research and development projects and our wholly-owned captive insurance companies are included in "Other." Refer to Note 12—Business Segments and Geographic Information for further details on our reportable segments.

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Such states include:

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

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

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

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

Our International Solutions operations have rigs and/or services primarily located in five international locations:

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

Additionally, we are preparing to commence operations in Saudi Arabia.

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

federal waters in the Gulf of Mexico.

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

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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 and six months ended March 31, 2023.

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 and six months ended March 31, 2023.

Income from discontinued operations was presented as a separate line item on our Unaudited Condensed Consolidated Statements of Operations during the three and nine months ended June 30, 2023.

Principles of 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 recorded restricted cash of $ 68.5 million and $ 53.2 million at March 31, 2024 and 2023, respectively, and $ 59.1 million and $ 36.9 million at September 30, 2023 and 2022, respectively.

All restricted cash at March 31, 2024 represents an amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies.

We recorded restricted cash of $ 78.4 million and $ 61.4 million at June 30, 2024 and 2023, respectively, and $ 59.1 million and $ 36.9 million at September 30, 2023 and 2022, respectively.

All restricted cash at June 30, 2024 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.

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

March 31, September 30,

June 30, September 30,

(in thousands) 2024 2023 2023 2022

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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.

Depository interests, referred to as CHESS Depository Interests, each representing beneficial interests of 1/200th of a share of Tamboran Corp.

common stock, are listed on the Australian Stock Exchange under the ticker symbol "TBN." Tamboran Corp.

is focused on developing a natural gas resource in Australia's Beetaloo Sub-basin.

On June 4, 2024, the Company entered into a convertible note agreement with Tamboran Corp.

This note was 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 agreement provided that the notes converted into shares of common stock of Tamboran Corp.

under certain circumstances in connection with an initial public offering in which its stock was listed on the New York Stock Exchange ("NYSE") or NASDAQ Stock Exchange.

On June 26, 2024, Tamboran Corp.

completed an initial public offering of its common stock on the NYSE and its common stock is listed on the NYSE, under the ticker "TBN".

As a result of this offering, the convertible note of $ 9.4 million was converted into 0.5 million common shares in Tamboran Corp.

Additionally and separately, one of our executive officers serves as a director of Tamboran Corp.

Refer to Note 10—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 March 31, 2024, we recorded $ 2.7 million in receivables, $ 8.1 million in other assets and $ 5.1 million in contract liabilities on our Unaudited Condensed Consolidated Balance Sheets.

Concurrent with the October 2022 investment agreement, we entered into a fixed-term drilling services agreement with Tamboran Resources.

As of June 30, 2024, we recorded $ 1.5 million in receivables and $ 4.5 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 $ 2.7 million and $ 7.0 million in revenue on our Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2024, respectively, related to the drilling services agreement with Tamboran Resources, which commenced drilling services during the fourth fiscal quarter of 2023.

We expect to earn $ 33.7 million in revenue over the remaining contract term, and, as such, this amount is included within our contract backlog as of March 31, 2024.

We recorded $ 2.9 million and $ 9.9 million in revenue on our Unaudited Condensed Consolidated Statement of Operations during the three and nine months ended June 30, 2024, respectively, related to the drilling services agreement with Tamboran Resources, which commenced drilling services during the fourth fiscal quarter of 2023.

We expect to earn $ 32.8 million in revenue over the remaining contract term, and, as such, this amount is included within our contract backlog as of June 30, 2024.

Q3 FY24 FORM 10-Q | 10

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Statements or Other Significant Matters

Standards that are not yet adopted as of March 31, 2024

Standards that are not yet adopted as of June 30, 2024

2023-07, Segment Reporting (Topic 280):

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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.

October 1, 2024 We plan to adopt this ASU, as required, during fiscal year 2025, with the first disclosure enhancements reflected in our FY 2025 Form 10-K.

We are currently evaluating the impact this ASU will have on our disclosures.

2023-09, Income Taxes (Topic 740):

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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.

October 1, 2025 We plan to adopt this ASU, as required, during fiscal year 2026, with the first disclosure enhancements reflected in our FY 2026 Form 10-K.

We are currently evaluating the impact this ASU will have on our disclosures.

Self-Insurance

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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 of $ 1.6 million and $ 1.7 million to accruals for estimated losses for the three months ended March 31, 2024 and 2023, respectively, and $ 5.1 million and $ 4.7 million for the six months ended March 31, 2024 and 2023, respectively, and rig and casualty insurance premiums of $ 9.9 million and $ 10.9 million during the three months ended March 31, 2024 and 2023, respectively, and $ 19.0 million and $ 20.9 million for the six months ended March 31, 2024 and 2023, respectively.

Direct operating costs primarily consisted of adjustments of $ 5.3 million and $ 5.5 million to accruals for estimated losses for the three months ended June 30, 2024 and 2023, respectively, and $ 10.4 million and $ 10.2 million for the nine months ended June 30, 2024 and 2023, respectively, and rig and casualty insurance premiums of $ 9.5 million and $ 9.7 million during the three months ended June 30, 2024 and 2023, respectively, and $ 28.5 million and $ 30.6 million for the nine months ended June 30, 2024 and 2023, 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 March 31, 2024 and 2023 amounted to $ 15.8 million and $ 17.7 million, respectively, and $ 31.0 million and $ 34.1 million during the six months ended March 31, 2024 and 2023, respectively, which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, International Solutions, and Offshore Gulf of Mexico reportable operating segments and are reflected as intersegment sales within "Other." Our medical stop loss operating expenses for the three months ended March 31, 2024 and 2023 were $ 3.2 million and $ 2.5 million, respectively, and $ 7.3 million and $ 5.3 million for the six months ended March 31, 2024 and 2023, respectively.

Intercompany premium revenues recorded by the Captives during the three months ended June 30, 2024 and 2023 amounted to $ 14.7 million and $ 17.4 million, respectively, and $ 45.7 million and $ 51.4 million during the nine months ended June 30, 2024 and 2023, respectively, which were eliminated upon consolidation.

These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, International Solutions, and Offshore Gulf of Mexico reportable operating segments and are reflected as intersegment sales within "Other." Our medical stop loss operating expenses for the three months ended June 30, 2024 and 2023 were $ 4.1 million and $ 2.1 million, respectively, and $ 11.4 million and $ 7.4 million for the nine months ended June 30, 2024 and 2023, respectively.

Q3 FY24 FORM 10-Q | 11

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

We recorded aggregate foreign currency losses of $ 0.6 million and $ 2.4 million for the three and six months ended March 31, 2024, respectively, and $ 0.1 million and $ 0.3 million for the three and six months ended March 31, 2023, respectively .

The aggregate foreign currency loss for three and six months ended March 31, 2024 was primarily due to Argentina's devaluation of its peso relative to the U.S.

We recorded aggregate foreign currency losses of $ 2.1 million and $ 4.5 million for the three and nine months ended June 30, 2024, respectively, and $ 1.4 million and $ 1.7 million for the three and nine months ended June 30, 2023, respectively .

The aggregate foreign currency loss for three and nine months ended June 30, 2024 was primarily due to Argentina's devaluation of its peso relative to the U.S.

dollar by approximately 55 percent in December 2023 .

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

As of March 31, 2024, our cash balance in Argentina was the U.S.

As of June 30, 2024, our cash balance in Argentina was the U.S.

dollar equivalent of $ 9.2 million in Argentine Pesos.

As mentioned above, the Central Bank of Argentina's currency controls continue to limit our ability to access U.S.

dollars in Argentina and remit cash from our Argentine operations.

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

dollar exchange rate.

During the three and nine months ended June 30, 2024 , we entered into a Blue Chip Swap transaction, which resulted in a $ 7.1 million loss on investment recorded in Gain (loss) on investment securities within our Unaudited Condensed Consolidated Statements of Operations.

As a result of the Blue Chip Swap transaction, $ 13.8 million of net cash was repatriated to the U.S.

during the period.

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

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

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three and six months ended March 31, 2024, approximately 6.9 percent and 7.5 percent of our operating revenues were generated from international locations compared to 7.4 percent and 7.5 percent during the three and six months ended March 31, 2023, respectively.

During the three and six months ended March 31, 2024, approximately 74.6 percent and 76.7 percent of operating revenues from international locations were from operations in South America compared to 86.3 percent and 88.4 percent during the three and six months ended March 31, 2023, respectively.

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

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, 2024, approximately 7.0 percent and 7.4 percent of our operating revenues were generated from international locations compared to 6.8 percent and 7.3 percent during the three and nine months ended June 30, 2023, respectively.

During the three and nine months ended June 30, 2024, approximately 77.9 percent and 77.1 percent of operating revenues from international locations were from operations in South America compared to 84.8 percent and 87.3 percent during the three and nine months ended June 30, 2023, respectively.

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

The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations .

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NOTE 3 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2024 and September 30, 2023 consisted of the following:

(in thousands) Estimated Useful Lives March 31, 2024 September 30, 2023

Property, plant and equipment as of June 30, 2024 and September 30, 2023 consisted of the following:

(in thousands) Estimated Useful Lives June 30, 2024 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 March 31, 2024 and 2023 was $ 102.9 million and $ 94.6 million, including abandonments of $ 2.6 million and $ 1.0 million, respectively.

During the three months ended March 31, 2024, depreciation expense included $ 7.3 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $ 0.8 million for three months ended March 31, 2023.

Depreciation expense during the six months ended March 31, 2024 and 2023 was $ 195.3 million and $ 189.5 million, including abandonments of $ 3.1 million and $ 2.1 million, respectively.

During the six months ended March 31, 2024 , depreciation expense included $ 8.2 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $ 1.7 million for six months ended March 31, 2023.

Depreciation expense during the three months ended June 30, 2024 and 2023 was $ 96.2 million and $ 93.2 million, including abandonments of $ 0.1 million and $ 0.2 million, respectively.

During the three months ended June 30, 2024, depreciation expense included $ 2.7 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $ 0.4 million for three months ended June 30, 2023.

Depreciation expense during the nine months ended June 30, 2024 and 2023 was $ 291.5 million and $ 282.7 million, including abandonments of $ 3.2 million and $ 2.4 million, respectively.

During the nine months ended June 30, 2024 , depreciation expense included $ 10.9 million of accelerated depreciation for components on rigs that are scheduled for conversion in fiscal year 2024 as compared to $ 2.1 million for nine months ended June 30, 2023.

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

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

The loss of $ 9.2 million was recorded as abandonment expense within Depreciation and amortization in our Unaudited Condensed Consolidated Statement of Operations for the six months ended March 31, 2023 and was offset by an insurance recovery that was also recognized within Depreciation and amortization for the same amount as the loss.

The loss of $ 9.2 million was recorded as abandonment expense within Depreciation and amortization in our Unaudited Condensed Consolidated Statement of Operations for the nine months ended June 30, 2023 and was offset by an insurance recovery that was also recognized within Depreciation and amortization for the same amount as the loss.

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

During the three months ended March 31, 2024, we recognized a gain on involuntary conversion of the rig of $ 5.5 million.

We collected $ 5.0 million of insurance proceeds during the period, with an outstanding receivable of $ 0.5 million as of March 31, 2024.

The total insurance proceeds received during the period exceeds the recognized loss and therefore was recognized as a gain within operating income during the three months ended March 31, 2024.

During the nine months ended June 30, 2024 , we recognized a gain on involuntary conversion of the rig of $ 5.5 million and fully collected $ 5.5 million in proceeds.

The total insurance proceeds received during the period exceeds the recognized loss and therefore was recognized as a gain within operating income during the nine months ended June 30, 2024 .

Impairment Charges

Fiscal Year 2024 Activity

We did not record any impairment charges during the three and six months ended March 31, 2024.

We did not record any impairment charges during the three and nine months ended June 30, 2024.

Fiscal Year 2023 Activity

During the six months ended March 31, 2023, our North America Solutions assets that were previously classified as Assets held-for-sale at September 30, 2022 were either sold or written down to scrap value.

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 six months ended March 31, 2023.

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.

During the same period, we also identified additional equipment that met the asset held-for-sale criteria and was reclassified as Assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets.

The aggregate net book value of the equipment of $ 1.4 million was written down to its estimated scrap value of $ 0.1 million, resulting in a non-cash impairment charge of $ 1.3 million during the six months ended March 31, 2023.

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

Q3 FY24 FORM 10-Q | 13

During the six months ended March 31, 2023, the Company initiated a plan to decommission and scrap four international FlexRig ® drilling rigs and four conventional drilling rigs located in Argentina that are not suitable for unconventional drilling.

As a result, these rigs were reclassified to Assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023.

The rigs’ aggregate net book value of $ 8.8 million was written down to the estimated scrap value of $ 0.7 million, which resulted in a non-cash impairment charge of $ 8.1 million within our International Solutions segment and recorded in our Unaudited Condensed Consolidated Statement of Operations during the six months ended March 31, 2023.

During the 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 as of June 30, 2023.

Gain on Reimbursement of Drilling Equipment

We recognized gains of $ 7.5 million and $ 15.0 million during the three and six months ended March 31, 2024, respectively, and $ 11.6 million and $ 27.3 million during the three and six months ended March 31, 2023, respectively, related to customer reimbursement for the current replacement value of lost or damaged drill pipe.

We recognized gains of $ 9.7 million and $ 24.7 million during the three and nine months ended June 30, 2024, respectively, and $ 10.6 million and $ 37.9 million during the three and nine months ended June 30, 2023, 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.

NOTE 4 GOODWILL AND INTANGIBLE ASSETS

During the three and six months ended March 31, 2024, we had no additions or impairments to goodwill.

As of March 31, 2024 and September 30, 2023, the goodwill balance was $ 45.7 million.

During the three and nine months ended June 30, 2024, there were no additions or impairments to goodwill.

As of June 30, 2024 and September 30, 2023, the goodwill balance was $ 45.7 million .

Intangible Assets

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

March 31, 2024 September 30, 2023

June 30, 2024 September 30, 2023

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

4 unchanged sentences

$ 96,961 $ 41,209 $ 55,752 $ 96,961 $ 36,386 $ 60,575

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.6 million for the three months ended March 31, 2024 and 2023, respectively and $ 3.2 million and $ 3.4 million for the six months ended March 31, 2024 and 2023, respectively.

Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $ 1.6 million for the three months ended June 30, 2024 and 2023, respectively and $ 4.8 million and $ 5.0 million for the nine months ended June 30, 2024 and 2023, respectively.

Amortization expense is estimated to be approximately $ 1.6 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 maturity shown in the following table:

March 31, 2024 September 30, 2023

June 30, 2024 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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The 2018 Credit Facility has $ 750.0 million in aggregate availability with a maximum of $ 75.0 million available for use as letters of credit.

As of March 31, 2024, there were no borrowings or letters of credit outstanding, leaving $ 750.0 million available to borrow under the 2018 Credit Facility.

As of June 30, 2024, 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 March 31, 2024, we had $ 95.0 million in uncommitted bilateral credit facilities, for the purpose of obtaining the issuance of international letters of credit, bank guarantees, and performance bonds.

Of the $ 95.0 million, $ 40.0 million was outstanding as of March 31, 2024.

As of June 30, 2024, we had $ 120.0 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 $ 120.0 million, $ 41.7 million was outstanding as of June 30, 2024.

Separately, we had $ 5.0 million in standby letters of credit and bank guarantees outstanding.

In total, we had $ 45.0 million outstanding as of March 31, 2024.

In total, we had $ 46.7 million outstanding as of June 30, 2024.

The applicable agreements for all unsecured debt contain additional terms, conditions and restrictions that we believe are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality.

At March 31, 2024, we were in compliance with all debt covenants.

At June 30, 2024, 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 for the three months ended March 31, 2024 and 2023 was $ 32.2 million and $ 51.1 million, respectively, resulting in effective tax rates of 27.5 percent and 23.8 percent, respectively.

Our income tax expense for the six months ended March 31, 2024 and 2023 was $ 62.3 million and $ 83.5 million, respectively, resulting in effective tax rates of 25.7 percent and 24.2 percent, respectively.

Effective tax rates differ from the U.S.

federal statutory rate of 21.0 percent for the three and six months ended March 31, 2024 primarily due to state and foreign income taxes, and permanent non-deductible items.

Additionally, the effective tax rate for the six months ended March 31, 2024 differs from U.S.

federal statutory rate of 21.0 percent due to a discrete tax benefit of $ 0.9 million related to equity compensation.

Our income tax expense for the three months ended June 30, 2024 and 2023 was $ 33.7 million and $ 40.7 million, respectively, resulting in effective tax rates of 27.5 percent and 29.9 percent, respectively.

Our income tax expense for the nine months ended June 30, 2024 and 2023 was $ 96.0 million and $ 124.2 million, respectively, resulting in effective tax rates of 26.3 percent and 25.9 percent, respectively.

Effective tax rates differ from the U.S.

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

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

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

federal statutory rate of 21.0 percent for the three months ended June 30, 2024, primarily due to state and foreign income taxes, permanent non-deductible items and a discrete benefit of $ 0.8 million primarily related to provision to return adjustments.

The effective tax rate for the nine months ended June 30, 2024 differs from U.S.

federal statutory rate of 21.0 percent primarily due to state and foreign income taxes, permanent non-deductible items and a discrete tax benefit of $ 1.6 million primarily related to equity compensation and provision to return adjustments.

Q3 FY24 FORM 10-Q | 15

As of March 31, 2024, we have recorded unrecognized tax benefits and related interest and penalties of approximately $ 3.4 million.

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.

Effective tax rates differ from the U.S.

federal statutory rate of 21.0 percent for the three months ended June 30, 2023 primarily due to state and foreign income taxes, permanent non-deductible items and discrete tax expense of $ 2.4 million primarily related to an increase in our deferred state income tax rate.

The effective tax rate for the nine months ended June 30, 2023, differs from the U.S.

federal statutory rate of 21.0 percent primarily due to state and foreign income taxes, permanent non-deductible items and a discrete tax expense of $ 2.3 million primarily related to an increase in deferred state income tax rate and equity compensation.

As of June 30, 2024, we have recorded unrecognized tax benefits and related interest and penalties of approximately $ 0.7 million.

During the three months ended June 30, 2024, $ 2.7 million of the unrecognized tax benefits, interest and penalties was recognized 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 repurchases may be made using our cash and cash equivalents or other available sources.

During the three and six months ended March 31, 2024, we repurchased 0.1 million and 1.4 million common shares at an aggregate cost of $ 4.0 million and $ 51.6 million, respectively, including excise tax of $ 0.3 million for the six months ended March 31, 2024.

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

During the three and six months ended March 31, 2024, we declared $ 42.1 million and $ 101.2 million, respectively, in cash dividends.

A base cash dividend of $ 0.25 per share and a supplemental dividend of $ 0.17 per share was declared on February 28, 2024 for shareholders of record on May 17, 2024, payable on May 31, 2024.

As a result, we recorded a Dividend payable of $ 42.0 million on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024.

We did not make any share repurchases during the three months ended June 30, 2024.

During the nine months ended June 30, 2024, we repurchased 1.4 million common shares at an aggregate cost of $ 51.6 million, including excise tax of $ 0.3 million.

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.

During the three and nine months ended June 30, 2024, we declared $ 42.0 million and $ 143.3 million, respectively, in cash dividends.

A base cash dividend of $ 0.25 per share and a supplemental dividend of $ 0.17 per share was declared on June 5, 2024 for shareholders of record on August 16, 2024, payable on August 30, 2024.

As a result, we recorded a Dividend payable of $ 42.0 million on our Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024.

Accumulated Other Comprehensive Loss

Components of accumulated other comprehensive loss were as follows:

March 31, September 30,

June 30, September 30,

(in thousands) 2024 2023

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Unrealized pension actuarial loss $ ( 9,886 ) $ ( 10,407 )

Unrealized loss on available-for-sale debt security

$ ( 11,077 ) $ ( 10,407 )

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Unrealized pension actuarial loss $ ( 7,579 ) $ ( 7,981 )

Unrealized loss on available-for-sale debt security

$ ( 8,499 ) $ ( 7,981 )

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 and six months ended March 31, 2024:

(in thousands) Three Months Ended March 31, 2024 Six Months Ended March 31, 2024

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

Investments classified as available-for-sale debt securities are reported at fair value with unrealized gains and losses excluded from net income (loss) and reported in other comprehensive income (loss).

The following is a summary of the changes in accumulated other comprehensive loss, net of tax, for the three and nine months ended June 30, 2024:

Three Months Ended June 30, 2024

(in thousands) Unrealized Loss on Available-for-Sale Securities

Defined Benefit Pension Plan Total

Balance at beginning of period $ — $ ( 7,713 ) $ ( 7,713 )

Activity during the period:

Net current-period other comprehensive income 134 268

Balance at March 31, 2024 $ ( 7,713 ) $ ( 7,713 )

Other comprehensive loss before reclassifications

( 920 ) — ( 920 )

Amounts reclassified from accumulated other comprehensive income — 134 134

Net current-period other comprehensive loss

( 920 ) 134 ( 786 )

Balance at June 30 2024 $ ( 920 ) $ ( 7,579 ) $ ( 8,499 )

Q3 FY24 FORM 10-Q | 16

Nine Months Ended June 30, 2024

(in thousands) Unrealized Loss on Available-for-Sale Securities

Defined Benefit Pension Plan Total

Balance at beginning of period $ — $ ( 7,981 ) $ ( 7,981 )

Other comprehensive loss before reclassifications

( 920 ) — ( 920 )

Amounts reclassified from accumulated other comprehensive income — 402 402

Net current-period other comprehensive loss

( 920 ) 402 ( 518 )

Balance at June 30 2024 $ ( 920 ) $ ( 7,579 ) $ ( 8,499 )

NOTE 8 REVENUE FROM CONTRACTS WITH CUSTOMERS

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

Q2FY24 FORM 10-Q | 16

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.

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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 $ 287.8 million and $ 586.0 million, of which $ 10.4 million and $ 25.6 million was related to performance bonuses recognized due to the achievement of performance targets during the three and six months ended March 31, 2024, respectively.

Total revenue recognized from performance contracts, including performance bonuses, was $ 297.2 million and $ 567.2 million, of which $ 11.5 million and $ 21.6 million was related to performance bonuses recognized due to the achievement of performance targets during the three and six months ended March 31, 2023, respectively.

Total revenue recognized from performance contracts, including performance bonuses, was $ 294.4 million and $ 880.4 million, of which $ 11.8 million and $ 37.4 million was related to performance bonuses recognized due to the achievement of performance targets during the three and nine months ended June 30, 2024, respectively.

Total revenue recognized from performance contracts, including performance bonuses, was $ 316.2 million and $ 883.3 million, of which $ 11.4 million and $ 33.0 million was related to performance bonuses recognized due to the achievement of performance targets during the three and nine months ended June 30, 2023, respectively.

Contract Costs

We had capitalized fulfillment costs of $ 10.6 million and $ 11.4 million as of March 31, 2024 and September 30, 2023, respectively.

We had capitalized fulfillment costs of $ 11.6 million and $ 11.4 million as of June 30, 2024 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 March 31, 2024 was approximately $ 1.7 billion, of which approximately $ 0.6 billion is expected to be recognized during the remainder of fiscal year 2024, approximately $ 0.5 billion during fiscal year 2025, and approximately $ 0.6 billion in fiscal year 2026 and thereafter.

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of June 30, 2024 was approximately $ 1.5 billion, of which approximately $ 0.3 billion is expected to be recognized during the remainder of fiscal year 2024, approximately $ 0.6 billion during fiscal year 2025, and approximately $ 0.6 billion in fiscal year 2026 and thereafter.

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

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

Q3 FY24 FORM 10-Q | 17

Contract Assets and Liabilities

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

(in thousands) March 31, 2024 September 30, 2023

(in thousands) June 30, 2024 September 30, 2023

Contract assets, net $ 4,899 $ 6,560

(in thousands) March 31, 2024

(in thousands) June 30, 2024

Contract liabilities balance at September 30, 2023

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Revenue recognized during the period ( 49,042 )

Contract liabilities balance at March 31, 2024 $ 26,804

Contract liabilities balance at June 30, 2024

NOTE 9 EARNINGS PER COMMON 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.

During the third 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 and nine months ended June 30, 2023, as presented below.

Q3 FY24 FORM 10-Q | 18

During the second 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 and six months ended March 31, 2023, as presented below.

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

Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2024 2023 2024 2023

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Three Months Ended

March 31, Six Months Ended

June 30, Nine Months Ended

(in thousands, except per share amounts) 2024 2023 2024 2023

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This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Q2FY24 FORM 10-Q | 18

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.

Q3 FY24 FORM 10-Q | 19

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:

March 31, 2024

June 30, 2024

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

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Other debt securities 4,060 3,810 — 250

5,250 5,000 — 250

Total 260,698 221,697 — 39,001

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Other equity securities 4,071 — — 4,071

2,965 — — 2,965

Total 4,071 — — 4,071

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Contingent consideration $ 5,000 $ — $ — $ 5,000

(1) As of March 31, 2024, our equity security investments in geothermal energy totaled $ 27.2 million and our debt security investments in held to maturity bonds totaled $ 0.2 million.

(1) As of June 30, 2024, our equity security investments in geothermal energy totaled $ 27.2 million and our debt security investments in held to maturity bonds totaled $ 0.3 million.

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

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

During the three and six months ended March 31, 2024, we recognized gain (loss) of $ 8.3 million and $( 2.1 ) million, respectively, on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment compared to gain of $ 42.6 million and $ 24.4 million during the three and six months ended March 31, 2023, respectively.

As of March 31, 2024, this investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

Equity Securities with Fair Value Option In October 2022, we made a $ 14.1 million equity investment, representing 106.0 million common shares 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 March 31, 2024), 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 March 31, 2024.

During the three and nine months ended June 30, 2024, we recognized gains of $ 5.6 million and $ 3.5 million, respectively, on our Unaudited Condensed Consolidated Statements of Operations, as a result of the change in fair value of the investment compared to gain (loss) of $( 17.0 ) million and $ 7.4 million during the three and nine months ended June 30, 2023, respectively.

This investment is classified as a Level 1 investment based on the quoted stock price on the Abu Dhabi Securities Exchange.

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