Helmerich & Payne (HP) Q3 FY26 earnings call: guidance and Q&A

Seeking details on the drivers behind the Q4 guidance and the sustainability of current trends into the next fiscal year for NAS, International, and Offshore.

Management highlighted sequential improvement in Q4 driven by activity growth across all segments. NAS is seeing continued rig count growth, International is benefiting from Latin America and Middle East reactivations, and Offshore provides stability. They expressed confidence in Q4 and constructive customer conversations for FY27, expecting continued improvement from the Q4 base.

“We actually think we'll be improving from this base into '27, but it's a good place to kind of start thinking about where EBITDA levels are going to be next year.”

asked by Derek Podhaiser · answered by Todd Scruggs

Asked about the factors influencing NAS margins, specifically the impact of reactivation costs, performance bonuses in Q3, and rising rates, to understand where margins could stabilize in early CY27 with ~150 rigs.

Trey Adams praised the team's ability to reactivate 10 rigs in Q3 while growing margins by $1,000/day. He noted private E&Ps are driving rig additions, while public E&Ps are focused on term and technology. Michael Lennox clarified that Q3 bonuses were lumpy, impacting Q4 guidance, and reactivation costs are a small component. He emphasized the tight super-spec market (95% utilized) and the value of technology, including Flex Robotics, which is performing exceptionally well.

“And out of the gate, it has exceeded that average. And today, for that customer, it is their top rigs, and they're running high 20s rig fleet, and it is their #1 rig in the fleet.”

asked by Scott Gruber · answered by Michael Lennox

Questioned how the company plans to maintain a $300 million maintenance plus sustaining CapEx program given growing international activity, and the confidence in unlocking free cash flow at that level.

Todd Scruggs emphasized internal cost reductions and realignment as equally important to capital spending. He stated that H&P has invested heavily in a uniform fleet, allowing growth without major capital projects, citing rig movements to Argentina as an example. He reiterated commitment to debt reduction (1x net debt-to-EBITDA target) and disciplined capital allocation to generate substantial and sustainable free cash flow for shareholder returns.

“We think that we can unlock a lot of growth in the current portfolio without spending a lot of capital. We think there's a lot of areas that we can drive cash flow that don't really require incremental rig counts and rig adds.”

asked by Arun Jayaram · answered by Todd Scruggs

Asked about current operations, new opportunities in the Middle East (especially Saudi), timeline for remaining suspended rigs (6th and 7th), and prospects for more rigs beyond the initial seven.

Trey Adams expressed encouragement from his Saudi trip, highlighting the team's resilience in reactivating 5 rigs amidst conflict. He stated the focus is on achieving stability and economic viability with the current 22 rigs, aiming for the $45 million quarterly International Solutions direct margin target. He noted the positive Jafurah unconventional story with 8 FlexRigs and potential for expansion, drawing parallels to the Permian. He also mentioned reactivating 2 rigs in Bahrain and constructive conversations with customers across the broader Middle East.

“I was thinking about an analog for my trip last week and I was reflecting on early days and some time spent in the Permian Basin. And it reminded me of being in the Permian not too long ago, where every single day, there's some new 22-inch or 16-inch whole section well record being broken.”

asked by Saurabh Pant · answered by Raymond Adams

Inquired about the evolving competitive landscape in Vaca Muerta given significant investment, and the reactivation timelines and margin economics for the three rigs being exported from the U.S.

Trey Adams highlighted the Vaca Muerta's positive impact, noting the assets are similar to U.S. Lower 48 rigs, allowing for expertise and technology transfer. Michael Lennox confirmed line of sight to 15 rigs, with discussions for more, and expects the 3 exported rigs to be deployed within 6-8 months. He stated margins are in line with U.S. Lower 48, with opportunities for technology expansion. He also explained the added costs for shipping and proactive replacement of API-required equipment for long-term contracts.

“As far as the margins on those, they're very much in line with really what we're seeing here, and they have the opportunity for that because of the technology expansion.”

asked by Keith MacKey · answered by Michael Lennox

Asked about the total number of geothermal rigs (U.S. and Europe), the likelihood of reaching double-digits by next year, and how geothermal rig returns compare to oil and gas.

Trey Adams stated geothermal is a great story, with projects in Europe and expanding enhanced geothermal in the U.S. He emphasized the direct transferability of H&P's expertise and technology, noting geothermal demand adds to the tightness of the super-spec market. Michael Lennox specified 6 rigs in U.S. operations, with discussions for more. He confirmed geothermal margins are in line with Lower 48 margins, benefiting from the application of technology in hot, hard rock environments. Trey added that they are not guiding to double-digits today but see it as a projected marker.

“Again, it's very, very hot rock, obviously, as well as very hard rock. And so keeping that bit on bottom with some of the technology that we have is very helpful and meaningful for our customers.”

asked by Eddie Kam · answered by Michael Lennox