Item 1. Business
ITEM 1. BUSINESS
Overview
Helmerich & Payne, Inc. ("H&P," which, together with its subsidiaries, is identified as the “Company,” “we,” “us” or “our,” except where stated or the context requires otherwise) was incorporated under the laws of the State of Delaware on February 3, 1940 and is successor to a business originally organized in 1920. We provide 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. We are an important partner for a number of oil and gas exploration and production companies, but we focus primarily on the drilling segment of the oil and gas production value chain. Our technology services focus on developing, promoting and commercializing technologies designed to improve the efficiency and accuracy of drilling operations, as well as wellbore quality and placement.
Our drilling services operations are organized into the following reportable operating business segments: North America Solutions, International Solutions and Offshore Gulf of Mexico. Our North America Solutions operations are primarily located in Texas, but also traditionally operate in other states, depending on demand. Such states include: Colorado, Louisiana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah, West Virginia, and Wyoming. Our International Solutions operations have rigs and/or services primarily located in five international locations: Argentina, Australia, Bahrain, Colombia and the United Arab Emirates ("U.A.E."). Additionally, we commenced operations in Saudi Arabia in the first quarter of fiscal 2025.
We also own and operate a limited number of commercial real estate properties located in Tulsa, Oklahoma. Our real estate investments include a shopping center containing approximately 371,000 leasable square feet and approximately 176 acres of undeveloped real estate. Our research and development endeavors include both internal development and external acquisition of developing technologies. Our wholly-owned captive insurance companies (the “Captives”) are primarily used to insure the deductibles for our workers’ compensation, general liability, automobile liability, rig property and a medical stop-loss program. The Company and the Captives maintain excess property and casualty reinsurance programs with third-party insurers in an effort to limit the financial impact of significant events covered under these programs. Our real estate operations and our wholly-owned captive insurance companies are included in "Other."
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Pending KCA Deutag Acquisition
On July 25, 2024, H&P and certain of its wholly owned subsidiaries entered into a Sale and Purchase Agreement (the "Purchase Agreement") to acquire KCA Deutag for total cash consideration of approximately $2.0 billion, which consists of the $0.9 billion unadjusted share purchase price and $1.1 billion to contemporaneously repay or redeem certain of KCA Deutag's existing debt upon consummation of the acquisition (the "Acquisition"). Total consideration is subject to adjustment as set forth in the Purchase Agreement. The transaction is expected to close prior to calendar 2024 year end, subject to customary closing conditions and regulatory approvals.
KCA Deutag is a diverse global drilling company. The company has a significant land drilling presence in the Middle East, which represents approximately two-thirds of the company’s calendar year 2023 Operating EBITDA, with additional operations in South America, Europe and Africa. In addition to its land operations, KCA Deutag has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada, with super major customers and long-term earnings visibility through a robust backlog. KCA Deutag’s Kenera segment comprises manufacturing and engineering businesses, including Bentec, with three facilities serving the energy industry, representing a longer-term growth opportunity.
Drilling Fleet
The following map shows the number of available rigs by basin in our North America Solutions reportable segment as of September 30, 2024:
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The following table sets forth certain information concerning our North America Solutions drilling rigs as of September 30, 2024:
NORTH AMERICA SOLUTIONS FLEET
Location Super-Spec FlexRig ® 1
Non Super-Spec FlexRig ® 2
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
TX 124 84 — — 124 84
NM 45 36 — — 45 36
OK 17 5 — — 17 5
ND 11 8 — — 11 8
LA 11 3 — — 11 3
WV 5 4 — — 5 4
CO 3 3 2 1 5 4
UT 4 3 — — 4 3
PA 4 2 — — 4 2
OH 2 2 — — 2 2
Totals 226 150 2 1 228 151
(1) AC drive, minimum of 1,500 horsepower drawworks, minimum of 750,000 lbs. hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability.
(2) AC drive, 1,500 horsepower drawworks, 500,000 or 750,000 lbs. hookload rating, 5,000 or 7,500 psi mud circulating system, may or may not have multiple-well pad capability.
The following table sets forth certain information concerning our International Solutions drilling rigs as of September 30, 2024:
INTERNATIONAL SOLUTIONS FLEET
Location AC (FlexRig ® 3) 1
AC (FlexRig ® 3WA) 2
AC (FlexRig ® 4) 3
Other AC SCR 4
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
Argentina 12 7 — — — — — — — — 12 7
Saudi Arabia — — 5 5 — — — — — — 5 5
Colombia 2 — — — — — 1 — 2 — 5 —
Bahrain 1 1 — — 3 2 — — — — 4 3
Australia 1 1 — — — — — — — — 1 1
Totals 16 9 5 5 3 2 1 — 2 — 27 16
(1) The FlexRig ® 3 is equipped with an AC drive, 1,500 horsepower drawworks, and a 750,000 lb. hookload rating. It can be equipped with an optional skid or walking system, third mud pump, and 7,500 psi high pressure mud system. Nine rigs in Argentina are equipped with skid systems, a third mud pump and 7,500 psi high pressure mud systems.
(2) The FlexRig® 3WA is uniquely enhanced for mobility and agility without compromising unconventional pad drilling that advanced drilling programs require for highly complex lateral wells. Its walking capability offers the flexibility of 500ft in a straight line, or multiple rows within a 200 x 50 ft box.
(3) The FlexRig ® 4 model has a small footprint and is designed to be highly mobile. The rig is equipped with a 300,000 lb. mast, 400HP top drive and two mud pumps. Range 3 drill pipe is used without setback. The rig is capable of horizontal and vertical drilling, but is primarily used for vertical drilling.
(4) A silicon-controlled-rectifier (“SCR”) system converts alternate current (“AC”) produced by one or more AC generator sets into direct current (“DC”). The SCR rigs are equipped with 3,000 horsepower drawworks to drill deep conventional wells.
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The following table sets forth certain information concerning our Offshore Gulf of Mexico drilling rigs as of September 30, 2024:
OFFSHORE GULF OF MEXICO FLEET
Location Shallow Water 1
Deep Water 1
Total Fleet
Total Available Rigs Contracted Total Available Rigs Contracted Total Available Rigs Contracted
Louisiana 2
3 — — — 3 —
Gulf of Mexico 1 — 3 3 4 3
Totals 4 — 3 3 7 3
(1) Shallow water rigs operate on fixed facilities and deep water rigs operate on floating facilities.
(2) Rigs are idle, stacked on land and not in state waters.
Drilling Services and Solutions
General
We are the largest provider of super-spec AC drive land rigs in the Western Hemisphere. Operating principally in North and South America, we specialize in shale and unconventional resource plays, drilling challenging and complex wells in oil and gas producing basins in the United States and in international locations. In the United States, we have a diverse mix of customers consisting of large independent, major, mid-sized and small cap oil companies and private independent companies (including private equity-backed companies) that are primarily focused on unconventional shale basins. In South America and the Middle East, our customers primarily include major international and national oil companies.
Revenue from drilling services performed for our largest drilling customer totaled approximately 11.0 percent ($302.6 million) of our total consolidated revenues during fiscal year 2024. We did not have any individual customers that represented 10% or more of our total consolidated revenues in fiscal years 2023, or 2022.
The following table presents operating statistics for the fiscal years 2024, 2023, and 2022:
Year Ended September 30,
North America Solutions International Solutions Offshore Gulf of Mexico
2024
2023
2022
2024
2023
2022
2024
2023
2022
Revenue days 1
55,387 61,814 59,672 4,614 4,788 3,036 1,111 1,460 1,460
Average active rigs 2
151 169 163 13 13 8 3 4 4
Number of active rigs at the end of period 3
151 147 176 16 13 12 3 4 4
Number of available rigs at the end of period 228 233 236 27 22 28 7 7 7
(1) Defined as the number of contractual days we recognized revenue during the period.
(2) Active rigs generate revenue for the Company; accordingly 'average active rigs' represents the average number of rigs generating revenue during the applicable period. This metric is calculated by dividing revenue days by total days in the applicable period (i.e. 366 days). This includes the impact of downsizing our fleet and/or rigs that have been reclassified to assets held-for-sale. See Note 3—Property, Plant and Equipment to our Consolidated Financial Statements.
(3) Defined as the number of rigs generating revenue at the applicable end date of the time period.
Our Segments
North America Solutions Segment
We believe we operate the largest and most technologically advanced AC drive drilling rig fleet in North America and have a presence in most of the U.S. shale and unconventional basins. We have the leading market share in at least two of the most active oil basins, which include the Permian Basin and Eagle Ford Shale. All of our active rigs are capable of drilling horizontal or directional wells. As of September 30, 2024, we had approximately 26.1 percent of the total market share in U.S. land drilling and approximately 34.6 percent of the super-spec market share in U.S. land drilling. In the United States, we have the industry's largest super-spec fleet and had 151 of our 228 marketed rigs active under contract as of September 30, 2024 of which 88 were under fixed‑term contracts, and 63 were working well-to-well.
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Our drilling technology within this segment enables a solutions-based approach that provides performance-driven drilling services designed to help deliver greater levels of drilling efficiency, accuracy, consistency, optimization and a reduction of human error to create higher quality wellbores with lower overall risk. This technology is intended to address our customers' unique challenges based upon their goals and desired outcomes which will often vary from well to well, basin to basin.
Our North America Solutions segment contributed approximately 88.7 percent ($2.4 billion) of our consolidated operating revenues during fiscal year 2024, compared to approximately 87.7 percent ($2.5 billion) and 86.8 percent ($1.8 billion) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. In North America, our customers are primarily from the major integrated oil companies, large independent oil companies, small cap oil companies and private independent companies (including private equity-backed companies). Revenue from drilling services performed for our largest North America Solutions drilling customer totaled approximately 12.2 percent ($299.3 million) of the North America Solutions segment revenues during fiscal year 2024.
International Solutions Segment
Our International Solutions segment conducts operations primarily in Argentina, Bahrain, Australia, U.A.E. and Colombia. Additionally, we commenced operations in Saudi Arabia in the first quarter of fiscal 2025. As of September 30, 2024, we had 16 land rigs contracted for work in locations outside of the United States. Our International Solutions operations contributed approximately 7.0 percent ($194.0 million) of our consolidated operating revenues during fiscal year 2024, compared to approximately 7.4 percent ($212.6 million) and 6.6 percent ($136.1 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively.
Argentina As of September 30, 2024, we had 12 available rigs in Argentina. Revenues generated by Argentine drilling operations contributed approximately 5.2 percent ($142.5 million) of our consolidated operating revenues during fiscal year 2024 compared to approximately 4.8 percent ($137.4 million) and 4.4 percent ($91.4 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. Revenues from drilling services performed for our two largest customers in Argentina totaled approximately 3.4 percent of our consolidated operating revenues and approximately 48.6 percent of our international operating revenues during fiscal year 2024. The Argentine drilling contracts are primarily with large international or national oil companies.
Bahrain As of September 30, 2024, we had four available rigs in Bahrain. Revenues generated by Bahrain drilling operations contributed approximately 0.7 percent ($18.0 million) of our consolidated operating revenues in fiscal year 2024, compared to approximately 0.5 percent ($15.4 million) and 0.8 percent ($17.0 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. All of our revenues in Bahrain are from a partner of the local national oil company.
Australia Our operations in Australia commenced in the fourth fiscal quarter of 2023. All of our revenue in Australia is from one customer, Tamboran Resources Corporation, a publicly traded company ("Tamboran Corp."). As of September 30, 2024, we had one available rig in Australia. Revenues generated by Australian drilling operations contributed to approximately 0.5 percent ($14.1 million) of our consolidated operating revenues in fiscal year 2024 compared to 0.1 percent ($3.4 million) in fiscal year 2023. As of September 30, 2024, we held a combined equity ownership in Tamboran Corp. of approximately 7.2 percent.
United Arab Emirates During the years ended September 30, 2024, 2023 and 2022, our operations in U.A.E. consisted of services provided to ADNOC Drilling Company P.J.S.C. ("ADNOC Drilling"), primarily in the form of secondment labor. Revenues generated in the U.A.E. contributed approximately 0.4 percent ($10.2 million) of our consolidated operating revenues in fiscal year 2024, compared to approximately 0.3 percent ($9.7 million) and 0.3 percent ($5.7 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. As of September 30, 2024, we had no rigs available in the U.A.E.
Colombia As of September 30, 2024, we had five available rigs in Colombia. Revenues generated by Colombian drilling operations contributed approximately 0.3 percent ($9.3 million) of our consolidated operating revenues in fiscal year 2024, compared to approximately 1.6 percent ($46.7 million) and 1.1 percent ($22.0 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. The Colombian drilling contracts that generated revenue during the fiscal year were primarily with large international or national oil companies.
Saudi Arabia During the year ended September 30, 2024, we began mobilizing five super-spec rigs to the Kingdom of Saudi Arabia. We commenced operations in the first quarter of fiscal 2025.
Offshore Gulf of Mexico Segment
Our Offshore Gulf of Mexico segment has been in operation since 1968 and currently consists of seven platform rigs in the Gulf of Mexico. We supply the rig equipment and crews and the operator, who owns the platform, will typically provide production equipment or other necessary facilities. Our offshore rig fleet operates on conventional fixed leg platforms and floating platforms attached to the sea floor with mooring lines, such as Spars and Tension Leg Platforms. Additionally, we provide management contract services to customer platforms where the customer owns the drilling rig.
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As of September 30, 2024, three of the seven offshore rigs were under contract. Our Offshore Gulf of Mexico operations contributed approximately 3.9 percent ($106.2 million) of our consolidated operating revenues during fiscal year 2024, compared to approximately 4.5 percent ($130.2 million) and 6.1 percent ($125.5 million) of our consolidated operating revenues during fiscal years 2023 and 2022, respectively. Revenues from drilling services performed for our largest offshore drilling customer totaled approximately 97.3 percent ($103.3 million) of offshore revenues during fiscal year 2024.
Other Operations
We own and operate a limited number of commercial real estate properties located in Tulsa, Oklahoma. Our real estate investments include a shopping center and undeveloped real estate.
We continue to use our captive insurance subsidiaries 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.
Our real estate operations and our wholly-owned captive insurance companies are included in "Other" within our segment disclosures.
Rigs, Equipment, R&D, and Facilities
During the late 1990’s, we undertook a strategic initiative to develop a new generation drilling rig that would be the safest, fastest-moving and highest performing rig in the land drilling market. Our first FlexRig ® drilling rig entered the market in 1998. We continued to innovate and in 2002 introduced our first AC drive rigs, which incorporated new drilling technology and improved safety and environmental design. These rigs found immediate success by delivering higher value wells to the customer and marked the beginning of the AC land rig revolution.
We also changed our pricing and contracting strategy, and beginning in 2005, predominantly all new FlexRig ® drilling rigs were built, supported by a firm contract, and generated attractive returns. To date, we have built over 200 FlexRig ® rigs that align with this strategy. An important part of our strategy was to design a rig that could support continuous improvement through upgrade capability of the hardware and software on the rigs to take advantage of technology improvements and lengthening the industry rig replacement cycle. These upgrades included, but were not limited to, enhanced drilling control systems and software, skid and walking systems for drilling multiple well pads, 7,500 psi mud systems, set back capacity to accommodate the pipe that longer laterals demanded, and additional mud system capacity.
In 2011, we introduced a FlexRig ® design for long lateral drilling of multiple wells from a single location and for drilling horizontally in unconventional shale reservoirs. The new design preserved the key performance features of earlier designs but added a bi-directional skidding system and equipment capacities suitable for drilling long lateral wells.
In 2016, we saw the further progression of longer lateral wells, which brought additional technical challenges. At that time, we began delivering rigs to the market that were equipped and capable of drilling these longer lateral wells. The industry would later refer to these rigs as super-spec rigs, which have the following specific characteristics: AC drive, minimum 1,500 horsepower drawworks, minimum of 750,000 lbs. hookload rating, 7,500 psi mud circulating system, and multiple-well pad capability. Additionally, our competency in design and construction as well as our financial strength enabled us to efficiently upgrade our other existing rigs to super-spec, resulting in what we believe to be the largest fleet of super-spec rigs in the world. As a result of these investments, today the vast majority of our current domestic fleet is comprised of super-spec rigs and half the rigs in our international fleet are super-spec rigs. As of September 30, 2024, we had a total of 242 super-spec rigs.
In 2017, we introduced our first walking rig by reconfiguring some of our uni-directional skid designed FlexRig ® drilling rigs. Since then, we have reconfigured, converted, and upgraded a total of 73 FlexRig ® drilling rigs to super-spec walking rigs.
Years of designing and building our fleet of AC drive FlexRig ® drilling rigs has given us many competitive benefits in unconventional drilling. One key advantage is fleet uniformity, particularly in our North America Solutions FlexRig ® fleet. We have overseen the design and assembly of all of our AC FlexRig ® drilling rigs, and our different rig classes share many common components. We co-designed the control systems for our rigs and have the right to make any changes or modifications to those systems that we desire. A uniform fleet creates an adaptive environment to reach maximum efficiency for employees, equipment and technology and is critical to our ability to provide consistent, safe and reliable operations in unconventional drilling applications. In addition, our fleet has greater scale than any other competitor, which enables us to upgrade our existing FlexRig ® drilling rigs to super-spec in a capital efficient way. High levels of uniformity in crew training and rotation and our ability to identify and remove safety exposures across a more standard fleet allow us to deliver higher performance in a safer and more reliable manner for the customer. Further, our fleet is supported by a cost-effective Company-owned supply chain that provides standardized materials directly to the rigs from our regional warehouses.
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A long-standing challenge in our industry is providing high quality and consistent results. In addressing this challenge, we utilize process excellence techniques that are developed internally. We provide experienced drilling and maintenance support for our operations, which provides value by reducing nonproductive time in our operations and improving drilling performance through our Rig Systems Monitoring and Support Center (“RSMS”) and Remote Operations Centers ("ROCs"). Our RSMS and ROCs are manned 24 hours a day, seven days a week, with the ability to monitor and detect trends in drilling and drilling services performance onboard our rigs. Our monitoring group within the RSMS provides real-time help and feedback to our wellsite employees, as well as our customers, to fully optimize our operational performance. Additionally, our RSMS and ROCs have staffs of engineers and industry experts that work with our customers to enhance wellbore positioning, drilling program execution and overall drilling performance. The monitoring group and our performance engineers capture our drilling work steps to help provide high quality and reliable results for our customers.
We currently have two facilities that provide vertically integrated solutions for drilling rig manufacturing, upgrades, retrofits and modifications, as well as overhauling, recertification, and repairs as it relates to our rigs and equipment. These facilities utilize lean manufacturing processes to enhance quality and efficiency as well as provide important insights into the maintenance and wear of equipment on our rigs. Our facility located in Galena Park, Texas is primarily utilized for overall rig assembly, overhaul, recommissioning and recertification while our facility near Tulsa, Oklahoma is primarily utilized for modular rig component overhauls and repairs.
We continue to see adoption and growth with our technologically enabled automation solutions. We designed our automation solutions to address challenges within our customers’ businesses as much of the drilling process is heavily dependent on human decision-making to design, execute and optimize crude oil and natural gas extraction. Utilizing these technologies, we are able to deploy a more data-driven solution compared to human decisions and execution, thereby reducing variability and the costs around achieving optimal outcomes. These solutions are designed to continue to help provide differentiated value for our customers through enhanced wellbore quality and placement, improved cost performance and well economics, and better consistency at reduced risk. Our automation-focused solutions and applications are enabled by our uniform digital fleet and are designed to provide additional value to our customers' well programs by providing a platform for machine-human collaboration during the drilling process to improve efficiency. Our path to autonomous drilling continues to evolve with several solutions in various stages of commercial testing. All of our technologies play an important role in developing our strategy as we head towards autonomous drilling.
Markets and Competition
Our business largely depends on the level of capital spending by oil and gas companies for exploration and production activities. The level of capital spending has traditionally been correlated to oil and gas prices. Oil and gas prices can be volatile at times depending upon both near and long-term supply and demand factors. Sustained increases or decreases in the prices of oil and natural gas generally have a material impact on the exploration and production activities of our customers. As such, significant declines in the prices of oil and natural gas may have a material adverse effect on our business, financial condition and results of operations. As of September 30, 2024, we had 170 active rigs under contract, compared to 164 and 192 rigs under contract as of September 30, 2023 and 2022, respectively. For further information concerning risks associated with our business, including volatility surrounding oil and natural gas prices and the impact of low oil prices on our business, see Item 1A—Risk Factors and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10‑K.
Our industry is highly competitive, and we strive to differentiate our services based upon the quality of our FlexRig ® drilling rigs and our engineering design expertise, operational efficiency, software technologies, and safety and environmental awareness. The number of available rigs generally exceeds demand in many of our markets, resulting in significant price competition. We compete against many drilling companies, some of whom are present in more than one of our operating regions. In the United States, we compete with Nabors Industries Ltd., Patterson-UTI Energy, Inc., Precision Drilling Corporation, and many other competitors with regional operations. Internationally, we compete directly with various contractors at each location where we operate. In the Gulf of Mexico platform rig market, we primarily compete with Nabors Industries Ltd. and Blake International Rigs, LLC. For further information concerning risks associated with competition in our industry, see Item 1A—Risk Factors—Business and Operating Risks.
Drilling Contracts
Our drilling contracts are obtained through competitive bidding or as a result of direct negotiations with customers. Our contracts vary in their terms and rates depending on the nature of the operations to be performed, the duration of the work, the amount and type of equipment and services provided, the geographic areas involved, market conditions and other variables. In many instances, our contracts cover multi‑well or pad and multi‑year projects. Contracts generally contain renewal or extension provisions exercisable at the option of the customer. The option to extend and the pricing are mutually agreed upon by both the customer and H&P. In most instances, contracts provide for additional payments for mobilization and demobilization of the rig.
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The duration of our drilling contracts are generally either “well‑to‑well/pad-to-pad” or for a fixed term. “Well‑to‑well” contracts can be terminated at the option of either party upon the completion of drilling of any one well. Fixed-term contracts generally have a minimum term of at least six months up to multiple years. These contracts customarily provide for termination at the election of the customer, but may include an “early termination payment” to be paid to us if the contract is terminated prior to the expiration of the fixed term. However, under certain limited circumstances such as destruction of a drilling rig, bankruptcy, sustained unacceptable performance by us or delivery of a rig beyond certain grace and/or liquidated damage periods, no early termination payment would be paid to us.
Each drilling rig operates under a separate drilling contract and, in some instances, these contracts are part of an over-arching term agreement known as a FlexPool. These agreements are with a limited number of customers that operate multiple rigs, oftentimes across multiple basins in the U.S. Under the FlexPool agreements, customers enter into a fixed term contract covering a minimum amount of drilling days, utilizing a minimum number of drilling rigs and have the flexibility to employ more or fewer rigs as long as the minimum number of rigs (outlined in the agreement) is maintained. If any provisions are violated, as in a customer operating below the minimum number of rigs, early termination payments may apply.
Daywork Contracts
Daywork contracts are contracts under which we charge a rate per day, with the price determined by the location, depth and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market.
Performance-based Contracts
Performance-based contracts are contracts pursuant to which we are compensated partly based upon our performance against a mutually agreed upon set of predetermined targets. These types of contracts typically have a lower base dayrate, but give us the opportunity to receive additional compensation by meeting or exceeding certain performance targets agreed to by our customers. For example, some performance targets are set based upon days to drill a well or the number of lateral feet drilled in zone per day. We often use our automated technology solutions to assist in achieving the performance targets. The risks associated with these contracts relate to the failure to reach the agreed upon performance targets. If we do not meet these targets, we will not receive additional compensation above the base dayrate. 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. Based on our operational track record throughout fiscal year 2024 and drilling expertise, our performance-based contracts have produced a positive risk-reward outcome. We are seeing a growing adoption of performance contracts by our customers and we expect this trend to continue. Refer to Note 9—Revenue from Contracts with Customers for additional information related to performance-based contracts.
Contract Backlog
Our contract drilling backlog was $1.5 billion and $1.4 billion as of September 30, 2024 and 2023, respectively. Approximately 53.3 percent of the September 30, 2024 backlog is reasonably expected to be fulfilled in fiscal year 2025. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—"Contract Backlog" included in this Form 10-K for additional information pertaining to backlog.
Employees
As of September 30, 2024, we had approximately 6,200 employees within the United States and approximately 800 employees in our international operations. The number of employees fluctuates depending on the current and expected demand for our services. We consider our employee relations to be robust. None of our U.S. employees are represented by a union. However, some of our international employees are unionized.
Human Capital Objectives and Programs
We strive to create a culture and work environment that enables us to attract, train, promote, and retain a diverse group of talented employees who together can help us gain a competitive advantage.
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Core Values and Culture
"The H&P Way" defines our purpose, core values, and the behaviors that drive our culture. What we endeavor to do is anchored in our purpose, improving lives through efficient and responsible energy. Fostering and maintaining a strong, healthy culture is a key strategic focus. Our core values serve to inform who we are and the way our employees interact with one another, our customers, partners and shareholders. Our core value of Actively C.A.R.E. means that we treat one another with respect. We care about each other, and from a safety perspective, our employees are committed to Controlling and Removing Exposures ("C.A.R.E.") for themselves and others. Our core value of Service Attitude means that we do our part and more for those around us. We consider the needs of others and provide solutions to meet their needs. Our core value of Innovative Spirit means that we constantly work to improve and are willing to try new approaches. We make decisions with the long-term view in mind. Our core value of Teamwork means that we listen to one another and work across teams toward a common goal. We collaborate to achieve results and focus on success for our customers and shareholders. Finally, we strive to Do The Right Thing. That means we are honest and transparent. We tackle tough situations, make decisions, and speak up when needed.
Talent Attraction & Retention
Our recruiting practices and decisions on whom we hire are among our most important activities. Our Workforce Staffing team provides full staffing services to enable consistent staffing levels on our rigs. This team sources, hires, onboards, trains, assigns and reassigns rig-based employees. In downturn years, we maintain relationships with former employees and prioritize recalling our most experienced people for field positions. In addition, we utilize social media, local job fairs, employee referral bonuses, and educational organizations across the United States to find diverse, motivated and responsible employees.
Education and Training
We are committed to the continual training and development of our employees, especially of those in field operations, to help ensure we can develop future managers and leaders from within our organization. Our training starts with on-boarding procedures that focus on safety, responsibility, ethical conduct and inclusive teamwork.
H&P’s strong commitment to our employees’ growth is demonstrated through our formal organizational development team, which oversees talent management, training and development. In addition to career and safety training efforts, the team creates, manages and implements enhancements to development and succession plans, change management initiatives and diversity, equity and inclusion ("DE&I") programs.
H&P offers a variety of training programs ranging from job specific programs to leadership development. Some of the prominent training programs that we offer are:
• New Employment Safety Training - onboarding program for new hires in safety sensitive positions. The purpose of the program is to prepare employees to work safely on our rigs and provide necessary certifications to do so; including all Occupational Safety and Health Administration ("OSHA") and International Association of Drilling Contractors ("IADC") training, as well as Company culture education.
• Short Service Employee Training - specialized training program that is a continuation of New Employment Introduction basics and is intended to provide technical on-the-job training guided by a mentor.
• Ethics and Compliance Training – comprised of several specific training programs, including Code of Conduct, Insider Trading, Anti-Discrimination & Harassment, Data Privacy, Trade Compliance, and Anti-Corruption.
• Change Champions Training - teaches employees to solve complex problems using structured processes, tools and data to drive results while emphasizing leadership and public speaking.
• Leadership Series Training - accessible online to all leaders and covers a variety of topics related to leading The H&P Way.
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Safety Training and Serious Injury and/or Fatality ("SIF") Reduction Program
We are committed to creating a culture highlighted by an Actively Caring workforce. We strive to Actively C.A.R.E. for:
• our own safety and health;
• the safety and health of others; and
• the protection of our environment.
Fundamental to our Actively C.A.R.E. culture is every individual's willingness to provide immediate open feedback to others regarding safe and unsafe work practices and to proactively correct recognized exposures that threaten one's health and safety. Through training and accountability, H&P educates our employees on the negative consequences of taking health and safety risks.
Safety Leadership
For more than 20 years, H&P measured safety success the same way other companies in our industry did – the absence of OSHA recordable injuries and declining total recordable injury rates ("TRIR"). We now believe it is more important to take a more holistic and proactive approach to identify safety issues which supports management's efforts to build trust with field employees. Starting in 2015, we have redefined safety success as the C.A.R.E. for self and others and encourage employees to report near miss incidents with serious, life-altering or fatal injury potential, identifying and reporting serious injury exposures for which employees are personally recognized and rewarded monetarily for exemplifying our Actively C.A.R.E culture. We believe trust is key to organizational health, as well as safety and operational success.
SIF Strategy
We are committed to controlling and removing SIF exposures at any H&P rig or facility. We continue to track traditional safety metrics, such as TRIR, to be responsive to customer requests and industry benchmarking, but do not use these metrics as the foundation for our safety culture. H&P data shows that only a small portion of OSHA recordable incidents provide value in preventing potential serious injuries. Incidents that do not result in an injury, but have the potential for a serious injury or fatality provide many more learning opportunities for preventing future serious injuries or fatalities. Based on this data we have a guided approach to incident investigations and corrective actions. Incidents that have the potential to cause a serious injury or fatality are escalated. Our safety success at H&P will be based on key performance indicators related to the removal of SIF exposures, such as SIF Potential and SIF Mitigated rates. Our vision for the future of safety at H&P will be guided by these principles.
Diversity, Equity & Inclusion
We believe that creating an environment where our employees feel valued and respected drives engagement, better leverages the unique talents and perspectives of our people to innovate and enhances our ability to attract and retain a diverse workforce. H&P has employed a DE&I Principal Specialist, implemented a thriving Women of H&P Employee Resource Group, and established a DE&I Advisory Council with global employee representation. Our commitments are evidenced by formalized policies regarding equal opportunity and a discrimination-free workplace. We are actively tracking diversity data to better understand demographics within the organization.
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Employee Benefits, Health and Wellness
H&P values its employees and believes competitive compensation and benefit packages are essential to prioritizing the well-being of its staff. Select highlights of our benefits programs for US-based employees include:
• Medical, dental and vision insurance for all full-time employees, and all part-time employees working more than 20 hours per week, and their dependents;
• A 401(k) plan with Company match incentive for all full-time employees, and all part-time employees working more than 20 hours per week;
• Employer paid life and accidental and dismemberment and employer subsidized long-term disability;
• The Employee Assistance Plan, which offers wellness support with counseling, legal assistance, financial coaching, and identity theft resolution;
• The H&P Way Fund, which provides financial assistance to H&P employees during unavoidable emergencies;
• Employee discounts for phone, computer, personal vehicle, car rental, and hotel purchases; and
• An Educational Assistance Plan, which offers reimbursement of tuition fees for any employee pursuing an undergraduate degree and, in some cases, post-graduate degrees.
We also provide supplemental non-statutory benefits to our international employees that are customary and competitive to each specific region.
Insurance and Risk Management
Our operations are subject to a number of operational risks, including personal injury and death, environmental, cyber, and weather risks, which could expose us to significant losses and damage claims. We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us. Furthermore, if a significant accident or other event occurs and is not fully covered by insurance or an enforceable or recoverable indemnity from a customer, it could have a material adverse effect on our business, financial condition and results of operations.
We have indemnification agreements with many of our customers and we also maintain liability and other forms of insurance. In general, our drilling contracts contain provisions requiring our customers to indemnify us for, among other things, well control events and reservoir damage. However, our contractual rights to indemnification may be unenforceable or limited due to negligent or willful acts by us, or subcontractors and/or suppliers or by reason of state anti-indemnity laws. Our customers and other third parties may also dispute these indemnification provisions, or we may be unable to transfer these risks to our drilling customers or other third parties by contract or indemnification agreements.
We insure working land rigs and related property and equipment at values that approximate the current replacement costs on the inception date of the policies. However, we self-insure large deductibles under these policies. We also carry insurance with varying deductibles and coverage limits with respect to stacked rigs, offshore platform rigs, and “named wind storm” risk in the Gulf of Mexico.
We have insurance coverage for comprehensive general liability, automobile liability, workers’ compensation and employer’s liability, and certain other specific risks. Insurance is purchased over deductibles to reduce our exposure to catastrophic events. We retain a significant portion of our expected losses under our workers’ compensation, general liability and automobile liability programs. We self-insure a number of other risks including loss of earnings and business interruption. We are unable to obtain significant amounts of insurance to cover risks of underground reservoir damage.
Our insurance may not in all situations provide sufficient funds to protect us from all liabilities that could result from our operations. Our coverage includes aggregate policy limits. As a result, we retain the risk for any loss in excess of these limits. No assurance can be given that all or a portion of our coverage will not be canceled, that insurance coverage will continue to be available at rates considered reasonable or that our coverage will respond to a specific loss. Further, we may experience difficulties in collecting from our insurers or our insurers may deny all or a portion of our claims for insurance coverage. For further information see Item 1A—Risk Factors—Business and Operating Risks—Our drilling and technology related operations are subject to a number of operational risks, including environmental and weather risks, which could expose us to significant losses and damage claims. We are not fully insured against all of these risks and our contractual indemnity provisions may not fully protect us.
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Government Regulations
Our operations are affected from time to time and in varying degrees by foreign and domestic political developments and a variety of federal, state, foreign, regional and local laws, rules and regulations, including those relating to:
• drilling of oil and natural gas wells;
• directional drilling services;
• protection of the environment;
• workplace health and safety;
• labor and employment;
• data privacy;
• taxation;
• exportation or importation of equipment, technology and software;
• currency conversion and repatriation;
• global anti-corruption laws; and
• government sanctions and embargo listing.
Environmental laws and regulations that apply to our operations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act (each, as amended) and similar laws that provide for responses to, and liability for, air emissions, water discharges or releases of oil or hazardous substances into the environment, including damages to natural resources. Applicable environmental laws and regulations also include similar foreign, state or local counterparts to the above-mentioned federal laws, which regulate air emissions, water discharges, and management of hazardous substances and waste. Environmental laws can have a material adverse effect on the drilling industry, including our operations, and compliance with such laws may require us to make significant capital expenditures, such as the installation of costly equipment or operational changes, and may affect the resale values or useful lives of our drilling rigs.
The Occupational Safety and Health Act and other similar laws and regulations govern the protection of the health and safety of employees. The OSHA hazard communication standard, the Environmental Protection Agency community right-to-know regulations under Title III of CERCLA, the Emergency Planning and Community Right-to-Know Act and similar state statutes and local regulations require that information be maintained about hazardous materials used in our operations and that this information be provided to employees, state and local governments, emergency responders and citizens.
A number of countries actively regulate and control the importation and/or exportation of oil and gas and other aspects of the oil and gas industries in their countries. In addition, government actions and initiatives by OPEC+ may continue to contribute to oil price volatility. In some areas of the world, government activity has adversely affected the amount of exploration and development work done by oil and gas companies and influenced their need for drilling services, and likely will continue to do so.
In addition, we are subject to a variety of other U.S. and foreign laws and regulations, including, but not limited to, the U.S. Foreign Corrupt Practices Act, other anti-bribery and anti-corruption laws, and data privacy, data security and consumer protection laws. The U.S. Foreign Corrupt Practices Act and similar anti-bribery and anti-corruption laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Data privacy, data security, and consumer protection laws in the U.S. that apply to our operations include the Critical Infrastructure Act and the CAN-SPAM Act, and at the state level, the California Consumer Privacy Act (“CCPA”) as amended by the California Privacy Rights Act (“CPRA”), as well as similar laws enacted in other states. Because we conduct business in France and the UK, we are also subject to the European General Data Protection Regulation (“GDPR”) and the UK Data Protection Act. Our operations in the Middle East and Colombia are subject to similar data privacy and data protection laws. Failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines, penalties or other sanctions. For more information, see Item 1A— “Risk Factors — Failure to comply with the U.S. Foreign Corrupt Practices Act or foreign anti‑bribery legislation could adversely affect our business and Our business is subject to complex and evolving laws and regulations regarding privacy, data security and consumer protection. ”
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We are also subject to the jurisdiction of the U.S. Treasury Department’s Office of Foreign Assets Control, the U.S. Commerce Department’s Bureau of Industry and Security, the U.S. Customs and Border Protection and other U.S. and non-U.S. laws and regulations governing the international trade of goods, services and technology. Such regulations regarding exports and imports of covered goods or dealings with sanctioned countries, persons or entities include licensing, recordkeeping and reporting requirements. Failure to comply with applicable laws and regulations relating to customs, tariffs, sanctions and export controls may subject us to criminal sanctions or civil remedies, including fines, denial of export privileges, injunctions or seizures of assets. For more information, see Item 1A— “Risk Factors — Government policies, mandates, and regulations specifically affecting the energy sector and related industries, regulatory policies or matters that affect a variety of businesses, taxation polices, and political instability could adversely affect our financial condition and results of operations. ”
We are also subject to regulation by numerous other regulatory agencies, including, but not limited to, the U.S. Department of Labor, which sets employment practice standards for workers. In addition, we are subject to certain requirements to contribute to retirement funds or other benefit plans, and laws in some jurisdictions may require payment of statutorily calculated amounts to employees upon termination of employment.
We monitor our compliance with applicable governmental rules and regulations in each country of operation. We have made and will continue to make the required expenditures to comply with current and future regulatory requirements. We do not anticipate that compliance with currently applicable rules and regulations and required controls will significantly change our competitive position, capital spending or earnings during fiscal year 2025. We believe we are materially compliant with applicable rules and regulations and, to date, the cost of such compliance has not been material to our business or financial condition. However, future events such as additional laws and regulations, changes in existing laws and regulations or their interpretation or more vigorous enforcement policies of regulatory agencies, may require additional expenditures by us, which may be material. Specifically, the expansion of the scope of laws or regulations protecting the environment has accelerated in recent years, particularly outside the United States, and we expect this trend to continue. Accordingly, there can be no assurance that we will not incur significant compliance costs in the future. See Item 1A— “Risk Factors — Failure to comply with or changes to governmental and environmental laws could adversely affect our business.”
Sustainability
H&P has helped its customers supply energy for more than a century, and we continue to innovate and improve the ways in which we can provide energy safely, reliably, and efficiently. The Company continues to evolve and refine its comprehensive sustainability strategy rooted in our core value to "do the right thing," as discussed above. Our sustainability strategy uses data to better understand our impacts in areas like emissions, diversity, and safety. Additional information on our sustainability strategy and programs can be obtained by reviewing our Sustainability Reports and related information, located on our website.
Available Information
Our website is located at www.helmerichpayne.com. Annual reports on Form 10‑K, quarterly reports on Form 10‑Q, current reports on Form 8‑K, and amendments to those reports, earnings releases, and financial statements are made available free of charge on the investor relations section of our website as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission ("SEC"). The information contained on our website, or accessible from our website, including our Sustainability Reports and related information, is not incorporated into, and should not be considered part of, this Form 10‑K or any other documents we file with, or furnish to, the SEC. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Annual reports, quarterly reports, current reports, amendments to those reports, earnings releases, financial statements and our various corporate governance documents are also available free of charge upon written request.
Investors and others should note that we announce material financial information to our investors using our investor relations website (https://ir.helmerichpayne.com/websites/helmerichandpayne/English/0/investor-relations.html), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with our stockholders and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on our investor relations website.
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