Helmerich & Payne (HP) Q3 Revenue Up 49%

Helmerich & Payne (HP -0.77%), a leading provider of drilling services and advanced land rigs, released its earnings for the third quarter of fiscal 2025 on August 6, 2025. The company posted non-GAAP earnings per share of $0.22, beating analysts’ expectations of $0.18 non-GAAP EPS. Revenue for the period reached $1,040.9 million (GAAP), and growing sharply from the $697.7 million (GAAP) recorded in Q3 FY2024. Despite the strong headline revenue and EPS results, net income (GAAP) was negative due to a $173 million goodwill impairment tied to its international segment. The overall quarter reflected strength in North America and meaningful, though challenging, integration progress internationally following the acquisition of KCA Deutag. Management maintained its quarterly dividend and highlighted resilience in core segments, even as integration costs and challenging overseas conditions weighed on the bottom line.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.

Business Overview and Strategic Focus

Helmerich & Payne is an energy services provider in the oil and gas drilling industry. It is best known for its land-based drilling rigs, particularly its advanced FlexRig® line, which automate and improve drilling efficiency and safety. The company operates through three major divisions: North America Solutions, International Solutions, and Offshore Solutions.

In recent years, it has focused on technological advancement with automation and data-driven drilling tools. Expanding geographically, especially in Saudi Arabia and the Middle East, has also been a core strategic goal. The company's future success depends on continued innovation, delivery of highly efficient drilling solutions, effective integration of major acquisitions like KCA Deutag, and its ability to manage earnings during volatile oil price cycles.

Quarterly Performance and Key Developments

Reflecting the first full period of the KCA Deutag acquisition and broader international operations. However, the company recorded a net loss under generally accepted accounting principles (GAAP), primarily driven by a $173 million goodwill impairment in the International Solutions division. Direct margins (non-GAAP) improved substantially in International Solutions, reaching $34.1 million, but operating losses were sizable due to both the impairment and integration costs. In North America Solutions, direct margin (non-GAAP) remained stable at $266.2 million, even as average rig counts slipped from 150 in the prior year to 147. About half the North American fleet operated under performance-based contracts, emphasizing the company’s focus on technical performance and customer alignment.

Adjusted EBITDA, a non-GAAP measure of core profitability excluding interest, taxes, depreciation, and other non-operating items, reached $268.1 million. Offshore Solutions, which manages offshore drilling platforms, nearly tripled its direct margin (non-GAAP) to $22.8 million from $7.6 million in Q3 FY2024, boosted by scale from the KCA Deutag acquisition. However, management noted some sequential decline in offshore direct margins in the face of softening activity, while North American direct margin remained approximately flat.

Within International Solutions, all eight unconventional FlexRigs are now operating in Saudi Arabia after the final rig commenced activity during the quarter. Management identified approximately $50 million in annual cost savings from KCA Deutag integration, with a goal to reduce the combined company cost structure by $50–$75 million, and expects to recognize the full impact of these savings during fiscal year 2026. The company noted steady progress, but international earnings were reduced by both suspended rigs in Saudi and the heavy non-cash impairment.

The company repaid $120 million in term loan debt as of the end of July 2025, raising its full-year repayment target to $200 million (from the $175 million previously) for calendar 2025. Liquidity remains robust with $187 million in cash and short-term investments at quarter’s end, along with access to a $950 million undrawn line of credit. The quarterly dividend was maintained at $25 million, in line with prior periods.

Product Lines and Segment Commentary

The core of the company’s fleet is its FlexRig® land rigs, designed for complex oil and gas wells with automation and performance-data integration. This technology underpins much of its performance-based contract business in North America, where compensation and bonuses are linked to drilling efficiency. About 50% of North American activity used such contracts, benefiting both customers and the company amid market changes.

Internationally, FlexRigs also form the backbone of its Saudi Arabian operations, enabling unconventional drilling projects in a region historically focused on conventional wells. Offshore operations are lower-margin but provide stability due to their capital-light and contract-driven structure, often with blue-chip customers.

Outlook and Guidance

Management issued non-GAAP direct margin guidance, reflecting cautious optimism, but highlighting ongoing uncertainty overseas. In North America Solutions, the company expects average rig counts to fall to 138–144, with direct margins (non-GAAP) guided to $230–$250 million. International Solutions is forecast to see direct margin (non-GAAP) in the $22–$32 million range, with rig counts dipping due to continued suspensions in Saudi Arabia. Offshore Solutions direct margin (non-GAAP) is expected to be between $22–$30 million. Gross capital expenditures are planned to total $380–$395 million, with research and development costs near $32 million.

The company remains committed to repaying debt, increasing its repayment target for the year and citing its strong liquidity. Investors are being urged to monitor the pace of international synergy realization, future FlexRig utilization in Saudi Arabia, and any signs of stabilization or improvement in North America rig activity. While direct guidance for the next full fiscal year was not provided, management emphasized long-term opportunity, but also acknowledged the unpredictable timing of suspended rigs returning to service in the Middle East.

Approximately $25 million was returned to shareholders through the company’s ongoing dividend program.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.