Q4 2021 Helmerich and Payne Inc Earnings Call

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Good day, everyone and welcome to today's homework and pain fiscal fourth quarter earnings call. At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session he'd be registered to ask a question at any time by pressing the star one on your Touchtone phone.

Speaker 1: Good day, everyone, and welcome to today's Homework and Paying Fiscal Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the star and 1 on your touchtone phone. Please note this call may be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Dave Wilson, Vice President of Investor Relations.

Please note this call maybe recorded and I will be standing by should you need any assistance and it's now my pleasure to turn today's program over to Dave Wilson, Vice President of Investor Relations.

Okay.

Thank you Britney and welcome everyone to Helmerich, <unk> Payne conference call and webcast for the fourth quarter and fiscal year ended 2021.

Speaker 2: Thank you, Brittany, and welcome everyone to Humber Campaign's conference call and webcast for the fourth quarter and fiscal year ended 2021.

Here today are John Lindsay, President and CEO, and Mark Smith, Senior Vice President and CFO, and John <unk> Senior Vice President International and offshore operations, John Lindsay and Mark will be sharing some comments with us after which we'll open the call for questions before.

Speaker 2: With us today are John Lindsay, President and CEO , Mark and Mark Smith, Senior Vice President and CFO , and John Bell, Senior Vice President, International and Offshore Operations.

Speaker 2: John Lindsay and Mark will be sharing some comments with us, after which we'll open the call for questions.

Before we begin our prepared remarks, I'll remind everyone that this call will include forward looking statements as defined in securities laws.

Speaker 2: Before we begin our prepared remarks, I'll remind everyone that this call will include forward-looking statements as defined under the securities laws. Such statements are based upon current information and management's expectations as of this date and are not guarantees of future performance.

Payments are based upon current information and management's expectations as of this date and are not guarantees of future performance.

Looking statements involve certain risks uncertainties and assumptions that are difficult to predict.

Speaker 2: Forelooking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our outcomes and results could differ materially.

Actual outcomes and results could you could differ materially.

Can learn more about these risks in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our other SEC filings you should not place any undue reliance on forward looking statements and we undertake no obligation to publicly update these forward looking statements.

Speaker 2: You can learn more about these risks in our annual report on Form 10-K , our quarterly reports on Form 10-Q , and our other SEC filings. You should not place any undue reliance on forward-looking statements, and we undertake no obligation to publicly update these forward-looking statements.

We will also be making reference to certain non-GAAP financial measures such as segment operating income and other operating statistics, you'll find the GAAP reconciliation comments and calculations in yesterday's press release with that said I'll turn the call over to John Lindsay.

Speaker 2: We will also be making reference to certain non-GAAP financial measures such as segment operating income and other operating statistics. You'll find the GAAP reconciliation comments and calculations in yesterday's press release. With that said, I'll turn the

Yeah.

Thank you Dave Good morning, everyone and thank you for joining us today.

Speaker 3: Thank you, Dave. Good morning, everyone, and thank you for joining us today.

I'm excited to be in Abu Dhabi. This week, having just participated in the Adam Peck Conference, which has provided a unique occasion to meet face to face with colleagues customers and of course, our strong partner add not drilling.

Speaker 3: I'm excited to be in Abu Dhabi this week, having just participated in the ADIPAC conference, which has provided a unique occasion to meet face-to-face with colleagues, customers, and of course, our strong partner, ADNOC Drilling.

Also joining mark and me today in Abu Dhabi, as Jon Bell Senior Vice President International and offshore operations.

Speaker 3: Also joining Mark and me today in Abu Dhabi is John Bell, Senior Vice President, International and Offshore Operations, and he'll be available for international and ADNOC-specific questions.

And he'll be available for international and Aetna specific questions.

Before getting into our traditional discussion topics I wanted to first mention that.

Speaker 3: Before getting into our traditional discussion topics, I wanted to first mention that ADAPEC, which is a global energy conference in Abu Dhabi, and this week there was over 150,000 attendees, 33 energy ministers, and representatives from over 50 energy companies.

<unk>, which is a global energy conference in Abu Dhabi.

And this week there was over 150000 attendees 33 energy ministers and representatives from over 50 energy companies.

I've been impressed with the focus on ESG and especially the discussion of the impacts on energy security for the globe.

Speaker 3: I've been impressed with the focus on ESG and especially the discussions of the impacts on energy security for the globe.

In addition to industry leaders sharing their focus on sustainability and ESG.

Speaker 3: In addition to industry leaders sharing their focus on sustainability and ESG,

There were also leaders of countries from around the globe that were present to give their perspectives on the energy transition.

Speaker 3: There were also leaders of countries from around the globe that were present to give their perspectives on the energy transition and the importance of ongoing investments to ensure a smooth transition.

And the importance of ongoing investments to ensure a smooth transition.

Dr Sultan Al Jabber.

Speaker 3: Dr. Sultan Al-Jaber, the ADNOC Group CEO and UAE Minister of Industry and Advanced Technology,

And our group CEO and UAE minister of industry and advanced technology.

Gave a very compelling speech at FX opening ceremony.

Speaker 3: gave a very compelling speech at ADIPEC's opening ceremony.

He started with a reminder, that energy transitions take multiple decades.

Speaker 3: He started with a reminder that energy transitions take multiple decades.

And I quote <unk>.

Wiring the energy system is a multi trillion dollar business opportunity that is good for humanity.

Speaker 3: And I quote, rewiring the energy system is a multi-trillion dollar business opportunity that is good for humanity and good for economic growth.

And good for economic growth.

He also had a call to action, stating that the world really needs us to hold back emissions not progress.

Speaker 3: He also had a call to action, stating, what the world really needs is to hold back emissions, not progress. Let us, together,

Let us together drive that progress.

Let us always keep in mind, our industry must play a pivotal role in the energy transition.

Speaker 3: Let us always keep in mind our industry must play a pivotal role in the energy transition.

We have the knowledge.

The skills and the people to make a difference in our world.

Speaker 3: the skills, and the people to make a difference in our world.

Yeah last statement really resonates with me working with our customers to reduce emissions and our collective environmental footprint is a major area of focus for us here at <unk>.

Speaker 3: Now that statement really resonates with me. Working with our customers to reduce emissions and our collective environmental footprint is a major area of focus for us here at H&P.

The strategic Alliance, we signed with <unk> is a great opportunity to deliver rig technology through the sale of eight high spec A&P flex rigs as.

Speaker 3: The strategic alliance we signed with ADNOC is a great opportunity to deliver rig technology through the sale of eight high-spec H&P FlexRigs, as well as to make a significant $100 million investment in their initial public offering.

As well as to make a significant $100 million investment in their initial public offering.

<unk> has a 2030 oil production target of 5 million barrels per day, and a goal to achieve natural gas independence.

Speaker 3: ADNOC has a 2030 oil production target of 5 million barrels per day and a goal to achieve natural gas independence.

We believe HMP can make significant contributions towards helping add not achieve those goals through this this new partnership.

Speaker 3: We believe H&P can make significant contributions towards helping ADNOC achieve those goals through this new partnership.

While also providing additional opportunities for us to expand in this pivotal and growing energy regions.

Speaker 3: while also providing additional opportunities for us to expand in this pivotal and growing energy region.

We're delighted with the reception <unk> has received this week and we want to thank you had not team for their hospitality.

Speaker 3: We're delighted with the reception H&P has received this week, and we want to thank the ADNOC team for their hospitality.

Looking at the rest of our international activity historically, we've experienced a lag compared to the U S. So we are expecting activity to improve in these markets in the coming quarters.

Speaker 3: Looking at the rest of our international activity, historically, we've experienced a lag compared to the U.S., so we are expecting activity to improve in these markets in the coming quarters.

A recent example is a couple of new agreements with Ips.

Speaker 3: A recent example is a couple of new agreements with YPF, as we will put four rigs back to work under term contracts in Argentina during fiscal 2022.

As we will put four rigs back to work under term contracts in Argentina during fiscal 2022.

We continue to pursue other international opportunities and look forward to improving activity.

Speaker 3: We continue to pursue other international opportunities and look forward to improving activity.

Okay.

Shifting to North America solutions. It is hard to believe that a year ago H M. P.

Speaker 3: Shifting to North America's solutions, it is hard to believe that a year ago, H&P had only 80 active ridge run, and today we have 141 active ridge run.

Only 80 active rigs right.

And today, we have 141 active flex rigs.

The response of our people and their leadership through the pandemic has been nothing short of amazing.

Speaker 3: The response of our people and their leadership through the pandemic has been nothing short of amazing.

Particularly impressive as their service attitude and responding to customers as rig demand has been recovering.

Speaker 3: Particularly impressive is their service attitude in responding to customers as rigged demand has been recovering.

Our folks are resilient and deliver on safety efficiency and reliability for our customers each and every day.

Speaker 3: Our folks are resilient and deliver on safety, efficiency, and reliability for our customers each and every day.

We expected that the rig activity increases would be more measured during our fourth fiscal quarter as we realized more rapid rig churn among customers who are sticking to their disciplined spending plans.

Speaker 3: We expected that the rig activity increases would be more measured during our fourth fiscal quarter as we realized more rapid rig churn among customers who are sticking to their disciplined spending plans.

Given that we were pleased with the 5% incremental rig count increase experienced during the quarter.

Speaker 3: Given that, we were pleased with the 5% incremental rig count increase experienced during the quarter and are even more optimistic as we look ahead to the fourth calendar quarter where we expect to see our rig count increase sequentially and at a higher pace as E&Ps reset their annual capital budgets. We believe our customers

And are even more optimistic as we look ahead to the fourth calendar quarter, where we expect to see our rig count increased sequentially and at a higher pace as e&ps reset their annual capital budgets.

We believe our customers will remain disciplined.

And similar to 2021, the budgets for 2022 we'll be at here too, but the new budgets will be reset at higher levels based on a higher commodity price environment, meaning.

Meaning more active rigs in 2022.

As evidenced by our rig count growth to date, we expect our rig count will have a significant increase in calendar Q4 of 'twenty, one and Q1 of 2022.

I mentioned, our U S land rig count stands at 141 rigs today.

Speaker 3: As mentioned, our U.S. land rig count stands at 141 rigs today, up from 127 at September 30, our fiscal year end.

127 at September 30, our fiscal year end.

We expect to add roughly another 10 to 15 rigs by year end of calendar 2021.

Speaker 3: And we expect to add roughly another 10 to 15 rigs by year end of calendar 2021.

To summarize North America solutions.

Calendar.

Speaker 4: during calendar fourth quarter.

The fourth quarter.

We expect to add 25 to 30 rigs.

Speaker 3: We expect to add 25 to 30 rigs.

With that in perspective. This is approximately the same number of rigs we added in the preceding nine months. Further we're also readying several more rigs during the first fiscal quarter that we expect to commence work in the first half of January.

Speaker 3: To put that in perspective, this is approximately the same number of rigs we added in the preceding nine months.

Speaker 3: Further, we are also readying several more rigs during the first fiscal quarter that we expect to commence work in the first half of January .

This activity increase as exciting as our customers are investing in their calendar 2022 budgets.

Speaker 3: This activity increase is exciting as our customers are investing in their calendar 2022 budgets.

It does however cause near term margin compression due to the onetime expenses incurred.

For reactivation.

He will discuss the details more in a moment and I'll add that we are pleased with the future cash generation. These rigs will have will have post reactivation.

Speaker 3: Mark will discuss the details more in a moment, and I'll add that we are pleased with the future cash generation these rigs will have post-reactivation as we return to greater scale operations driving both pricing higher and leveraging our fixed costs.

As we return to greater scale operation is driving both pricing higher and leveraging our fixed costs.

Given the well publicized challenges in what we hope is finally, a post pandemic environment, it's not a it's not surprising to see rig reactivation and field labor cost increasing.

Speaker 3: Given the well-publicized challenges and what we hope is finally a post-pandemic environment, it's not surprising to see rig reactivation and field labor costs increasing.

All of the Super spec rigs that are available to work today had been idle for well over a year.

Speaker 3: All of the superspec rigs that are available to work today have been idled for well over a year, which equates to...

It equates to higher startup cost comp.

Competition for quality people is also escalating.

Speaker 3: Competition for quality people is also escalating, and we will be increasing field labor wages accordingly. And as a reminder, those cost increases are passed through to the customer.

And we will be increasing field labor wages accordingly.

As a reminder, those cost increases are passed through to the customer.

The tightening supply of readily available rigs coupled with these cost increases have already began to move contract pricing effort in the market.

Speaker 3: The tightening supply of readily available rigs coupled with these cost increases have already begun to move contract pricing upward in the market.

Based upon what we're experiencing today, we expect price increases will become even more pronounced in the coming months as.

Speaker 3: Based upon what we are experiencing today, we expect price increases will become even more pronounced in the coming months as rigged demand picks up heading into 2022.

As rig demand takes heading into 'twenty 2022.

Mark will talk about our strong balance sheet in his remarks, but I wanted to mention one of our goals was to generate free cash flow.

Speaker 3: Mark will talk about our strong balance sheet in his remarks, but I wanted to mention one of our goals was to generate free cash flow, and we are encouraged that we believe that is achievable in the back half of 2022 with the rig count and revenue expectations we have.

And we are encouraged that we believe that is achievable in the back half of 2022 with the rig count and revenue expectations, we have.

These market conditions demonstrate further potential for Hmp's, new commercial models and digital technology solutions.

Speaker 3: These market conditions demonstrate further potential for H&P's new commercial models and digital technology solutions.

Our digital technology solutions deliver value through improved efficiencies reliability lower cost.

Speaker 3: Our digital technology solutions deliver value through improved efficiencies, reliability, lower cost, and better quality.

And better overall outcomes.

Today, approximately 35% of our flex rigs are on performance contracts.

Speaker 3: Today, approximately 35% of our flex rigs are on performance contracts, and several customers are experiencing the powerful synergies a combination of performance contracts and digital technology can deliver.

Several customers are experiencing the powerful synergies of combination of performance contracts and digital technology can deliver.

Adoption continues to improve and is driving economic returns higher not only for our customers, but for ourselves as well.

Speaker 3: Adoption continues to improve and is driving economic returns higher, not only for our customers, but for ourselves as well.

In closing we are encouraged heading into 2022.

Speaker 3: In closing, we are encouraged heading into 2022 and fully expect that the demand for H&P's drilling solutions will continue.

And fully expect that the demand for <unk> drilling solutions will continue.

E&P capital discipline rising commodity prices.

Speaker 3: E&P capital discipline, rising commodity prices, and a collective vision to play our crucial role in a smooth energy transition will strengthen the industry.

And our collective vision to play a crucial role in a smooth the energy transition will strengthen the industry.

There are still many challenges, but I am confident that our people and solutions have the company well positioned to deliver value for customers and shareholders in this improving environment.

Speaker 3: There are still many challenges, but I'm confident that our people and solutions have the company well positioned to deliver value for customers and shareholders in this improving environment.

And now I'll turn the call over to Mark.

Thanks, John.

Today, I'll review, our fiscal fourth quarter and full year 2021 operating results provide guidance for the first quarter and full fiscal year 2022, as appropriate and comment on our financial position let.

Speaker 3: Thanks, John . Today I will review our fiscal fourth quarter and full year 2021 operating results, provide guidance for the first quarter and full fiscal year 2022 as appropriate, and comment on our financial position.

Let me start with highlights for the recently completed fourth quarter and fiscal year ended September 32021, the company generated quarterly revenues of $344 million versus 332 million in the previous quarter. The increase in revenue corresponds to a modest increase in our rig count during the quarter correspondingly total direct operating costs incurred.

Speaker 3: Let me start with highlights for the recently completed fourth quarter and fiscal year ended, September 30, 2021. The company generated quarterly revenues of $344 million versus $332 million in the previous quarter. The increase in revenue corresponds to a modest increase in a rickout during the quarter. Correspondingly, total direct operating cost incurred were $269 million for the fourth quarter versus $257 million for the previous quarter.

269 million for the fourth quarter versus $2 57 for the previous quarter.

During the fourth quarter, we closed on two transactions with Aetna drilling first agent diesel to eight flex rig land rigs, including two already in Abu Dhabi and six from the United States for delivery during 2022.

Speaker 5: During the fourth quarter, we closed on two transactions with AdNoc Drilling. First, H&P sold eight flex rig land rigs, including two already in Abu Dhabi and six from the United States for delivery during 2022. Consideration received for this sale was $86.5 million, and any gains above book values together with required investments to prepare and deliver the rigs will be recognized as each rig is delivered.

Moderation receive for this sale was $86 5 million and any gains above book value used together with required investments to prepare and deliver the rigs will be recognized as each rig is delivery.

Second agent he made a 100 million investment in and not during drilling in conjunction with its initial public offering in early October.

Speaker 5: Second, H&P made a $100 million investment in ad nocturne drilling in conjunction with its initial public offering in early October .

General and administrative expenses totaled $52 million for the fourth quarter high.

Speaker 5: General and administrative expenses totaled $52 million for the fourth quarter, higher than our previous guidance due primarily to professional services fees associated with the ADNOC transactions and their ongoing cost management efforts.

Higher than our previous guidance due primarily to professional services fees associated with the Aetna transactions inter ongoing cost management efforts.

As well as increases to the short term incentive bonus plan accrual to reflect full fiscal year operating results.

Speaker 5: As well as increases to the short-term incentive bonus plan accrual to reflect full fiscal year operating results

On September 27, we issued $550 million in unsecured senior note bonds to refinance our $487 million outstanding bonds that were due.

Speaker 5: On September 27th, we issued $550 million in unsecured senior note bonds to refinance our $487 million outstanding bonds that were due in May 2025.

In May 2025.

Our new issuance came at a coupon of two 9% and a 10 year tenure of maturing in September 2031, the additional debt of about $63 million funded the make whole provision and accrued interest for the call of the existing bonds as well as an associated transaction costs. This has made the transaction and subsequent debt extinguishment in October.

Speaker 5: Our new issuance came at a coupon of 2.9% and a 10-year tenor maturing in September 2031. The additional debt of about $63 million funded the make-a-hole provision and accrued interest for the call of the existing bonds, as well as an associated transaction cost. This made the transaction and subsequent debt extinguishment in October liquidity neutral.

<unk> liquidity neutral.

Also note that the make whole premium and accrued interest will be recognized in the first fiscal quarter 2022 concurrently with the October 27 redemption.

Speaker 5: Also, note that the makeable premium and accrued interest will be recognized in the first fiscal quarter 2022 concurrently with the October 27 redemption.

Our Q4 effective tax rate was approximately 24% in line with our previous guidance.

Speaker 5: Our key for effective tax rate was approximately 24% in line with our previous guidance.

To summarize fourth quarter's results decent P incurred a loss of 74 sales per diluted share versus a loss of 52 since the previous quarter earnings per share were negatively impacted by a net <unk> <unk> per share loss of select items, which are primarily made up of noncash impairments for fair market value adjustments to equipment that is held for sale.

Speaker 5: To summarize fourth quarter's results, ASIN P incurred a loss of $0.74 per diluted share versus a loss of $0.52 in the previous quarter. Earnings per share were negatively impacted by a net $0.12 per share loss of select items, which are primarily made up of non-cash impairments for fair market value adjustments to equipment that is held for sale as highlighted in our press release.

As highlighted in our press release.

Absent these items adjusted diluted loss per share was <unk> 62 in the fourth fiscal quarter compared with an adjusted 57 cents loss during the third fiscal quarter.

Speaker 5: Absent these select items, adjusted diluted loss per share was 62 cents in the fourth fiscal quarter compared with an adjusted 57 cents loss during the third fiscal quarter.

Okay.

Sure.

For fiscal 2021, as a whole we incurred a loss of $3.04 per diluted share again. This was driven largely by the noncash impairments to fair value for decommissioned rigs and equipment. The majority of which were previously impaired and are held for sale.

Speaker 5: For fiscal 2021 as a whole, we incurred a loss of $3.04 per diluted share. Again, this was driven largely by the non-cash impairments to fair value for decommissioned or apron equipment, the majority of which were previously impaired and are held for sale. Collectively, these select items constituted a loss of $0.44 per diluted share, absent these items, fiscal 2021 adjusted losses were $2.60 per diluted share.

It could leave these select items constitute as a loss of <unk> 44 cents per diluted share absent. These items fiscal 2021, adjusted losses were $2 60 per diluted share.

Yeah.

Capital expenditures for fiscal 2021 totaled $82 million below our previous guidance due to the timing of supply chain spending that crossed into fiscal 2022.

Speaker 5: Capital expenditures for fiscal 2021 totaled $82 million below our previous guidance due to the timing of supply chain spending that crossed into fiscal 2022. Relative to our original guidance range of $85 to $105 million, the variance was primarily driven by a delay in the start of planned IT infrastructure spending that we have previously discussed. Most of that planned IT spend will now be incurred in fiscal 22.

Relative to our original guidance range of $85 million to $105 million. The variance was primarily driven by a delay in the startup planned 90 infrastructure spending that we have previously discussed most of that planned <unk> spend will now be incurred in fiscal 'twenty two.

A&P generated $136 million in operating cash flow during fiscal 2021.

Speaker 5: H&P generated $136 million in operating cash flow during fiscal 2021. Considering the pro forma impact of our recent debt refinancing, the collective cash and short-term investments balances decreased minimally by $7 million year-over-year due in part to working capital improvements achieved during fiscal 2021 as well as asset sales. I will discuss in more detail later in my presentation.

Considering the pro forma impact of our recent debt refinancing the collective cash and short term investment balances decreased minimally by $7 million year over year due in part to working capital improvements achieved during fiscal 2021 as well as asset sale.

In more detail.

Later in my prepared remarks.

Turning to our three segments, beginning with North America solutions segment.

Speaker 5: Turning to our three segments, beginning with the North America Solutions segment.

We averaged 124 contracted rigs during the fourth quarter up from an average of 119 rigs in fiscal Q3, we exited the fourth fiscal quarter with 127 contracted rigs.

Speaker 5: We averaged 124 contracted rigs during the fourth quarter, up from an average of 119 rigs in fiscal Q3. We exited the fourth fiscal quarter with 127 contracted rigs.

Revenues were sequentially higher by $12 million due to the aforementioned activity increase North America solutions operating expenses increased $18 million sequentially in the fourth quarter, primarily due to the addition of six rigs as well as a higher material and supplies expense.

Speaker 5: Revenues were sequentially higher by $12 million due to the aforementioned activity increase. North America Solutions operating expenses increased $18 million sequentially in the fourth quarter, primarily due to the addition of six rigs as well as a higher material and supplies expense.

Throughout fiscal 2021, we prudently managed our expenses and inventory levels using previously expense consumable inventory harvested during stacking activities in calendar 2020, rather than utilizing fully costed inventory or purchasing new inventory.

Speaker 5: Throughout fiscal 2021, we prudently managed our expenses and inventory levels using previously expensed consumable inventory harvested during stacking activities in calendar 2020 rather than utilizing fully costed inventory or purchasing new inventory.

The activity increase our level of previously expensed inventory or what we have been referring to internally as quote unquote Penny stock has been exhausted, resulting in the issuance of our higher cost inventory in the purchasing of additional inventory to replenish stock levels.

Speaker 5: As reactivity increases, our level of previously expensed inventory, or what we have been referring to internally as quote-unquote penny stock, has been exhausted, resulting in the issuance of a higher-cost inventory and the purchasing of additional inventory to replenish stock levels.

Replenishment is go on the balance sheet.

Through fiscal 2021, we did not experience inflation in our costs. However, we are anticipating inflationary pressures moving forward, which I will touch on in a moment.

Speaker 5: Through fiscal 2021, we did not experience inflation in our costs, however, we are anticipating inflationary pressures moving forward, which I will touch on in a moment.

Additionally, as I will expand on later, we put six rigs to work in the first half of October.

Speaker 5: Additionally, as I will expand on later, we put six rigs to work in the first half of October .

The first fiscal quarter of 2022, but the reactivation costs are primarily incurred in fiscal 2021, the onetime reactivation expenses associated with all of those rigs was $6 6 million in fiscal Q4.

Speaker 5: first fiscal quarter of 2022, but the reactivation costs were primarily incurred in fiscal 2021. The one-time reactivation expenses associated with all of those regs was $6.6 million in fiscal Q4.

Now looking ahead to the first quarter of fiscal 2022 for North America solutions as expected rig count growth was moderate during the fourth fiscal quarter publicly traded customers continue to operate within their calendar year budget plans, which are currently being reset for calendar 2022.

Speaker 5: Now looking ahead to the first quarter of fiscal 2022 for North America Solutions. As expected, recount growth was moderate during the fourth fiscal quarter. Publicly traded customers continue to operate within their calendar year budget plans, which are currently being reset for calendar 2022, in an oil and gas commodity environment that is significantly more robust than this time last year. Accordingly, we expect to see sizable spending increases, especially with our public company customers, during the first fiscal quarter of 2022.

And in oil and gas commodity environment that is significantly more robust than this time last year. Accordingly, we expect to see sizable spending increases, especially with our public company customers during the first fiscal quarter of 2022.

As of today's call, we have 141 rigs contracted and we expect to earn their first fiscal quarter with between 152 and 157 working rigs with current line of sight for a few additional.

Speaker 5: As of today's call, we have 141 rigs contracted and we expect to end our first fiscal quarter with between 152 and 157 working rigs with current line of sight for a few additional rigs turning to the right in early January .

Rigs turning to the right in early January.

In the North American solutions segment, we expect gross margins to range between $75 million to $85 million inclusive of the effect of about $15 million and reactivation costs as I mentioned last quarter. There is a positive correlation between the length of time, a rig has been idle and the cost required to reactivate it.

Speaker 5: In the North America solutions segment we expect gross margins to range between 75 to 85 million inclusive of the effect of about 15 million in reactivation costs. As I mentioned last quarter there is a positive correlation between the length of time a rig has been idle and the cost required to reactivate it.

Most of the costs, we are reactivating most of the rigs we are reactivating in the first quarter had been idle for 18 plus months reactivation costs are mostly incurred in the quarter are startups. So the absence of such costs in future quarters as margin accretive.

Speaker 5: Most of the costs we are reactivating, most of the rigs we are reactivating in the first quarter have been idle for 18-plus months. Reactivation costs are mostly incurred in the quarter of start-ups, so the absence of such cost in future quarters is margin accretive. As John mentioned, we are expecting to achieve higher pricing in light of higher demand and tight, ready-to-work super spec supply.

As John mentioned, we are expecting to achieve higher pricing in light of higher demand and tight ready to work Super spec supply.

I will now pause to comment on inflationary considerations ahead for fiscal 2022, we have seen increases in commodity pricing such as for steel products, reflecting upward pricing due to this pressure include capital items, such as drill pipe.

Speaker 5: I will now pause to comment on inflationary considerations ahead for fiscal 2022. We have seen increases in commodity pricing, such as for steel. Products reflecting upward pricing due to this pressure include capital items such as drill pipe. Note that our upcoming capital expenditure guidance is inclusive of such pricing increases. For margin-related expenditures, I will

Note that our upcoming capital expenditure guidance is inclusive of those such pricing increases.

Your margin related expenditures I will touch on two items.

First maintenance and supplies pricing is increasing across certain categories, such as oil based products like lubricants and steel based products like fluid ends.

Speaker 5: First, maintenance and supplies pricing is increasing across some categories, such as oil-based products like lubricants and steel-based products like fluids.

Second as John discussed, we are increasing field labor rates to respond to market conditions and assist in talent retention and attraction further our contracts are structured the pass through labor price increases over a 5% threshold. Therefore significant labor increases are margin neutral due to contractual protections our margin guidance is inclusive of or expect.

Speaker 5: Second, as John discussed, we are increasing field labor rates to respond to market conditions and assist in talent retention and attraction.

Speaker 5: Further, our contracts are structured to pass through labor price increases over a 5% threshold. Therefore, significant labor increases are margin neutral due to contractual protections. Our margin guidance is inclusive of our expectations for inflation in the first fiscal quarter. As it relates to supply chain access to parts and materials to run our business, we are in constant communication with our suppliers and have placed advanced orders for certain higher risk categories.

Patients for inflation in the first fiscal quarter.

As it relates to supply chain access to parts and materials to run our business. We are in constant communication with our suppliers and have placed advanced orders for certain higher risk categories.

Our proactive approach to inventory planning, coupled with our scale and healthy vendor partner relationships provide reasonable assurance of supply chain issues as we see them today will not materially impact our business. We will continue to engage our suppliers and partners to stay ready to adjust as developments unfold.

Speaker 5: Our proactive approach to inventory planning, coupled with our scale and healthy vendor-partner relationships provides reasonable assurance that supply chain issues as we see them today will not materially impact our business.

Speaker 5: We will continue to engage our suppliers and partners to stay ready to adjust as developments unfold.

Subsequent to September 32021, we sold two peripheral service lines, which provided rig move trucking casing running to our services to a portion of our North America segment customers.

Speaker 5: Subsequent to September 30, 2021, we sold two peripheral service lines, which provided rig-move trucking and casing running tool services to a portion of our North America segment customers.

These business lines were largely margin neutral da Vinci P. Having collected revenues in the fourth quarter and full fiscal year of 2021 of $10 million and $34 million respectively.

Speaker 5: These business lines were largely margin neutral to H&P having collective revenues in the fourth quarter and full fiscal year of 2021 of $10 million and $34 million, respectively.

Sure.

To conclude comments on the North America segment, our current revenue backlog from our North America solutions fleet is roughly $430 million.

Speaker 5: To conclude comments on the North America segment, our current revenue backlog from our North America Solutions fleet is roughly $430 million.

Okay.

Regarding our international solutions segment International business activity increased by one rig in Argentina to six active rigs during the fourth fiscal quarter as we look to the.

Speaker 5: Regarding our international solutions segment, international business activity increased by one rig in Argentina to six active rigs during the fourth fiscal quarter. As we look to the first fiscal quarter of 2022 for international, activity in Bahrain is holding steady with the three rigs working, and we expect to go from three to four rigs working in Argentina, as well as get the contracted Columbia rig turning to the right.

First fiscal quarter of 2022 for international activity in Bahrain is holding steady with the three rigs working and we expect to go from three to four rigs working in Argentina, as well as get the contracted Colombia rig turning to the right.

Note that three of the IPF rigs John mentioned earlier, we'll commence work and subsequent FY 'twenty two quarters in Argentina.

Speaker 5: Note that three of the YPF rigs John mentioned earlier will commence work in subsequent FY22 quarters in Argentina.

Turning to our offshore Gulf of Mexico segment, we continue to have four of our seven offshore platform rigs contracted.

Speaker 5: Turning to our offshore Gulf of Mexico segment, we continue to have four of our seven offshore platform rigs contracted.

Offshore generated a gross margin of $8 million during this quarter, which was within our guided range as we look to the first quarter of fiscal 2022 for offshore we expect that the segment will generate between $6 million to $8 million of operating gross margin.

Speaker 5: Offshore generated a gross margin of $8 million during this quarter, which was within our guided range. As we look to the first quarter of fiscal 2022 for offshore, we expect that the segment will generate between $6 million to $8 million of operating gross margin.

Now let.

Let me look forward to the first fiscal quarter and full fiscal year 2022 for certain consolidated and corporate items.

Speaker 5: Now, let me look forward to the first fiscal quarter and full fiscal year 2022 for certain consolidated and corporate items.

As we increase our rig count and capital expenditures for the full fiscal 2022 year are expected to range between $250 million to $270 million. This capital outlay is comprised of three buckets similar to fiscal 2021 first.

Speaker 5: As we increase our recount, capital expenditures for the full fiscal 2022 year are expected to range between $250 million to $270 million. This capital outlay is comprised of three buckets similar to fiscal 2021. First,

Maintenance Capex to support our active rig fleet will be approximately 50% of the total FY 'twenty two capex.

Speaker 5: Maintenance CapEx to support our active rig fleet will be approximately 50% of the total FY22 CapEx.

In fiscal 2019, we had bulk purchases and capex to scale up rotating componentry for it in 200, plus working Super spec flex rig count.

Speaker 5: In fiscal 2019, we had bulk purchases in CapEx to scale up rotating componentry for a then 200-plus working superspec flex rate count. In addition, we harvested components from previously impaired and decommissioned rigs to conserve capital. As such, we were able to utilize resources on hand and preserve capital in 2021.

In addition, we harvested components from previously impaired and decommissioned rigs to conserve capital.

As such we were able to utilize resources on hand and preserved capital in 2021.

But now we have reached the end of those inventories and are and we are needing to recommence a regular cadence as component equipment overhauls and drill pipe purchases. This coupled with the sharp activity increase we are experiencing is driving or fiscal 2022 maintenance capex back into our historical range of between 750000 to 1 million.

Speaker 5: But now we have reached the end of those inventories, and we are needing to recommence a regular cadence of component equipment overhauls and drill pipe purchases. This, coupled with the sharp activity increase we are experiencing, is driving our fiscal 2022 maintenance capex back into our historical range of between $750,000 to $1 million per active rig per annum in the North American

Dollars per active rig.

Per annum in the North America solution segment.

Second skidding to walking capability conversions will approximate 35% over the fiscal 2022 capex.

Speaker 5: Second, skidding-to-walking capability conversions will approximate 35% of the fiscal 2022 CapEx. Although our peers have walking rigs available in the market, select customers prefer certain rig design elements and commit to a conversion. For customers that need walking rigs, we will invest to convert certain rigs from skidding-to-walking pad capability in exchange for a term contract.

There are peers that walking rigs available in the market select customers prefer certain rig design elements and commit to a conversion.

For customers that need walking rigs, we will invest to convert certain rigs from skidding to walking pad capability in exchange for a term contract.

It will enable the new investment, which we currently estimate is $6 five to $7 5 million per conversion.

Speaker 5: that will enable the new investment, which we currently estimate is $6.5 to $7.5 million per conversion.

Third corporate capital investments will be about 15% of fiscal 2020 Capex.

Speaker 5: Third, corporate capital investments will be about 15% of fiscal 2020 capex.

Over half of this bucket is comprised of modernization for datacenter data and analytics platforms and enterprise. It systems, most of which has moved from fiscal 2021 to fiscal 2022.

Speaker 5: Over half of this bucket is comprised of modernization for data center, data and analytics platforms and enterprise IT systems, most of which has moved from fiscal 2021 to fiscal 2022 and will improve our infrastructure and cybersecurity posture.

And we will improve our infrastructure and cyber security posture.

Portions of the balance.

This corporate capital investment are for power solutions capital associated with ESG research and development efforts.

Speaker 5: of this corporate capital investment are for power solutions capital associated with ESG research and development efforts and for certain real estate matters.

And for certain real estate matters.

As part of the <unk> sale transaction mentioned earlier, we will deliver the eight rigs to add knock throughout.

Speaker 5: As part of the ADNOC sale transaction mentioned earlier, we will deliver the aid rigs to ADNOC throughout...

The year of 2020 to your sale proceeds of $86 5 billion. We received in September 2021, and are included in accrued liabilities on our balance sheet and.

Speaker 5: The year of 2022, sale proceeds of 86.5 million were received in September 2021 and are included in accrued liabilities on our balance sheet.

In addition to the capital expenditures just described above we will spend.

Speaker 5: In addition to the capital expenditures just described above we will spend

Approximately $25 million in cash to prepare and deliver the rigs to add mark.

Speaker 5: approximately $25 million in cash to prepare and deliver the rigs to ADMA.

And we incur these expenses a day together with the net book values, which among other assets are classified as assets held for sale will collectively represent the accounting basis and the rigs for the purpose of determining gains to be recognized in the upcoming quarters upon each delivery.

Speaker 5: When we incur these expenses a day together with the net book values, which among other assets are classified in assets held for sale, will collectively represent the accounting basis in the rigs for the purpose of determining gains to be recognized in the upcoming quarters upon each delivery.

Depreciation for fiscal 2022 is expected to be approximately $405 million.

Speaker 5: Depreciation for fiscal 2022 is expected to be approximately $405 million.

Our general and administrative expenses for the full 2022 year expected to be approximately $170 million, which is roughly consistent with the year just completed.

Speaker 5: Our general and administrative expenses for the full 2022 year are expected to be approximately $170 million, which is roughly consistent with the year just completed.

Fiscal 2022, SG&A will be partly frontloaded in the first fiscal quarter due to short term incentive compensation payments for fiscal year 2021 results and the timing of certain professional services fees, specifically, we expect $45 million to $85 million in Q1 with the remainder spread proportionately over the final three.

Speaker 5: Fiscal 2022 SG&A will be partly front-loaded in the first fiscal quarter due to short-term incentive compensation payments for fiscal year 2021 results and the timing of certain professional services fees. Specifically, we expect $45 million to $85 million in Q1, with the remainder spread proportionally over the final three quarters.

<unk>.

Our investment in research and development is largely focused on autonomous drilling wellbore quality and.

Speaker 5: Our investment in research and development is largely focused on autonomous drilling, wellbore quality, and ESG initiatives, and we anticipate these innovation efforts to yield further enhancements and solutions offerings on our technology roadmap. We anticipate R&D expenditures to be approximately $25 million in fiscal 22.

And ESG initiatives and we anticipate these innovation efforts to yield further enhancements in our solutions offerings on our technology roadmap, we anticipate R&D expenditures to be approximately 25 million in fiscal 'twenty two.

We are expecting an effective income tax rate range of 18% to 24% for fiscal 2022. In addition to the U S statutory rate of 21% incremental state and foreign income taxes awesome impact our provision.

Speaker 5: We are expecting an effective income tax rate range of 18 to 24 percent for fiscal 2022. In addition to the U.S. statutory rate of 21 percent, incremental state and foreign income taxes also impact our provision.

Based upon estimated fiscal year 'twenty do that 2022 operating results and Capex, we are forecasting another decrease to our deferred tax liability.

Speaker 5: Based upon estimated fiscally 2022 operating results and capex, we are forecasting another decrease to our deferred tax liability.

Additionally, we are expecting cash tax in the range of 5% to $20 million.

Speaker 5: Additionally, we are expecting cash tax in the range of $5 to $20 million.

Now looking at our financial position.

Helmerich <unk> Payne had cash and short term investments of approximately $1 1 billion at September 32021.

Speaker 5: Humber Campaign had cash and short-term investments of approximately $1.1 billion in September 30, 2021. When considering the aforementioned 2025 bond repayment and makehold premium that occurred in October , the pro forma cash and short-term equivalents of September 30, 2021 were $570 million.

When considering the aforementioned 2025 bond repayment in make whole premium that occurred in October.

The pro forma cash and short term equivalents of September 32021 were $570 million.

Sequentially compared to 558 million at June 32021.

Speaker 5: sequentially compared to $558 million at GM 30 2021.

Including availability under our revolving credit facility, but excluding the 546 million in 2025 bond extinguishment amount.

Speaker 5: including availability under our revolving credit facility but excluding the 546 million 2025 bond extinguishment amount.

Our liquidity was approximately $1 3 billion commensurate to the prior quarter.

Speaker 5: Our liquidity was approximately $1.3 billion, commensurate to the prior quarter. Our debt-to-capital at quarter end was temporarily at 26%, given the debt overlap at the September 30 balance sheet date. Accounting for the repayment of the 2025 bond, however, pro forma debt-to-capital adjusts down to 16%.

Debt to capital at quarter end was temporarily and 26% given the debt overlap at the September 30 balance sheet date accounting for the repayment of the 2025 bonds, however, pro forma debt to capital adjust down to 16%.

Our working capital stewardship since the March 2020 downturn resulted in cash accretion.

Speaker 5: Our working capital stewardship since the March 2020 downturn resulted in cash accretion.

As we look forward towards the end of fiscal 'twenty two.

Speaker 5: As we look forward towards the end of fiscal 22, we do expect to consume a modest amount of cash given the one-time recommissioning expenses together with networking capital increase as our rig activity climbs.

We do expect to consume a modest amount of cash given the one time re commissioning expenses together with networking capital increases aren't rig activity declines.

Fiscal Q1, we will experience lower cash flow from operations in the following quarters due to the rig ramp up and the seasonal cash expenditures for incentive compensation property taxes et cetera, we do expect to end the fiscal year with between $475 million to $525 million of cash on hand, and 20 <unk>.

Speaker 5: Fiscal Q1 will experience lower cash flow from operations than the following quarters due to the rig ramp up and the seasonal cash expenditures for incentive compensation, property taxes, et cetera. We do expect to end the fiscal year with between $475 to $525 million of cash on hand and $25 to $75 million of net debt.

5% to $75 million of net debt in summary.

We are expecting to generate free cash flow that when combined with a modest usage of cash on hand early in the fiscal year will cover our capital expenditure plan debt service costs and dividends in fiscal 'twenty two the growth in rig count early in the fiscal year provides a platform for cash generation in the second half of the year that pointing forward fully.

Speaker 5: We are expecting to generate free cash flow to that when combined with the modest issues of cash on hand early in the fiscal year will cover our capital expenditure plan, debt service cost and dividends in fiscal 22.

Speaker 5: The growth and rig count early in the fiscal year provides a platform for cash generation in the second half of the year that.

Our cash uses including our dividend is set the stage for further gas accretion.

Speaker 5: Pointing forward, fully covers our cash uses, including our dividend, and sets the stage for further cash accretion. Our balance sheet strength, liquidity level, and term contract backlog provide H&P the flexibility to adapt to market conditions, take advantage of attractive opportunities, and maintain our long practice of returning capital to shareholders.

Our balance sheet strength liquidity level and term contract backlog provide <unk> the flexibility to adapt to market conditions take advantage of attractive opportunities and maintain our long practice of returning capital to shareholders.

That concludes our prepared comments for the fourth fiscal quarter, Let me now turn the call back over to Brittany for questions.

Speaker 1: That concludes our prepared comments for the fourth fiscal quarter. Let me now turn the call back over to Brittany for questions. At this time, if you would like to ask a question, please press the star and one on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one if you would like to ask a question. And we will take our first question from our room, Jay Hum with JPMorgan Chase.

At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound key.

Once again that is star one if you would like to ask a question and we will take our first question from Arun <unk> with Jpmorgan Chase.

Yes, good morning.

Speaker 6: Yeah, good morning. I wanted to get a little bit more color around the fiscal year 22 CAPEX program. It looks like you're spending around $90 million or so on the walking system upgrades. You mentioned a $6.5 to $7.5 million type upgrade.

Wanted to get a little bit more color around the fiscal year 'twenty two capex program. It looks like you're spending around $90 million or so on the walking system upgrades, you mentioned six 5% to seven 5 million dollar type.

Type upgrades.

Can you give us a sense firstly of the 95 idle rigs at HCP.

Speaker 6: Could you give us a sense, firstly, of the 95 idle rigs at H&P? How many of those have walking systems?

How many of those have walking systems.

And for the next batch of.

Speaker 6: on them and for the next batch of, you know, reactivations that you expect to do, you know, how many more upgrades do you anticipate, and secondly, can you comment on

Reactivation that you expect to do.

How many more upgrades do you anticipate.

Secondly, can you comment on that.

The amount of.

Speaker 6: the amount of reimbursements of and above your day work margins, what kind of reimbursements you're getting for those investments in Milwaukee?

Reimbursements oven above your daywork margins, what kind of reimbursement you're getting from those investments in Milwaukee systems.

Yes.

Yes.

Rune on the.

Speaker 3: Mr. Maroon, on the investments, I think we're, Dave, correct me if I'm wrong, I think we've got one a month.

The investments I think we're.

Dave Correct me, if I'm wrong I think we've got one month.

Is that right on the on the walking dead.

Speaker 5: Is that right, on the walking route? That's correct. Yeah, that is right. We're planning about, John , we're planning one a month, currently, based on line of sight with customers.

Correct Yeah.

Yeah.

That is right. We have we're planning about genre planning one a month currently based on line of sight with.

With customers.

And.

That will adjust potentially up or down based on customer demand and we're getting back I think to come.

Speaker 3: And that will adjust, potentially, up or down based on the customer demand. But getting back, I think, to come back to the pricing and term we're getting, I'll just let John maybe start us off with a little bit of the commentary on why customers are asking us to convert. Yeah, I mean, it's interesting, Ryan, because there's about 214 idle super spec rigs in the U.S.

Come back to the pricing and term were getting.

I'll, let John maybe start us off with a little bit on the commentary on why our customers are asking.

Seeing us to convert.

I mean, it's interesting around because there is about 214 idle super spec rigs and in the U S.

And 124 of those were walking rigs.

And so we've got significant demand and all of our walking rigs or are active and so we have significant demand for for walkman. So it's clear that there is more demand than just for walking a there's obviously a demand for what <unk> provides in terms of overall.

Speaker 3: And so we've got significant demand, and all of our walking rigs are active, and so we have significant demand for walking. So it's clear that...

Speaker 3: there's more demand than just for walking. Uh, there's obviously a demand for what H and P provides in terms of overall overall performance. So there's that that's a key

Overall performance. So there is that's the key.

That's a key element.

We are getting.

Speaker 3: I think that's a key element. We are getting, you know,

You know I think the last contract, we probably had an 18 month term contract.

Speaker 3: I think the last contract, we probably had an 18-month term contract.

And I think it's been.

5000, a day, let's say a typically to your point are in we're getting term were shooting for to the typical payback on these is three years and and commanding a premium price for doing so.

Speaker 5: At $25,000 a day, specifically to your point, we're getting term, we're shooting for two, the typical payback on these is three years and commanding a premium price for doing so.

Great I think you can start I wanted to I wanted to I wanted to clarify something though Arun I thought I heard you and maybe I Misheard, you said 190000 or one.

Speaker 3: I wanted to clarify something, though, Arun. I thought I heard you, and maybe I misheard. You said $190,000—$190 million, pardon me, on the walking rig upgrades.

190 million pardon me.

On the walking rig upgrades.

<unk> million dollars.

I Randy.

Speaker 3: No, I said 90 million. I did. Okay. Yeah, I thought it was. Yeah, 80, 84 to 90. But I thought you said 190. I miss I miss her. Yeah.

Okay.

I thought it was.

80%, 84% to 90, but I thought you said 190, I Miss I misheard.

Okay, Yes 90 million.

Speaker 6: Okay. Yeah, it was $90 million. And just my follow-up would be on the ADNOC rigs, Mark, $86.5 million of proceeds from that. Obviously, you also get the $100 million investment. But can you comment on the CapEx required in fiscal year 2022 to get those rigs in a condition to be sold?

And just my follow up would be on the AD hoc rig mark.

86, and a half million of <unk>.

Proceeds from that obviously, you also get the $100 million and investment.

Could you comment on the Capex required in fiscal year 'twenty, two to get those rigs and the condition.

To be sold.

Well.

I mentioned, it's about 24% $25 million I think in the prepared remarks.

Speaker 5: Well, as I mentioned, it's about $24-$25 million, I think, in the prepared remarks.

And it's a couple of things it's a there are some specific technical.

Speaker 5: and it's a couple of things it's uh there's some specific technical

Components that the that our partner wanted one too we're gonna be recertifying everything so that for example, the Bob He leaves with a five year certification in the top drive leaves.

Speaker 5: components that our partner wanted, one. Two, we're going to be recertifying everything so that, for example, the BOP leaves with a five-year certification, and the top drive leaves with seven years, et cetera, et cetera. But there's also the transit costs, so the shipping or mobilization costs to get those rigs across the

Seven years et cetera, et cetera, but there's also the transit costs, so the shipping or mobilization costs to get those rigs across it.

The water.

But I have not commented on is the net book value by rig obviously, the the Ain have different different values and two are already in Abu Dhabi. The six in the U S. Two of the six for Super spec as we've previously stated.

Speaker 5: the water. What I have not commented on is the net bug value by rig. Obviously, the eight have different values, and two are already in Abu Dhabi, the six in the U.S., two of the six are super spec as we've previously stated.

Alright, Thank you very much.

Thank you.

And we will take our next question from Derik pod Hetzer with Barclays. Your line is now open.

Speaker 1: And we will take our next question from Derek Podhanser with Barclays. Your line is now open.

Hey, good morning, guys I wanted to talk more about the add up deal.

Speaker 7: Hey, good morning guys. I wanted to talk more about the ADNOC deal. Obviously, the news just came out. We saw they just announced pretty significant tender just to support the growth of up to 5 million barrels per day. You talked about expanding into the region. Can you just maybe expand to us a little bit more about what you're talking about? Are these going to be more HPO and rigs going in there? I think you talked about consultancy work. Just any more color you can give us on how you see yourself growing with ADNOC in this new partnership.

Obviously the news just came out we saw they just announced a pretty significant tender just to support the growth of the 5 million barrels per day, you talked about expanding into the region can you just maybe expand a little bit more about what you're talking about and this is gonna be more HBO on rigs going in that that you're talking about consultancy work just any more color you can give us on how you see yourself growing.

With add knocking this new partnership.

Yes, Derek this is John I'll start and then hand, it over to John to Jon Bell to give additional color, but I think in general.

Speaker 3: Yeah, Derek, this is John . I'll start. I'm going to hand it over to John Bell to give additional color. But I think in general, you know, the strategic partnership with ADNOC is very important. But, you know, our hope is that we can continue to, you know, to expand internationally both, you know, with ADNOC drilling, as well as

The strategic partnership with <unk> is very important but our hope is that we can continue to expand internationally.

Both with.

With that dock drilling as well as.

You know there are some areas that makes sense.

Speaker 3: You know, there's some areas that make sense that, you know, that the H&P operation would be there. But go ahead.

The Asian operation.

Operation would be there but.

Go ahead.

John.

Yeah. John you said, we have right now we're focused on just getting the rigs ready.

Speaker 3: Yeah, John , as you said, we have by now we're focused on just getting the rigs ready and getting the people.

People.

Onboard.

Start up the rigs, but also support.

Speaker 8: on board to start the rigs but also support the work in the process of fine-tuning a rig enablement framework agreement that

In the process of fine tuning a rig and then framework agreement.

Well give us the structure, we need to provide them with the support lending areas maintenance supply chain and operational efficiencies and so forth.

Speaker 8: will give us the structure we need to provide not with support they need in areas like maintenance, supply chain, operational efficiencies and so forth and that's really what we're focused on. We have had discussions with them about different ways we might approach certain countries and customers in the region but

Really what we're focused on we have had discussions with them about different ways and my approach.

Certain countries and customers in the region.

Okay.

Open to looking at that but there's nothing that we've firmed up at this point.

Okay.

Yeah, I think yeah.

I think there's a real opportunity, though on the on the partnership I mean, I think this week. It's been a great example, we've had excellent meetings with the with add not drilling in.

Speaker 3: Yeah, I think, yeah, I think there's a real opportunity though on the on the partnership. I mean, I think this week has been a great example. We've had excellent meetings with with Adenault Drilling and

They're very excited about the future.

Speaker 3: They're very excited about the future. You know, there are some obviously different service contracts and technology opportunities that

There are.

Obviously different service contracts and technology opportunities.

We have to explore and again you said you saw the announcement of 5 million barrels in and they have a goal of getting to natural gas independence.

Speaker 3: that we have to explore. And again, you said it. You saw the announcement, five million barrels, and they have a goal of getting to natural gas independence. A lot of that work is unconventional, and that really is a sweet spot, obviously, for H&P. And so, you know, our hope is to be able to work closely with them.

A lot of that work is unconventional.

And that really is the sweet spot, obviously for <unk> and so.

Our hope is to be able to work closely with them.

To help them to.

Speaker 3: you know, to help them to achieve those goals. So it's a really exciting opportunity.

To achieve those goals, so it's a really exciting opportunity.

That's great.

So switching over to the North America side, the contract coverage has stepped up pretty significantly quarter over quarter.

Speaker 7: So, switching over to the North America side, the contract coverage has stepped up pretty significantly quarter over quarter. Maybe can you just talk to us about the confidence from your side and the willingness from the customer side to start locking in that pricing in term instead of keeping contracts on short term? It looks like you're now extending that out and getting more contract coverage across your total fleet, so maybe just spend some time walking us through that.

Maybe can you just talked us about the confidence from your side and the willingness from the customer side to start locking in that pricing and terms.

Ethane contracts on short term it looks like you are now extending that out and getting more contract coverage across across your total fleet. So maybe just spend some time walking you through that.

Well there are several several factors.

Speaker 3: Well, there's several factors. One is, which has been talked about on reactivations, I mean, we want to make certain that when we're reactivating a rig and.

One is which has been talked about on reactivation I mean, we want to make certain that when we're reactivating a rig in.

These are 300, 400, and $500000 reactivation fees and we want to make certain that we're getting some.

Speaker 3: You know, these are $300,000, $400,000, $500,000 reactivation.

Speaker 3: fees and we want to make certain that we're either getting some some lump sum or we're getting some term coverage you know to cover to cover that cost.

Some lumps.

The lump sum or we're getting some term coverage.

To cover to cover that cost, but I think in general our customers are are are willing to lock in and I think part of the reason why they are <unk>.

Speaker 3: But I think in general, you know, customers are willing to to lock in. And I think part of the reason why they are is because of.

Because of the.

Efficiencies and the startups that our people are able to provide I mean.

Speaker 3: efficiencies and the startups that our people are able to provide.

It's not unusual to see.

Speaker 3: you know, it's not unusual to see.

Historically rig startup and really struggled for several months and are our teams are doing a great job just starting right off the bat and.

Speaker 6: Uh, you know, historically rigged startup and and really struggled for for several months and uh, and our our teams are doing a great job just starting right off the bat and

In some cases, even drilling record wells right out of the box. So there is a lot of.

Speaker 3: in some cases even drilling record wells right out of the box. So there's a lot of reason why customers are willing and entering into these term contracts. Again, we're going to continue to push on pricing. It's a really tight market as it relates to super spec availability in terms of anything being ready to go. I mean, there's really nothing ready to go right now. Everything's been idle for, you know, for well over a year.

Lot of reason why customers are are willing and entering into these term contracts again, we're going to continue to push on pricing.

Really a tight market as it relates to super spec availability in terms of anything being ready to go and then there's really nothing ready to go right now everything's.

Been idle for.

For well over a year.

Does that does that answer your question.

Speaker 7: Does that answer your question? Yeah, very helpful. I appreciate it, guys. Thanks.

Yeah very helpful. I appreciate it guys. Thanks.

Okay. Thank you.

And we will take our next question from Ian Macpherson with Piper Sandler Your line is now open.

Speaker 9: And we will take our next question from Ian McPherson with Piper Sandler. Your line is now open. Hi, thank you. Hello, John and Mark. How are you?

Hi, Thank you Hello, John and Mark how are you.

I am good.

Yes.

Great. Thanks, I wanted to ask if we could peak a little bit past fiscal Q1.

Speaker 9: Great, thanks. I wanted to ask if we could peek a little bit past fiscal Q1.

Towards the trajectory of your margins in U S. Because we see with the more expensive reactivation. So it looks like your average reactivation.

Speaker 9: towards the trajectory of your margins in U.S. because we see with the more expensive reactivations it looks like your average reactivation cost per rig day is

Cost per rig day is.

More than doubling in and in this quarter, but that should improve with time with better absorption and a deceleration.

Speaker 9: more than doubling in this quarter, but that should improve with time, with better absorption and a deceleration of those costs, and then you have your rates being pulled up, especially by the premiums you're getting on expensive upgrades for walking rigs. So I would imagine those dynamics should point us towards a pretty good inflection in your average daily margins.

Of those costs and then you have your rates being pulled up especially by the premiums are getting on expensive upgrades for walking rigs so I would imagine.

Those dynamics should point us towards the I'm pretty good inflection in your average daily margins I just wanted to get more comfortable that you see that happening in fiscal Q2, where do you see cost pressures or other dynamics maybe.

Speaker 9: I just want to get more comfortable that you see that happening in fiscal Q2, or do you see cost pressures or other dynamics maybe pushing that out into a later point in the year?

Pushing that out into a later point in the year.

Well I appreciate the question Ian.

Yeah.

I think if I, if I remember right.

Speaker 5: You know, I think if I remember right, looking at consensus estimates, you know, had us adding 10 rigs.

Looking at consensus estimates had us adding 10 rigs.

In this quarter that we're giving guidance on but we're gonna be adding three times that and so there's a directional factor of the sheer volume of reactivation expenses with that.

Speaker 5: in this quarter that we're giving guidance on but we're going to be adding three times that and so there's a directional factor of the sheer volume of reactivation expenses with that really heavy increase in activity.

Really heavy increase in activity.

Your point.

Speaker 5: to your point, coupled with the fact that, as I mentioned in prepared remarks, we're also getting ready this quarter several rigs that will actually commence work right after the turn of the calendar year.

Coupled with the fact that the as I mentioned in prepared remarks, we're also getting ready this quarter several rigs that will actually commence work right. After the turn of the calendar year.

So that's kind of bleeding in to make some extra so on a per rig basis, I think will be pretty consistent at the end of the day.

Speaker 5: So that's kind of loading in some extra. So on a per rig basis, I think we'll be pretty consistent at the end of the day.

And as we look forward, we do expect the absence of that needed to be accretive.

Speaker 5: And as we look forward, we do expect the absence of that, you know, to be accretive. You know, it just depends on how you do the math, but you could see anywhere.

You know it just depends on how you can do the math, but you could see anywhere.

From 500 to 1000 at least per day accretion from the absence of that.

Speaker 5: from 500 to 1,000 at least per day, accretion from the absence of that.

So thats directionally.

Speaker 5: uh so that's uh you know directionally it's looking good for potential cash accretion but

Directionally and it's looking good.

Potential cash accretion, but.

There's going to be a question Mark there and that is we still expect more rig accretion in the first calendar quarter. It's just too early to have clear line of sight through to March 31, what that volume will be.

Speaker 5: There's going to be a question mark there, and that is we still expect more rig accretion in the first calendar quarter. It's just too early to have clear line of sight through to March 31 what that volume will be. But then we expect that our customers, especially public company customers, will hold the line pretty steady and maintain these new budgets from April through September of next year.

But then we expect that our customers, especially public company customers will hold the line pretty steady and maintain these new budgets from April through September of next year.

Yes, that's very helpful. Mark that's all I have I appreciate it guys.

Speaker 9: Yes. That's very helpful, Mark. That's all I have. Appreciate it, guys.

Thank you.

And we will take our next question from Neil Mehta with Goldman Sachs. Your line is now open.

Speaker 1: And we will take our next question from Neil Mehta with Goldman Sachs. Your line is now open.

Yeah. Thanks, Thanks team and I appreciate the visibility on 22 capital spending and I know in 2023 that really for.

Speaker 10: Yeah, thanks team, and I appreciate the visibility on 22 capital spending, and I know 2023 is a really far away away, and it's hard to get visibility, but

Far away away its hard to get visibility, but it but.

How should we think about that Capex budget, which was a little higher than consensus how much of that is one time ish in nature and as you look at 'twenty three do you get more to a maintenance type of program that with free cash flow comes through in a more powerful way does that make sense in any any color that you can provide on the long term.

Speaker 10: But as we think about that CapEx budget, which was a little higher than consensus, how much of that is one-timish in nature? And as you look at 23, do you get more to a maintenance type of program at which free cash flow comes through in a more powerful way? Does that make sense? And any color that you can provide on the long-term?

As opposed to just next year.

Thanks, Neil Great question, there are several things to consider when you when you when you consider the question.

Speaker 5: Thanks, Neil. Great question. There's several things to consider when you when you when you consider the question. I think we're back into that, you know, as I mentioned, historical 750,000 to a million per active rig range.

I think we're back into that.

As I mentioned historical 750000 to a million practice rig range.

Where that might go through time.

Speaker 5: Where that might go through time, who knows for certain, but I hope it's a little bit more muted through time. We're experiencing the obvious inflation that we're including.

Who knows for certain but I hope, it's a it's a little bit more muted through time, we're experiencing the obvious inflation that we're including.

And guidance for this year.

Speaker 5: and guidance for this year related to steel costs, et cetera. Plus, we had really, if you will, taken a holiday from operating our FlexMit rig machinery center in the last calendar year, and we're having to get back in business recertifying top drives, BOPs especially, et cetera. So kind of a crank up of work there that might normalize a bit through time as well.

We ended the steel costs et cetera.

Plus we had really if you will taken a holiday from operating our flex rig machinery center in the last calendar year, and we're having to get back in business re certifying top drives.

Essentially et cetera, so a kind of a crank up of work there that might normalize a bit through time as well.

And then there's the big question Mark is what do our customers want to do related to walking rigs as John and I went through a few moments ago.

Speaker 5: And then the big question, Mark, is what do our customers want to do related to walking rigs? As John and I went through a few moments ago, you know, we've had, interestingly, in the churn of rigs this year, even though rig count stayed pretty steady and, you know, modestly increased in calendar Qs 2 and 3.

We've had interestingly in the churn of rigs this year, even the rig count stayed pretty steady and modestly increased in calendar Q2 and three.

We had some customers that picked up skidding rigs and actually exited walking rigs while other customers quickly absorbed those walking rigs and as has been evidenced by commitments.

Speaker 5: We had some customers that picked up skidding rigs and actually exited walking rigs while other customers quickly absorbed those walking rigs. And as has been evidenced by commitments, we're still seeing customers want our design of a walking rig and commit to those despite the availability of them in the broader market.

We are still.

Still seeing customers and one iron design in Milwaukee rig and commit to those despite the availability of them in the broader market. So.

So it's really just going to depend.

Speaker 5: So it's really just going to depend as we move towards a better term and better pricing for those commitments to get the right return on capital and the new investment, those can be easy decisions to make.

Or is it as we move towards better terms and better pricing for those commitments to get the right return on capital on the new investment.

It can be easy decisions to make.

So it's just going to depend Neil is that helpful.

Speaker 5: So it's just going to depend, Neil. Is that helpful? Well, I will add one thing. Let me just add one footnote that corporate capex will come down. Once we get these IT projects done, that shifted from year to year, they're done. And some of these real estate matters will be done as well. Yeah, that is helpful.

I'll add one thing let me just add one footnote that corporate Capex will come down.

Once we get these projects done that's shifted from year to year, they're done and some of these are the real estate matters will be done as well.

Yes.

Helpful.

We are all trying to figure out what normalized free cash flow power is good clarity on the positive side I want I want to talk about market share and.

Speaker 10: We are all trying to figure out what normalized free cash flow power is, so that's good clarity. On the positive side, I want to talk about market share, and your market share level is, I think, it's up to 26% now, which is above historical level. Can you just provide us your perspective on your ability to continue to move?

Your market share level, I think it's up to 26% now which is above historical levels provide us.

Your perspective on your ability to continue to maintain that market share what are the key competitive threats that you're monitoring.

Speaker 10: that market share, what are the key competitive threats that you're monitoring, and what confidence you can give to the market around that.

And what what confidence you can give to the market around your ability to sustain these type one.

And Fortunately, we've had attract a track record.

Speaker 3: Well, and fortunately, we've had a track a track record coming out of downturns where we we capture market share. So we fully expect that at least, you know, the management team

Out of downturns, where we capture market share. So we fully expect that at least as a management team.

The company in general felt like we had the opportunity to do that.

Speaker 3: The company in general felt like we had the opportunity to do that. You know, it's interesting, over the last year, there's been about 235 net ads to the market rig-wise, and 180 of those were from private companies. So 75% of the ads were private companies. Now, we're the largest.

It's interesting over.

Over the last year, there's been about 235 net adds.

Two the market rig wise and 180 Boes.

I'm, a private company so 75% of the ads were private companies.

We're the largest.

We still have the largest market share of the private company, but I think we were up to 16% of that share.

Speaker 3: We still have the largest market share of the private company, and I think we're up to 16% of that share.

But the public companies of course have only had 25% of that we think is probably going to go the other direction at least through Q4 and Q1.

Speaker 3: But, you know, the public companies, of course, have only had 25% of that. We think it's probably going to go the other direction, at least through Q4 and Q1.

Where we're going to see it.

Speaker 6: where we're going to see, at least based on the commitments that we have, about 60 percent of our commitments are public companies. So there's a little bit of shift there. And we've got about 31 percent of the public company market share. So our hope is that we can continue to gain share. And you say, well, why is that? And how can you continue to do that? Well, I think a lot of it is part of what I've already touched on is

Based on the commitments that we have about 60% of our commitments are public company. So there's a little bit of shift there and we've got about 31% of the of the public company market share. So our whole business that we can continue to gain share and you say well why.

Is that and how can you continue to do that well I think a lot of it is part of what I've already touched on is the.

The ability.

To start to safely and efficiently and being able to really hit the ground running.

Speaker 3: uh to start up uh safely and efficiently and and being able to you know really hit the ground running

We haven't talked about performance contracts. This morning, with the exception is our prepared remarks, but we have a lot of customers that are that are really interested in entering into a win win win win contracts. They see just like we do that the day rate contract really isn't structure to drive.

Speaker 3: Um, you know, we haven't talked about performance contracts this morning, with the exception of prepared remarks, but we have a lot of customers that are that are really interested in entering into win-win-win-win contracts. They see, just like we do, that the day rate contract really isn't structured to drive, you know, outperformance.

Outperformance and so Fortunately we've had we have customers that are willing to enter into those new new types of new types of contracts. So I think that's a driver and I just I look at all of the work that we've put in over the last four.

Speaker 3: And so, fortunately, we've had customers that are willing to enter into those new types of contracts. So I think that's a driver, and I look at all the work that we've put in over the last

Four or five years organizationally and.

Speaker 3: four or five years organizationally and just continuing to invest in our people and our systems and processes.

Just continuing to invest in our in our people and our systems and processes.

We're utilizing data today better than we ever had.

Speaker 3: We're utilizing data today better than we ever have, and that helps us in terms of driving better performance. I mean, at the end of the day, that's what our customers want, is they want better performance. They want…

And that helps us in terms of driving better performance I mean at the end of the day, that's what our customers want is they want better performance they want.

Obviously.

Efficiency and reliability, and then Theres, an ESG component and again the data set that we have today and our ability we believe to be able to manage ESG at a at a better level than what our peers are going to be able to do so again I think I think those are.

Speaker 3: Obviously, in efficiency and reliability. And then there's an ESG component. And again, the data set that we have today and our ability, we believe, to be able to manage ESG at a better level than what our peers are going to be able to do. So again, I think those are some things that are ahead that hopefully we can continue to take advantage of. All right, thank you, sir.

Some things.

And better better ahead, hopefully we can continue to take advantage of.

Alright, Thank you Sir.

Thank you Dan Thanks Neal.

And we will take our next question from Scott Gruber with Citibank. Your line is open.

Okay.

Yes, good morning.

Good morning, Scott Good evening.

Speaker 11: Good evening. Good morning, Scott. Good evening. Good point. I'm a little nervous.

Yes.

A follow up.

Yes.

Speaker 12: How are you doing, Scott? I'm doing well.

Yeah, Bill Doyle good luck.

Quick follow up on Mad dog.

Vintage of the rigs deal. So it's just the restart capex and recertification can be somewhat.

When you're moving the rigs abroad.

And then do you think there is an opportunity to sell more rates farmer down the road.

Okay.

Go ahead John.

Scott.

Vintage.

You asked me about real time.

We're excited.

Uh huh.

The main question, but if you want to throw out a build year as well.

So Scott I'll jump in on.

The rig the vintage it varies across the the eight.

And there's less sort of recertification work that we're going to be doing it for some of the componentry and theres more sort of.

Some of the technical specs.

Work.

Remember two of the eight are Super specs, though.

You know a lot of this is really the cost to get the some of the six to Houston and get them across the Atlantic Ocean that penetrating into the final destination.

That's the majority related to the expenses, just getting them ready for international and just getting them over there.

But in terms of selling more rigs that we don't have plans to sell more earnings, but we do have.

We want we're going to continue to produce work on normal weather that we currently don't have any plans to sell them more.

Hey, Greg it's only two that are super sorry, sorry, I thought I I think I heard that wrong I think it was too that we're not super spec rigs going to bet on that with respect.

Correct. The two that are here are non super spec and then we're done.

Turning to over and then the rest will be non super spec.

Understood understood, Okay that makes sense.

And then with respect to the rest of the international portfolio.

Confirm that the four rigs going to work with <unk>, those would be incremental and Argentina.

Yes, there's one that's going to work.

This quarter.

That has been planned for a bit and then there'll be one I think in Q fiscal Q2, and two in fiscal Q3 at this stage that timing can be subject to change.

The remaining three after this quarter plan for this fiscal year.

Yeah.

It's starting to get a lot of scale.

Starting to get a little bit of scale back in the block of mortgage operations. There. So you've got some exciting news for the Argentina team.

Well, it's definitely about his thoughts on <unk>.

With that sort of incremental demand beyond what's contracted to go back to work in Argentina, and Colombia, which is after those.

Go back you still have a fair bit of spare capacity on the international side. So.

Any color on additional rig adds over the course of 'twenty two.

Okay.

John comment further on this customer specifics, but we don't have anything definitive. However, I will tell you that we are participating in bidding activity in both Colombia and Argentina today.

Yes, that's right.

We've seen interest pick up in both Argentina, and Colombia, we've seen the big rework.

In particular, we have interest in Columbia, and then of course marketing work there with the gas plan.

They recently put in place.

Resulting in some some rigs going back to work in the Blackmore.

Great.

I'll leave it there I appreciate the color.

Thank you thanks.

Thanks Scott.

And we will take our next question from.

Zucker with Tudor Pickering Your line is open.

Hi, John and Mark Thanks for taking my questions first one just wanted to circle back on costs in the lower 48.

Yeah.

Some element of the cost.

Increases.

As transitory.

Elevated reactivation cost of a piece of that is going to be.

I'm going to stick with you on the inflationary side. So I was hoping you could help us understand if we just look on a per rig basis, where normalized costs costs are on a per rig basis. After somebody's reactivation costs tempered down a bit in the back half of the year. I mean are we at 15 and $16000 a day or <unk> or a different range on a per rig basis.

Tyler Thanks for the.

Thanks for the question we are.

There's a lot of moving parts in here.

The science reactivation costs.

We are.

There are several things to consider there is labor cost increases that we alluded to which will be margin.

Neutral.

And we have customer protection provisions of contracts.

We also have.

And so we've moved away from our previously harvested inventory of the quote unquote Penny stock we've talked about in prior quarters, and we're having to pull out of.

Having to pull out a fully cost of inventory.

There are adjustments there.

I will say, though that I don't anticipate a lot of working capital lockup.

For that sort of thing as we have implemented a lot of processes policies and systems improvements. So that our warehouses are alive and Oracle and people across the United States can see all the warehouses.

And we have put in place min Max programs to manage the amount of buying that we do.

So.

Nonetheless, we will still see some a little bit of May.

Maintenance.

Cost to go up.

But maintenance is not the largest component of.

Opex as you know labor is so I wouldn't say a guess, it's probably closer to 14000 after all those moving parts but.

So we still have some time to go until we settled on the final number I believe.

Okay. Thanks for that and just a quick follow up on.

Some of the smaller divestments you made in U S land in partnership with with Parker T.

E. R. S. It sounds like you've all through that kind of a trucking business can you just talk a little bit about what the benefits go to H B R. In terms of why you decided to ultimately exit those businesses I know, they're not core.

Core to the lower 48 business, but I do add some additional revenue and margin per day and two your rig business I'm. Just curious if you could help us think about.

You know why why you're exiting those businesses.

That's on an H b.

I'll start with a couple of the numbers thing isn't John expand otherwise.

As we look at these.

We have an approximate proceeds of initially.

That are modest as $6 million to $7 million, which you'll be seeing coming out in our 10-K later today plus the potential for more.

Revenue sharing through time.

<unk> are very much margin neutral so theres not a lot of accretion too.

Tour de margin and if you think about it they are very capital intensive businesses. So as we focus on our capital spend.

Through time that was one of our considerations.

And then there's a bit of you know the.

The time and attention that such a margin neutral businesses can can bring.

For the management team John.

Yeah, Tyler it's a great great question, we've had both of those.

Those services for a long long time and.

At the end of the day, if you get right down to it we could not grow.

Those two significant scale we couldnt.

Couldnt get the we just continue to believe year after year that we wouldn't get the scale from the customer from our customer base.

And I think it's.

Just probably a function of.

The competitive nature out there for those particular services.

But I think probably the biggest thing for us as it simplifies.

What we're what we're doing it removes some complication.

As you just think about it I mean trucking running trucking is very complex and as Mark said, it's capital intensive.

And Theres, a lot of training and risk that's different than rigs.

And really kind of the same way with casing. So it just really didnt fit just didn't really fit our model.

And so we hated their great great both the trucking in the casing or best in class, There's no doubt about it but again it was very hard to grow it.

To the extent that we needed to.

Yeah understood. Thanks for the answers guys.

Thank you.

And we will take our next question from Lee <unk> with <unk> capital markets. Your line is open.

Thank you for taking my question John.

In terms of the contracted day rates comparing.

This quarter or Q3.

Calendar Q2, you know as you've added a new rig contracts.

Yeah, the contracted day rates gone up or in a if you look at maybe the forward Q.

Q4 calendar Q4, and the contracted data had gone up sequentially or is it still declined.

Well with car as you know.

We're working really hard to get out of the out of the day rate business and.

Obviously, we.

We can back into it if you were to look at it on a day rate basis.

And you you pull out the.

Turn the term contracts that were entered into at an earlier date at much higher rates.

Then, yes the quarter over quarter.

It is increasing I don't know the amounts David.

It may be something that.

You can.

If you have that information.

But if you combine them all together because of the rigs that are rolling off with earlier term contracts that were a much higher hurdle rates that has a negative impact on the overall margin our overall.

<unk> and revenue.

So.

This is just one other on the same topic.

Does the contracted day rate for the 82 or so rigs that are under contract compared to the spot day rate right now.

Oh, that's a great question.

A car.

And just let me say.

Hey, guys.

As we consider what John just said.

About.

About some rigs rolling off that are signed on term and a better and a better market than even our increasing day rate market that we have today.

Uh huh.

I am thinking is as we just alluded to with a with a marquee price of 25000 per day for a walking rig conversion that we're getting back to some better pricing levels.

In fact, we've had.

For existing term contracts in the standing spot customers, we've been passing it through rate increases those don't all take effect at the same time and we're still in negotiations with some customers about what that exact rate increase will be and when it will be.

But suffice it to say that we.

We are pushing the pricing and more of that's going to be to come Dave any.

Specifics on any numbers.

Yes, I'd just add <unk>.

Pricing, it's very region specific there's a couple of regions where it.

Difference between the spot and the term is it isn't that great, but then theres other regions like in the West where you are seeing.

It's still a disparity between the two a couple thousand per day or something like that.

Okay.

John just one last question if I may may I ask you.

If we go back like different cycles that <unk> always had a premium margin, but its our competitors. However that seems to have gone away and depending on how you treat the E&P technology contribution.

It doesn't feel right now.

There is a premium for.

Embedded in the numbers.

Do you think that as the cycle you know as we continue into next year that you regain that margin premium.

Or is it going to be kind of more in line with where the competition is.

Yes, I think if you look at individual.

Speaker 3: Yeah, I think if you look at individual contracts that we win, we're winning at a premium, but obviously these costs that we have, the reactivation costs and other costs that we're incurring have caused some challenges. I think if you go back to the 2000...

Individual contracts that we win we're winning at a at a premium.

But obviously these costs that we have the reactivation costs and other costs that were that were.

Incurring have caused some challenges I think if you go back to the 2000 <unk>.

17, 2018, 2019 market, we did have a premium margin at that time.

Speaker 3: 2017, 2018, 2019 market, we did have a premium margin at that time.

So yes, I fully expect that we'll continue to have premium margins over our over our peers. You mentioned technology no doubt technology is going to play a larger role.

Speaker 3: So, yes, I fully expect that we'll continue to have premium margins over our peers. You mentioned technology, no doubt technology is going to play a larger role.

We're continuing to have adoption from from customers and again, we're continuing to work.

Speaker 3: and you know we're continuing to have adoption from from customers and again we're continuing to work.

Very hard on executing on new commercial models performance based and Kpis, we have customers that love the model and they're willing to pay for a lot of the value that we provide so more to come.

Speaker 5: very hard on executing on new commercial models, performance-based and KPI. We have customers that love the model, and they're willing to pay for a lot of the value that we provide. So more to come. We can talk about it all day. We just have to demonstrate it, right? And I would just put a note with CAR that we're getting with these.

We can talk about it all day, we just have to demonstrate it right.

Just footnote with car that we're getting with these.

With these upticks that we're guiding to you and talking about and rig activity, we're starting to get back to absorption rates with our scale.

Speaker 5: With these upticks that we're guiding to and talking about in rig activity, we're starting to get back to absorption rates with our scale, which will help with that margin accretion in historical industry-leading margin.

<unk>.

This will help with that margin accretion.

And historically.

Our industry.

Industry, leading margin.

Okay.

Great. Thank you very much and look forward to that.

Speaker 3: Great. Thank you very much. I look forward to that. Thank you. Thank you, Waqar. We are too. Brittany, I think that was our last.

Thank you Waqar, we are to Britney I think thats.

Or less.

Question that that was our last question for today I will turn the program back over to John Lindsay for any additional or closing remarks.

Speaker 1: question. That was our last question for today. I will turn the program back over to John Lindsay for any additional or closing remarks.

Okay. Thank you Brittany appreciate it thanks again, everybody for joining us today.

Speaker 3: Okay. Thank you, Brittany. Appreciate it. Thanks again, everybody, for joining us today. And as mentioned, we're very optimistic about the future. We thank, obviously, our H&P Flex Rigs, our digital solutions, and our best-in-class people. So we're looking forward to the future, and we'll talk to you next quarter. Thank you.

And as mentioned, we're very optimistic about the future.

Think of obviously, our A&P flex rigs, our digital solutions and our best in class people. So we're looking forward in the future and we will talk to you next quarter. Thank you.

This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.

Speaker 1: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.

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