Helmerich and Payne Q1 2026 Helmerich & Payne Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Helmerich & Payne Inc Earnings Call
Operator: Good day, everyone, and welcome to the Helmerich & Payne Fiscal First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the 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 One on your telephone keypad. You may withdraw yourself from the queue by pressing Star and Two. Please note, this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Nicol, Vice President of Investor Relations.
Operator: Good day, everyone, and welcome to the Helmerich & Payne Fiscal First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the 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 One on your telephone keypad. You may withdraw yourself from the queue by pressing Star and Two. Please note, this call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Nicol, Vice President of Investor Relations.
Speaker #2: Later, you will have the 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 one on your telephone keypad.
Speaker #2: You may withdraw yourself from the queue by pressing star and two. Please note this call is being recorded. I will be standing by if you should need any assistance.
Speaker #2: It is now my pleasure to turn the conference over to Mr. Kris Nicol, Vice President of Investor
Speaker #2: Relations. Welcome, everyone, to
Chris Nicol: Welcome, everyone, to Helmerich & Payne's conference call and webcast for the first fiscal quarter of 2026. On today's call, John Lindsay, our CEO, will be joined by Trey Adams, President, Mike Lennox, Executive Vice President of the Western Hemisphere, and Kevin Vann, our Chief Financial Officer. Before we begin our prepared remarks, I'd like to remind everyone that this call will include forward-looking statements as defined under securities laws. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. Please refer to our filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. Reconciliations of direct margin and certain GAAP to non-GAAP measures can be found in our earnings release.
Chris Nicol: Welcome, everyone, to Helmerich & Payne's conference call and webcast for the first fiscal quarter of 2026. On today's call, John Lindsay, our CEO, will be joined by Trey Adams, President, Mike Lennox, Executive Vice President of the Western Hemisphere, and Kevin Vann, our Chief Financial Officer. Before we begin our prepared remarks, I'd like to remind everyone that this call will include forward-looking statements as defined under securities laws. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. Please refer to our filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. Reconciliations of direct margin and certain GAAP to non-GAAP measures can be found in our earnings release.
Speaker #3: Helmerich & Payne's conference call and webcast for the first fiscal quarter of 2026. On today's call, John Lindsay, our CEO, will be joined by Trey Adams, President; Mike Lennox, Executive Vice President of the Western Hemisphere; and Kevin Vann, our Chief Financial Officer.
Speaker #3: Before we begin, our prepared remarks, I'd like to remind everyone that this call will include forward-looking statements as defined under securities laws. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct.
Speaker #3: Please refer to our filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking Reconciliations of direct margin and certain gap to non-gap measures can be found in our earnings release.
Chris Nicol: I also want to highlight that we will have a presentation which will support the prepared remarks from the management team and can be found on the IR website. With that, I'll turn the call over to John.
Chris Nicol: I also want to highlight that we will have a presentation which will support the prepared remarks from the management team and can be found on the IR website. With that, I'll turn the call over to John.
Speaker #3: want to highlight that we will have a I also presentation which will support the prepared remarks from the management team and can be found on the IR website.
Speaker #3: With that, I'll turn the call over to
Speaker #3: John. Thank you,
John Lindsay: Thank you, Chris. Hello, everyone. Thank you for joining us. As always, we appreciate your interest in H&P. I'll begin with an overview of our first quarter results, and then I'll turn it over to Trey, and he will discuss the broader macro environment, current dynamics in the rig market, and several key commercial developments from the quarter, including an update on our latest technology initiative, Flex Robotics. Kevin will then walk through our financial results and provide guidance for the second quarter and full fiscal year. To wrap up, Trey will return to summarize the key takeaways before we open the line up for questions. Turning to slide four of the presentation, I'd like to begin by highlighting some of our key achievements for the fiscal first quarter. Execution continued to strengthen across our business, driving solid operational and financial performance.
John Lindsay: Thank you, Chris. Hello, everyone. Thank you for joining us. As always, we appreciate your interest in H&P. I'll begin with an overview of our first quarter results, and then I'll turn it over to Trey, and he will discuss the broader macro environment, current dynamics in the rig market, and several key commercial developments from the quarter, including an update on our latest technology initiative, Flex Robotics. Kevin will then walk through our financial results and provide guidance for the second quarter and full fiscal year. To wrap up, Trey will return to summarize the key takeaways before we open the line up for questions. Turning to slide four of the presentation, I'd like to begin by highlighting some of our key achievements for the fiscal first quarter. Execution continued to strengthen across our business, driving solid operational and financial performance.
Speaker #4: Kris. Hello, everyone. Thank you for joining us. As always, we appreciate your interest in H&P. I'll begin with an overview of our first quarter results, and then I'll turn it over to Trey.
Speaker #4: And he will discuss the broader macro market, as well as several key commercial developments from the quarter, including an update on our latest technology initiative, Flex Robotics.
Speaker #4: Kevin will then walk through our financial results and provide guidance for the second quarter and full fiscal year. To wrap up, Trey will return to summarize the key takeaways.
Speaker #4: Before we open the line up for questions. Turning to slide four of the presentation, I'd like to begin by highlighting some of our key achievements for the fiscal first quarter.
Speaker #4: Execution continued to strengthen across our business. Driving solid operational and financial performance. Adjusted EBITDA exceeded expectations at $230 million. Supported by resilient results in our North America solutions and offshore solutions segments.
John Lindsay: Adjusted EBITDA exceeded expectations at $230 million, supported by resilient results in our North America Solutions and Offshore Solutions segments, as well as a stronger than anticipated performance in International Solutions. I would note that Q1 benefited from the timing of certain rig reactivation expenses, which will be more heavily reflected in Q2. Beyond the rig reactivations in Saudi Arabia, we also saw meaningful margin improvement from our FlexRig fleet operating in the vast Jafurah gas field. I'm encouraged by this progress and optimistic that we will continue to see further margin expansion throughout the remainder of the year. In North America Solutions, I want to recognize the team for another quarter of strong execution.
John Lindsay: Adjusted EBITDA exceeded expectations at $230 million, supported by resilient results in our North America Solutions and Offshore Solutions segments, as well as a stronger than anticipated performance in International Solutions. I would note that Q1 benefited from the timing of certain rig reactivation expenses, which will be more heavily reflected in Q2. Beyond the rig reactivations in Saudi Arabia, we also saw meaningful margin improvement from our FlexRig fleet operating in the vast Jafurah gas field. I'm encouraged by this progress and optimistic that we will continue to see further margin expansion throughout the remainder of the year. In North America Solutions, I want to recognize the team for another quarter of strong execution.
Speaker #4: As well as a stronger than anticipated performance in international solutions. I would note that the first quarter benefited from the timing of certain rig reactivation expenses which will be more heavily reflected in the second quarter.
Speaker #4: Beyond the rig reactivations in Saudi Arabia, we also saw meaningful margin improvement from our FlexRig fleet operating in the vast Jafira gas field. I'm encouraged by this progress and optimistic that we will continue to see further margin expansion throughout the remainder of the year.
Speaker #4: In North America Solutions, I want to recognize the team for another quarter of strong execution. We averaged 143 rigs working, and our industry-leading technology and talented teams continue to deliver for customers.
John Lindsay: We averaged 143 rigs working, and our industry-leading technology and talented teams continued to deliver for customers, generating average margins of over $18,000 per day. Our offshore segment also delivered another quarter of robust operational performance. This business typically operates under long-term contracts, which provides a stabilizing counterbalance to the more cyclical land drilling market. As Trey will discuss during his remarks, Flex Robotics, automated drilling, and connections represent the next step forward in rig safety and capability. I am personally very excited about this development and view it as yet another example of how H&P continues to lead the industry in rig technology and drilling innovation... Now, as this is my final earnings call as CEO for H&P, I wanna take a step back for a moment and share a few reflections.
John Lindsay: We averaged 143 rigs working, and our industry-leading technology and talented teams continued to deliver for customers, generating average margins of over $18,000 per day. Our offshore segment also delivered another quarter of robust operational performance. This business typically operates under long-term contracts, which provides a stabilizing counterbalance to the more cyclical land drilling market. As Trey will discuss during his remarks, Flex Robotics, automated drilling, and connections represent the next step forward in rig safety and capability. I am personally very excited about this development and view it as yet another example of how H&P continues to lead the industry in rig technology and drilling innovation... Now, as this is my final earnings call as CEO for H&P, I wanna take a step back for a moment and share a few reflections.
Speaker #4: Generating average margins of over $18,000 per day. Our offshore segment also delivered another quarter of robust operational performance. This business typically operates under long-term contracts.
Speaker #4: Which provides a stabilizing counterbalance to the more cyclical land drilling market. As Trey will discuss during his remarks, Flex Robotics, automated drilling and connections, represent the next step forward in rig safety and capability.
Speaker #4: I am personally very excited about this development and view it as yet another example of how H&P continues to lead the industry in rig technology and drilling innovation.
Speaker #4: Now, as this is my final earnings call as CEO for H&P, I want to take a step back for a moment and share a few reflections.
Speaker #4: I started my career at H&P 39 years ago, and while I don't have time to thank everyone who was instrumental in my career—there are many—I am deeply grateful to all of them.
John Lindsay: I started my career at H&P 39 years ago, and while I don't have time to thank everyone that was instrumental in my career, there are many, and I am deeply grateful to all of them. During my 12 years as CEO, we've navigated volatile cycles, shifting markets, and rapid technological change, and H&P still leads. Our long-term success depends on discipline, the skill and commitment of our people, and the company's willingness to invest through the cycles rather than just react. Durability matters. We don't chase a perfect quarter, but we would build with patience, rigor, and people who do things the right way. We build for decades of performance. Finally, I wanna thank my exceptional leadership team and the many employees I've had the privilege to work with along the way, for their commitment, professionalism, and support, for truly living the H&P way.
John Lindsay: I started my career at H&P 39 years ago, and while I don't have time to thank everyone that was instrumental in my career, there are many, and I am deeply grateful to all of them. During my 12 years as CEO, we've navigated volatile cycles, shifting markets, and rapid technological change, and H&P still leads. Our long-term success depends on discipline, the skill and commitment of our people, and the company's willingness to invest through the cycles rather than just react. Durability matters. We don't chase a perfect quarter, but we would build with patience, rigor, and people who do things the right way. We build for decades of performance. Finally, I wanna thank my exceptional leadership team and the many employees I've had the privilege to work with along the way, for their commitment, professionalism, and support, for truly living the H&P way.
Speaker #4: During my 12 years as CEO, we've navigated volatile cycles, shifting markets, and rapid technological change. And H&P still leads. Our long-term success depends on discipline, the skill and commitment of our people, and the company's willingness to invest through the cycles rather than just react.
Speaker #4: Durability matters. We don't chase a perfect quarter, but we would build with patience, rigor, and people who do things the right way. We build for decades of performance.
Speaker #4: Finally, I want to thank my exceptional leadership team and the many employees I've had the privilege to work with along the way. For their commitment, professionalism, and support.
Speaker #4: For truly living the H&P way. I also want to thank our customers for their partnership over these many years. And our shareholders for their long-term support of the company.
John Lindsay: I also wanna thank our customers for their partnership over these many years, and our shareholders for their long-term support of the company. It's been a privilege to lead H&P, and I'm excited about the future of the company under Trey's leadership. We have a strong team, a clear strategy, and we are well-positioned for the future. So thank you all, and now it's over to you, Trey.
John Lindsay: I also wanna thank our customers for their partnership over these many years, and our shareholders for their long-term support of the company. It's been a privilege to lead H&P, and I'm excited about the future of the company under Trey's leadership. We have a strong team, a clear strategy, and we are well-positioned for the future. So thank you all, and now it's over to you, Trey.
Speaker #4: It's been a privilege to lead H&P, and I'm excited about the future of the company under Trey's leadership. We have a strong team, a clear strategy, and we are well-positioned for the future.
Speaker #4: So thank you all. And now it's over to you, Trey.
Speaker #5: Thank you, John. I'd like to express my gratitude both on behalf of our whole organization and personally for your outstanding leadership, discipline, and the example you've provided.
Trey Adams: Thank you, John. I'd like to express my gratitude, both on behalf of our whole organization and personally, for your outstanding leadership, discipline, and the example you've provided, and especially for the mentorship and friendship. You've led this company with a long-term mindset, a steady hand through multiple cycles, and a deep respect for the people and values that define H&P. The strength of the company today is a direct reflection of that leadership. As I step into the role next month, I do so with a great deal of respect for what's been built, and for real excitement about where we're headed. The foundation is strong: a global footprint, differentiated technology, and the H&P Way, a culture that truly differentiates us.
Trey Adams: Thank you, John. I'd like to express my gratitude, both on behalf of our whole organization and personally, for your outstanding leadership, discipline, and the example you've provided, and especially for the mentorship and friendship. You've led this company with a long-term mindset, a steady hand through multiple cycles, and a deep respect for the people and values that define H&P. The strength of the company today is a direct reflection of that leadership. As I step into the role next month, I do so with a great deal of respect for what's been built, and for real excitement about where we're headed. The foundation is strong: a global footprint, differentiated technology, and the H&P Way, a culture that truly differentiates us.
Speaker #5: And especially for the mentorship and friendship. You've led this company with a long-term mindset, a steady hand through multiple cycles, and a deep respect for the people and values that define H&P.
Speaker #5: The strength of the company today is a direct reflection of that leadership. As I step into the role next month, I do so with a great deal of respect for what's been built.
Speaker #5: And for real excitement about where we're headed. The foundation is strong. A global footprint, differentiated technology, and the H&P way. A culture that truly differentiates us.
Speaker #5: Building on that foundation, our focus will be on continuing to evolve. Leaning into innovation, positioning the company to compete and create value at a global scale in what is a constantly changing energy landscape.
Trey Adams: Building on that foundation, our focus will be on continuing to evolve, leaning into innovation, advancing our capabilities, and positioning the company to compete and create value at a global scale in what is a constantly changing energy landscape. I'm honored to take on the role of CEO and to lead the next chapter of Helmerich & Payne alongside this team. I look forward to working with our employees, customers, and shareholders as we move forward together. Turning our attention to the current macro environment on slide six, we firmly believe that in the future, the world will require significantly more energy than it consumes today, driven by expanding population and growing prosperity in emerging markets, along with the rising power needs from AI advancements in many developed nations.
Trey Adams: Building on that foundation, our focus will be on continuing to evolve, leaning into innovation, advancing our capabilities, and positioning the company to compete and create value at a global scale in what is a constantly changing energy landscape. I'm honored to take on the role of CEO and to lead the next chapter of Helmerich & Payne alongside this team. I look forward to working with our employees, customers, and shareholders as we move forward together. Turning our attention to the current macro environment on slide six, we firmly believe that in the future, the world will require significantly more energy than it consumes today, driven by expanding population and growing prosperity in emerging markets, along with the rising power needs from AI advancements in many developed nations.
Speaker #5: I'm honored to take on the role of CEO and to lead the next chapter of Helmerich & Payne alongside this team. I look forward to working with our employees, customers, and shareholders as we move forward together.
Speaker #5: Turning our attention to the current macro environment on slide six. We firmly believe that, in the future, the world will require significantly more energy than it consumes today.
Speaker #5: Driven by expanding population, and growing prosperity in emerging markets. Along advancements and many developed nations. This dynamic supports our view that demand for oil and gas will persist and grow for many years to come.
Trey Adams: This dynamic supports our view that demand for oil and gas will persist and grow for many years to come, which, in turn, bolsters the need for our global drilling solutions. Looking at this year, the energy landscape appears cautiously positive but uneven, as various macroeconomic and geopolitical factors continue to influence the market. While these developments have eased concerns over an imminent fall in oil prices at the year's outset, the price rebound has not been sustained for long enough to influence a pickup in industry activity. Operators remain focused on disciplined capital deployment, conserving inventory, and prioritizing returns over volume expansion. Consequently, we anticipate oil-related investment will remain soft this year, with greater upside potential likely to play out beyond this year. In contrast, the outlook for gas markets is more robust. Structural growth continues, fueled by demand for LNG and surging AI-led power demand.
Trey Adams: This dynamic supports our view that demand for oil and gas will persist and grow for many years to come, which, in turn, bolsters the need for our global drilling solutions. Looking at this year, the energy landscape appears cautiously positive but uneven, as various macroeconomic and geopolitical factors continue to influence the market. While these developments have eased concerns over an imminent fall in oil prices at the year's outset, the price rebound has not been sustained for long enough to influence a pickup in industry activity. Operators remain focused on disciplined capital deployment, conserving inventory, and prioritizing returns over volume expansion. Consequently, we anticipate oil-related investment will remain soft this year, with greater upside potential likely to play out beyond this year. In contrast, the outlook for gas markets is more robust. Structural growth continues, fueled by demand for LNG and surging AI-led power demand.
Speaker #5: Which, in turn, bolsters the need for our global drilling solutions. Looking at this year, the energy landscape appears cautiously positive but uneven. As various macroeconomic and geopolitical factors continue to influence the market, while these developments have eased concerns over an imminent fall in oil prices at the year's outset, the price rebound has not been sustained for long enough to influence a pickup in industry activity.
Speaker #5: Operators' deployment, conserving, remain focused on disciplined capital inventory and prioritizing returns over volume expansion. Consequently, we anticipate oil-related investment will remain soft this year, with greater upside potential likely to play out beyond this year.
Speaker #5: In contrast, the outlook for gas markets is more robust. Structural growth continues, fueled by demand for LNG and surging AI-led power demand. As such, we expect 2026 global upstream investment levels to remain flatish overall.
Trey Adams: As such, we expect 2026 global upstream investment levels to remain flattish overall, though with notable variations by region and market segment. North America is likely to remain most restrained market in the quarter ahead. This is evident in current activity levels and the recent behaviors of both customers and competitors. We do, however, expect activity to gradually improve through the course of the year and strengthen into 2027. Internationally, the market demonstrates greater resilience, with a clear uptick in activity in the Middle East. Our recent announcements regarding reactivations in Saudi Arabia highlight this growing momentum, and we are beginning to observe broader improvements across the region. South America is also on a more positive path. In this context, our strategic priorities remain unchanged: maintaining our focus on pricing, making selective capital investments, and positioning our business to capitalize when the market cycle strengthens.
Trey Adams: As such, we expect 2026 global upstream investment levels to remain flattish overall, though with notable variations by region and market segment. North America is likely to remain most restrained market in the quarter ahead. This is evident in current activity levels and the recent behaviors of both customers and competitors. We do, however, expect activity to gradually improve through the course of the year and strengthen into 2027. Internationally, the market demonstrates greater resilience, with a clear uptick in activity in the Middle East. Our recent announcements regarding reactivations in Saudi Arabia highlight this growing momentum, and we are beginning to observe broader improvements across the region. South America is also on a more positive path. In this context, our strategic priorities remain unchanged: maintaining our focus on pricing, making selective capital investments, and positioning our business to capitalize when the market cycle strengthens.
Speaker #5: Though with notable variations by region and market segment. North America is likely to remain most restrained market in the quarter ahead. This is evident in current activity levels and the recent behaviors of both customers and competitors.
Speaker #5: do, however, expect activity to We gradually improve through the course of the year and strengthen into 2027. Internationally, the market demonstrates greater resilience. With a clear uptick in activity in the Middle East, our recent announcements regarding reactivations in Saudi Arabia, highlight this growing momentum.
Speaker #5: And we are beginning to observe broader improvements across the region. South America is also on a more positive path. In this context, our strategic priorities remain unchanged.
Speaker #5: Maintaining our focus on pricing, making selective capital investments, and positioning our business to capitalize when the market cycle strengthens. Turning to rig dynamics on slide seven, I want to provide a brief update on the operational front.
Trey Adams: Turning to rig dynamics on slide 7, I wanna provide a brief update on the operational front. Lower 48 rig demand moderated into the end of the year, with operators adjusting activity levels to align with market conditions. North America Solutions exited Q1 with 139 rigs, a 4% decline from the prior quarter's exit rate. For Q2, we expect to average between 132 and 138 active rigs, and currently have 135 rigs operating as of today. Although activity has softened, we remain optimistic for the full year outlook, supported by ongoing discussions with customers. Our expectation is that conditions will gradually improve over the course of the year, with a pickup in both oil and gas-focused activity.
Trey Adams: Turning to rig dynamics on slide 7, I wanna provide a brief update on the operational front. Lower 48 rig demand moderated into the end of the year, with operators adjusting activity levels to align with market conditions. North America Solutions exited Q1 with 139 rigs, a 4% decline from the prior quarter's exit rate. For Q2, we expect to average between 132 and 138 active rigs, and currently have 135 rigs operating as of today. Although activity has softened, we remain optimistic for the full year outlook, supported by ongoing discussions with customers. Our expectation is that conditions will gradually improve over the course of the year, with a pickup in both oil and gas-focused activity.
Speaker #5: Lower 48 rig demand moderated into the end of the year, with operators adjusting activity levels to align with market conditions. North America's solutions exited the first fiscal quarter with 139 rigs.
Speaker #5: A 4% decline from the prior quarter's exit rate. For the second quarter, we expect to average between 132 and 138 active rigs, and currently have 135 rigs operating as of today.
Speaker #5: Although activity has softened, we remain optimistic for the full year outlook. Supported by ongoing discussions with customers, our expectation is that conditions will gradually improve over the course of the year with a pickup in both oil and gas-focused activity.
Speaker #5: Moving to our international operations, we continue to expect a phased reactivation of the suspended rigs in Saudi Arabia that we've been notified will return to service.
Trey Adams: Moving to our international operations, we continue to expect a phased reactivation of the suspended rigs in Saudi Arabia, that we've been notified will return to service. We now have raised the mast on two rigs and anticipate completing reactivations by mid-2026. Offshore Solutions continues to perform well, reinforcing H&P's leadership in offshore operations and platform maintenance. Currently, this segment has three active offshore rigs and 31 management contracts, backed by long-standing customer relationships, creating a steady and reliable cash flow base. Our geographic footprint positions us well for anticipated offshore investment cycle, and the continued integration of our land and offshore operating models and safety practices will strengthen our performance both over the near and long term. Turning to Slide 8. On the commercial front, we made progress in several areas during the quarter.
Trey Adams: Moving to our international operations, we continue to expect a phased reactivation of the suspended rigs in Saudi Arabia, that we've been notified will return to service. We now have raised the mast on two rigs and anticipate completing reactivations by mid-2026. Offshore Solutions continues to perform well, reinforcing H&P's leadership in offshore operations and platform maintenance. Currently, this segment has three active offshore rigs and 31 management contracts, backed by long-standing customer relationships, creating a steady and reliable cash flow base. Our geographic footprint positions us well for anticipated offshore investment cycle, and the continued integration of our land and offshore operating models and safety practices will strengthen our performance both over the near and long term. Turning to Slide 8. On the commercial front, we made progress in several areas during the quarter.
Speaker #5: We have now raised the mast on two rigs and anticipate completing reactivations by mid-2026. Offshore solutions continue to perform well, reinforcing H&P's leadership in offshore operations and platform maintenance.
Speaker #5: Currently, this segment has three active offshore rigs and 31 management contracts backed by long-standing customer relationships creating a steady and reliable cash flow base.
Speaker #5: Our geographic footprint positions us well for the anticipated offshore investment cycle, and the continued integration of our land and offshore operating models and safety practices will strengthen our performance both over the near and long term.
Speaker #5: Turning to slide eight on the commercial front, we made progress in several areas during the quarter. Most notably was the announcement of rig reactivations in Saudi Arabia, which commenced in November last year.
Trey Adams: Most notably was the announcement of rig reactivations in Saudi Arabia, which commenced in November last year. This marks a turning point in activity levels in the kingdom, and we remain hopeful that we will see further reactivations, as well as the opportunity to further deploy our technology and performance capabilities over time. Our teams are working hard to redeploy these rigs in-country with a focus on customer satisfaction, safety, and operational performance. Elsewhere in our International Solutions business, we are pleased to deploy additional rigs in both Australia and Pakistan, and continue to see a high level of engagement with host NOCs, IOCs, and leading OFS service firms on opportunities to expand our presence in the Middle East and North Africa. The potential reopening of Venezuela could offer meaningful growth for H&P in the medium term.
Trey Adams: Most notably was the announcement of rig reactivations in Saudi Arabia, which commenced in November last year. This marks a turning point in activity levels in the kingdom, and we remain hopeful that we will see further reactivations, as well as the opportunity to further deploy our technology and performance capabilities over time. Our teams are working hard to redeploy these rigs in-country with a focus on customer satisfaction, safety, and operational performance. Elsewhere in our International Solutions business, we are pleased to deploy additional rigs in both Australia and Pakistan, and continue to see a high level of engagement with host NOCs, IOCs, and leading OFS service firms on opportunities to expand our presence in the Middle East and North Africa. The potential reopening of Venezuela could offer meaningful growth for H&P in the medium term.
Speaker #5: This marks a turning point in activity levels in the kingdom, and we remain hopeful that we will see further reactivations as well as the opportunity to further deploy our technology and performance capabilities over time.
Speaker #5: Our teams are working hard to redeploy these rigs in country with a focus on customer satisfaction, safety, and operational performance. Elsewhere in our international solutions business, we are pleased to deploy additional rigs in both Australia and Pakistan and continue to see a high level of engagement with host NOCs, IOCs, and leading OFS service firms on opportunities to expand our presence in the Middle East and North Africa.
Speaker #5: The potential reopening of Venezuela could offer meaningful growth for H&P in the medium term, we have a long and distinguished heritage of operating in the country, and with the right operator, commercial framework, and returns profile in place, we could mobilize relatively quickly.
Trey Adams: We have a long and distinguished heritage of operating in the country, and with the right operator, commercial framework, and returns profile in place, we could mobilize relatively quickly. Furthermore, we are excited to note that geothermal rig interest remains high both in Europe and North America. During the quarter, we received three contract awards for geothermal rigs in Germany, Denmark, and the Netherlands. In January, we added another rig for a geothermal project in North America. Domestically, while the rig count remains soft, we are pleased to sign multiyear contract extensions for several of our rigs operating for key customers across the lower 48. This strengthens our term backlog and provides greater visibility regarding activity levels and margin rates. Offshore Solutions saw continued commercial momentum during the quarter, with progress on several multiyear offshore contract renewals and extensions under evolving commercial frameworks.
Trey Adams: We have a long and distinguished heritage of operating in the country, and with the right operator, commercial framework, and returns profile in place, we could mobilize relatively quickly. Furthermore, we are excited to note that geothermal rig interest remains high both in Europe and North America. During the quarter, we received three contract awards for geothermal rigs in Germany, Denmark, and the Netherlands. In January, we added another rig for a geothermal project in North America. Domestically, while the rig count remains soft, we are pleased to sign multiyear contract extensions for several of our rigs operating for key customers across the lower 48. This strengthens our term backlog and provides greater visibility regarding activity levels and margin rates. Offshore Solutions saw continued commercial momentum during the quarter, with progress on several multiyear offshore contract renewals and extensions under evolving commercial frameworks.
Speaker #5: Furthermore, we are excited to note that geothermal rig interests remain high both in Europe and North America. During the quarter, we received three contract awards for geothermal rigs in Germany, Denmark, and the Netherlands.
Speaker #5: In January, we added another rig for a geothermal project in North America. Domestically, while the rig count remains soft, we are pleased to sign multi-year contract extensions for several of our rigs operating for key customers across the Lower 48.
Speaker #5: This strengthens our term backlog and provides greater visibility regarding activity levels and margin rates. Offshore solutions saw continued commercial momentum during the quarter, with progress on several multi-year offshore contractor renewals and extensions under evolving commercial frameworks.
Speaker #5: These opportunities span multiple regions and reflect ongoing customer demand for H&P's operations, maintenance, and integrated service capabilities. While certain contracts remain subject to customer approvals and customary conditions, the company is encouraged by its potential to support long-term revenue visibility in the offshore portfolio.
Trey Adams: These opportunities span multiple regions and reflect ongoing customer demand for H&P's operations, maintenance, and integrated service capabilities. While certain contracts remain subject to customer approvals and customary conditions, the company is encouraged by its potential to support long-term revenue visibility in the offshore portfolio. As I mentioned, our Offshore Solutions business is differentiated from the more cyclical parts of our portfolio, providing durability and longer-term visibility, and is in an area we are actively looking to expand over time. Moving to the next slide, I would like to take this opportunity to discuss our latest advancement in rig technology, Flex Robotics. Our system has been successfully deployed on 3 pads for a super major customer in the Permian Basin, delivering results in line or better across several operational metrics.
Trey Adams: These opportunities span multiple regions and reflect ongoing customer demand for H&P's operations, maintenance, and integrated service capabilities. While certain contracts remain subject to customer approvals and customary conditions, the company is encouraged by its potential to support long-term revenue visibility in the offshore portfolio. As I mentioned, our Offshore Solutions business is differentiated from the more cyclical parts of our portfolio, providing durability and longer-term visibility, and is in an area we are actively looking to expand over time. Moving to the next slide, I would like to take this opportunity to discuss our latest advancement in rig technology, Flex Robotics. Our system has been successfully deployed on 3 pads for a super major customer in the Permian Basin, delivering results in line or better across several operational metrics.
Speaker #5: As I mentioned, our offshore solutions business is differentiated from the more cyclical parts of our portfolio, providing durability and longer-term visibility, and is in an area we are actively looking to expand over time.
Speaker #5: Moving to the next slide, I would like to take this opportunity to discuss our latest advancement in rig technology, Flex Robotics. Our system has been successfully deployed on three pads for a super major customer in the Permian Basin.
Speaker #5: Delivering results in line or better across several operational metrics. Flex Robotics is all about the automation of routine tasks so the crews can concentrate more on performance and safety.
Trey Adams: Flex Robotics is all about the automation of routine tasks so that crews can concentrate more on performance and safety. Flex Robotics fully automates drilling, drilling connections, and tripping rig floor activities. This, in turn, helps improve safety and operational performance by helping move our rig crews out of the rig floor red zone. We started our journey with Flex Robotics testing in 2024 on our R&D FlexRig 918 in Tulsa to help validate the system. But now, Flex Robotics is successfully deployed and operational in the Permian Basin. The Flex Robotics system is designed with three off-the-shelf robotic arms used in many industries, allowing for a retrofit-ready system to integrate seamlessly with any of our active rigs. We are excited about the potential to deploy more Flex Robotics systems on our rigs in the future.
Trey Adams: Flex Robotics is all about the automation of routine tasks so that crews can concentrate more on performance and safety. Flex Robotics fully automates drilling, drilling connections, and tripping rig floor activities. This, in turn, helps improve safety and operational performance by helping move our rig crews out of the rig floor red zone. We started our journey with Flex Robotics testing in 2024 on our R&D FlexRig 918 in Tulsa to help validate the system. But now, Flex Robotics is successfully deployed and operational in the Permian Basin. The Flex Robotics system is designed with three off-the-shelf robotic arms used in many industries, allowing for a retrofit-ready system to integrate seamlessly with any of our active rigs. We are excited about the potential to deploy more Flex Robotics systems on our rigs in the future.
Speaker #5: Flex Robotics fully automates drilling, drilling connections, and tripping rig floor activities. This in turn helps improve safety and operational performance by helping move our rig crews out of the rig floor red zone.
Speaker #5: We started our journey with Flex Robotics testing in 2024 on our R&D Flex Rig 918 in Tulsa, to help validate the system. But now, Flex Robotics has successfully deployed and operational in the Permian Basin.
Speaker #5: The Flex Robotics system is designed with three off-the-shelf robotic arms used in many industries, allowing for a retrofit-ready system to integrate seamlessly with any of our active rigs.
Speaker #5: We are excited about the potential to deploy more Flex Robotics systems on our rigs in the future. At the same time, customers are innovation.
Trey Adams: At the same time, customers are excited about its potential, with several inbounds on our latest innovation. As John said, H&P continues to lead in rig technology innovation. We remain dedicated to developing solutions that both enhance customer experience and deliver superior returns for our business. With that, I will now turn the call over to Kevin, who will walk you through our financial results.
Trey Adams: At the same time, customers are excited about its potential, with several inbounds on our latest innovation. As John said, H&P continues to lead in rig technology innovation. We remain dedicated to developing solutions that both enhance customer experience and deliver superior returns for our business. With that, I will now turn the call over to Kevin, who will walk you through our financial results.
Speaker #5: excited about its potential, with As John said, H&P continues to lead in rig technology innovation. We remain dedicated to developing solutions that both enhance customer experience and deliver superior returns for our business.
Speaker #5: With that, I will now turn the call over to Kevin, who will walk you through our financial results.
Speaker #2: Thanks, Trey. I will start by reviewing our first quarter operating results and providing details on the performance of our operating segments. I will then spend some time walking through our capital allocation framework and conclude by outlining our guidance for the fiscal second quarter before handing it back to Trey.
Kevin Vann: ... Thanks, Trey. I will start by reviewing our Q1 operating results and providing details on the performance of our operating segments. I will then spend some time walking through our capital allocation framework and conclude by outlining our guidance for the fiscal Q2 before handing it back to Trey. Let me start with highlights for the recently completed quarter on slide 11, where we exceeded the midpoint of our direct margin guidance in all our operating regions, despite the dynamic market environment. Alongside our continued operational and commercial success, we also made strong progress on the deleveraging front, as we have paid off $260 million on our $400 million term loan as of the end of January, remaining significantly ahead of the debt reduction goals we laid out last year.
Kevin Vann: ... Thanks, Trey. I will start by reviewing our Q1 operating results and providing details on the performance of our operating segments. I will then spend some time walking through our capital allocation framework and conclude by outlining our guidance for the fiscal Q2 before handing it back to Trey. Let me start with highlights for the recently completed quarter on slide 11, where we exceeded the midpoint of our direct margin guidance in all our operating regions, despite the dynamic market environment. Alongside our continued operational and commercial success, we also made strong progress on the deleveraging front, as we have paid off $260 million on our $400 million term loan as of the end of January, remaining significantly ahead of the debt reduction goals we laid out last year.
Speaker #2: Let me start with highlights for the recently completed quarter on slide 11. Where we exceeded the midpoint of our direct margin guidance and all our operating regions despite the dynamic market environment.
Speaker #2: Alongside our continued operational and commercial success, we also made strong progress on the deleveraging front as we have paid off $260 million on our $400 million term loan as of the end of January, remaining significantly ahead of the debt reduction goals we laid out last year.
Speaker #2: During the quarter, the company generated revenues of $1 billion, which is the third consecutive quarter at that billion dollar mark. We generated $230 million of adjusted EBITDA coming in ahead of expectations.
Kevin Vann: During the quarter, the company generated revenues of $1 billion, which is the third consecutive quarter at that billion-dollar mark. We generated $230 million of Adjusted EBITDA, coming in ahead of expectations. This was primarily led by stronger than anticipated margin performance in International Solutions as a result of the lower than expected reactivation cost in Saudi during the quarter. The balance will now occur in the second fiscal quarter and is reflected in our Q2 international margin guidance. On EPS, we reported a net loss of $0.98 per diluted share. These results were negatively impacted by a non-cash impairment charge and some unusual non-cash items of $103 million. Absent those items, we generated a loss of $0.15 per share. Capital expenditures for the first quarter were $68 million, trending below our sequential run rate.
Kevin Vann: During the quarter, the company generated revenues of $1 billion, which is the third consecutive quarter at that billion-dollar mark. We generated $230 million of Adjusted EBITDA, coming in ahead of expectations. This was primarily led by stronger than anticipated margin performance in International Solutions as a result of the lower than expected reactivation cost in Saudi during the quarter. The balance will now occur in the second fiscal quarter and is reflected in our Q2 international margin guidance. On EPS, we reported a net loss of $0.98 per diluted share. These results were negatively impacted by a non-cash impairment charge and some unusual non-cash items of $103 million. Absent those items, we generated a loss of $0.15 per share. Capital expenditures for the first quarter were $68 million, trending below our sequential run rate.
Speaker #2: Primarily led by stronger-than-anticipated margin performance in International Solutions as a result of the lower-than-expected reactivation cost in Saudi during the quarter. The balance will now occur in the second fiscal quarter and is reflected in our Q2 international margin guidance.
Speaker #2: On EPS, we reported a net loss of $98 cents per diluted share. These results were negatively impacted by a non-cash impairment charge and some unusual non-cash items of $103 million, absent those items we generated a loss of $0.15 per share.
Speaker #2: Quarter were $68 million, trending below our sequential run rate. This outcome was primarily driven by slower-than-anticipated capex associated with the Saudi reactivation capital deployment in International Solutions, along with timing changes in some of our North American Solutions spend.
Kevin Vann: This outcome was primarily driven by slower than anticipated CapEx associated with the Saudi reactivation capital deployment in International Solutions, along with timing changes in some of our North American Solutions spend. In line with this, HP free cash flow in the quarter came in strongly at $126 million. Our cash flow generation funded $25 million in base dividends, in addition to the significant progress on paying down our term loan. Now, turning to our three segments, beginning with North American Solutions on slide 12. We averaged 143 contracted rigs during Q1, which was up slightly from the levels we experienced in the fiscal Q4 of 2025, and consistent with the activity expectations we set on the prior call.
Kevin Vann: This outcome was primarily driven by slower than anticipated CapEx associated with the Saudi reactivation capital deployment in International Solutions, along with timing changes in some of our North American Solutions spend. In line with this, HP free cash flow in the quarter came in strongly at $126 million. Our cash flow generation funded $25 million in base dividends, in addition to the significant progress on paying down our term loan. Now, turning to our three segments, beginning with North American Solutions on slide 12. We averaged 143 contracted rigs during Q1, which was up slightly from the levels we experienced in the fiscal Q4 of 2025, and consistent with the activity expectations we set on the prior call.
Speaker #2: In line with this, H&P free cash flow in the quarter came in strongly at $126 million. Our cash flow generation funded $25 million in base dividends in addition to the significant progress on paying down our term loan.
Speaker #2: Now turning to our three segments. Beginning with North American solutions on slide 12. We averaged $143 contracted rigs during the first quarter, which was up slightly from the levels we experienced in the fiscal fourth quarter of 2025 and consistent with the activity expectations we set on the prior call.
Speaker #2: Segment direct margin $239 million, which came in above the midpoint of our guidance range. This was driven by a higher rig count sequentially and our total gross margin holding in above $18,000 per day as we closed out the calendar year.
Kevin Vann: Segment Direct Margin for North American Solutions was $239 million, which came in above the midpoint of our guidance range. This was driven by a higher rig count sequentially, and our total gross margin holding in above $18,000 per day as we closed out the calendar year. This outcome is also evidence of our commitment to our customers. We benefit when they benefit via our, via our performance-based contracts. Ultimately, our goal is to help them meet their objectives of drilling consistent and timely wells and setting them up for a clean and efficient completion and production process. Turning to International Solutions on slide 13, the segment ended Q1 with 59 rigs working and generated approximately $29 million in direct margins, exceeding the high end of our guidance range of $13 million to $23 million.
Kevin Vann: Segment Direct Margin for North American Solutions was $239 million, which came in above the midpoint of our guidance range. This was driven by a higher rig count sequentially, and our total gross margin holding in above $18,000 per day as we closed out the calendar year. This outcome is also evidence of our commitment to our customers. We benefit when they benefit via our, via our performance-based contracts. Ultimately, our goal is to help them meet their objectives of drilling consistent and timely wells and setting them up for a clean and efficient completion and production process. Turning to International Solutions on slide 13, the segment ended Q1 with 59 rigs working and generated approximately $29 million in direct margins, exceeding the high end of our guidance range of $13 million to $23 million.
Speaker #2: This outcome is also evidence of our commitment to our customers. We benefit when they benefit via our performance-based contracts. Ultimately, our goal is to help them meet their objectives of drilling consistent and timely wells and setting them up for a clean and efficient completion and production process.
Speaker #2: Turning to international solutions on slide 13, the segment ended the first quarter with 59 rigs working and generated approximately $29 million in direct margins.
Speaker #2: Exceeding the high end of our guidance range of $13 to $23 million. Again, the much higher-than-anticipated margin rate is primarily driven by the timing of reactivation costs which were anticipated to occur in the first quarter but will now happen in the second fiscal quarter.
Kevin Vann: Again, the much higher than anticipated margin rate is primarily driven by the timing of reactivation costs, which were anticipated to occur in Q1, but will now happen in Q2. Underlying the lumpiness of our reactivation costs in Saudi Arabia, we saw continued improvement in the margin performance of our flex rig fleet and higher than anticipated rig utilization in the Middle East and in Colombia. Finally, with our offshore solutions segment on slide 14, we generated a direct margin of approximately $31 million during the quarter, which came in slightly ahead of the midpoint of our guidance range. We had 3 active rigs and 33 management contracts in operation during the quarter. As with prior quarters, we are excited about this business and the consistent and stable results that it delivers.
Kevin Vann: Again, the much higher than anticipated margin rate is primarily driven by the timing of reactivation costs, which were anticipated to occur in Q1, but will now happen in Q2. Underlying the lumpiness of our reactivation costs in Saudi Arabia, we saw continued improvement in the margin performance of our flex rig fleet and higher than anticipated rig utilization in the Middle East and in Colombia. Finally, with our offshore solutions segment on slide 14, we generated a direct margin of approximately $31 million during the quarter, which came in slightly ahead of the midpoint of our guidance range. We had 3 active rigs and 33 management contracts in operation during the quarter. As with prior quarters, we are excited about this business and the consistent and stable results that it delivers.
Speaker #2: Underlying the lumpiness of our reactivation costs in Saudi Arabia, we saw continued improvement in the margin performance of our FlexRig fleet and higher-than-anticipated rig utilization in the Middle East and in Colombia.
Speaker #2: Finally, with our offshore solution segment on slide 14, we generated a direct margin of approximately $31 million during the quarter, which came in slightly ahead of the midpoint of our guidance range.
Speaker #2: We had three active rigs and $33 management contracts in operation during the quarter. As with prior quarters, we are excited about this business and the consistent and stable results that it delivers.
Speaker #2: As Trey said, it requires minimal capital, and generates steady cash flow which is distinctive from the cyclical and more capital-dependent nature of portfolio. our onshore provide an update on our capital allocation framework.
Kevin Vann: As Trey said, it requires minimal capital and generates steady cash flow, which is distinctive from the cyclical and more capital-dependent nature of our onshore portfolio. Turning to slide 15, I want to provide an update on our capital allocation framework. Our focus remains unchanged, with the top priority being continued deleveraging and maintaining our investment grade status. In relatively short time, we've made meaningful progress to reduce our post-acquisition leverage, and we remain committed to reaching our near-term goal of paying down our term loan of $400 million ahead of schedule by mid-2026. As I mentioned earlier, we have paid down $260 million on it as of the end of January. At the end of the fiscal Q1, we had cash and short-term investments of approximately $269 million.
Kevin Vann: As Trey said, it requires minimal capital and generates steady cash flow, which is distinctive from the cyclical and more capital-dependent nature of our onshore portfolio. Turning to slide 15, I want to provide an update on our capital allocation framework. Our focus remains unchanged, with the top priority being continued deleveraging and maintaining our investment grade status. In relatively short time, we've made meaningful progress to reduce our post-acquisition leverage, and we remain committed to reaching our near-term goal of paying down our term loan of $400 million ahead of schedule by mid-2026. As I mentioned earlier, we have paid down $260 million on it as of the end of January. At the end of the fiscal Q1, we had cash and short-term investments of approximately $269 million.
Speaker #2: Our focus remains unchanged with the top priority being continued deleveraging and maintaining our investment-grade status. In relatively short time, we've made meaningful progress to reduce our post-acquisition leverage and we remain committed to reaching our near-term goal of paying down our term loan of $400 million ahead of schedule by mid-2026.
Speaker #2: As I mentioned earlier, we have paid down $260 million on it as of the end of January. At the end of the fiscal first quarter, we had cash and short-term investments of approximately $269 million.
Speaker #2: Including the availability under our revolving credit facility, our total liquidity is approximately $1.2 billion. Beyond the term loan repayment, we are focused on driving leverage down to around one turn or one times net debt to EBITDA.
Kevin Vann: Including the availability under our revolving credit facility, our total liquidity is approximately $1.2 billion. Beyond the term loan repayment, we are focused on driving leverage down to around one turn or one times net debt to EBITDA. We continue to evaluate our asset base to ensure capital is directed toward the highest return opportunities, while simplifying the portfolio where appropriate, and driving structural cost improvements across the organization. Since we closed the sale of the transaction, we have been able to reduce our SG&A by over $50 million relative to pre-merger standalone run rates, and will continue to align the cost structure with the level of activity. Further, as I stated last quarter, we are harmonizing processes and systems across our Eastern and Western Hemisphere operations... These efforts will help in the longer term with the cost-conscious culture we have at H&P.
Kevin Vann: Including the availability under our revolving credit facility, our total liquidity is approximately $1.2 billion. Beyond the term loan repayment, we are focused on driving leverage down to around one turn or one times net debt to EBITDA. We continue to evaluate our asset base to ensure capital is directed toward the highest return opportunities, while simplifying the portfolio where appropriate, and driving structural cost improvements across the organization. Since we closed the sale of the transaction, we have been able to reduce our SG&A by over $50 million relative to pre-merger standalone run rates, and will continue to align the cost structure with the level of activity. Further, as I stated last quarter, we are harmonizing processes and systems across our Eastern and Western Hemisphere operations... These efforts will help in the longer term with the cost-conscious culture we have at H&P.
Speaker #2: continue to evaluate our asset We base to ensure capital is directed toward the highest return opportunities while simplifying the portfolio where appropriate and driving structural cost improvements across the organization.
Speaker #2: Since we closed the sale of the transaction, we have been able to reduce our SG&A by over $50 million relative to pre-merger standalone run rates and will continue to align the cost structure with the level of activity.
Speaker #2: Further, as I stated last quarter, we are harmonizing processes and systems across our Eastern and Western Hemisphere operations. These efforts will help in the longer term with the cost-conscious culture we have at H&P.
Speaker #2: On portfolio optimization, we continue to work diligently to streamline the portfolio and have line of sight on over $100 million of divestments. Lastly, on shareholder returns, a key element is the dividend.
Kevin Vann: On portfolio optimization, we continue to work diligently to streamline the portfolio and have line of sight on over $100 million of divestments. Lastly, on shareholder returns, a key element is the dividend. We view the base dividend as a core commitment to shareholders, and we remain confident in its sustainability. The dividend is well covered by cash flow, and our capital allocation decisions are structured to support it across commodity cycles. Now I wanna transition to our Q2 and full year guidance on slide 16. Looking ahead to the Q2 of fiscal 2026 for North American Solutions, we expect our margins and operating rig count to taper down in line with the typical seasonality and ongoing softness in US land activity levels.
Kevin Vann: On portfolio optimization, we continue to work diligently to streamline the portfolio and have line of sight on over $100 million of divestments. Lastly, on shareholder returns, a key element is the dividend. We view the base dividend as a core commitment to shareholders, and we remain confident in its sustainability. The dividend is well covered by cash flow, and our capital allocation decisions are structured to support it across commodity cycles. Now I wanna transition to our Q2 and full year guidance on slide 16. Looking ahead to the Q2 of fiscal 2026 for North American Solutions, we expect our margins and operating rig count to taper down in line with the typical seasonality and ongoing softness in US land activity levels.
Speaker #2: We view the base dividend as a core commitment to shareholders, and we remain confident in its sustainability. The dividend is well covered by cash flow, and our capital allocation decisions are structured to support it across commodity cycles.
Speaker #2: Now I want to transition to our second quarter and full year guidance on slide 16. Looking ahead to the second quarter of fiscal 2026 for North American solutions, we expect our margins and operating rig count to taper down in line with the typical seasonality and ongoing softness in US land activity levels.
Speaker #2: As a result, we expect direct margins in our second quarter to range between $205 million to $230 million based on anticipated rig count of between $132 to $138 rigs in the second quarter.
Kevin Vann: As a result, we expect direct margins in our Q2 to range between $205 million to $230 million, based on anticipated rig count of between 132 to 138 rigs in the Q2. Importantly, as we look out to the fiscal Q3 and Q4, we do see signs of the market stabilizing and expect our rig count to pick up in the back half of the year, giving us a path to approach the midpoint of our full-year rig count of 132 to 148 rigs. For international, we anticipate the rig count to average between 57 to 63 rigs in the Q2, which includes the rigs being reactivated in Saudi.
Kevin Vann: As a result, we expect direct margins in our Q2 to range between $205 million to $230 million, based on anticipated rig count of between 132 to 138 rigs in the Q2. Importantly, as we look out to the fiscal Q3 and Q4, we do see signs of the market stabilizing and expect our rig count to pick up in the back half of the year, giving us a path to approach the midpoint of our full-year rig count of 132 to 148 rigs. For international, we anticipate the rig count to average between 57 to 63 rigs in the Q2, which includes the rigs being reactivated in Saudi.
Speaker #2: Importantly, as we look out to the fiscal third and fourth quarters, we do see signs of the market stabilizing and expect our rig count to pick up in the back half of the year.
Speaker #2: Giving us a path to approach the midpoint of our full year rig count of $132 to $148 rigs. For international, we anticipate the rig count to average between $57 to $63 rigs in the second quarter which includes the rigs being reactivated in Saudi.
Speaker #2: As a reminder, this outlook also includes the expectation for some lower rig counts in non-core countries where the current EBITDA contribution is minimal. When we think about core Middle East, the year-on-year trend is positive.
Kevin Vann: As a reminder, this outlook also includes the expectation for some lower rig counts in non-core countries where the current EBITDA contribution is minimal. When we think about core Middle East, the year-on-year trend is positive. We expect International Solutions to generate a direct margin between $12 million to $22 million. As previously mentioned, we did not incur as much reactivation cost in Q1 as we anticipated. The balance will now fall in Q2, resulting in a step down in sequential margin rates. We are also experiencing some churn in Argentina, where rigs coming to the end of their term are returning to the yard to be fitted with additional technology packages before being redeployed.
Kevin Vann: As a reminder, this outlook also includes the expectation for some lower rig counts in non-core countries where the current EBITDA contribution is minimal. When we think about core Middle East, the year-on-year trend is positive. We expect International Solutions to generate a direct margin between $12 million to $22 million. As previously mentioned, we did not incur as much reactivation cost in Q1 as we anticipated. The balance will now fall in Q2, resulting in a step down in sequential margin rates. We are also experiencing some churn in Argentina, where rigs coming to the end of their term are returning to the yard to be fitted with additional technology packages before being redeployed.
Speaker #2: We expect international solutions to generate a direct margin between $12 million to $22 million. As previously mentioned, we did not incur as much reactivation cost in the first quarter as we anticipated.
Speaker #2: The balance will now fall in the second quarter, resulting in the step down in sequential margin rates. We are also experiencing some churn in Argentina, where rigs coming to the end of their term are returning to the yard to be fitted with additional technology packages before being redeployed.
Speaker #2: Despite this timing difference, we expect the direct margin in the fiscal third quarter and fourth quarter to be materially higher than the direct margin rate we achieved in the fiscal first quarter.
Kevin Vann: Despite this timing difference, we expect the direct margin in the fiscal third quarter and fourth quarter to be materially higher than the direct margin rate we achieved in the fiscal first quarter. All reactivations will be behind us, and we expect our flex rig fleet margin to continue to improve. For offshore, we anticipate an average of 30 to 35 management contracts and operating rigs. We expect the margin rate in the fiscal second quarter to range between $20 million and $30 million. This step down is reflective of typical seasonality, lower revenue days, and the roll-off of some higher-margin rig management contracts in Angola. As we progress through the remainder of the year, we anticipate the margin rate to step back up and remain confident in the $100 million to $115 million direct margin full-year guidance we shared previously.
Kevin Vann: Despite this timing difference, we expect the direct margin in the fiscal third quarter and fourth quarter to be materially higher than the direct margin rate we achieved in the fiscal first quarter. All reactivations will be behind us, and we expect our flex rig fleet margin to continue to improve. For offshore, we anticipate an average of 30 to 35 management contracts and operating rigs. We expect the margin rate in the fiscal second quarter to range between $20 million and $30 million. This step down is reflective of typical seasonality, lower revenue days, and the roll-off of some higher-margin rig management contracts in Angola. As we progress through the remainder of the year, we anticipate the margin rate to step back up and remain confident in the $100 million to $115 million direct margin full-year guidance we shared previously.
Speaker #2: All reactivations will be behind us and we expect our Flex Rig fleet margin to continue to improve. For offshore, we anticipate an average of $30 to $35 management contracts and operating rigs.
Speaker #2: We expect the margin rate in the fiscal second quarter to range between $20 million and $30 million. This step down is reflective of typical seasonality, lower revenue days, and the roll-off of some higher margin rig management contracts in Angola.
Speaker #2: As we progress through the remainder of the year, we anticipate the margin rate to step back up and remain confident in the $100 million to $115 million direct margin full year guidance we shared previously.
Speaker #2: We are also trimming our 2026 gross capital expenditure budget slightly to be between $270 million to $310 million as a result of activity levels and ongoing programs.
Kevin Vann: We are also trimming our 2026 gross capital expenditure budget slightly to be between $270 million and $310 million as a result of activity levels and ongoing benefits of our optimization programs. All other full-year guidance ranges remain the same. To conclude, the timing difference of the cost associated with reactivations is creating some lumpiness in the direct margin between Q1 and Q2. Beyond that, we remain optimistic about activity and direct margin progression in Q3 and Q4 and are comfortable with where external expectations lie for the full year. I will now turn it back over to Trey for some closing remarks.
Kevin Vann: We are also trimming our 2026 gross capital expenditure budget slightly to be between $270 million and $310 million as a result of activity levels and ongoing benefits of our optimization programs. All other full-year guidance ranges remain the same. To conclude, the timing difference of the cost associated with reactivations is creating some lumpiness in the direct margin between Q1 and Q2. Beyond that, we remain optimistic about activity and direct margin progression in Q3 and Q4 and are comfortable with where external expectations lie for the full year. I will now turn it back over to Trey for some closing remarks.
Speaker #2: All other full year guidance ranges remain the conclude, the timing difference of the cost associated with reactivations is creating some lumpiness in the same.
Speaker #2: Direct margin between the first and second quarters. Beyond that, we remain optimistic about activity and direct margin progression in the third and fourth quarters and are comfortable with where external expectations lie for the full year.
Speaker #2: I will now turn it back over to Trey for some closing remarks. Thank you, Kevin. Turning to slide 18, I'd like to conclude by thesis.
Trey Adams: Thank you, Kevin. Turning to slide 18, I'd like to conclude by refocusing on our compelling investment thesis. H&P today is unrivaled in our scale, geographic diversity, and portfolio to capture rising global onshore drilling activity. We are clearly the technology leader and see a significant opportunity over time to deploy our cutting-edge technology across our global fleet. We believe we are only in the early stages of international shale development and are particularly excited about the prospects in the Middle East and North Africa. At the same time, we are embarking on a rewarding journey of enterprise optimization, with several programs underway to streamline our portfolio, cost structure, and deliver on the full potential of the KCA Deutag acquisition. Our near-term commitment remains on deleveraging our balance sheet, and we are confident in repaying our term loan ahead of schedule.
Trey Adams: Thank you, Kevin. Turning to slide 18, I'd like to conclude by refocusing on our compelling investment thesis. H&P today is unrivaled in our scale, geographic diversity, and portfolio to capture rising global onshore drilling activity. We are clearly the technology leader and see a significant opportunity over time to deploy our cutting-edge technology across our global fleet. We believe we are only in the early stages of international shale development and are particularly excited about the prospects in the Middle East and North Africa. At the same time, we are embarking on a rewarding journey of enterprise optimization, with several programs underway to streamline our portfolio, cost structure, and deliver on the full potential of the KCA Deutag acquisition. Our near-term commitment remains on deleveraging our balance sheet, and we are confident in repaying our term loan ahead of schedule.
Speaker #2: H&P today is unrivaled in our refocusing on our compelling investment scale, geographic diversity, and portfolio to capture rising global onshore drilling activity. We are clearly the technology leader and see a significant opportunity over time to deploy our cutting-edge technology across our global fleet.
Speaker #2: We believe we are only in the early stages of international shale development and are particularly excited about the prospects in the Middle East and North Africa.
Speaker #2: At the same time, we are embarking on a rewarding journey of enterprise optimization, with several programs underway to streamline our portfolio cost structure and deliver on the full potential of the KCA Dori Tag acquisition.
Speaker #2: Our near-term commitment remains on deleveraging our balance sheet, and we are confident in repaying our term loan ahead of schedule. Beyond that, we believe we will have the financial strength and flexibility to enhance our attractive shareholder return profile and further differentiate our portfolio.
Trey Adams: Beyond that, we believe we will have the financial strength and flexibility to enhance our attractive shareholder return profile and further differentiate our portfolio. Lastly, I'm proud of the way we've started the year with solid Q1 results. While we face some timing and market dynamics in Q2, we are optimistic about activity improving through our fiscal Q3 and Q4 and remain confident in the guide we set out at the start of the year. I want to thank the employees of H&P for all of their efforts and look forward to what we can achieve together this year and beyond. That concludes our prepared remarks for the quarter, and I will now turn it back to the operator for questions.
Trey Adams: Beyond that, we believe we will have the financial strength and flexibility to enhance our attractive shareholder return profile and further differentiate our portfolio. Lastly, I'm proud of the way we've started the year with solid Q1 results. While we face some timing and market dynamics in Q2, we are optimistic about activity improving through our fiscal Q3 and Q4 and remain confident in the guide we set out at the start of the year. I want to thank the employees of H&P for all of their efforts and look forward to what we can achieve together this year and beyond. That concludes our prepared remarks for the quarter, and I will now turn it back to the operator for questions.
Speaker #2: Lastly, I'm proud of the way we've started the year with solid first quarter results. While we face some timing and market dynamics in the second quarter, we are optimistic about activity improving through our fiscal third and fourth quarters.
Speaker #2: And remain confident in the guide we set out at the start of the year. I want to thank the employees of H&P for all of their efforts and look forward to what we can achieve together this year and beyond.
Speaker #2: That concludes our prepared remarks for the quarter and I will now turn it back to the operator for
Speaker #2: questions. Thank
Kevin Vann: Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question at any time by pressing the star and two. Once again, to ask a question, please press star one on your telephone keypad. Thank you. We'll take our first question from Scott Gruber with Citigroup. Your line is open.
Operator: Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question at any time by pressing the star and two. Once again, to ask a question, please press star one on your telephone keypad. Thank you. We'll take our first question from Scott Gruber with Citigroup. Your line is open.
Speaker #3: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question at any time by pressing the star and two.
Speaker #3: Once again, to ask a question, please press star one on your telephone keypad. Thank you. We'll take our first question from Scott Gruber with Citigroup.
Speaker #3: Your line is
Speaker #3: open. Yes, good morning
Scott Gruber: Yes, good morning, everyone, and before I ask the question, I just want to thank you, John, for all the insights over the years. It's been a real pleasure, and enjoy your next adventure.
Scott Gruber: Yes, good morning, everyone, and before I ask the question, I just want to thank you, John, for all the insights over the years. It's been a real pleasure, and enjoy your next adventure.
Speaker #4: Everyone, and before I ask the question, I just want to thank you, John, for all the insights over the years. It's been a real pleasure, and enjoy your next adventure.
Speaker #5: Great. Thank you very much, Scott. I appreciate it.
Trey Adams: Great. Thank you very much, Scott. I appreciate it.
John Lindsay: Great. Thank you very much, Scott. I appreciate it.
Speaker #4: Yes, indeed. And Trey, congrats on the promo to you as well.
Scott Gruber: Yes, indeed. And Trey, congrats on the promo to you as well.
Scott Gruber: Yes, indeed. And Trey, congrats on the promo to you as well.
Trey Adams: Thank you very much.
Speaker #5: Thank you very
Trey Adams: Thank you very much.
Speaker #5: much. So I want
Scott Gruber: So I wanna ask about the moving parts incorporated into the fiscal 2022 guide. You know, we got some color, which I appreciate. You know, it sounds like the startup costs are gonna increase in 2022, as you really push forward those reactivations in Saudi. Are you able to dimension the size of those startup costs in fiscal 2022, and will there still be some reactivation costs continuing into fiscal 2023? And then, you know, you mentioned the seasonal headwinds in the US business. Outside of seasonality, you know, is the underlying profit margin for the North American services business now pretty stable, or is there still some contractual headwind in that business?
Scott Gruber: So I wanna ask about the moving parts incorporated into the fiscal 2022 guide. You know, we got some color, which I appreciate. You know, it sounds like the startup costs are gonna increase in 2022, as you really push forward those reactivations in Saudi. Are you able to dimension the size of those startup costs in fiscal 2022, and will there still be some reactivation costs continuing into fiscal 2023? And then, you know, you mentioned the seasonal headwinds in the US business. Outside of seasonality, you know, is the underlying profit margin for the North American services business now pretty stable, or is there still some contractual headwind in that business?
Speaker #4: to ask about the moving parts incorporated into the fiscal two Q guide. We got some color which I appreciate. It sounds like the startup costs are going to increase and two Q, as you really push forward, those reactivations in Saudi.
Speaker #4: Are you able to dimension the size of those startup costs in fiscal two Q and where they'll still be some reactivation costs continuing into fiscal three Q and then you mentioned the seasonal headwinds in the US business.
Speaker #4: Outside of seasonality, is the underlying profit margin for the North American services business now pretty stable or is there still some contract role headwind in that business?
Speaker #4: So just some color on those moving parts in the guide for two Q and how some of those headwinds abate into the future.
Scott Gruber: Just some color, you know, on those moving parts in the guide for 22 and how some of those headwinds abate, you know, into the future.
Scott Gruber: Just some color, you know, on those moving parts in the guide for 22 and how some of those headwinds abate, you know, into the future.
Speaker #5: Yeah, thank you for the question. This is Trey. I'll start and then Kevin and Mike may fill in some additional color as we go through this question.
Trey Adams: Yeah, thank you for the question. This is Trey. I'll start, and then Kevin and Mike may fill in some additional color as we go through this question. We definitely saw some lumpiness between Q1 and Q2, and we'll discuss the three primary drivers of the lumpiness between the quarters here in just a second. I will firmly commit and say that we feel good on the forward guide. We feel good about our guided activity range in North America, as Kevin stated in his prepared remarks, and we feel good about the international solutions outlook. As it relates to reactivation costs in Saudi, those costs we anticipated occurring in the first fiscal quarter now have moved into the second fiscal quarter.
Trey Adams: Yeah, thank you for the question. This is Trey. I'll start, and then Kevin and Mike may fill in some additional color as we go through this question. We definitely saw some lumpiness between Q1 and Q2, and we'll discuss the three primary drivers of the lumpiness between the quarters here in just a second. I will firmly commit and say that we feel good on the forward guide. We feel good about our guided activity range in North America, as Kevin stated in his prepared remarks, and we feel good about the international solutions outlook. As it relates to reactivation costs in Saudi, those costs we anticipated occurring in the first fiscal quarter now have moved into the second fiscal quarter.
Speaker #5: We definitely saw some lumpiness between Q1 and Q2 and we'll discuss the three primary drivers of the lumpiness between the quarters. Here in just a second.
Speaker #5: I will firmly commit and say that we feel good on the forward guide. We feel good about our guided activity range in North America.
Speaker #5: As Kevin stated in his prepared remarks, we feel good about the international solutions outlook. As it relates to reactivation costs in Saudi, those costs we anticipated occurring in the first fiscal quarter now have moved into the second fiscal quarter.
Trey Adams: We will see some of those costs continue to move forward into Q3, but the vast majority of those will occur in Q2 and within our guide. Also, the other kind of key driver was in our North American solution segment. As you guys are aware, and as we've shown, we do expect fewer rigs in North America. This was largely driven by the end of the calendar year, 2025 crude pricing. You know, some of the churn rates and some of the private activity that we have traditionally seen was much more moderated, as we exited the calendar year, 2025, and entered into, you know, our Q2.
Speaker #5: We will see some of those costs continue to move forward into the third quarter, but the vast majority of those will occur in the second fiscal quarter.
Trey Adams: We will see some of those costs continue to move forward into Q3, but the vast majority of those will occur in Q2 and within our guide. Also, the other kind of key driver was in our North American solution segment. As you guys are aware, and as we've shown, we do expect fewer rigs in North America. This was largely driven by the end of the calendar year, 2025 crude pricing. You know, some of the churn rates and some of the private activity that we have traditionally seen was much more moderated, as we exited the calendar year, 2025, and entered into, you know, our Q2.
Speaker #5: And within our guide, we did also— the other kind of key driver was in our North American Solutions segment. As you guys are aware, and as we've shown, we do expect fewer rigs in North America.
Speaker #5: This was largely driven by the end of the calendar year 2025 accrued pricing. Some of the churn rates and some of the private activity that we have traditionally seen was much more moderated as we exited the calendar year 2025 and entered into our second fiscal quarter.
Trey Adams: Mike can get into some color later on the call about how we see that outlook as we progress through the year, but we feel like that's much more robust. Private E&Ps, you know, compared to a couple years ago, you know, definitely didn't jump on the bandwagon in the Q4 and into the Q1 like they had been over the past couple of years. Our public E&P customers remain very fiscally disciplined. Their capital returns programs remain very much firm and in place. So we feel pretty robust on that guide as we go forward, but it just all kind of occurred as we started this new year with a little bit lighter of a guide than we had initially anticipated in North America.
Speaker #5: Mike can get into some color later on the call about how we see that outlook as we progress through the year, but we feel like that's much more robust.
Trey Adams: Mike can get into some color later on the call about how we see that outlook as we progress through the year, but we feel like that's much more robust. Private E&Ps, you know, compared to a couple years ago, you know, definitely didn't jump on the bandwagon in the Q4 and into the Q1 like they had been over the past couple of years. Our public E&P customers remain very fiscally disciplined. Their capital returns programs remain very much firm and in place. So we feel pretty robust on that guide as we go forward, but it just all kind of occurred as we started this new year with a little bit lighter of a guide than we had initially anticipated in North America.
Speaker #5: Private EMPs, compared to a couple of years ago, definitely didn't load to the wagon in the fourth quarter and into the first quarter like they had been over the past couple of years.
Speaker #5: Our public EMP customers remain very fiscally disciplined. Their capital returns programs remain very much firm and in place. So we feel pretty robust on that guide as we go forward, but it just all kind of occurred as we started this new year with a little bit lighter of a guide than we had initially anticipated in North America.
Speaker #5: The last kind of component of some of the lumpiness was this offshore seasonality that Kevin referred to in some of his prepared remarks. We definitely had some rigs that moved from a drilling to a more maintenance mode.
Trey Adams: The last kind of component of some of the lumpiness was this offshore seasonality that Kevin referred to in some of his prepared remarks. We definitely had some rigs that moved from a drilling to a more maintenance mode. We had one rig that, that stopped working and stopped activity in, in Africa. That, that is pretty seasonal, though. We expect those rigs to go back to drilling and off of maintenance mode, and so it just provided a little bit of a lump in our quarter, through the offshore segment. You know, what we are, though, is very optimistic on the full year guide. The Saudi reactivations are putting a lot of wind in our sails. We feel like those are largely behind us, and the startup expenses are behind us.
Trey Adams: The last kind of component of some of the lumpiness was this offshore seasonality that Kevin referred to in some of his prepared remarks. We definitely had some rigs that moved from a drilling to a more maintenance mode. We had one rig that, that stopped working and stopped activity in, in Africa. That, that is pretty seasonal, though. We expect those rigs to go back to drilling and off of maintenance mode, and so it just provided a little bit of a lump in our quarter, through the offshore segment. You know, what we are, though, is very optimistic on the full year guide. The Saudi reactivations are putting a lot of wind in our sails. We feel like those are largely behind us, and the startup expenses are behind us.
Speaker #5: We had one rig that stopped working and stopped activity in Africa. That is pretty seasonal though. We expect those rigs to go back to drilling and off of maintenance mode.
Speaker #5: And so, it just provided a little bit of a lump in our quarter through the offshore segment. What we are, though, is very optimistic on the full-year guide.
Speaker #5: The Saudi reactivations are putting a lot of wind in our sails. We feel like those are largely behind us, and those startup expenses are behind us.
Speaker #5: We feel good about our forward guide on those, as well as our fluctuating margins throughout the rest of this fiscal year 2026. Our fluctuating margins continue to trend well and are moving in the right direction.
Trey Adams: We feel good about our forward guide on those, as well as our flex rig margins. Throughout the rest of this FY 2026 year, our flex rig margins continue to trend well, and are moving in the right direction. In North American Solutions, you know, current expectations of activity improvement are being felt and seen, and so we still feel very good about our, our overall activity guide in North American Solutions. Then lastly, I'll just touch on, before I turn it over to Kevin for some additional color, I'll just touch on, you know, the optimization of costs and expenses throughout the company and portfolio will be a keen focus area, throughout the rest of FY 2026. Kevin referenced in his prepared remarks and can, and add some additional color on our CapEx guide. We feel comfortable about that.
Trey Adams: We feel good about our forward guide on those, as well as our flex rig margins. Throughout the rest of this FY 2026 year, our flex rig margins continue to trend well, and are moving in the right direction. In North American Solutions, you know, current expectations of activity improvement are being felt and seen, and so we still feel very good about our, our overall activity guide in North American Solutions. Then lastly, I'll just touch on, before I turn it over to Kevin for some additional color, I'll just touch on, you know, the optimization of costs and expenses throughout the company and portfolio will be a keen focus area, throughout the rest of FY 2026. Kevin referenced in his prepared remarks and can, and add some additional color on our CapEx guide. We feel comfortable about that.
Speaker #5: In North American Solutions, the current expectations of activity improvement are being felt and seen, and so we still feel very good about our overall activity guide in North American Solutions.
Speaker #5: And then lastly, I'll just touch on before I turn it over to Kevin for some additional color. I'll just touch on the optimization of costs and expenses throughout the company and portfolio area.
Speaker #5: Throughout the rest of FY26, Kevin referenced in his prepared remarks and adds some additional color on our CapEx guide. We feel comfortable about that.
Trey Adams: Overall, I think we're feeling good about the second half of FY 26 and believe that this Q2 bumpiness will abate and resolve itself. Turn it to you, Kevin.
Speaker #5: So overall, the second half of FY26, and we believe that this second quarter lumpiness will abate and resolve itself. I'll turn it to you, Kevin.
Trey Adams: Overall, I think we're feeling good about the second half of FY 26 and believe that this Q2 bumpiness will abate and resolve itself. Turn it to you, Kevin.
Speaker #2: Yeah, hey Scott. Yeah, and if you think about second quarter international guidance of $12 to $22 million, we've got all of the additional startup reactivation costs that are hitting margin.
Kevin Vann: Yeah. Hey, hey, Scott. Yeah, and if you think about Q2 international guidance of $12 to 22 million, we've got all of the additional startup reactivation costs that are hitting margin. We've got them plugged into that quarter. We're pretty confident they'll all hit next quarter. But what you're gonna see, without giving you Q3 guidance, you're gonna see a material step up in gross margin coming out of our International Solutions segment from Q2 to Q3. So, again, from an International Solutions perspective, it's really just kind of sliding some costs between quarters, but we still anticipate when you think about those reactivation or those reactivated rigs in Saudi, we're anticipating, you know, a little over $5 million of EBITDA per year contribution out of those rigs.
Kevin Vann: Yeah. Hey, hey, Scott. Yeah, and if you think about Q2 international guidance of $12 to 22 million, we've got all of the additional startup reactivation costs that are hitting margin. We've got them plugged into that quarter. We're pretty confident they'll all hit next quarter. But what you're gonna see, without giving you Q3 guidance, you're gonna see a material step up in gross margin coming out of our International Solutions segment from Q2 to Q3. So, again, from an International Solutions perspective, it's really just kind of sliding some costs between quarters, but we still anticipate when you think about those reactivation or those reactivated rigs in Saudi, we're anticipating, you know, a little over $5 million of EBITDA per year contribution out of those rigs.
Speaker #2: We've got them plugged into that quarter. We're pretty confident they'll all hit next quarter. But what you're going to see without giving you
Speaker #2: In our third quarter guidance, you're going to see a material step, I think we're feeling good about, up in gross margin coming out of their International Solutions segment from the second to third quarter.
Speaker #2: So again, from an International Solutions point of view, it's really just kind of sliding some costs between quarters, but we still anticipate, when you think about those reactivations or those reactivated rigs in Saudi, we're anticipating a little over $5 million of EBITDA per year contribution out of those rigs.
Speaker #2: And then, on top of get better in that, with our FlexRig performance continuing to Saudi, I think what we've talked about—million dollars for that fleet historically has been between $20 and $25 million—for those rigs to contribute to annualized EBITDA.
Kevin Vann: And then on top of that, with our FlexRig performance continuing to get better in Saudi, you know, I think what we've talked about historically has been between $20 and 25 million for that fleet, those rigs to contribute to annualized EBITDA. So, you know, again, Q2, kind of a lull. Some of that's activity driven, some of that's just, you know, getting ready to really ramp up our International Solutions segment. So, and as Trey mentioned on cost, you know, using all that as the opportunity from a capital perspective, really to, you know, take a long, hard look in the mirror and make sure that, you know, we've got capital allocated to the best projects and the ones that are gonna return the most value, the quickest.
Kevin Vann: And then on top of that, with our FlexRig performance continuing to get better in Saudi, you know, I think what we've talked about historically has been between $20 and 25 million for that fleet, those rigs to contribute to annualized EBITDA. So, you know, again, Q2, kind of a lull. Some of that's activity driven, some of that's just, you know, getting ready to really ramp up our International Solutions segment. So, and as Trey mentioned on cost, you know, using all that as the opportunity from a capital perspective, really to, you know, take a long, hard look in the mirror and make sure that, you know, we've got capital allocated to the best projects and the ones that are gonna return the most value, the quickest.
Speaker #2: So again, second quarter—kind of a lull. Some of that's activity-driven, some of that's just getting ready to really ramp up our International Solutions segment.
Speaker #2: And as Trey mentioned on cost, using all that as the opportunity from a capital perspective, really to take a long, hard look in the mirror and make sure we’ve got capital allocated to the best projects and the ones that are going to return the most value the quickest.
Speaker #2: And so we're lowering our capital guidance a slight touch, but again, I think that's demonstrative of just us keeping our eye on the ball.
Kevin Vann: And so, you know, we're lowering our capital guidance a slight touch, but again, I think that's demonstrative of just us keeping, you know, our eye on the ball.
Kevin Vann: And so, you know, we're lowering our capital guidance a slight touch, but again, I think that's demonstrative of just us keeping, you know, our eye on the ball.
Speaker #3: Okay. No, I appreciate all the color. I'll turn it back. Thank you.
Scott Gruber: Okay. No, I appreciate all the color. I'll turn it back. Thank you.
Scott Gruber: Okay. No, I appreciate all the color. I'll turn it back. Thank you.
Speaker #1: We'll take our next question from Arun Jayaram. With JP Morgan. Your line is
Operator: We'll take our next question from Arun Jayaram with J.P. Morgan. Your line is open.
Operator: We'll take our next question from Arun Jayaram with J.P. Morgan. Your line is open.
Speaker #1: open. Yeah, good morning,
Arun Jayaram: Yeah, good morning, gentlemen. Trey, to see if we could start with your vision, you know, for H&P. You talked about this being a new chapter, you know, for the company, as you take over for John next month. But I was wondering if you could talk about your vision for the company, including what you see as some of the opportunities internationally, particularly as we see growth in unconventionals and geothermal.
Arun Jayaram: Yeah, good morning, gentlemen. Trey, to see if we could start with your vision, you know, for H&P. You talked about this being a new chapter, you know, for the company, as you take over for John next month. But I was wondering if you could talk about your vision for the company, including what you see as some of the opportunities internationally, particularly as we see growth in unconventionals and geothermal.
Speaker #4: gentlemen. Trey, I wanted to start and see if we could start with your vision for H&P. You talked about this being a new chapter for the company as you take over for John next month, but I was wondering if you could talk about your vision for the company including what you see as some of the opportunities internationally particularly as we see growth in unconventionals and geothermal.
Speaker #4: Gentlemen, Trey, I wanted to start and see if we could begin with your vision for H&P. You talked about this being a new chapter for the company as you take over for John next month, but I was wondering if you could talk about your vision for the company, including what you see as some of the opportunities internationally, particularly as we see growth in unconventionals and...
Speaker #5: Yeah, thank you. And first, I just want to take a moment to say how excited I am about the future and today. John's sitting here and his vision has been manifested in his coming to reality across the organization.
Trey Adams: Yeah, thank you. First, I just wanna take a moment to say how excited I am about the future and about where we're positioned today. You know, John sitting here, and his vision has been manifested and is coming to reality across the organization. The company is well-founded, and our foundation is strong. You know, if you think about where we were 14 months ago, prior to the KCA Deutag acquisition and the true form of H&P today versus where we were then, we're a truly different company in business today than we were 14 months ago. We're the global leader in onshore drilling. We have a great base of operations in offshore, the leader in platform operations and maintenance services globally, and have an incredible customer base to be leveraged and build upon, as we look into the future.
Trey Adams: Yeah, thank you. First, I just wanna take a moment to say how excited I am about the future and about where we're positioned today. You know, John sitting here, and his vision has been manifested and is coming to reality across the organization. The company is well-founded, and our foundation is strong. You know, if you think about where we were 14 months ago, prior to the KCA Deutag acquisition and the true form of H&P today versus where we were then, we're a truly different company in business today than we were 14 months ago. We're the global leader in onshore drilling. We have a great base of operations in offshore, the leader in platform operations and maintenance services globally, and have an incredible customer base to be leveraged and build upon, as we look into the future.
Speaker #5: The company is well-founded, and our foundation is strong. If you think about where we were 14 months ago, prior to the acquisition, and the true from two of to the KCA Doytag H&P today versus where we were then, we're truly a different company and business today than we were 14 months ago.
Speaker #5: We're the global leader in onshore drilling. We have a great base of operations in offshore. We're the leader in platform operations and maintenance services globally.
Speaker #5: And having an incredible customer base to be leveraged and built upon as we look into the future. In addition to that, if you think about the geographic diversity and talent we have at the organization today, it's just incredible.
Trey Adams: In addition to that, if you think about the geographic diversity and talent we have at the organization today, it's just incredible. From an engineering resource, drilling expertise, our office-based employees, we just have an incredibly talented organization to build and leverage for a lot of future growth. You know, when you think about the vision over the next 3 to 5 years, obviously, this will continue to be dynamic and very iterative as we look forward, but it's really founded on 4 kind of key notes and nodes, if you will, right? The first one being international growth and expansion that you referenced.
Trey Adams: In addition to that, if you think about the geographic diversity and talent we have at the organization today, it's just incredible. From an engineering resource, drilling expertise, our office-based employees, we just have an incredibly talented organization to build and leverage for a lot of future growth. You know, when you think about the vision over the next 3 to 5 years, obviously, this will continue to be dynamic and very iterative as we look forward, but it's really founded on 4 kind of key notes and nodes, if you will, right? The first one being international growth and expansion that you referenced.
Speaker #5: From an engineering resource, drilling expertise, our office-based employees—we just have an incredibly talented organization to build and leverage for a lot of future growth.
Speaker #5: When you think about the vision over the next three to five years, obviously this will continue to be dynamic and very iterative as we look forward.
Speaker #5: But it's really founded on four kind of key notes. And notes, if you will, right? And the first one being international referenced. We are very, very focused on continuing to build our Eastern Hemisphere land exposure—the Middle East and North Africa—kind of backed by our rig reactivations in Saudi, key IOC relationships, and then the transference of our models and technology from the North American business will really underpin what we believe is going to be a great growth story for the organization into the future.
Trey Adams: We are very, very focused on continuing to build our Eastern Hemisphere land exposure, the Middle East and North Africa, you know, backed by our rig reactivations in Saudi, key IOC relationships, and then the transference of our models and technology from the North American business will really underpin what we believe is gonna be a growth-- a great growth story for the organization into the future. In addition to that, North American Solutions and maintaining and continuing our leadership position in North America will be a key focus for us. Over the last decade, decade and a half, we've continued to accrete and grow our share position in North America. We've done that through our great people, processes, equipment, technology portfolio.
Trey Adams: We are very, very focused on continuing to build our Eastern Hemisphere land exposure, the Middle East and North Africa, you know, backed by our rig reactivations in Saudi, key IOC relationships, and then the transference of our models and technology from the North American business will really underpin what we believe is gonna be a growth-- a great growth story for the organization into the future. In addition to that, North American Solutions and maintaining and continuing our leadership position in North America will be a key focus for us. Over the last decade, decade and a half, we've continued to accrete and grow our share position in North America. We've done that through our great people, processes, equipment, technology portfolio.
Speaker #5: In addition to that, North American solutions and maintaining and continuing our leadership position in North America will be a key focus for us. Over the last decade, decade and a half, we've continued to accrete and grow our share position in North America.
Speaker #5: We've done that through our great people, processes, equipment, technology portfolio, continuing to build and expand on that will be a big focus and will be right in our front window as we look forward through '26 and beyond.
Trey Adams: Continuing to build and expand on that will be a big focus, and will be right in our front window as we look forward through 2026 and beyond. Today, we've talked about, and we've talked about in some of our prepared remarks, some of our technology innovations, continuing a leadership position in the digital and automation space, Flex Robotics, and continuing that progression in the North American shale market will be very critical for us to maintain that leadership position and continue to grow share over time here in North America. You know, a subcomponent that I will reference is offshore. It's not bullet three, but offshore continues to be a very exciting space for us. It's a very capital light and stable, very durable business that we look to expand and grow in 2026 and beyond.
Trey Adams: Continuing to build and expand on that will be a big focus, and will be right in our front window as we look forward through 2026 and beyond. Today, we've talked about, and we've talked about in some of our prepared remarks, some of our technology innovations, continuing a leadership position in the digital and automation space, Flex Robotics, and continuing that progression in the North American shale market will be very critical for us to maintain that leadership position and continue to grow share over time here in North America. You know, a subcomponent that I will reference is offshore. It's not bullet three, but offshore continues to be a very exciting space for us. It's a very capital light and stable, very durable business that we look to expand and grow in 2026 and beyond.
Speaker #5: And today, we've talked about and we've talked about in some of our prepared remarks, some of our technology innovations, continuing a leadership position in the digital and automation space, flex robotics, and continuing that progression in the North American shale market will be very critical for us to maintain that leadership position and continue to grow share over time here in North America.
Speaker #5: A subcomponent that I will reference is offshore. It's not bullet three, but offshore continues to be a very exciting space for us. It's a very capital-light and stable, very durable business that we look to expand and grow.
Speaker #5: In 2026 and beyond. Bullet three really is what Kevin was talking about in his prepared remarks. And we'll continue to discuss— that's the leveraging and maintaining our fiscal discipline at H&P.
Trey Adams: Bullet three really is what Kevin was talking about in his prepared remarks, and, and we'll continue to discuss, and that's deleveraging and maintaining our fiscal discipline at H&P. For 106 years of our company's history, we've been very fiscally rooted and founded in very good stewards of capital. We're committed to shareholder returns, and we're committed to getting down to 1 turn of leverage, and that will be a focus for us through the rest of this year and over the next 3 to 5 years to really maintain that fiscal discipline. The fourth bullet I'd like to discuss and really focus on here is this enterprise optimization. If you think about enterprise optimization, I'll break it into 2 pieces. One is on the field and front office focus for us.
Trey Adams: Bullet three really is what Kevin was talking about in his prepared remarks, and, and we'll continue to discuss, and that's deleveraging and maintaining our fiscal discipline at H&P. For 106 years of our company's history, we've been very fiscally rooted and founded in very good stewards of capital. We're committed to shareholder returns, and we're committed to getting down to 1 turn of leverage, and that will be a focus for us through the rest of this year and over the next 3 to 5 years to really maintain that fiscal discipline. The fourth bullet I'd like to discuss and really focus on here is this enterprise optimization. If you think about enterprise optimization, I'll break it into 2 pieces. One is on the field and front office focus for us.
Speaker #5: Historically, we've been very fiscally rooted and founded in very good— for 106 years, our company's stewards of capital. We're committed to getting down to one turn of leverage.
Speaker #5: And that will be a focus for us through the rest of this year. And over the next three to five years to really maintain that fiscal discipline.
Speaker #5: The fourth bullet I'd like to discuss, and really focus on here, is this enterprise optimization. If you think about enterprise optimization, I'll break it into two pieces.
Speaker #5: One is on the field and front office focus for us. And you think about the transference of the H&P business system, the transference of the H&P way outside of the North American market and into the international markets in a big way.
Trey Adams: When you think about the transference of the H&P business system, the transference of the H&P way outside of the North American market and into the international markets in a big way, and in our offshore segments. Our customer-centric culture, and being able to see that through everything we do, everywhere we work, driving safety excellence every single day, everywhere we work, and continuing to be the performance and technology leader that we are today, but we need to see that, and we will see that come through all of our operations across the globe. On the back office, we're committed to being a very lean and efficient organization. We're committed to being a very cost-conscious culture, as Kevin mentioned, and now leveraging our global scale and capabilities, there's ways to continue to optimize our customer delivery in everything we do as we're looking forward.
Trey Adams: When you think about the transference of the H&P business system, the transference of the H&P way outside of the North American market and into the international markets in a big way, and in our offshore segments. Our customer-centric culture, and being able to see that through everything we do, everywhere we work, driving safety excellence every single day, everywhere we work, and continuing to be the performance and technology leader that we are today, but we need to see that, and we will see that come through all of our operations across the globe. On the back office, we're committed to being a very lean and efficient organization. We're committed to being a very cost-conscious culture, as Kevin mentioned, and now leveraging our global scale and capabilities, there's ways to continue to optimize our customer delivery in everything we do as we're looking forward.
Speaker #5: And in offshore segments, our customer-centric culture—and being able to see that through everything we do, everywhere we work—drives safety excellence every single day, everywhere we work. And continuing to be the performance and technology leader that we are today, where we need to see that.
Speaker #5: And we will see that come through all of our operations across the company.
Speaker #1: globe The the We're back committed to office . being a very lean and efficient organization . We're on committed to being a very caution .
Speaker #1: We're committed to being a very conscious culture, as Kevin Cost mentioned. And now, leveraging our global scale and capabilities, there are ways to continue to optimize our customer delivery and everything we, as forward, moving to international excitement.
Trey Adams: Moving to international excitement. Yes, go ahead.
Trey Adams: Moving to international excitement. Yes, go ahead.
Speaker #1: Yes . Go ahead .
Arun Jayaram: No, no, go ahead. Go ahead.
Arun Jayaram: No, no, go ahead. Go ahead.
Trey Adams: Okay. Okay. Moving to international excitement, right? We sit here today, and we're talking about the rig reactivations in Saudi that are gonna be foundational for our Eastern Hemisphere land growth. What we haven't referenced in a big way, I think Kevin touched on it a little bit earlier, but we're adding a second rig in Australia today. Excited about that opportunity. In addition to that, you know, we saw a little bit of activity moderation going from Q1 to Q2 in Argentina. We expect that activity to pick back up through the second half of the year. What we're taking advantage of through that activity moderation period is we're investing in technology in Argentina. And so our digital applications and fleet will be able to be levered by our customers down there.
Trey Adams: Okay. Okay. Moving to international excitement, right? We sit here today, and we're talking about the rig reactivations in Saudi that are gonna be foundational for our Eastern Hemisphere land growth. What we haven't referenced in a big way, I think Kevin touched on it a little bit earlier, but we're adding a second rig in Australia today. Excited about that opportunity. In addition to that, you know, we saw a little bit of activity moderation going from Q1 to Q2 in Argentina. We expect that activity to pick back up through the second half of the year. What we're taking advantage of through that activity moderation period is we're investing in technology in Argentina. And so our digital applications and fleet will be able to be levered by our customers down there.
Speaker #2: No, no. Go ahead, go ahead.
Speaker #1: Okay, okay. Moving to international excitement, we sit here today and we're talking rig reactivations in Saudi, right, that are going to be foundational for our Eastern Hemisphere land growth.
Speaker #1: What we haven't referenced in a big way I think Kevin touched on it a little bit earlier . we're But adding a second rig in Australia today .
Speaker #1: Excited about that opportunity . In addition to that we saw a little bit of , you know , going from one Q to two Q in Argentina .
Speaker #1: We expect that pick back activity to be up through the second half of the year. And what we're taking advantage of through that activity, moderation period, investing in is—we're technology and Argentina.
Speaker #1: And so our digital applications and fleet will be able to be leveraged by customers. That's going to create exponential value for us as we move forward. In Argentina today, as we stand here on the call, we're rolling out technology and our digital solutions in Oman as well for some key IOCs. We're excited about that and those clients.
Trey Adams: It's gonna create exponential value for us as we look forward in Argentina. Today, as we stand here on the call, we're rolling out technology and our digital solutions in Oman as well for some key IOC clients. We're excited about that progression. And so, as we stated in prepared remarks, we believe we're in the early innings of a really long game here and a long, great growth story in the international market. Outside of some of the rig reactivations in Saudi, there's continuing ongoing discussions with IOCs and NOCs in North Africa and in the Middle East. Those are great conversations. We look forward to providing more material updates as the quarters move through the year, but it's really, really exciting to see kind of where we're going. I think you mentioned geothermal.
Trey Adams: It's gonna create exponential value for us as we look forward in Argentina. Today, as we stand here on the call, we're rolling out technology and our digital solutions in Oman as well for some key IOC clients. We're excited about that progression. And so, as we stated in prepared remarks, we believe we're in the early innings of a really long game here and a long, great growth story in the international market. Outside of some of the rig reactivations in Saudi, there's continuing ongoing discussions with IOCs and NOCs in North Africa and in the Middle East. Those are great conversations. We look forward to providing more material updates as the quarters move through the year, but it's really, really exciting to see kind of where we're going. I think you mentioned geothermal.
Speaker #1: Progression. And so, as we stated in remarks, we believe we're in the early innings of a prepared, really long game here.
Speaker #1: long great And a growth story in the international market outside of some of the rig reactivations in Saudi , there's continuing ongoing discussions with IOCs and Knox and North Africa .
Speaker #1: And in the Middle East . Those are great conversations . forward to We look providing more material updates as the quarters move through the year .
Speaker #1: But it's really, really exciting to see kind of where it's going. I think you mentioned geothermal—geothermal, both in Europe and North America.
Trey Adams: Geothermal, both in Europe and North America, continue to be exciting for us. We've added a second rig in the North American market. We've signed an LOI for a third rig in North America. And in Europe, geothermal, we're proud to be over the most advanced, extended reach, complex geothermal project in Europe today, with more activity points that are coming in the near term, and so that's really starting to gain some good momentum.
Trey Adams: Geothermal, both in Europe and North America, continue to be exciting for us. We've added a second rig in the North American market. We've signed an LOI for a third rig in North America. And in Europe, geothermal, we're proud to be over the most advanced, extended reach, complex geothermal project in Europe today, with more activity points that are coming in the near term, and so that's really starting to gain some good momentum.
Speaker #1: It continues to be exciting for us. We've added a second rig in the North American market. We've signed an LOI for a third rig in North America.
Speaker #1: And then Europe . We're proud to be over the Geothermal . most advanced extended reach complex . project Geothermal in Europe today . more With activity points that are coming in the near so that's really starting to gain some good momentum .
Arun Jayaram: Great, John, I wanted to-
Arun Jayaram: Great, John, I wanted to-
Trey Adams: Is that all?
Trey Adams: Is that all?
Arun Jayaram: wish you the best.
Arun Jayaram: wish you the best.
Trey Adams: Back over.
Trey Adams: Back over.
Speaker #2: Great , John , I wanted to wish you the best . Join . Yeah , yeah . John , I want to wish you the best as you join Hans and George Dodson in retirement .
Arun Jayaram: Yeah, John, I wanna wish you the best as you join Hans and George Dotson in retirement.
Arun Jayaram: Yeah, John, I wanna wish you the best as you join Hans and George Dotson in retirement.
Trey Adams: Yeah, thank you very much. I appreciate it. It's an exciting time for the company, and I'm looking forward to my next chapter as well. Thank you.
John Lindsay: Yeah, thank you very much. I appreciate it. It's an exciting time for the company, and I'm looking forward to my next chapter as well. Thank you.
Speaker #2: . Yeah
Speaker #1: Yeah . Thank you very I much . appreciate it . It's an exciting time for the and company , next to my forward to I'm looking chapter as well .
Speaker #1: Thank you
Operator: We'll take our next question from Saurabh Pant with Bank of America. Your line is open.
Operator: We'll take our next question from Saurabh Pant with Bank of America. Your line is open.
Speaker #1: .
Speaker #3: our next question from Pant Sorabh
Speaker #3: Bank of America . Your open .
Saurabh Pant: Hi, good morning. Thank you. And John, I'll echo, Arun and Scott, congrats on your retirement. It's been, it's been a pleasure to hear your patient and reassuring voice over all these years, John. Thank you.
Saurabh Pant: Hi, good morning. Thank you. And John, I'll echo, Arun and Scott, congrats on your retirement. It's been, it's been a pleasure to hear your patient and reassuring voice over all these years, John. Thank you.
Speaker #4: morning . Thank Hi . Good you . And , John ,
Speaker #4: Echo Arun, and congrats on your retirement. It's a pleasure to have heard your patient and reassuring voice over all these years.
Speaker #4: Thank you
Trey Adams: You're welcome. Thank you very much. It's been, it's been a great, a great journey.
Trey Adams: You're welcome. Thank you very much. It's been, it's been a great, a great journey.
Speaker #1: you very You're much . It's been a John . been it's a great welcome . Thank
Saurabh Pant: Yeah. No, I'm sure you're looking forward to slowing down a little bit. But, Trey, you'll face the tougher questions now, so maybe I'll throw one at you. Maybe I want to dig in a little bit on the international outlook, Trey or Kevin, if you don't mind. I know you alluded to this a little bit in your prepared remarks and in response to Scott's question, but how should we think about profitability when all these 8 flex rigs are done fully ramping up, and the 7 rigs we are reactivating in Saudi? I know activity moved up, right, but keeping everything else steady, how should we think about where margins can go? I think, let's say, perhaps by Q4 of this year. Just some idea of where things might land.
Saurabh Pant: Yeah. No, I'm sure you're looking forward to slowing down a little bit. But, Trey, you'll face the tougher questions now, so maybe I'll throw one at you. Maybe I want to dig in a little bit on the international outlook, Trey or Kevin, if you don't mind. I know you alluded to this a little bit in your prepared remarks and in response to Scott's question, but how should we think about profitability when all these 8 flex rigs are done fully ramping up, and the 7 rigs we are reactivating in Saudi? I know activity moved up, right, but keeping everything else steady, how should we think about where margins can go? I think, let's say, perhaps by Q4 of this year. Just some idea of where things might land.
Speaker #1: journey
Speaker #4: Yeah . No , I'm sure you're looking forward to slowing down a little it's been But today you'll face the tougher questions bit .
Speaker #4: Now, so line is one at you. Maybe I want to dig in a little bit on the international outlook. Or...
Speaker #4: don't Kevin , if you I know you alluded to mind . this a little bit in your prepared remarks and in response to Scott's question , but we how should think about profitability when all these eight flex rigs fully are done ramping and the up seven rigs are reactivating Saudi ?
Speaker #4: I know in activity but keeping up right , everything moves think . steady How should we else where margins can go ? I think , let's say perhaps by the fourth fiscal quarter of this year , just some idea of where things might .
Trey Adams: Yeah. Thank you. I'll start, and then turn it over to Kevin for additional color on anything I miss. So we're excited today, as we sit here on the call. We have two masts in the air of the planned reactivations, and a third mast that's ready to be raised imminently. So we're making good progress on our rig reactivations, working closely with our customer there in the kingdom to make sure that those startups move seamlessly, and go really, really well. You know, overall, we expect six of those seven reactivations to resume prior to the first half of calendar year 2026. The seventh rig, we're still working on timing for rig number seven.
Trey Adams: Yeah. Thank you. I'll start, and then turn it over to Kevin for additional color on anything I miss. So we're excited today, as we sit here on the call. We have two masts in the air of the planned reactivations, and a third mast that's ready to be raised imminently. So we're making good progress on our rig reactivations, working closely with our customer there in the kingdom to make sure that those startups move seamlessly, and go really, really well. You know, overall, we expect six of those seven reactivations to resume prior to the first half of calendar year 2026. The seventh rig, we're still working on timing for rig number seven.
Speaker #1: Thank you . And I'll start and then turn it over to Kevin for additional color Yeah . on I missed . So anything excited today as we sit here on the call , we have two masts in the air we're reactivations and a third mass that's ready to be raised imminently So we're .
Speaker #1: Making good progress on our rig. Reactivations working closely with our customer there in the Kingdom to make sure that those startups move seamlessly and go really, really, you know, well.
Speaker #1: overall , we expect six of those seven Reactivations resume prior to the calendar 2026 . year first half of The seventh rig we're still working on timing for rig number seven , as it relates to some financials around those reactivations , our those reactivations has built into been CapEx guide , so there's no of the CapEx that is being additional planned or will come out .
Trey Adams: As it relates to some of the financials around those reactivations, our CapEx for those reactivations has been built into our CapEx guide, so there's no additional CapEx that is being planned or will come out. It's based into our FY 2026 assumptions as we sit here today. You know, beyond that, in Saudi Arabia, that being a really core and key area for us on Eastern Hemisphere growth, we're continuing to have ongoing conversations with our primary NOC customer there in the kingdom, and really think that there's plenty of opportunity as we look through 2026 and 2027.
Trey Adams: As it relates to some of the financials around those reactivations, our CapEx for those reactivations has been built into our CapEx guide, so there's no additional CapEx that is being planned or will come out. It's based into our FY 2026 assumptions as we sit here today. You know, beyond that, in Saudi Arabia, that being a really core and key area for us on Eastern Hemisphere growth, we're continuing to have ongoing conversations with our primary NOC customer there in the kingdom, and really think that there's plenty of opportunity as we look through 2026 and 2027.
Speaker #1: It's based into our FY As we sit here today . You know , beyond that in Saudi Arabia , that being a really and key core area for us on Hemisphere growth , Eastern continuing to have ongoing conversations with our primary NOC customer .
Speaker #1: the Kingdom 26 assumptions . , and And think that there's plenty of opportunity as we look through 26 and 27 , nothing that we can comment on materially today , but a lot of encouraging conversations .
Mike Lennox: ... nothing that we can comment on, materially today, but a lot of encouraging conversations. It's all underpinned by safety and performance. So we have great safe startups, and our FlexRig performance has been moving in a direction that's providing a lot of tailwinds for us for incremental activity. That operations team continues to drill very safe and efficient wells. The more we do that, the more opportunities will be right there in front of us. As the rigs come out of suspension, the 7 reactivations, we anticipate annualized EBITDA of roughly $5 million per rig. And as you alluded to, we expect that to get there into full run rate by Q4 of our fiscal year.
Trey Adams: ... nothing that we can comment on, materially today, but a lot of encouraging conversations. It's all underpinned by safety and performance. So we have great safe startups, and our FlexRig performance has been moving in a direction that's providing a lot of tailwinds for us for incremental activity. That operations team continues to drill very safe and efficient wells. The more we do that, the more opportunities will be right there in front of us. As the rigs come out of suspension, the 7 reactivations, we anticipate annualized EBITDA of roughly $5 million per rig. And as you alluded to, we expect that to get there into full run rate by Q4 of our fiscal year.
Speaker #1: It's all underpinned by safety and performance. So we have great, safe startups, and our FlexRig performance has been moving in a direction that's providing a tailwind for a lot of us, for incremental activity. That operations team continues to drill safe and efficient wells.
Speaker #1: The more that, the more we do, opportunities will be right there in front of us as the rigs come out of suspension.
Speaker #1: The seven anticipated annualized EBITDA reactivations we have are roughly $5 million per rig. And as you alluded to, we expect that to get there into full run rate by Q4 of our fiscal year.
Mike Lennox: In addition to that, you know, we referenced on some commentary earlier that our Flex rig margins continue to improve, and we expect those rigs to get to full annualized run rate numbers by the end of FY 2026 as well. So it provides a pretty robust and well-founded business for us there in Saudi through this fiscal year.
Trey Adams: In addition to that, you know, we referenced on some commentary earlier that our Flex rig margins continue to improve, and we expect those rigs to get to full annualized run rate numbers by the end of FY 2026 as well. So it provides a pretty robust and well-founded business for us there in Saudi through this fiscal year.
Speaker #1: In addition to you know , we referenced on on some commentary earlier that our flex rig margins continue to improve and we those expect rigs to get full to very annualized run rate numbers by the end of as well FY 26 , .
Speaker #1: So it provides a pretty robust and well-founded business for us there in Saudi through this fiscal year just hit more broadly on . international I will the segment , direct margin before turning to Kevin to see if there's anything I missed here you know , is , everything once is reactivated Saudi in , you know , and still it's obviously there's still a lot more to to happen .
Mike Lennox: I will just hit more broadly on the international segment, direct margin before turning it to Kevin to see if there's anything I missed here, is, you know, once everything is reactivated in Saudi, you know, and it's still obviously there's still a lot more to happen and more opportunity in front of us, but as these reactivations come online, we expect our International Solutions segment to be right around a direct margin rate exceeding $45 million per quarter. And so it's just a good testament to getting these reactivations behind us, and we can get to a very stabilized run rate, as we're looking beyond FY 2026.
Trey Adams: I will just hit more broadly on the international segment, direct margin before turning it to Kevin to see if there's anything I missed here, is, you know, once everything is reactivated in Saudi, you know, and it's still obviously there's still a lot more to happen and more opportunity in front of us, but as these reactivations come online, we expect our International Solutions segment to be right around a direct margin rate exceeding $45 million per quarter. And so it's just a good testament to getting these reactivations behind us, and we can get to a very stabilized run rate, as we're looking beyond FY 2026.
Speaker #1: And more opportunity in front of us. But as these reactivations come online, expect our International Solutions segment to be right around a margin direct rate exceeding $45 million per quarter.
Speaker #1: And so, it's just a good testament to getting these reactivations behind us, and we can get to a very stabilized run as we're looking beyond FY26 now.
Kevin Vann: Now, this is Kevin. I don't really have much to add other than, you know, as Trey mentioned, you know, getting, you know, gross margin above $45 million, hopefully relatively soon when I can think about the big step up that I mentioned earlier between Q2 and Q3. But even more important to that, and, you know, Trey mentioned all the potential new business and growth that we're gonna see out of the Eastern Hemisphere. You know, the acquisition of KCAD basically enabled us to be in this position, where now we have that footprint to continue to grow from it. And so, you know, $45 million is a good start, but, you know, I'm anticipating for years to come now, that number to continue to grow.
Kevin Vann: Now, this is Kevin. I don't really have much to add other than, you know, as Trey mentioned, you know, getting, you know, gross margin above $45 million, hopefully relatively soon when I can think about the big step up that I mentioned earlier between Q2 and Q3. But even more important to that, and, you know, Trey mentioned all the potential new business and growth that we're gonna see out of the Eastern Hemisphere. You know, the acquisition of KCAD basically enabled us to be in this position, where now we have that footprint to continue to grow from it. And so, you know, $45 million is a good start, but, you know, I'm anticipating for years to come now, that number to continue to grow.
Speaker #5: And this is Kevin , I don't really have much to add other than , you know , as Troy mentioned , you know , getting , you know , gross margin 45 million or above hopefully relatively soon when I can think about the big step up that I mentioned earlier between the third quarter .
Speaker #5: But even second and more important to that , you know , Trey mentioned all the potential new business and growth that we're going to see out of the Eastern acquisition of know , the Kcad basically enabled us this to be in position where now we have that footprint to continue to grow from it .
Speaker #5: And so , you know , 45 million is a good start . But , you know , I'm Hemisphere . anticipating You for years to come now that number to continue to grow .
Saurabh Pant: Okay, now that's super helpful, Trey, Kevin. I'll turn it back.
Saurabh Pant: Okay, now that's super helpful, Trey, Kevin. I'll turn it back.
Speaker #4: Okay. No, that's super helpful, Kevin. I'll turn it back.
Operator: We'll move next to Eddie Kim with Barclays. Your line is open.
Operator: We'll move next to Eddie Kim with Barclays. Your line is open.
Speaker #3: We'll move next to Eddie Kim with your line is Barclays.
Edward Kim: Hi, good morning. Wanted to circle back to a comment you made about North America likely remaining the most restrained market in the quarter ahead, as evidenced by recent behaviors of competitors. Are you still seeing some bad actors out there in terms of pricing? And I know you expressed confidence in maintaining your full year rig count in North America, which does imply a ramp-up as we move through the year. Does that same confidence apply to pricing as well, or do you think that ramp up will take a bit longer to materialize?
Eddie Kim: Hi, good morning. Wanted to circle back to a comment you made about North America likely remaining the most restrained market in the quarter ahead, as evidenced by recent behaviors of competitors. Are you still seeing some bad actors out there in terms of pricing? And I know you expressed confidence in maintaining your full year rig count in North America, which does imply a ramp-up as we move through the year. Does that same confidence apply to pricing as well, or do you think that ramp up will take a bit longer to materialize?
Speaker #6: Hey, good morning. I wanted to go back to a comment you made about North America likely remaining the most important market in the period ahead.
Speaker #6: quarter As evidenced by behaviors restrained competitors . Are you still seeing some some bad actors in terms of pricing ? out there And I know you expressed confidence in maintaining your full rig year count in North America , which does imply a ramp up as we move through through the year .
Speaker #6: Does that same confidence apply to pricing as well, or do you think that ramp-up will take a bit longer to materialize too?
Speaker #6: Materialize .
Mike Lennox: Hey, Eddie, I'll start. This is Mike. Appreciate the question. Yeah, so let's start with the customers, and kind of what we're seeing is there's kind of two camps out there, the ones that are just disciplined and staying true to what their plans are, and then we have the ones that are more sensitive to the commodity prices. And so, what we saw and you know quarter and we've already rebounded essentially is how I'd describe it, where they had pulled back, kind of a wait and see, but they still have plans to pick up, and we're starting to see those conversations pick up. And that's why in the back half of the year, we're very optimistic of picking up.
Mike Lennox: Hey, Eddie, I'll start. This is Mike. Appreciate the question. Yeah, so let's start with the customers, and kind of what we're seeing is there's kind of two camps out there, the ones that are just disciplined and staying true to what their plans are, and then we have the ones that are more sensitive to the commodity prices. And so, what we saw and you know quarter and we've already rebounded essentially is how I'd describe it, where they had pulled back, kind of a wait and see, but they still have plans to pick up, and we're starting to see those conversations pick up. And that's why in the back half of the year, we're very optimistic of picking up.
Speaker #2: I'll Hey , Eddie , start . This is Mike . I appreciate the question . Yeah . So start with the customers and kind of let's what we're seeing is , is there's kind of two camps out there .
Speaker #2: Ones that are just and staying disciplined, true to what their plans are. And then we have the ones that are more sensitive to the commodity prices.
Speaker #2: And so what we saw and , you know , quarter and we've we've already rebounded essentially as I describe it , had pulled back kind of a wait and see where they , but they still had plans to pick up .
Speaker #2: And we're see those conversations up . And that's why in the in the back half of the year , we're very optimistic pick of of picking up most of those players that were obviously sensitive .
Mike Lennox: Most of those players that were obviously sensitive are your smaller E&Ps, your independents. As far as pricing, you know, we're still staying true. We're not wavering from the 45% to 50% direct margins that we've been on. We're not chasing market share. And really, why 45% to 50% direct margins? It's what we need as an organization to continue to invest back in the organization and to achieve the outcomes that our customers are looking to achieve. Again, we're confident in our ability just to navigate the near term, and we're very optimistic about the back half of the year.
Mike Lennox: Most of those players that were obviously sensitive are your smaller E&Ps, your independents. As far as pricing, you know, we're still staying true. We're not wavering from the 45% to 50% direct margins that we've been on. We're not chasing market share. And really, why 45% to 50% direct margins? It's what we need as an organization to continue to invest back in the organization and to achieve the outcomes that our customers are looking to achieve. Again, we're confident in our ability just to navigate the near term, and we're very optimistic about the back half of the year.
Speaker #2: Are your smaller your as far as pricing ? You know , we're we're still staying true . We're not wavering from the 45 to 50% margins that market we've not chasing on .
Speaker #2: share . We're And really why 45 to 50% direct margins ? It's it's what we independents need as an organization to continue to invest back in the organization and to achieve the outcomes that our that our customers are looking to , to achieve .
Speaker #2: Again, in our confident ability just to navigate the near term. And we're very optimistic about the back half of the year.
Edward Kim: Got it. Great. And just, just a quick follow-up. Do you think direct margins in North America you'll be able to hold around that $18,000 a day level for the full year? Or does that look more like an upside case based on pricing trends you're seeing right now?
Eddie Kim: Got it. Great. And just, just a quick follow-up. Do you think direct margins in North America you'll be able to hold around that $18,000 a day level for the full year? Or does that look more like an upside case based on pricing trends you're seeing right now?
Speaker #2: . Great .
Speaker #6: Just got it. Just a quick follow-up. Do you think direct margins in North America—you'll be able to hold around that $18,000-a-day level for the full year, or does that look more like an upside case based on the pricing trends you're seeing right now?
Mike Lennox: Yeah, you know, kind of more short term, I'd call it flat. Yeah, we're holding, trying to hold on to that $18, roughly, a day. You know, the back half's kind of a let's see. We do think, like I said, there's some opportunity there. And of course, that's on the revenue side, and then on the expense side, we're obviously working that just from, Trey had mentioned, just leveraging our scale. We have some great opportunity there, and we continue to work on our expenses as well.
Mike Lennox: Yeah, you know, kind of more short term, I'd call it flat. Yeah, we're holding, trying to hold on to that $18, roughly, a day. You know, the back half's kind of a let's see. We do think, like I said, there's some opportunity there. And of course, that's on the revenue side, and then on the expense side, we're obviously working that just from, Trey had mentioned, just leveraging our scale. We have some great opportunity there, and we continue to work on our expenses as well.
Speaker #2: Yeah . You know , kind of more short term , I'd call it flat . Yeah . We're we're holding trying to hold on to that 18 roughly a day the back of half kind a .
Speaker #2: You know , let's think see . We there's some do opportunity there . And of course that's on the revenue side . And then on the expense side , we're obviously working that just from a trade mentioned , just leveraging our skill have some .
Speaker #2: Great, we see opportunity there. And we continue to work on our expenses as well.
Edward Kim: Understood. Great. Thanks for that color. I'll turn it back.
Eddie Kim: Understood. Great. Thanks for that color. I'll turn it back.
Speaker #6: Understood . Great . Thanks for that turn it back color . I'll .
Operator: We'll take our next question from Derek Podhazer with Piper Sandler. Your line is open.
Operator: We'll take our next question from Derek Podhazer with Piper Sandler. Your line is open.
Speaker #3: We'll take our next question from Podhorzer. Derrick is open.
Kevin Vann: Hey, good morning, all. I just wanted to discuss the opportunity for Flex Robotics. I mean, could you please explain the details around how much capital is required to retrofit an active rig? How many rigs you see being upgraded to Flex Robotics? Will this be customer funded? How should we think about the paybacks, and how meaningful could this be for your earnings over the near to medium term?
Derek Podhaizer: Hey, good morning, all. I just wanted to discuss the opportunity for Flex Robotics. I mean, could you please explain the details around how much capital is required to retrofit an active rig? How many rigs you see being upgraded to Flex Robotics? Will this be customer funded? How should we think about the paybacks, and how meaningful could this be for your earnings over the near to medium term?
Speaker #7: Hey , good morning all . I just wanted to discuss the opportunity for flex Robotics . I could you please explain the details around how much capital is required retrofit an active rig ?
Speaker #7: How many rigs do you see being upgraded to Flex Robotics? Will this be customer funded? How should we think about the paybacks, and how meaningful could this be for your earnings over the near to medium term?
Mike Lennox: ... Hey, Derek, this is Mike again. I'll start, and then Trey, probably add in. You know, I, I'll just start bluntly. I think it is meaningful in the long term. There's a lot of excitement, and really proud of the efforts we've made on our robotics so far. I think Trey mentioned in his earlier comments, we have a test rig that we've been testing this on for quite some time. And, you know, we're rolling it out. It's already proven. I'll talk about the rig that's already deployed for a super major in the Permian. We work very closely with them to establish goals. We weren't just gonna do robotics for robotics just for fun.
Mike Lennox: ... Hey, Derek, this is Mike again. I'll start, and then Trey, probably add in. You know, I, I'll just start bluntly. I think it is meaningful in the long term. There's a lot of excitement, and really proud of the efforts we've made on our robotics so far. I think Trey mentioned in his earlier comments, we have a test rig that we've been testing this on for quite some time. And, you know, we're rolling it out. It's already proven. I'll talk about the rig that's already deployed for a super major in the Permian. We work very closely with them to establish goals. We weren't just gonna do robotics for robotics just for fun.
Speaker #2: Hey Derrick , this is Mike again . I'll Trey probably add in , you know , I'll just start bluntly , I think it is meaningful long in the term .
Speaker #2: There's a lot of excitement and really proud of the efforts we've made on our robotics so far . I think Trey mentioned in his earlier we have comments , a test rig that we've been testing this on for quite time , and , and , you know , we're rolling it out .
Speaker #2: It's already proven. I'll talk about the rig that's already deployed for a super major in the Permian, working very closely with them to establish goals.
Speaker #2: We weren't just going to do robotics for just for fun. It was going to have to at least perform at level.
Mike Lennox: It was gonna have to at least perform at P50 level, so the average level for that operator in the Permian Basin. And after 10 wells, we've drilled and completed, we've moved the rig twice, so 2 pads. We're roughly at P40, so we're exceeding that. And really, that's a lot of hard work by our employees, our rig crews, our customer, working with us very closely, as well as our vendors. It's taken some vendors interacting and setting that goal and going out and achieving it. So very optimistic. The demand, the pipeline, the discussion around it, yeah, we think it's very optimistic and look forward to progressing that. Yeah, and I'll just-- This is Trey.
Mike Lennox: It was gonna have to at least perform at P50 level, so the average level for that operator in the Permian Basin. And after 10 wells, we've drilled and completed, we've moved the rig twice, so 2 pads. We're roughly at P40, so we're exceeding that. And really, that's a lot of hard work by our employees, our rig crews, our customer, working with us very closely, as well as our vendors. It's taken some vendors interacting and setting that goal and going out and achieving it. So very optimistic. The demand, the pipeline, the discussion around it, yeah, we think it's very optimistic and look forward to progressing that.
Speaker #2: average So the level for that operator P50 in the Permian Basin and after ten wells , we've we've drilled and completed , we've moved the rig So twice .
Speaker #2: Two pads, we're roughly at P-40. So we're exceeding that. And really, that's of hard work by our, a lot of employees.
Speaker #2: Our rig crews , our customer working with us very closely as well as our vendors . It's taken some some vendors interacting that and going out and achieving goal it .
Speaker #2: So very optimistic . The demand , the pipeline , that discussion around it . Yeah , we it's it's very think optimistic and look forward to progressing .
Trey Adams: Yeah, and I'll just-- This is Trey.
Mike Lennox: I'll just share that, you know, on your question around pricing and commercial constructs, right? We intend to make these investments with appropriate returns. Obviously, we're focused on improving safety out at the edge, and then the performance related to robotics is going to be another step change and uplift for us and for our customers. So those creative commercial constructs that we've levered throughout the rest of our business will be, you know, looked at and levered here as well. And we're not gonna make this investment without an appropriate returns profile. But it's still early days. The conversations are moving with customers. There's great customer interest and intrigue in the Flex Robotics system, and look forward to providing additional color as we move forward.
Trey Adams: I'll just share that, you know, on your question around pricing and commercial constructs, right? We intend to make these investments with appropriate returns. Obviously, we're focused on improving safety out at the edge, and then the performance related to robotics is going to be another step change and uplift for us and for our customers. So those creative commercial constructs that we've levered throughout the rest of our business will be, you know, looked at and levered here as well. And we're not gonna make this investment without an appropriate returns profile. But it's still early days. The conversations are moving with customers. There's great customer interest and intrigue in the Flex Robotics system, and look forward to providing additional color as we move forward.
Speaker #1: Yeah I'll just
Speaker #1: this is that Trey I'll just share that know , you on your question around pricing and commercial constructs . Right . We intend to make these investments with appropriate returns .
Speaker #1: Obviously, we're focused on improving safety out at the edge. And then the performance related to robotics is going to be another.
Speaker #1: uplift Change and for and for our us customers . So those step creative commercial constructs that we've levered throughout the rest of our business will looked at and levered here as well be , .
Speaker #1: And we're not going to make this investment without an appropriate profile of returns. But it's still early days. The conversations are moving with customers.
Speaker #1: Great. There's customer interest and intrigue in the FlexLook system. Looking forward to robotics and color as we move additional providing forward.
Rachel Smith: Thank you.
Derek Podhaizer: Thank you.
Speaker #7: Thank you .
Operator: We'll move next to Keith Mackey with RBC Capital Markets. Your line is open.
Operator: We'll move next to Keith Mackey with RBC Capital Markets. Your line is open.
Speaker #3: move next to Keith with
Speaker #3: Capital, RBC Markets, your line is open. We'll...
Keith Mackey: Hi, thanks, and good morning. Maybe just a question on Free Cash Flow conversion, very strong for Q1. We have some of the pieces for how 2026 will unfold, but can you help us maybe fill in some of those gaps for how we should be thinking about Free Cash Flow conversion for the full year?
Keith Mackey: Hi, thanks, and good morning. Maybe just a question on Free Cash Flow conversion, very strong for Q1. We have some of the pieces for how 2026 will unfold, but can you help us maybe fill in some of those gaps for how we should be thinking about Free Cash Flow conversion for the full year?
Speaker #8: Hi . Thanks and good morning . Maybe just a question on on free cash flow conversion . Very strong for Q1 . We have some of the pieces for how 2026 will unfold .
Speaker #8: But can you help us maybe fill in some of those gaps for how we should be thinking about free cash flow conversion for the full year?
Kevin Vann: Yeah, I mean, obviously, without giving full year guidance, when you think about how much cash we're gonna be able to generate, as I mentioned earlier, and we've talked about in some of Trey's prepared remarks, you know, we have a clear line of sight on the paying down of the remaining $140 million of our term loan, and that's just from organic cash flow. You know, and that should happen by the end of our Q3 or right around the end of our fiscal year, Q3, Q3. So very optimistic about that. But that tells you that how much additional free cash flow. Obviously, the dividend is still of primary importance to us, and so we'll continue to obviously pay that.
Kevin Vann: Yeah, I mean, obviously, without giving full year guidance, when you think about how much cash we're gonna be able to generate, as I mentioned earlier, and we've talked about in some of Trey's prepared remarks, you know, we have a clear line of sight on the paying down of the remaining $140 million of our term loan, and that's just from organic cash flow. You know, and that should happen by the end of our Q3 or right around the end of our fiscal year, Q3, Q3. So very optimistic about that. But that tells you that how much additional free cash flow. Obviously, the dividend is still of primary importance to us, and so we'll continue to obviously pay that.
Speaker #5: Yeah , I mean , obviously without giving full year guidance , when you think how how much cash we're going to be able to generate , as I mentioned earlier , and we've talked about in of the prepared remarks , you know , we have a clear line of sight on the paying down of the remaining $140 million of our term loan .
Speaker #5: And that's just from cash and , you know , and that should happen by the right around the end end of our of our fiscal year , third quarter .
Speaker #5: Third quarter . So very optimistic about that . What that that how much flow cash obviously the dividend is still of primary important importance to us .
Speaker #5: so we'll And continue to obviously pay that . But then when you think about just the capital guidance we're giving this quarter , obviously a slight reduction , but our but again , you just the free cash flow will continue to increase .
Kevin Vann: But then when you think about just the capital guidance that we're giving this quarter, obviously a slight reduction, but again, you know, just the Free Cash Flow will continue to increase. You know, this quarter was a little bit higher just because of the lower CapEx numbers. But again, for the full year, you know, again, clear line of sight on being able to pay down just organically the remaining balance on the term loan. And then on top of that, we haven't really talked about it, but you know, we've got, as we said on the call, we've got $100 million of clarity around some portfolio optimization that we're doing coming out of the acquisition.
Kevin Vann: But then when you think about just the capital guidance that we're giving this quarter, obviously a slight reduction, but again, you know, just the Free Cash Flow will continue to increase. You know, this quarter was a little bit higher just because of the lower CapEx numbers. But again, for the full year, you know, again, clear line of sight on being able to pay down just organically the remaining balance on the term loan. And then on top of that, we haven't really talked about it, but you know, we've got, as we said on the call, we've got $100 million of clarity around some portfolio optimization that we're doing coming out of the acquisition.
Speaker #5: You know this quarter was a little bit higher just because of the lower CapEx numbers . But again , for the full year , you know , again , clear line of sight on being able to pay just organically the the remaining balance on down the term loan .
Speaker #5: And then on top of that , we haven't really talked about it . But you know , we've got , as we said on the call , we got $100 million of of of clear or clarity around some portfolio optimization that we're doing coming out of the acquisition .
Kevin Vann: Feel very strongly about our ability to execute and get those deals pulled across the line by the end of the year.
Kevin Vann: Feel very strongly about our ability to execute and get those deals pulled across the line by the end of the year.
Speaker #5: Feel very strongly about our ability to execute and get those deals pulled across the line by the end of the year.
Keith Mackey: Appreciate the color. Thank you.
Keith Mackey: Appreciate the color. Thank you.
Speaker #8: Appreciate the color. Thank you.
Operator: We'll move next to Ati Modak with Goldman Sachs. Your line is open.
Operator: We'll move next to Ati Modak with Goldman Sachs. Your line is open.
Speaker #3: And we'll next move to Etsy Modok with Goldman Sachs. Your line is open.
Mike Lennox: Yeah. Hey, good morning, team. I guess on the rig rationalizations in the quarter, should we expect more? Can you talk about that? And can you give us any more color on what your thoughts are for market to reduce capacity?
Ati Modak: Yeah. Hey, good morning, team. I guess on the rig rationalizations in the quarter, should we expect more? Can you talk about that? And can you give us any more color on what your thoughts are for market to reduce capacity?
Speaker #3: .
Speaker #9: Yeah . Hey team . I guess on the rig rationalizations in the quarter . Should we expect more ? Can you talk about that ?
Speaker #9: good morning
Speaker #9: And can you give us any more color on what your thoughts are for the market to reduce capacity?
Kevin Vann: Yeah, this is Kevin. I'll begin just in terms of rig rationalization and the impairments that we took for the quarter. You know, it's very difficult. You know, accounting rules will drive a lot of those impairment decisions and impairment accruals that we have to take. But I'll let Mike touch a little bit on just kind of what those stem from, in terms of the rigs that, you know, we've had on the sidelines for a while. And if you look at the amount of capital that was going to be necessary in order to put those rigs back to work versus the rigs that, you know, obviously, we're just continually trying to churn and get those put back into our operating system.
Kevin Vann: Yeah, this is Kevin. I'll begin just in terms of rig rationalization and the impairments that we took for the quarter. You know, it's very difficult. You know, accounting rules will drive a lot of those impairment decisions and impairment accruals that we have to take. But I'll let Mike touch a little bit on just kind of what those stem from, in terms of the rigs that, you know, we've had on the sidelines for a while. And if you look at the amount of capital that was going to be necessary in order to put those rigs back to work versus the rigs that, you know, obviously, we're just continually trying to churn and get those put back into our operating system.
Speaker #5: Yeah , this is Kevin . I'll begin just in terms of rig rationalization and the impairments that we that we took for quarter , you know , it's very difficult .
Speaker #5: You know , accounting rules will drive a lot of those impairment decisions . And accruals that we the have to take . But I'll let Mike touch a little what bit on just kind of those stemmed from in of the rigs that , you know , we've had on the sidelines for a while .
Speaker #5: And if you look at the amount of capital that that was going to going to be necessary in order to put those rigs back to work versus the rigs that obviously , you know , were just continually trying to churn and get those put back into our operating system .
Kevin Vann: We just, from an accounting perspective, we looked at that as, you know, too much of a hurdle. And so as a result of it, you know, again, these impairments happen from time to time. But I'll let Mike touch on kind of these specific rigs.
Kevin Vann: We just, from an accounting perspective, we looked at that as, you know, too much of a hurdle. And so as a result of it, you know, again, these impairments happen from time to time. But I'll let Mike touch on kind of these specific rigs.
Speaker #5: We terms from an accounting perspective , we looked at that as , you know , too much of a hurdle . And so as a result of it , you know , again , these impairments happen from time to time .
Speaker #5: But I'll let on kind of these, these specific rigs.
Mike Lennox: Yeah, Ati, more on the details. So we're talking about 30 rigs. Most of them had already been decommissioned. We had been pulling a componentry, reusing that across our fleet. These rigs had not worked since COVID or prior to COVID, so they had been idled for quite some time. And some of the components that we're talking about, for example, on 42 of our rigs today, we have what I call level one automation. So it's a rig floor automation that's removing people from the red zones on the floor. So as we've put new equipment on those rigs, the equipment that we've pulled off is what we're talking about that we've-- we're decommissioning and impairing.
Mike Lennox: Yeah, Ati, more on the details. So we're talking about 30 rigs. Most of them had already been decommissioned. We had been pulling a componentry, reusing that across our fleet. These rigs had not worked since COVID or prior to COVID, so they had been idled for quite some time. And some of the components that we're talking about, for example, on 42 of our rigs today, we have what I call level one automation. So it's a rig floor automation that's removing people from the red zones on the floor. So as we've put new equipment on those rigs, the equipment that we've pulled off is what we're talking about that we've-- we're decommissioning and impairing.
Speaker #2: Yeah , Audie , more on details . So we're the talking about 30 rigs . Most of them had already been decommissioned . We had been pulling a componentry , reusing that across fleet .
Speaker #2: rigs had not worked since or prior to Covid , so they had been idled for quite some time . And some of the components that we're talking These , for about example , 42 of our rigs today , we have what I automation .
Speaker #2: call a rig floor level one So it's that's automation removing people from the red zones on the floor . So put new as we've equipment on those we've rigs , equipment that the we've pulled off is what we're talking about .
Speaker #2: That we've we're decommissioning and impairing . Another example would be as we've upgraded our entire fleet , at least domestically , we've had to put new driller's cabins with new technology to run our full suite of of of tech on those rigs .
Mike Lennox: Another example would be, as we've upgraded our entire fleet, at least domestically, we've had to put new drillers' cabins with new technology to run our full suite of tech on those rigs. So these drillers' cabins, we've used about as much as we can on them, and it's time to clean the yards and dispose of that equipment. So that's kind of the nature of what we're talking about on equipment.
Mike Lennox: Another example would be, as we've upgraded our entire fleet, at least domestically, we've had to put new drillers' cabins with new technology to run our full suite of tech on those rigs. So these drillers' cabins, we've used about as much as we can on them, and it's time to clean the yards and dispose of that equipment. So that's kind of the nature of what we're talking about on equipment.
Speaker #2: So drillers cabins , we've used about as much as we can on them . And time it's to these to to clean the yards and , and dispose of that that's , that's kind of the nature of what we're talking about on equipment .
Saurabh Pant: Got it. Thank you, and congratulations, John.
Ati Modak: Got it. Thank you, and congratulations, John.
Speaker #9: Got it . Thank you . And John congratulations .
Mike Lennox: Thank you. I appreciate it.
John Lindsay: Thank you. I appreciate it.
Speaker #2: I appreciate Thank you it .
Operator: That does conclude our question-and-answer session for today. I would now like to turn the call back to John Lindsay for any additional or closing remarks.
Operator: That does conclude our question-and-answer session for today. I would now like to turn the call back to John Lindsay for any additional or closing remarks.
Speaker #3: That does conclude our question and answer session for today. I would now like to turn the call back to John Lindsay for any additional or closing remarks.
Mike Lennox: I just wanna thank everyone for joining us on the call today. It has truly been an honor to lead the company as CEO, serving our shareholders, our board of directors, and our amazing employees. It, it has really been the dream of a lifetime, and we'll be forever thankful. I truly believe Trey and team will achieve great success. I have complete confidence in their ability to execute the strategy going forward. And with that, operator, you may now close the call.
John Lindsay: I just wanna thank everyone for joining us on the call today. It has truly been an honor to lead the company as CEO, serving our shareholders, our board of directors, and our amazing employees. It, it has really been the dream of a lifetime, and we'll be forever thankful. I truly believe Trey and team will achieve great success. I have complete confidence in their ability to execute the strategy going forward. And with that, operator, you may now close the call.
Speaker #2: I just want to thank everyone for joining.
Speaker #1: on the Us call today .
Speaker #2: It has truly been an honor to lead the company as CEO, serving our shareholders, our Board of Directors, and our amazing employees.
Speaker #2: It has really been the dream of a lifetime and I will be forever thankful. I truly believe Trey and the team will achieve great success.
Speaker #2: I have complete confidence in their ability to execute the strategy going forward, and with that, operator, you may close the call now.
Operator: Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at this time.
Operator: Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at this time.
Speaker #3: you . Thank This does conclude today's program . Thank you for your participation . You may disconnect at this time .
