What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2025-02-05 · 366 added, 138 removed, 261 unchanged (66% of the section changed)

15 unchanged sentences

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

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

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

6 unchanged sentences

Q2 FY25 FORM 10-Q | 35

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

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

• our financial condition and liquidity;

10 unchanged sentences

H&P through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

As of December 31, 2024, our drilling rig fleet included a total of 262 drilling rigs.

Our reportable operating business segments consist of the North America Solutions segment with 225 rigs, the International Solutions segment with 30 rigs, and the Offshore Gulf of Mexico segment with seven offshore platform rigs as of December 31, 2024.

At the close of the first quarter of fiscal year 2025, we had 171 active contracted rigs, of which 103 were under a fixed-term contract and 68 were working well-to-well, compared to 170 contracted rigs at September 30, 2024.

During the second quarter of fiscal year 2025, the naming convention for one of our reportable segments changed from Offshore Gulf of Mexico to Offshore Solutions.

Beginning on the Closing Date, Offshore Solutions now includes the results from the acquired KCA Deutag offshore management contract operations.

Similarly, our International Solutions segment now includes the results from the acquired KCA Deutag land operations.

Operating results related to KCA Deutag's Kenera business unit are included in "Other" along with results from our real estate operations and our wholly-owned captive insurance companies.

Our North America Solutions operating segment remains unchanged.

For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination

As of March 31, 2025, our drilling rig fleet included a total of 384 drilling rigs.

Our reportable operating business segments consist of the North America Solutions segment with 224 rigs, the International Solutions segment with 153 rigs, and the Offshore Solutions segment with seven offshore platform rigs as of March 31, 2025.

Although the Offshore Solutions segment has a fleet of platform rigs, the majority of its revenues are derived from asset-light management contracts.

At the close of the second quarter of fiscal year 2025, we had 229 active contracted rigs, of which 157 were under a fixed-term contract and 72 were working well-to-well, compared to 170 contracted rigs at September 30, 2024.

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

4 unchanged sentences

Furthermore, E&Ps have become more fiscally disciplined in their level of capital expenditures relative to commodity price fluctuations, which has resulted in less volatility within the oilfield service businesses, including our operations.

Based upon the current conducive pricing environment for crude oil and natural gas and the capital budgets established by our customers for calendar year 2025 and their desires to at least maintain current production levels, we expect the level of capital spending and activity in calendar year 2025 to be similar to that experienced in calendar year 2024.

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

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

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

Q2 FY25 FORM 10-Q | 36

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

As such, during fiscal year 2025, we expect our rig activity to remain relatively stable absent any significant changes to commodity prices.

The Company also intends to maintain its strategy around employing a fiscally prudent approach to deploying capital and prioritizing economic margins over rig utilization to remain intact.

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

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

During fiscal 2025, our operational presence in certain international markets, primarily the Middle East and the offshore management contract business, is expected to increase substantially due to the completion of the Acquisition.

With the closing of the Acquisition, the Company's International Solutions segment contracted rig count is expected to increase to approximately 89 rigs from 20 contracted rigs as of December 31, 2024.

Included in the contracted rigs acquired as part of the Acquisition are 12 rigs that have either temporarily suspended operations or been notified to suspend operations in Saudi Arabia due to a customer's desire to reduce their level of capital expenditures.

The suspension of the operations of these rigs is expected to have an adverse impact on our International Solutions segment's operating results during fiscal 2025.

Given the nature of these suspensions, we expect these rigs to re-commence operations during fiscal 2026, however, we have no assurances that such activity will occur on the anniversaries of the notices to suspend.

Similarly, our Offshore Gulf of Mexico reportable segment, to be re-named Offshore Solutions subsequent to the Acquisition, is expected to increase its active management contract and rig count to approximately 37 from six as of December 31 ,2024.

Current expectations are for activity and pricing in the International Solutions and Offshore Gulf of Mexico (Offshore Solutions) reportable segments to remain relatively stable post the completion of the Acquisition.

In April 2025, the announcements by the U.S.

government regarding the implementation of global tariffs and OPEC+ regarding the planned increase of crude oil supply have both created a high level of uncertainty in the global energy markets.

Additionally, the announcement and subsequent suspension or modification of certain tariffs has increased uncertainty regarding the ultimate effect on any tariffs on economic conditions.

Although we do not anticipate that these announcements, particularly the tariff announcements, will have a direct material impact on the Company's operations or financial results, we believe the indirect effects could lead to reduced activity and profitability for the remainder of fiscal 2025, or until the global economic impacts are fully realized.

Since these announcements, both crude oil and natural gas prices have become more volatile and have declined significantly.

Such volatility could lead E&Ps to adjust their capital budgets lower and reduce planned capital expenditures, which could ultimately impact our business through lower expected activity levels.

Recent Developments

International Revenue Contracts

In February 2024, the Company finalized the contractual terms with Saudi Aramco for a seven super-spec FlexRig® tender award for work in the Kingdom of Saudi Arabia.

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

During the year ended September 30, 2024, we began mobilizing five super-spec rigs to the Kingdom of Saudi Arabia, while the remaining rigs mobilized during the three months ended December 31, 2024.

We commenced operations in the first quarter of fiscal 2025.

KCA Deutag Acquisition

On January 16, 2025 (the “Closing Date”), H&P completed the Acquisition of KCA Deutag pursuant to the Purchase Agreement.

On the Closing Date, H&P completed the Acquisition of KCA Deutag pursuant to the Purchase Agreement.

H&P paid aggregate cash consideration of approximately $2.0 billion, which consisted of the share purchase price of $0.9 billion and $1.1 billion which was used to contemporaneously repay or redeem certain of KCA Deutag existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees.

1 unchanged sentence

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.

The company derives a significant portion of its revenues and cash flow from its land operations and has a substantial land drilling presence in the Middle East with additional operations in South America, Europe, and Africa.

In addition to its land operations, the company has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada.

KCA Deutag’s Kenera business unit comprises manufacturing and engineering operations, including Bentec, with three facilities serving the energy industry.

See Note 3—Business Combination for additional details related to the Acquisition.

Subsequent to the announcement of the Acquisition in July 2024 through April 2025, KCA Deutag and the Company have received notifications of contract suspensions for rigs from the legacy KCA Deutag rig fleet operating in Saudi Arabia.

Through March 31, 2025, the Company's total rig suspensions were 14 rigs;

however, subsequent to March 31, 2025, the Company has received notification of three additional rigs suspended bringing the total rigs suspensions in country to 17 rigs.

At the time the Acquisition was announced, we initially expected to realize approximately $25 million in synergies.

Since that time, we have been able to conduct a more detailed analysis of possible synergies, and we also launched a broader review of our enterprise cost structure.

We now anticipate realizing in excess of $25 million in expense synergies associated with the Acquisition that when combined with other permanent cost-saving initiatives identified, we would expect our overall cost structure to be reduced by approximately $50 to $70 million.

We believe these cost-saving efforts will become increasingly evident in the forthcoming quarters.

Contract Backlog

As of December 31, 2024 and September 30, 2024, our contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $1.5 billion.

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

Approximately 50.6 percent of the December 31, 2024 total backlog is reasonably expected to be fulfilled in fiscal year 2025.

As of March 31, 2025 and September 30, 2024, our total contract drilling backlog, being the expected future dayrate revenue from executed contracts, was $7.6 billion and $1.5 billion, respectively.

The increase in backlog from September 30, 2024 to March 31, 2025 is primarily due to the completion of the Acquisition.

Approximately 13.3 percent of the March 31, 2025 total backlog is reasonably expected to be fulfilled during the remainder of fiscal year 2025.

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The following table sets forth the total backlog by reportable segment as of December 31, 2024 and September 30, 2024, and the percentage of the December 31, 2024 backlog reasonably expected to be fulfilled in fiscal year 2025:

(in billions) December 31, 2024 September 30, 2024 Percentage Reasonably

The following table sets forth the total backlog by reportable segment as of March 31, 2025 and September 30, 2024, and the percentage of the March 31, 2025 backlog reasonably expected to be fulfilled in fiscal year 2025:

(in billions) March 31, 2025 September 30, 2024 Percentage Reasonably

Expected to be Fulfilled in Fiscal Year 2025

Firm contracts 1 :

North America Solutions $ 0.7 $ 0.7 67.1 %

International Solutions

Offshore Gulf of Mexico

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

In some limited circumstances, such as sustained unacceptable performance by us, no early termination payment would be paid to us.

Early terminations could cause the actual amount of revenue earned to vary from the backlog reported.

See Item 1A—"Risk Factors— Our current backlog of drilling services and solutions revenue may decline and may not be ultimately realized as fixed‑term contracts and may, in certain instances, be terminated without an early termination payment ” and Item 1A—Risk Factors—" The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations.

within our 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), regarding fixed term contract risk.

Results of Operations for the Three Months Ended December 31, 2024 and 2023

Offshore Solutions 0.8 — 28.9

Optional contract extension periods:

International Solutions 2

Offshore Solutions 1.7 — —

Total backlog

$ 7.6 $ 1.5 13.3 %

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

(2) Included in the International Solutions reportable segment's backlog balance at March 31, 2025 is $0.2 billion of expected revenue from certain contracts in Saudi Arabia that have been temporarily suspended and are expected to gradually resume operations.

The information presented in the table above reflects the fact that we expect these contracts to be extended for a period of time at least equal to the suspension period.

The total backlog figures for the International Solutions and Offshore Solutions reporting segments, as of March 31, 2025 include $3.6 billion and $2.5 billion, respectively, attributed to our recently acquired subsidiary, KCA Deutag International Limited.

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

The agreements within our recently acquired subsidiary, KCA Deutag International, contain provisions for optional early termination or suspension without any associated early termination fees.

Early terminations could cause the actual amount of revenue earned to significantly vary from the backlog reported.

Results of Operations for the Three Months Ended March 31, 2025 and 2024

It is important to note that results presented for the three months ended March 31, 2025 reflect a full 90 days of H&P operations and 75 days of KCA Deutag operations, as the Acquisition was completed on January 16, 2025.

Consolidated Results of Operations

Net Income We reported income of $54.8 million ($0.54 per diluted share) for the three months ended December 31, 2024 compared to income of $95.2 million ($0.94 per diluted share) for the three months ended December 31, 2023.

Operating Revenue Consolidated operating revenues were $677.3 million and $677.1 million for the three months ended December 31, 2024 and 2023, respectively.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $413.0 million and $404.4 million for the three months ended December 31, 2024 and 2023, respectively.

The increase was primarily driven by start-up costs associated with our commencement of operations in Saudi Arabia.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $63.1 million during the three months ended December 31, 2024 compared to $56.6 million during the three months ended December 31, 2023.

The increase was primarily due to a $3.3 million increase in labor and labor-related expenses and a $3.1 million increase in IT related expenses.

Acquisition Transaction Costs During the three months ended December 31, 2024, we recognized approximately $10.5 million in acquisition transaction costs associated with the acquisition of KCA Deutag.

These non-recurring costs are primarily related to third-party legal, consulting and advisory services.

See Note 9—Acquisition Transaction Costs for additional details related to the Acquisition.

Interest Expense Interest expenses were $22.3 million and $4.4 million for the three months ended December 31, 2024 and 2023, respectively.

The increase was primarily driven by accrued interest associated with our September 2024 senior notes offering.

Net Income Attributable to Helmerich & Payne Inc.

We reported income of $1.7 million ($0.01 diluted share) for the three months ended March 31, 2025 compared to income of $84.8 million ($0.84 diluted share) for the three months ended March 31, 2024.

Operating Revenue During the three months ended March 31, 2025 and 2024, consolidated operating revenues were $1.0 billion and $687.9 million, respectively.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $320.6 million of revenue during the three months ended March 31, 2025.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $705.1 million and $402.3 million for the three months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $260.7 million in direct operating expenses during the three months ended March 31, 2025.

Depreciation and Amortization Expense Depreciation and amortization expense increased to $157.7 million during the three months ended March 31, 2025 compared to $104.5 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $57.1 million in depreciation and amortization expense during the three months ended March 31, 2025.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $80.8 million during the three months ended March 31, 2025 compared to $61.2 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $19.6 million in selling, general and administrative expenses during the three months ended March 31, 2025.

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Acquisition Transaction Costs During the three months ended March 31, 2025 and 2024, we recognized $29.9 million and $0.9 million, respectively, in acquisition transaction costs associated with the Acquisition.

These non-recurring costs are primarily related to third-party legal and advisory services.

See Note 3—Business Combination for additional details related to the Acquisition.

Interest Expense Interest expenses were $28.3 million and $4.3 million for the three months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by accrued interest associated with our September 2024 senior notes offering and Term Loan Credit Agreement.

See Note 6—Debt for additional details related to our debt agreements.

Loss on Investment Securities During the three months ended December 31, 2024, we recognized an aggregate loss of $13.4 million on investment securities.

The aggregate loss is mainly comprised of a $12.4 million loss on our sale of equity securities in ADNOC Drilling, of which $8.4 million is associated with the change in the fair value of the investment and $4.0 million relates to transaction fees associated with the sale of the securities.

Additionally, during the three months ended December 31, 2024, we recognized a $1.1 million loss on our equity investment in Tamboran Corp.

as a result of a decrease in the fair market value of the stock.

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

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

Gain on Investment Securities During the three months ended March 31, 2025, we recognized an aggregate gain of $27.8 million on investment securities.

The aggregate gain primarily consisted of $14.4 million, $10.2 million, and $3.2 million of gains on various geothermal equity investments, our investment in Galileo, and our investment in Tamboran, respectively, due to changes in the fair value of the investments.

During the three months ended March 31, 2024, we recognized a gain of $3.7 million on investment securities.

The gain was mainly due to a $8.3 million gain on our equity investment in ADNOC Drilling, partially offset against a $4.5 million loss on our investment in Tamboran Corp.;

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

Income Taxes We recorded income tax expense of $21.6 million for the three months ended December 31, 2024 (which includes a discrete tax expense of $0.7 million related to equity compensation) compared to income tax expense of $30.1 million (which includes a discrete tax benefit of $0.9 million related to equity compensation) for the three months ended December 31, 2023.

Our statutory federal income tax rate for fiscal year 2025 is 21.0 percent (before incremental state and foreign taxes).

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Income Taxes For the three months ended March 31, 2025, we recorded income tax expense of $41.5 million compared to income tax expense of $32.2 million for the three months ended March 31, 2024.

Our statutory federal income tax rate for fiscal year 2025 and 2024 is 21.0 percent (before incremental state and foreign taxes).

North America Solutions

Three Months Ended December 31,

Three Months Ended March 31,

(in thousands, except operating statistics) 2025 2024 % Change

4 unchanged sentences

Selling, general and administrative expense 15,484 13,682 13.2

Acquisition transaction costs

Asset impairment charges 1,507 — —

Segment operating income $ 151,943 $ 147,224 3.2

5 unchanged sentences

Average active rigs 4

149 155 (5.0)

Number of active rigs at the end of period 5

11 unchanged sentences

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

Operating Revenues Operating revenues were $598.1 million and $594.3 million in the three months ended December 31, 2024 and 2023, respectively.

The increase in operating revenue was primarily due to higher average pricing levels.

Direct Operating Expenses Direct operating expenses decreased to $332.6 million during the three months ended December 31, 2024 as compared to $338.2 million during the three months ended December 31, 2023.

This decrease was primarily driven by a decrease in per revenue day labor and materials and supplies expense.

Depreciation and Amortization Expense Depreciation and amortization expense increased $1.3 million to $88.3 million during the three months ended December 31, 2024 as compared to $87.0 million during the three months ended December 31, 2023.

The increase is reflective of higher capital expenditures over the last several years.

Operating Revenues Operating revenues were $599.7 million and $613.3 million in the three months ended March 31, 2025 and 2024, respectively.

The decrease in operating revenues was primarily due to lower activity levels partially offset by higher pricing levels.

Direct Operating Expenses Direct operating expenses decreased to $334.1 million during the three months ended March 31, 2025 as compared to $341.9 million during the three months ended March 31, 2024.

This decrease was primarily driven by a decrease in per revenue day materials and supplies expense.

Q2 FY25 FORM 10-Q | 39

Depreciation and Amortization Expense Depreciation and amortization expense decreased $10.4 million to $87.2 million during the three months ended March 31, 2025 as compared to $97.6 million during the three months ended March 31, 2024.

The decrease was primarily driven by $7.3 million of accelerated depreciation recognized during the three months ended March 31, 2024 for components on rigs that were scheduled for conversion.

Asset Impairment Charges During the three months ended March 31, 2025, we identified a domestic drilling rig that met the asset held-for-sale criteria.

The rig's net book value of $1.7 million The rig's net book value of $1.7 million was written down to its estimated scrap value of $0.2 million, resulting in a non-cash impairment charge of $1.5 million in our North America Solutions segment during the three and six months ended March 31, 2025.

International Solutions

Three Months Ended December 31,

Three Months Ended March 31,

(in thousands, except operating statistics) 2025

2024 % Change

Operating revenues $ 247,909 $ 45,878 440.4 %

Direct operating expenses 220,983 37,013 497.0

Depreciation and amortization 57,153 2,418 2,263.6

Selling, general and administrative expense 4,546 2,377 91.2

Acquisition transaction costs

Segment operating income (loss)

$ (34,983) $ 4,070 (959.5)

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

$ 26,926 $ 8,865 203.7

Revenue days 3

6,198 1,038 497.1

Average active rigs 4

Number of active rigs at the end of period 5

Number of available rigs at the end of period 153 22 595.5

Reimbursements of "out-of-pocket" expenses $ 8,470 $ 1,964 331.3

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

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

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

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

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

(4) Active rigs generate revenue for the Company;

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

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 90 days).

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

Operating Revenues Operating revenues were $247.9 million and $45.9 million in the three months ended March 31, 2025 and 2024, respectively.

The $202.0 million increase in operating revenues was primarily driven by an additional $181.2 million in revenue generated from expanded operations following the Acquisition and increased FlexRig ® activity levels in Saudi Arabia from the commencement of operations for rigs previously awarded during fiscal year 2024.

Direct Operating Expenses Direct operating expenses increased to $221.0 million during the three months ended March 31, 2025 as compared to $37.0 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $146.3 million in direct operating expenses during the three months ended March 31, 2025 and a result of start up costs associated with our increased FlexRig ® activity levels in Saudi Arabia from the commencement of operations for rigs previously awarded during fiscal year 2024..

Depreciation and Amortization Expense Depreciation expense increased to $57.2 million during the three months ended March 31, 2025 compared to $2.4 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $49.5 million in depreciation and amortization expense during the three months ended March 31, 2025.

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Offshore Solutions

Three Months Ended March 31,

(in thousands, except operating statistics) 2025 2024 % Change

1 unchanged sentence

Direct operating expenses 122,904 23,010 434.1

Depreciation and amortization 7,777 1,941 300.7

Selling, general and administrative expense 964 884 9.0

Acquisition transaction costs

Segment operating income

$ 17,375 $ 78 22,175.6

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

$ 26,176 $ 2,903 801.7

Revenue days 3

270 273 (1.1)

Average active rigs 4

Number of active rigs at the end of period 5

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

Reimbursements of "out-of-pocket" expenses $ 26,936 $ 8,857 204.1

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

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

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

(4) Active rigs generate revenue for the Company;

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

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 90 days).

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

Operating Revenues Operating revenues were $149.1 million and $25.9 million in the three months ended March 31, 2025 and 2024, respectively.

The $123.2 million increase in operating revenues was primarily driven by an additional $122.7 million in revenue generated from expanded operations following the Acquisition.

Direct Operating Expenses Direct operating expenses increased to $122.9 million during the three months ended March 31, 2025 as compared to $23.0 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $102.2 million in direct operating expenses during the three months ended March 31, 2025.

Depreciation and Amortization Expense Depreciation expense increased to $7.8 million during the three months ended March 31, 2025 compared to $1.9 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $6.1 million in depreciation and amortization expense during the three months ended March 31, 2025.

Other Operations

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

Three Months Ended March 31,

(in thousands) 2025 2024 % Change

Operating revenues $ 45,524 $ 18,559 145.3 %

Direct operating expenses 43,088 14,910 189.0

Depreciation 1,531 475 222.3

Selling, general and administrative expense 2,259 389 480.7

Acquisition transaction costs

Operating income (loss)

$ (1,375) $ 2,785 (149.4)

Q2 FY25 FORM 10-Q | 41

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

Operating revenues of $45.5 million and $18.6 million during the three months ended March 31, 2025 and 2024, respectively, primarily consisted of $17.9 million and $15.8 million, respectively, in intercompany premium revenues recorded by the Captives.

These revenues were eliminated upon consolidation.

During the three months ended March 31, 2025, operating revenues also consisted of $24.7 million from Kenera's manufacturing and engineering operations.

Of which, $7.9 million is related to intercompany revenues that were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses of $43.1 million and $14.9 million during the three months ended March 31, 2025 and 2024, respectively, primarily consisted of $10.3 million and $1.6 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $11.2 million and $9.9 million, respectively, and medical stop loss expenses of $5.2 million and $3.2 million, respectively.

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

During the three months ended March 31, 2025, direct operating expenses also consisted of $12.2 million from Kenera's manufacturing and engineering operations.

Results of Operations for the Six Months Ended March 31, 2025 and 2024

It is important to note that results presented for the six months ended March 31, 2025 reflect a full 182 days of H&P operations and 75 days of KCA Deutag operations, as the Acquisition was completed on January 16, 2025.

Consolidated Results of Operations

Net Income We reported income of $56.4 million ($0.56 per diluted share) for the six months ended March 31, 2025 compared to income of $180.0 million ($1.79 per diluted share) for the six months ended March 31, 2024.

Operating Revenue Consolidated operating revenues were $1.7 billion and $1.4 billion for the six months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $320.6 million of revenue during the six months ended March 31, 2025.

Direct Operating Expenses, Excluding Depreciation and Amortization Direct operating expenses were $1.1 billion and $804.9 million for the six months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $260.7 million in direct operating expenses during the six months ended March 31, 2025.

Depreciation and Amortization Expense Depreciation and amortization expense increased to $256.7 million during the six months ended March 31, 2025 compared to $198.5 million during the six months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $57.1 million in depreciation and amortization expense during the six months ended March 31, 2025.

Selling, General and Administrative Expense Selling, general and administrative expenses increased to $143.9 million during the six months ended March 31, 2025 compared to $117.8 million during the six months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $19.6 million in selling, general and administrative expenses during the six months ended March 31, 2025.

Acquisition Transaction Costs During the six months ended March 31, 2025 and 2024, we recognized approximately $40.4 million and $0.9 million, respectively, in acquisition transaction costs associated with the Acquisition.

These non-recurring costs are primarily related to third-party legal and advisory services.

See Note 3—Business Combination for additional details related to the Acquisition.

Interest Expense Interest expenses were $50.6 million and $8.6 million for the six months ended March 31, 2025 and 2024, respectively.

The increase was primarily driven by accrued interest associated with our September 2024 senior notes offering and Term Loan Credit Agreement.

See Note 6—Debt for additional details related to our debt agreements.

Gain (Loss) on Investment Securities During the six months ended March 31, 2025, we recognized an aggregate gain of $14.4 million on investment securities.

The aggregate gain consisted of $14.4 million, $10.2 million and $2.1 million of gains on various geothermal equity investments, our investment in Galileo, and our investment in Tamboran, respectively, due to changes in the fair value of the investments.

The gain was partially offset by a $12.4 million loss on our sale of equity securities in ADNOC Drilling, of which $8.4 million is associated with the change in the fair value of the investment and $4.0 million relates to transaction fees associated with the sale of the securities.

During the six months ended March 31, 2024, we recognized an aggregate loss of $0.3 million on investment securities.

The loss was primarily due to a $2.1 million loss on our equity investment in ADNOC Drilling, partially offset by a $1.8 million gain on our investment in Tamboran Corp.;

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

Q2 FY25 FORM 10-Q | 42

Income Taxes For the six months ended March 31, 2025 we had income tax expense of $63.1 million (which includes a discrete tax expense of $0.7 million primarily related to equity compensation) compared to income tax expense of $62.3 million (which includes a discrete tax benefit of $0.9 million related to equity compensation) for the six months ended March 31, 2024.

Our statutory federal income tax rate for fiscal year 2025 and 2024 is 21.0 percent (before incremental state and foreign taxes).

North America Solutions

Six Months Ended March 31,

(in thousands, except operating statistics) 2025 2024 % Change

Operating revenues $ 1,197,839 $ 1,207,621 (0.8) %

Direct operating expenses 666,420 680,138 (2.0)

Depreciation and amortization 175,487 184,592 (4.9)

Research and development 18,943 21,695 (12.7)

Selling, general and administrative expense 31,294 29,573 5.8

Acquisition transaction costs

Asset impairment charges 1,507 — —

Segment operating income $ 304,154 $ 291,623 4.3

Financial Data and Other Operating Statistics 1 :

Direct margin (Non-GAAP) 2

531,419 527,483 0.7

Revenue days 3

27,123 27,834 (2.6)

Average active rigs 4

149 152 (2.0)

Number of active rigs at the end of period 5

150 152 (1.3)

Number of available rigs at the end of period 224 233 (3.9)

Reimbursements of "out-of-pocket" expenses $ 146,034 $ 143,312 1.9

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

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

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

(4) Active rigs generate revenue for the Company;

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

This metric is calculated by dividing revenue days by total days in the applicable period (i.e., 182 days).

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

Operating Revenues During the six months ended March 31, 2025, operating revenue decreased by $9.8 million compared to the same period in 2024.

This decrease was mainly driven by reduced activity levels, although it was partially offset by an increase in ancillary service revenues.

Direct Operating Expenses Direct operating expenses decreased to $666.4 million during the six months ended March 31, 2025 as compared to $680.1 million during the six months ended March 31, 2024.

This decrease was primarily driven by a decrease in rig activity.

Depreciation and Amortization Expense Depreciation and amortization expense increased to $175.5 million during the six months ended March 31, 2025 as compared to $184.6 million during the six months ended March 31, 2024.

The decrease was primarily driven by $8.2 million of accelerated depreciation recognized during the six months ended March 31, 2024 for components on rigs that were scheduled for conversion.

Asset Impairment Charges During the six months ended March 31, 2025, we identified a domestic drilling rig that met the asset held-for-sale criteria.

The rig's net book value of $1.7 million was written down to its estimated scrap value of $0.2 million, resulting in a non-cash impairment charge of $1.5 million in our North America Solutions segment during the three and six months ended March 31, 2025.

Q2 FY25 FORM 10-Q | 43

International Solutions

Six Months Ended March 31,

(in thousands, except operating statistics) 2025 2024 % Change

Operating revenues $ 295,389 $ 100,630 193.5 %

Direct operating expenses 275,411 79,671 245.7

Depreciation and amortization 61,981 4,752 1,204.3

Selling, general and administrative expense 7,254 4,853 49.5

Acquisition transaction costs

Segment operating income (loss)

$ (49,467) $ 11,354 (535.7)

Financial Data and Other Operating Statistics 1 :

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

Operating Revenues Operating revenues were $47.5 million and $54.8 million in the three months ended December 31, 2024 and 2023, respectively.

The $7.3 million decrease in operating revenues was primarily due to no revenue producing activities in Colombia and United Arab Emirates partially offset by the commencement of operations in Saudi Arabia during three months ended December 31, 2024.

Direct Operating Expenses Direct operating expenses increased to $55.1 million during the three months ended December 31, 2024 as compared to $44.5 million during the three months ended December 31, 2023.

This increase was primarily driven by start-up costs associated with our commencement of operations in Saudi Arabia.

Operating Revenues Operating revenues were $295.4 million and $100.6 million in the six months ended March 31, 2025 and 2024, respectively.

The $194.8 million increase in operating revenues was primarily driven by an additional $181.2 million in revenue generated from expanded operations following the Acquisition and increased FlexRig ® activity levels in Saudi Arabia from the commencement of operations for rigs previously awarded during fiscal year 2024.

Direct Operating Expenses Direct operating expenses increased to $275.4 million during the six months ended March 31, 2025 as compared to $79.7 million during the six months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $146.3 million in direct operating expense during the six months ended March 31, 2025 and a result of start up costs associated with our increased FlexRig ® activity levels in Saudi Arabia from the commencement of operations for rigs previously awarded during fiscal year 2024.

Depreciation and Amortization Expense Depreciation expense increased to $62.0 million during the six months ended March 31, 2025 compared to $4.8 million during the six months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $49.5 million in depreciation and amortization expense during the six months ended March 31, 2025.

Q2 FY25 FORM 10-Q | 44

Offshore Gulf of Mexico

Three Months Ended December 31,

Offshore Solutions

Six Months Ended March 31,

(in thousands, except operating statistics) 2025 2024 % Change

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Direct operating expenses 145,565 42,589 241.8

Depreciation 1,980 2,068 (4.3)

Depreciation and amortization 9,757 4,009 143.4

Selling, general and administrative expense 2,028 1,716 18.2

Acquisition transaction costs

Segment operating income $ 20,880 $ 3,130 567.1

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

Operating Revenues Operating revenues were $29.2 million and $25.5 million in the three months ended December 31, 2024 and 2023, respectively.

The $3.7 million increase in operating revenue was primarily due to higher pricing levels.

Direct Operating Expenses Direct operating expenses increased to $22.7 million during the three months ended December 31, 2024 as compared to $19.6 million during the three months ended December 31, 2023.

This increase was primarily driven by a $3.1 million increase in labor and labor-related expenses.

Operating Revenues Operating revenues were $178.3 million and $51.4 million in the six months ended March 31, 2025 and 2024, respectively.

The $126.8 million increase in operating revenues was primarily driven by an additional $122.7 million in revenue generated from expanded operations following the Acquisition.

Direct Operating Expenses Direct operating expenses increased to $145.6 million during the six months ended March 31, 2025 as compared to $42.6 million during the six months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $102.2 million in direct operating expense during the six months ended March 31, 2025.

Depreciation and Amortization Expense Depreciation expense increased to $9.8 million during the six months ended March 31, 2025 compared to $4.0 million during the three months ended March 31, 2024.

The increase was primarily driven by the completion of the Acquisition, resulting in an additional $6.1 million in depreciation and amortization expense during the six months ended March 31, 2025.

Other Operations

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

Three Months Ended December 31,

Six Months Ended March 31,

(in thousands) 2025 2024 % Change

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Selling, general and administrative expense 2,628 703 273.8

Acquisition transaction costs

Operating income (loss)

$ (601) $ 2,718 (122.1)

Q2 FY25 FORM 10-Q | 45

Operating revenues of $19.3 million and $17.8 million during the three months ended December 31, 2024 and 2023, respectively, primarily consisted of $16.6 million and $15.2 million, respectively, in intercompany premium revenues recorded by the Captives.

Operating revenues of $64.8 million and $36.4 million during the six months ended March 31, 2025 and 2024, respectively, primarily consisted of $34.5 million and $31.0 million, respectively, in intercompany premium revenues recorded by the Captives.

These revenues were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses of $17.7 million and $17.1 million during the three months ended December 31, 2024 and 2023, respectively, primarily consisted of $3.9 million and $3.5 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $10.5 million and $9.1 million, respectively, and medical stop loss expenses of $5.2 million and $4.1 million, respectively.

During the six months ended March 31, 2025, operating revenues also consisted of $24.7 million from Kenera's manufacturing and engineering operations.

Of which, $7.9 million is related to intercompany revenues that were eliminated upon consolidation.

Direct Operating Expenses Direct operating expenses of $60.8 million and $32.0 million during the six months ended March 31, 2025 and 2024, respectively, primarily consisted of $14.2 million and $5.1 million, respectively, in adjustments to accruals for estimated losses allocated to the Captives, rig and casualty insurance premiums of $21.7 million and $19.0 million, respectively, and medical stop loss expenses of $10.4 million and $7.3 million, respectively.

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

Q1 FY25 FORM 10-Q | 33

During the six months ended March 31, 2025, direct operating expenses also consisted of $12.2 million from Kenera's manufacturing and engineering operations.

Liquidity and Capital Resources

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Our sources of available liquidity include existing cash balances on hand, cash flows from operations, and availability under the Amended Credit Facility.

Our liquidity requirements include meeting ongoing working capital needs, funding our capital expenditure projects, paying dividends declared, repaying our outstanding indebtedness, and funding the pending acquisition of KCA Deutag.

Historically, we have financed operations primarily through internally generated cash flows.

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

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

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

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

Net working capital (defined as current assets less current liabilities) was $789.1 million and $745.1 million as of December 31, 2024 and September 30, 2024, respectively.

As of December 31, 2024, we had cash and cash equivalents of $391.2 million, restricted cash of $1.3 billion and short-term investments of $135.3 million.

Our cash flows for the three months ended December 31, 2024, and 2023 are presented below:

Three Months Ended December 31,

Net working capital (defined as current assets less current liabilities) was $605.6 million and $745.1 million as of March 31, 2025 and September 30, 2024, respectively.

As of March 31, 2025, we had cash and cash equivalents of $174.8 million, restricted cash of $70.3 million and short-term investments of $20.8 million.

Our cash flows for the six months ended March 31, 2025, and 2024 are presented below:

Six Months Ended March 31,

(in thousands) 2025 2024

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Financing activities 311,107 (148,099)

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

Effect of exchange rate changes on cash, cash equivalents and restricted cash 6,406 —

Net decrease in cash, cash equivalents and restricted cash

$ (1,283,606) $ (54,055)

Q2 FY25 FORM 10-Q | 46

Operating Activities

Cash flows provided by operating activities were approximately $158.4 million and $174.8 million for the three months ended December 31, 2024 and 2023, respectively.

The change in cash provided by operating activities is primarily driven by start-up costs associated with our commencement of our operations in Saudi Arabia.

Cash flows provided by operating activities were approximately $214.4 million and $318.5 million for the six months ended March 31, 2025 and 2024, respectively.

The change in cash provided by operating activities is primarily driven by start-up costs associated with our commencement of our operations in Saudi Arabia and acquisition transaction costs associated with the Acquisition.

Investing Activities

Capital Expenditures Our capital expenditures during the three months ended December 31, 2024 were $106.5 million compared to $136.4 million during the three months ended December 31, 2023.

The decrease in capital expenditures is driven by the timing of procurement associated with equipment overhauls and certain long-term projects including skidding to walking rig conversions.

Net Sales of Short-Term Investments Our net sales of short-term investments during the three months ended December 31, 2024 were $147.0 million compared to net sales of $11.7 million during the three months ended December 31, 2023.

The change in activity is primarily driven by $193.3 million of net proceeds received from the liquidation of shares in ADNOC Drilling and our ongoing liquidity management.

Q1 FY25 FORM 10-Q | 34

Sale of Assets Our proceeds from asset sales during the three months ended December 31, 2024 were $12.1 million compared to proceeds of $11.9 million during the three months ended December 31, 2023.

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

Capital Expenditures Our capital expenditures during the six months ended March 31, 2025 were $265.2 million compared to $254.7 million during the six months ended March 31, 2024.

The increase in capital expenditures is driven by the completion of the Acquisition, resulting in an additional $42.5 million of capital expenditures during the six months ended March 31, 2025.

Net Sales of Short-Term Investments Our net sales of short-term investments during the six months ended March 31, 2025 were $261.6 million compared to net sales of $12.4 million during the six months ended March 31, 2024.

The increase in activity is primarily driven by $193.3 million of net proceeds received from the liquidation of shares in ADNOC Drilling and our ongoing liquidity management.

Payment for the Acquisition of Business, Net of Cash Received During the six months ended March 31, 2025, H&P completed the Acquisition by paying approximately $2.0 billion in cash.

This included acquiring $196.7 million in cash and cash equivalents, resulting in a net cash payment of $1.8 billion.

For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination.

Sale of Assets Our proceeds from asset sales during the six months ended March 31, 2025 were $26.1 million compared to proceeds of $20.9 million during the six months ended March 31, 2024.

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

Financing Activities

Dividends We paid a cash dividend of $0.25 per share during the three months ended December 31, 2024.

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

Total dividends paid were $25.0 million and $42.3 million during the three months ended December 31, 2024 and 2023, respectively.

Dividends We paid cash dividends of $0.50 per share during the six months ended March 31, 2025.

Comparatively, during the six months ended March 31, 2024, we paid dividends of $0.84 per share, comprising of a base cash dividend of $0.50 and a supplemental cash dividend of $0.34.

Total dividends paid were $50.3 million and $84.4 million during the six months ended March 31, 2025 and 2024, respectively.

Debt Issuance Proceeds and Payment On January 16, 2025, we received $400.0 million of proceeds from the Term Loan Credit Agreement.

During the three months ended March 31, 2025, the Company repaid $25.0 million of the outstanding balance on the Term Loan Credit Agreement.

For additional information regarding debt issuance and repayment, refer to Note 6—Debt.

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

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

We did not make any share repurchases during the three months ended December 31, 2024.

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

We did not make any share repurchases during the six months ended March 31, 2025.

We repurchased 1.4 million common shares at an aggregate cost of $51.6 million, including excise tax of $0.3 million during the six months ended March 31, 2024.

Senior Notes Issued in Fiscal Year 2024

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On January 16, 2025, H&P completed the Acquisition, and the Company used the net proceeds of the Notes, together with the proceeds of its term loan credit agreement (discussed below) and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag’s outstanding indebtedness, and to pay related fees and expenses.

For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events.

The net proceeds reduced the commitments under the Company’s Bridge Loan Facility (discussed herein) for purposes of financing the Acquisition.

For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination.

The net proceeds reduced the commitments under the Company’s Bridge Loan Facility (refer to Note 6—Debt for additional information regarding the Bridge Loan Facility) for purposes of financing the Acquisition.

Q2 FY25 FORM 10-Q | 47

In connection with the issuance of the Notes, the Company also entered into a registration rights agreement, dated as of September 17, 2024 (the "Registration Rights Agreement"), with the initial purchasers of the Notes named therein.

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

Q1 FY25 FORM 10-Q | 35

Senior Notes Issued in Fiscal Year 2021

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

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

persons in transactions outside the United States pursuant to Regulation S under the Securities Act.

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Term Loan Credit Agreement

On August 14, 2024, the Company entered into a unsecured term loan credit agreement (the "Term Loan Credit Agreement"), dated as of August 14, 2024, among the Company, Morgan Stanley Senior Funding, Inc.

On August 14, 2024, the Company entered into an unsecured term loan credit agreement (the "Term Loan Credit Agreement"), dated as of August 14, 2024, among the Company, Morgan Stanley Senior Funding, Inc.

(“MSSF”) as administrative agent, and the other lenders party thereto.

Under the Term Loan Credit Agreement, the Company may obtain unsecured term loans in a single delayed draw in an aggregate principal amount up to $400.0 million, which reduced the commitments under the Company's Bridge Loan Facility (discussed herein) for purposes of financing the Acquisition.

On the Closing Date, the Company drew an aggregate principal amount of $400.0 million, which reduced the commitments under the Company's bridge loan facility (refer to Note 6—Debt for additional information regarding the Bridge Loan Facility) for purposes of financing the Acquisition.

The Term Loan Credit Agreement matures at the two -year anniversary of the funding of the term loans unless earlier terminated pursuant to the terms of the Term Loan Credit Agreement.

On January 16, 2025, H&P completed the Acquisition, and the Company used the proceeds from the Term Loan Credit Agreement, together with the net proceeds from the Notes, and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag's outstanding indebtedness, and to pay related fees and expenses.

For additional information regarding the completion of the Acquisition, refer to Note 3—Business Combination.

During the three months ended March 31, 2025, the Company repaid $25.0 million of the outstanding balance on the Term Loan Credit Agreement.

As such, the outstanding balance as of March 31, 2025, was $375.0 million .

Q2 FY25 FORM 10-Q | 48

The benchmark rate is the Secured Overnight Financing Rate ("SOFR").

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Commitment fees for both rates range from 0.10 percent to 0.250 percent per annum.

Based on the unsecured debt rating of the Company on December 31, 2024 , the spread over SOFR would have been 1.375 percent had borrowings been outstanding under the Term Loan Credit Agreement and commitment fees would have been 0.175 percent.

The funding of the term loans had not occurred as of December 31, 2024.

On January 16, 2025, H&P completed the Acquisition, and the Company used the proceeds from the Term Loan Credit Agreement, together with the net proceeds from the sale of the Notes and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag's outstanding indebtedness, and to pay related fees and expenses.

For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events.

Revolving Credit Facility

Based on the unsecured debt rating of the Company on March 31, 2025, the spread over SOFR was 1.375 percent and commitment fees were 0.175 percent.

As of March 31, 2025 , the interest rate on the Term Loan was 5.660 percent per annum.

The weighted average variable interest rate on all amounts outstanding under the Term Loan was 5.659 percent for the three months ended March 31, 2025 .

2024 Oman Facility

In connection with the completion of the Acquisition, KCA Deutag Energy LLC (“KCAD Energy”) became a wholly-owned subsidiary of the Company.

On April 25, 2024, KCAD Energy entered into the 2024 Oman Facility, which is fully drawn.

The 2024 Oman Facility provides for term loan borrowings of $45.5 million, which bear interest payable quarterly at a fixed rate of 7.00 percent per annum for the first two years and thereafter, at a rate that is the higher of (x) 5.50 percent and (y) the reference rate specified in the 2024 Oman Facility plus 2.60 percent.

During the three months ended March 31, 2025, the Company received the final draw down of $1.4 million and repaid $0.9 million of the outstanding balance on the facility.

Of the $44.8 million borrowings outstanding at March 31, 2025, a total of $3.4 million is payable within one year.

These secured bank loans are wholly denominated in Omani rial.

The value of these borrowings in Omani rial is OMR $17.6 million.

The commitments under the 2024 Oman Facility mature December 31, 2034.

There is an annual financial covenant in the 2024 Oman Facility that requires KCAD Energy to maintain a debt service coverage ratio of at least 1.20:1.00.

The 2024 Oman Facility and related agreements contain additional terms, conditions, restrictions and covenants that we believe are usual and customary in secured debt arrangements for companies of similar size and credit quality.

2023 Oman Facility

In connection with the completion of the Acquisition, KCAD Energy became a wholly-owned subsidiary of the Company.

On June 19, 2023, KCAD Energy entered into the 2023 Oman Facility, which is fully drawn.

The 2023 Oman Facility provides for term loan borrowings of $45.6 million, which bear interest payable quarterly at a fixed rate of 6.25 percent per annum for the first two years and thereafter, at a rate that is the higher of (x) 5.50 percent and (y) the reference rate specified in the 2023 Oman Facility plus 2.79 percent.

During the three months ended March 31, 2025, the Company repaid $0.9 million of the outstanding balance on the facility.

Of the $41.5 million borrowings outstanding at March 31, 2025, a total of $3.4 million is payable within one year.

These secured bank loans are wholly denominated in Omani rial.

The value of these borrowings in Omani rial is OMR $17.6 million.

The commitments under the 2023 Oman Facility mature December 31, 2033.

There is an annual financial covenant in the 2023 Oman Facility that requires KCAD Energy to maintain a debt service coverage ratio of at least 1.20:1.00.

The 2023 Oman Facility and related agreements contain additional terms, conditions, restrictions and covenants that we believe are usual and customary in secured debt arrangements for companies of similar size and credit quality.

Amended Credit Facility

On August 14, 2024, the Company entered into an Amended and Restated Credit Agreement (the "Amended Credit Facility") with the lenders party thereto (the "Revolving Credit Agreement Lenders"), the issuing lenders party thereto and Wells Fargo, National Association ("Wells Fargo") as administrative agent, swing line lender and issuing lender, which amended and restated the Credit Agreement, dated as of November 13, 2018 (as amended through Amendment No.

2 to the Credit Agreement dated as of March 8, 2022, the “Existing Credit Agreement”), among the Company, the lenders party thereto and Wells Fargo, as administrative agent, swing line lender and issuing lender.

Under the terms of the Amended Credit Facility, the Company may obtain unsecured revolving loans in an aggregate principal amount not to exceed $950.0 million outstanding at any time (the “Revolving Credit Facility”).

$775.0 million of the revolving commitments under the Amended Credit Facility expire on November 12, 2028 and $175.0 million of the revolving commitments mature on November 10, 2027 (the “Stated Maturity Date”), but the Company may request two one-year extensions of the Stated Maturity Date, subject to satisfaction of certain conditions.

Under the terms of the Amended Credit Facility, the Company may obtain unsecured revolving loans in an aggregate principal amount not to exceed $950.0 million outstanding at any time.

$775.0 million of the revolving commitments under the Amended Credit Facility expire on November 12, 2028 and $175.0 million of the revolving commitments mature on November 10, 2027 (the “Stated Maturity Date”), but the Company may request 2 one-year extensions of the Stated Maturity Date, subject to satisfaction of certain conditions.

Commitments under the Amended Credit Facility may be increased by up to $100.0 million, subject to the agreement of the Company and new or existing Revolving Credit Agreement Lenders.

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Commitment fees for both rates range from 0.075 percent to 0.200 percent per annum.

Based on the unsecured debt rating of the Company on December 31, 2024, the spread over SOFR would have been 1.250 percent had borrowings been outstanding under the Amended Credit Facility and commitment fees would have been 0.150 percent.

Based on the unsecured debt rating of the Company on March 31, 2025, the spread over SOFR would have been 1.25 percent had borrowings been outstanding under the Amended Credit Facility and commitment fees would have been 0.15 percent.

There is a financial covenant in the Amended Credit Facility that requires us to maintain a total funded debt to total capitalization ratio of less than or equal to 55.0 percent.

The Amended Credit Facility contains additional terms, conditions, restrictions and covenants that we believe are usual and customary in unsecured debt arrangements for companies of similar size and credit quality, including a limitation that priority debt (as defined in the credit agreement) may not exceed 17.5 percent of the net worth of the Company.

As of December 31, 2024, there were no borrowings or letters of credit outstanding, leaving $950.0 million available to borrow under the Amended Credit Facility.

As of December 31, 2024, we had $160.0 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 $160.0 million, $47.2 million was outstanding as of December 31, 2024.

As of March 31, 2025, there were no borrowings or letters of credit outstanding, leaving $950.0 million available to borrow under the Amended Credit Facility.

As of March 31, 2025, we had $375.0 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 $375.0 million, $153.4 million was outstanding as of March 31, 2025.

Separately, we had $47.1 million in standby letters of credit and bank guarantees outstanding.

In total, we had $52.2 million outstanding as of December 31, 2024.

In total, we had $200.5 million outstanding as of March 31, 2025.

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

At March 31, 2025, we were in compliance with all debt covenants.

Future Cash Requirements

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If needed, we may decide to obtain additional funding from our $950.0 million Amended Credit Facility.

As of December 31, 2024, our indebtedness under our unsecured senior notes totaled $1.8 billion and comprised with the following maturities:

Our indebtedness under our unsecured senior notes totaled $1.8 billion at March 31, 2025 and comprised of the following maturities:

$350.0 million due December 2027, $350.0 million due December 2029, $550.0 million due September 2031, and $550.0 million due December 2034.

As of December 31, 2024, we had a $485.7 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

Our indebtedness under our unsecured term loan credit agreement totaled $375.0 million at March 31, 2025 and matures in January 2027.

Our indebtedness under our secured term loan credit agreements totaled $86.3 million at March 31, 2025, of which $6.8 million is due within one year, and the remaining balance is comprised of the following maturities:

$38.1 million due December 2033 and $41.4 million due December 2034.

This debt is allocated specifically to finance the ongoing rig construction activities in Oman.

As of March 31, 2025, we had a $646.2 million deferred tax liability on our Unaudited Condensed Consolidated Balance Sheets, primarily related to temporary differences between the financial and income tax basis of property, plant and equipment.

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

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

As of December 31, 2024, we have recorded unrecognized tax benefits and related interest and penalties of approximately $0.6 million.

Subsequent to December 31, 2024, we drew $400.0 million from the Term Loan Credit Agreement and the Company used the proceeds from the Term Loan Credit Agreement, together with the net proceeds from the sale of the Notes and cash on hand, to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag's outstanding indebtedness, and to pay related fees and expenses.

We utilized approximately $2.0 billion of cash, cash equivalents, and restricted cash to finance the purchase price for the Acquisition, to repay or redeem certain of KCA Deutag’s outstanding indebtedness, and to pay related fees and expenses.

For additional information regarding the completion of the Acquisition, refer to Note 14—Subsequent Events.

As of March 31, 2025, we have recorded unrecognized tax benefits and related interest and penalties of approximately $23.9 million.

Material Commitments

Material commitments as reported in our 2024 Annual Report on Form 10-K have not changed significantly as of December 31, 2024, other than those disclosed in Note 12—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

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Material commitments as reported in our 2024 Annual Report on Form 10-K have not changed significantly as of March 31, 2025, other than those disclosed in Note 3—Business Combination, Note 6—Debt, and Note 13—Commitments and Contingencies to the Unaudited Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our accounting policies and estimates that are critical or the most important to understand our financial condition and results of operations, and that require management to make the most difficult judgments, are described in our 2024 Annual Report on Form 10-K.

There have been no material changes in these critical accounting policies and estimates.

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Fair Value Estimates in Business Combination Accounting

In addition to the critical accounting policies and estimates previously disclosed, due to the Acquisition, we also consider estimates used in applying the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations , to be part of our critical accounting policies and estimates due to the high degree of judgment and complexity in its application.

The acquisition method of accounting involves the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed.

This allocation process involves the use of estimates and assumptions made in connection with estimating the fair value of assets acquired and liabilities assumed including cash flows expected to be derived from the use of the asset, the timing of such cash flows, the remaining useful life of assets, estimated asset replacement costs, and applicable discount rates.

Acquisition accounting allows for up to one year to obtain the information necessary to finalize the fair value of all assets acquired and liabilities assumed at January 16, 2025.

Refer to Note 3—Business Combination to the accompanying condensed consolidated financial statements for additional information about accounting for the Acquisition.

Based on management's evaluation, there have been no material changes in these critical accounting policies and estimates.

Recently Issued Accounting Standards

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GAAP that is most directly comparable to direct margin.

Three Months Ended

December 31, December 31,

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Three Months Ended Six Months Ended

March 31, March 31, March 31, March 31,

(in thousands) 2025 2024 2025 2024

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Selling, general and administrative expense 15,484 13,682 31,294 29,573

Acquisition transaction costs

Asset impairment charges

1,507 — 1,507 —

Direct margin (Non-GAAP) $ 265,621 $ 271,451 $ 531,419 $ 527,483

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Selling, general and administrative expense 4,546 2,377 7,254 4,853

Acquisition transaction costs

Direct margin (Non-GAAP) $ 26,926 $ 8,865 $ 19,978 $ 20,959

OFFSHORE GULF OF MEXICO

OFFSHORE SOLUTIONS

Segment operating income $ 17,375 $ 78 $ 20,880 $ 3,130

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Selling, general and administrative expense 964 884 2,028 1,716

Acquisition transaction costs

Direct margin (Non-GAAP) $ 26,176 $ 2,903 $ 32,725 $ 8,855

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis