Helmerich & Payne, Inc. [HP] Filings

10-Q 1 hp-20220331.htm 10-Q hp-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended: March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-4221

HELMERICH & PAYNE, INC.

(Exact name of registrant as specified in its charter)


Delaware						73-0679879
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1437 South Boulder Avenue, Suite 1400, Tulsa, Oklahoma, 74119

(Address of principal executive offices) (Zip Code)

(918) 742-5531

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year,

if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock ($0.10 par value)	HP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


CLASS						OUTSTANDING AT April 20, 2022
Common Stock, $0.10 par value						105,287,469

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HELMERICH & PAYNE, INC.
INDEX TO FORM 10‑Q



PART I		Page
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2022 and 2021	4
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended March 31, 2022 and 2021	5
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six Months Ended March 31, 2022 and 2021	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2022 and 2021	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	45
PART II.		45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 6.	Exhibits	46
SIGNATURES		47

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,		September 30,
(in thousands except share data and share amounts)	2022		2021
ASSETS
Current Assets:
Cash and cash equivalents	$	202,206	$	917,534
Short-term investments	148,377		198,700
Accounts receivable, net of allowance of $2,490 and $2,068, respectively	329,572		228,894
Inventories of materials and supplies, net	83,588		84,057
Prepaid expenses and other, net	97,380		85,928
Assets held-for-sale	57,373		71,453
Total current assets	918,496		1,586,566

Investments	219,295		135,444
Property, plant and equipment, net	3,022,335		3,127,287
Other Noncurrent Assets:
Goodwill	45,653		45,653
Intangible assets, net	70,246		73,838
Operating lease right-of-use assets	45,325		49,187
Other assets, net	13,000		16,153
Total other noncurrent assets	174,224		184,831

Total assets	$	4,334,350	$	5,034,128

LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	105,123	$	71,996
Dividends payable	26,697		27,332
Current portion of long-term debt, net	—		483,486
Accrued liabilities	245,778		283,492
Total current liabilities	377,598		866,306

Noncurrent Liabilities:
Long-term debt, net	541,969		541,997
Deferred income taxes	552,263		563,437
Other	125,754		147,757
Noncurrent liabilities - discontinued operations	2,356		2,013
Total noncurrent liabilities	1,222,342		1,255,204
Commitments and contingencies (Note 13)
Shareholders' Equity:
Common stock, $.10 par value, 160,000,000 shares authorized, 112,222,865 shares issued as of both March 31, 2022 and September 30, 2021, and 105,285,460 and 107,898,859 shares outstanding as of March 31, 2022 and September 30, 2021, respectively	11,222		11,222
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued	—		—
Additional paid-in capital	514,771		529,903
Retained earnings	2,463,665		2,573,375
Accumulated other comprehensive loss	(19,456)		(20,244)
Treasury stock, at cost, 6,937,405 shares and 4,324,006 shares as of March 31, 2022 and September 30, 2021, respectively	(235,792)		(181,638)
Total shareholders’ equity	2,734,410		2,912,618
Total liabilities and shareholders' equity	$	4,334,350	$	5,034,128

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended March 31,				Six Months Ended March 31,
(in thousands, except per share amounts)	2022		2021		2022		2021
OPERATING REVENUES
Drilling services	$	465,370	$	294,026	$	872,904	$	538,807
Other	2,227		2,145		4,475		3,741
	467,597		296,171		877,379		542,548
OPERATING COSTS AND EXPENSES
Drilling services operating expenses, excluding depreciation and amortization	339,759		230,313		639,411		429,002
Other operating expenses	1,181		1,274		2,363		2,636
Depreciation and amortization	102,937		106,417		203,374		213,278
Research and development	6,387		5,334		12,914		10,917
Selling, general and administrative	47,051		39,349		90,766		78,652
Asset impairment charge	—		54,284		4,363		54,284
Restructuring charges	63		1,608		805		1,746
Gain on reimbursement of drilling equipment	(6,448)		(3,748)		(11,702)		(5,939)
Other (gain) loss on sale of assets	(716)		22,263		313		12,118
	490,214		457,094		942,607		796,694
OPERATING LOSS FROM CONTINUING OPERATIONS	(22,617)		(160,923)		(65,228)		(254,146)
Other income (expense)
Interest and dividend income	3,399		4,819		5,988		6,698
Interest expense	(4,390)		(5,759)		(10,504)		(11,898)
Gain on investment securities	22,132		2,520		69,994		5,444
Loss on extinguishment of debt	—		—		(60,083)		—
Other	(476)		(577)		(1,018)		(2,057)
	20,665		1,003		4,377		(1,813)
Loss from continuing operations before income taxes	(1,952)		(159,920)		(60,851)		(255,959)
Income tax expense (benefit)	2,672		(36,624)		(4,896)		(54,739)
Loss from continuing operations	(4,624)		(123,296)		(55,955)		(201,220)
Income (loss) from discontinued operations before income taxes	(352)		2,293		(383)		9,786
Income tax provision	—		—		—		—
Income (loss) from discontinued operations	(352)		2,293		(383)		9,786
NET LOSS	$	(4,976)	$	(121,003)	$	(56,338)	$	(191,434)

Basic earnings (loss) per common share:
Loss from continuing operations	$	(0.05)	$	(1.15)	$	(0.53)	$	(1.87)
Income from discontinued operations	—		0.02		—		0.09
Net loss	$	(0.05)	$	(1.13)	$	(0.53)	$	(1.78)

Diluted earnings (loss) per common share:
Loss from continuing operations	$	(0.05)	$	(1.15)	$	(0.53)	$	(1.87)
Income from discontinued operations	—		0.02		—		0.09
Net loss	$	(0.05)	$	(1.13)	$	(0.53)	$	(1.78)

Weighted average shares outstanding:
Basic	105,393		107,861		106,494		107,738
Diluted	105,393		107,861		106,494		107,738

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
	Three Months Ended March 31,				Six Months Ended March 31,
(in thousands)	2022		2021		2022		2021
Net loss	$	(4,976)	$	(121,003)	$	(56,338)	$	(191,434)
Other comprehensive income, net of income taxes:
Net change related to employee benefit plans, net of income taxes of $(0.1) million and $(0.2) million for the three and six months ended March 31, 2022, respectively, and $(0.1) million and $(0.3) million for the three and six months ended March 31, 2021.	394		457		788		914
Other comprehensive income	394		457		788		914
Comprehensive loss	$	(4,582)	$	(120,546)	$	(55,550)	$	(190,520)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
	Three and Six Months Ended March 31, 2022
(in thousands, except per share amounts)	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
	Shares	Amount								Shares	Amount		Total
Balance, September 30, 2021	112,222	$	11,222	$	529,903	$	2,573,375	$	(20,244)	4,324	$	(181,638)	$	2,912,618
Comprehensive income (loss):
Net loss	—	—		—		(51,362)		—		—	—		(51,362)
Other comprehensive income	—	—		—		—		394		—	—		394
Dividends declared ($0.25 per share)	—	—		—		(26,807)		—		—	—		(26,807)

Vesting of restricted stock awards, net of shares withheld for employee taxes	—	—		(21,152)		—		—		(381)	17,040		(4,112)
Stock-based compensation	—	—		6,218		—		—		—	—		6,218
Share repurchases	—	—		—		—		—		2,548	(60,358)		(60,358)


Balance, December 31, 2021	112,222	$	11,222	$	514,969	$	2,495,206	$	(19,850)	6,491	$	(224,956)	$	2,776,591
Comprehensive income:
Net loss	—	—		—		(4,976)		—		—	—		(4,976)
Other comprehensive income	—	—		—		—		394		—	—		394
Dividends declared ($0.25 per share)	—	—		—		(26,565)		—		—	—		(26,565)

Vesting of restricted stock awards, net of shares withheld for employee taxes		—		(7,197)		—		—		(161)	5,805		(1,392)
Stock-based compensation	—	—		6,999		—		—		—	—		6,999
Share repurchases	—	—		—		—		—		607	(16,641)		(16,641)


Balance, March 31, 2022	112,222	$	11,222	$	514,771	$	2,463,665	$	(19,456)	6,937	$	(235,792)	$	2,734,410

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
	Three and Six Months Ended March 31, 2021
(in thousands, except per share amounts)	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
	Shares	Amount								Shares	Amount		Total
Balance, September 30, 2020	112,151	$	11,215	$	521,628	$	3,010,012	$	(26,188)	4,663	$	(198,153)	$	3,318,514
Comprehensive income (loss):
Net loss	—	—		—		(70,431)		—		—	—		(70,431)
Other comprehensive income	—	—		—		—		457		—	—		457
Dividends declared ($0.25 per share)	—	—		—		(27,324)		—		—	—		(27,324)

Vesting of restricted stock awards, net of shares withheld for employee taxes	72	7		(16,742)		—		—		(295)	14,618		(2,117)
Stock-based compensation	—	—		7,451		—		—		—	—		7,451

Cumulative effect adjustment for adoption of ASU No. 2016-13	—	—		—		(1,251)		—		—	—		(1,251)
Other	—	—		(381)		—		—		—	—		(381)
Balance, December 31, 2020	112,223	$	11,222	$	511,956	$	2,911,006	$	(25,731)	4,368	$	(183,535)	$	3,224,918
Comprehensive income:
Net loss	—	—		—		(121,003)		—		—	—		(121,003)
Other comprehensive income	—	—		—		—		457		—	—		457
Dividends declared ($0.25 per share)	—	—		—		(27,268)		—		—	—		(27,268)

Vesting of restricted stock awards, net of shares withheld for employee taxes	—	—		(1,678)		—		—		(39)	1,678		—
Stock-based compensation	—	—		6,826		—		—		—	—		6,826

Other	—	—		(234)		—		—		—	—		(234)
Balance, March 31, 2021	112,223	$	11,222	$	516,870	$	2,762,735	$	(25,274)	4,329	$	(181,857)	$	3,083,696

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Six Months Ended March 31,
(in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS	$	(56,338)	$	(191,434)
Adjustment for (income) loss from discontinued operations	383		(9,786)
Loss from continuing operations	(55,955)		(201,220)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	203,374		213,278
Asset impairment charge	4,363		54,284

Amortization of debt discount and debt issuance costs	559		920
Loss on extinguishment of debt	60,083		—
Provision for credit loss	669		(227)
Provision for obsolete inventory	(761)		423
Stock-based compensation	14,163		14,277
Gain on investment securities	(69,994)		(5,444)
Gain on reimbursement of drilling equipment	(11,702)		(5,939)
Other loss on sale of assets	313		12,118

Deferred income tax benefit	(11,597)		(46,068)

Other	(3,526)		3,646
Change in assets and liabilities:
Accounts receivable	(103,751)		(8,498)
Inventories of materials and supplies	158		7,159
Prepaid expenses and other	(4,068)		(7,951)
Other noncurrent assets	10,375		(3,696)
Accounts payable	32,138		25,277
Accrued liabilities	(29,322)		(451)
Deferred income tax liability	196		27
Other noncurrent liabilities	(16,777)		6,912
Net cash provided by operating activities from continuing operations	18,938		58,827
Net cash used in operating activities from discontinued operations	(42)		(25)
Net cash provided by operating activities	18,896		58,802
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(104,482)		(30,745)
Other capital expenditures related to assets held-for-sale	(10,550)		—
Purchase of short-term investments	(68,565)		(105,662)
Purchase of long-term investments	(14,124)		(1,069)

Proceeds from sale of short-term investments	117,456		63,742

Proceeds from asset sales	34,944		13,419


Net cash used in investing activities	(45,321)		(60,315)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(54,007)		(54,230)



Payments for employee taxes on net settlement of equity awards	(5,503)		(2,119)
Payment of contingent consideration from acquisition of business	(250)		(250)
Payments for early extinguishment of long-term debt	(487,148)		—
Make-whole premium payment	(56,421)		—
Share repurchases	(76,999)		—
Other	(587)		—
Net cash used in financing activities	(680,915)		(56,599)
Net decrease in cash and cash equivalents and restricted cash	(707,340)		(58,112)
Cash and cash equivalents and restricted cash, beginning of period	936,716		536,747
Cash and cash equivalents and restricted cash, end of period	$	229,376	$	478,635

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest paid	$	10,798	$	11,473
Income tax paid (received), net	633		(31,965)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases	6,069		8,970
Non-cash operating and investing activities:
Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment	(2,431)		(1,296)
Changes in accounts receivable, property, plant and equipment and other noncurrent assets related to the sale of equipment	—		9,290
Cumulative effect adjustment for adoption of ASU No. 2016-13	—		(1,251)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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HELMERICH & PAYNE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS

Helmerich & Payne, Inc. (“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.

Our drilling services operations are organized into the following reportable operating business segments: North America Solutions, Offshore Gulf of Mexico and International Solutions. Our real estate operations, our incubator program for new research and development projects and our wholly-owned captive insurance companies are included in "Other." Refer to Note 14—Business Segments and Geographic Information for further details on our reportable segments.

Our North America Solutions operations are primarily located in Colorado, Louisiana, New Mexico, Nevada, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia and Wyoming. Additionally, our Offshore Gulf of Mexico operations are conducted in Louisiana and in U.S. federal waters in the Gulf of Mexico and in our International Solutions we have operations in four international locations: Argentina, Bahrain, Colombia and United Arab Emirates.

We also own and operate limited commercial real estate properties. Our real estate assets, which are located exclusively within Tulsa, Oklahoma, include a shopping center and undeveloped real estate.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES

Interim Financial Information

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2021 Annual Report on Form 10-K and other current filings with the SEC. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

Principles of Consolidation

The Unaudited Condensed Consolidated Financial Statements include the accounts of Helmerich & Payne, Inc. and its domestic and foreign subsidiaries. Consolidation of a subsidiary begins when the Company gains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the Unaudited Condensed Consolidated Statements of Operations and Unaudited Condensed Consolidated Statements of Comprehensive Loss from the date the Company gains control until the date when the Company ceases to control the subsidiary. All intercompany accounts and transactions have been eliminated upon consolidation.

COVID-19 and Russia-Ukraine Conflict

The direct impacts of the COVID-19 pandemic on the Company have diminished significantly as health guidelines and restrictions have eased in most jurisdictions in which we operate. Since the COVID-19 outbreak began, no rigs have been fully shut down (other than temporary shutdowns for disinfecting and the suspension for a certain period of time on one of our international rigs) and these temporary shutdowns did not have a significant impact on service.

The COVID-19 pandemic is predicted to continue and increases in infection rates may cause governmental authorities in highly impacted areas to impose more rigorous restrictions on business and social activities. We have experienced, and may experience in the future, some periodic disruptions to our business operations from government restrictions. We work to comply with all regulations of governmental authorities in the jurisdictions where our operations reside. In some cases, policies and procedures are more stringent in our foreign operations than in our North America operations.

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More recently, the Russian Federation's invasion of Ukraine and the related international reaction to the invasion, including sanctions, have introduced additional volatility in commodity prices. As we have no operations in the impacted regions of this conflict, we do not expect any direct impact to our operations. Additionally, we do not source supplies from these regions; however, the far-reaching ramifications of this conflict could result in some inflationary pressure within our supply chain.

From a financial perspective, we believe the Company is well positioned to manage through events, even protracted ones, that may result from market disruptions and the related commodity price volatility. More recent events, like the COVID-19 global pandemic and the Russian invasion into the Ukraine, have elevated commodity price volatility and have other far reaching global market ramifications.

At March 31, 2022, the Company had cash and cash equivalents and short-term investments of $350.6 million. The 2018 Credit Facility (as defined within Note 6—Debt) has $750.0 million in aggregate availability with a maximum of $75.0 million available for use as letters of credit. As of March 31, 2022, there were no borrowings or letters of credit outstanding, leaving $750.0 million available to borrow under the 2018 Credit Facility. We currently do not anticipate the need to draw on the 2018 Credit Facility. Furthermore, the Company's 2031 Notes (as defined within Note 6—Debt) do not mature until September 29, 2031. On March 8, 2022, we entered into the second amendment to the 2018 Credit Facility, which, among other things, raised the number of potential future extensions of the maturity date applicable to extending lenders from one to two such potential extensions and replaced provisions in respect of interest rate determinations that were based on the London Interbank Offered Rate with provisions based on the Secured Overnight Financing Rate. Lenders with $680.0 million of commitments under the 2018 Credit Facility also exercised their option to extend the maturity of the 2018 Credit Facility from November 12, 2025 to November 11, 2026. Refer to Note 6—Debt for further details.

On September 27, 2021, the Company delivered a conditional notice of optional full redemption for all of the outstanding 4.65 percent unsecured senior notes due 2025 (the "2025 Notes") at a redemption price calculated in accordance with the indenture governing the 2025 Notes, plus accrued and unpaid interest on the 2025 Notes to be redeemed. On September 29, 2021, we issued $550.0 million aggregate principal amount of the 2.90 percent unsecured senior notes due 2031 (the "2031 Notes"). The Company’s obligation to redeem the 2025 Notes was conditioned upon the prior consummation of the issuance of the 2031 Notes, which was satisfied on September 29, 2021. The 2031 Notes mature on September 29, 2031. On October 27, 2021, we redeemed all of the outstanding 2025 Notes. As a result, these notes were included in the current portion of long-term debt on our Consolidated Balance Sheets as of September 30, 2021. The associated make-whole premium of $56.4 million and the write off of the unamortized discount and debt issuance costs of $3.7 million were recognized during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 debt extinguishment. These amounts were recorded in Loss on Extinguishment of Debt in our Unaudited Condensed Consolidated Statements of Operations during the six months ended March 31, 2022. Refer to Note 6—Debt for further details.

Cash, Cash Equivalents, and Restricted Cash

Cash and cash equivalents include cash on hand, demand deposits with banks and all highly liquid investments with original maturities of three months or less. Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits.

We had restricted cash of $27.2 million and $51.4 million at March 31, 2022 and 2021, respectively, and $19.2 million and $48.9 million at September 30, 2021 and 2020, respectively. Of the total restricted cash at March 31, 2022 and September 30, 2021, $1.1 million and $1.5 million, respectively, is related to the acquisition of drilling technology companies, and $25.9 million and $17.7 million, respectively, represents an amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies. The restricted amounts are primarily invested in short-term money market securities.

The cash, cash equivalents, and restricted cash are reflected within the following line items on the Unaudited Condensed Consolidated Balance Sheets:


	March 31,				September 30,
(in thousands)	2022		2021		2021		2020
Cash and cash equivalents	$	202,206	$	427,243	$	917,534	$	487,884
Restricted cash
Prepaid expenses and other, net	26,438		48,457		18,350		45,577
Other assets, net	732		2,935		832		3,286
Total cash, cash equivalents, and restricted cash	$	229,376	$	478,635	$	936,716	$	536,747

During the six months ended March 31, 2022, our cash, cash equivalents, and restricted cash balance decreased approximately $707.3 million compared to our balance at September 30, 2021. This change was primarily driven by the redemption of all the outstanding 2025 Notes, resulting in a cash outflow of $487.1 million. Additionally, the associated make-whole premium of $56.4 million was paid during the first fiscal quarter of 2022 contemporaneously with the October 27, 2021 debt extinguishment.

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Recently Issued Accounting Updates

Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASUs") to the FASB Accounting Standards Codification ("ASC"). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company.

The following table provides a brief description of a recently adopted accounting pronouncement and our analysis of the effects on our financial statements:


Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Recently Adopted Accounting Pronouncements
ASU No. 2019-12, Financial Instruments – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	This ASU simplifies the accounting for income taxes by removing certain exceptions related to Topic 740. The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for annual and interim periods beginning after December 15, 2020. Early adoption of the amendment is permitted, including adoption in any interim period for public entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. Upon adoption, the amendments addressed in this ASU will be applied either prospectively, retrospectively or on a modified retrospective basis through a cumulative effect adjustment to retained earnings. This update is effective for annual periods beginning after December 15, 2020.	October 1, 2021	We adopted this ASU during the first quarter of fiscal year 2022. The adoption did not have a material effect on our Unaudited Condensed Consolidated Financial Statements and disclosures.
Standards that are not yet adopted as of March 31, 2022
ASU No. 2020-06, Debt with conversion and other options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s own equity (subtopic 815-40): Accounting For Convertible Instruments and Contracts In An Entity’s Own Equity	This ASU reduces the complexity of accounting for convertible debt and other equity-linked instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.	October 1, 2022	We are currently evaluating the impact of this ASU on our Unaudited Condensed Consolidated Financial Statements and disclosures.

Self-Insurance

Our wholly-owned insurance captives ("Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $1.8 million and $2.3 million for the three months ended March 31, 2022 and 2021, respectively, and $(0.4) million and $2.8 million for the six months ended March 31, 2022 and 2021, respectively, and rig casualty insurance premiums of $7.9 million and $5.0 million for the three months ended March 31, 2022 and 2021, respectively, and $16.7 million and $7.5 million for the six months ended March 31, 2022 and 2021, respectively, and were recorded within drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations. Intercompany premium revenues recorded by the Captives amounted to $13.2 million and $8.7 million during the three months ended March 31, 2022 and 2021, respectively, and $26.9 million and $15.8 million during the six months ended March 31, 2022 and 2021, respectively, which were eliminated upon consolidation. These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, Offshore Gulf of Mexico, and International Solutions reportable operating segments and are reflected as intersegment sales within "Other." The Company self-insures employee health plan exposures in excess of employee deductibles. Starting in the second quarter of fiscal year 2020, the Captives' insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $50,000. This program is reviewed at the end of each policy year by an outside actuary. Our medical stop loss operating expenses for the three months ended March 31, 2022 and 2021 were $3.6 million and $3.1 million, respectively, and $6.9 million and $5.4 million for the six months ended March 31, 2022 and 2021, respectively.

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International Solutions Drilling Risks

International Solutions drilling operations may significantly contribute to our revenues and net operating income (loss). There can be no assurance that we will be able to successfully conduct such operations, and a failure to do so may have an adverse effect on our financial position, results of operations, and cash flows. Also, the success of our International Solutions operations will be subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, fluctuations in currency exchange rates, modified exchange controls, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws. Additionally, in the event that extended labor strikes occur or a country experiences significant political, economic or social instability, we could experience shortages in labor and/or material and supplies necessary to operate some of our drilling rigs, thereby potentially causing an adverse material effect on our business, financial condition and results of operations.

We have also experienced certain risks specific to our Argentine operations. In Argentina, while our dayrate is denominated in U.S. dollars, we are paid in the equivalent of Argentine pesos. The Argentine branch of one of our second-tier subsidiaries remits U.S. dollars to its U.S. parent by converting the Argentine pesos into U.S. dollars through the Argentine Foreign Exchange Market and repatriating the U.S. dollars. Argentina also has a history of implementing currency controls which restrict the conversion and repatriation of U.S. dollars. In September 2020, Argentina implemented additional currency controls in an effort to preserve Argentina's U.S. dollar reserves. As a result of these currency controls, our ability to remit funds from our Argentine subsidiary to its U.S. parent has been limited. In the past, the Argentine government has also instituted price controls on crude oil, diesel and gasoline prices and instituted an exchange rate freeze in connection with those prices. These price controls and an exchange rate freeze could be instituted again in the future. Further, there are additional concerns regarding Argentina's debt burden, notwithstanding Argentina's restructuring deal with international bondholders in August 2020, as Argentina attempts to manage its substantial sovereign debt issues. These concerns could further negatively impact Argentina's economy and adversely affect our Argentine operations. Argentina’s economy is considered highly inflationary, which is defined as cumulative inflation rates exceeding 100 percent in the most recent three-year period based on inflation data published by the respective governments. Nonetheless, all of our foreign subsidiaries use the U.S. dollar as the functional currency and local currency monetary assets and liabilities are remeasured into U.S. dollars with gains and losses resulting from foreign currency transactions included in current results of operations.

We recorded aggregate foreign currency losses of $2.4 million for both the three months ended March 31, 2022 and 2021, and $3.3 million and $4.2 million for the six months ended March 31, 2022 and 2021, respectively. In the future, we may incur larger currency devaluations, foreign exchange restrictions or other difficulties repatriating U.S. dollars from Argentina or elsewhere, which could have a material adverse impact on our business, financial condition and results of operations. As of March 31, 2022, our cash balance in Argentina was $43.2 million.

Because of the impact of local laws, our future operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities. While we believe that neither operating through such entities nor pursuant to such arrangements would have a material adverse effect on our operations or revenues, there can be no assurance that we will in all cases be able to structure or restructure our operations to conform to local law (or the administration thereof) on terms acceptable to us.

Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three and six months ended March 31, 2022, approximately 5.9 percent and 7.5 percent of our operating revenues were generated from international locations in our drilling business compared to 5.2 percent and 4.9 percent during the three and six months ended March 31, 2021, respectively. During the three and six months ended March 31, 2022, approximately 75.8 percent and 76.6 percent of operating revenues from international locations were from operations in South America, compared to 51.4 percent and 37.6 percent during the three and six months ended March 31, 2021, respectively. Substantially all of the South American operating revenues were from Argentina and Colombia. The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations.

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NOTE 3 DISCONTINUED OPERATIONS

Noncurrent liabilities from discontinued operations include an uncertain tax liability related to the country of Venezuela. Expenses incurred for in-country obligations are reported as discontinued operations within our Unaudited Condensed Consolidated Statements of Operations.

The activity for the three and six months ended March 31, 2022 and 2021 was primarily due to the remeasurement of an uncertain tax liability as a result of the devaluation of the Venezuela Bolivar. Early in 2018, the Venezuelan government announced that it changed the existing dual-rate foreign currency exchange system by eliminating its heavily subsidized foreign exchange rate, which was 10 Bolivars per United States dollar, and relaunched an exchange system known as DICOM. The Venezuela government also established a new currency called the “Sovereign Bolivar,” which was determined by the elimination of five zeros from the old currency. The DICOM floating rate was approximately 4,181,782 and 1,987,185 Bolivars per United States dollar at September 30, 2021, and March 31, 2021, respectively. In October 2021, the Venezuela government launched another monetary overhaul by cutting six zeros from the Bolivar in response to hyperinflation and to simplifying accounting. As such, as of March 31, 2022, the DICOM floating rate was approximately 4.38 Bolivars per United States dollar. The DICOM floating rate might not reflect the barter market exchange rates.

NOTE 4 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of March 31, 2022 and September 30, 2021 consisted of the following:


(in thousands)	Estimated Useful Lives	March 31, 2022		September 30, 2021
Drilling services equipment	4 - 15 years	$	6,284,174	$	6,229,011
Tubulars	4 years	555,968		573,900
Real estate properties	10 - 45 years	44,916		43,302
Other	2 - 23 years	420,589		459,741
Construction in progress (1)		62,959		47,587
		7,368,606		7,353,541
Accumulated depreciation		(4,346,271)		(4,226,254)
Property, plant and equipment, net		$	3,022,335	$	3,127,287

Assets held-for-sale		$	57,373	$	71,453

(1)Included in construction in progress are costs for projects in progress to upgrade or refurbish certain rigs in our existing fleet. Additionally, we include other capital maintenance purchase orders that are open/in process. As these various projects are completed, the costs are then classified to their appropriate useful life category.

Depreciation

Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $101.1 million and $104.6 million, including $2.5 million and $0.5 million in abandonments, for the three months ended March 31, 2022 and 2021, respectively. Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $199.8 million and $209.7 million, including $3.8 million and $0.4 million in abandonments for the six months ended March 31, 2022 and 2021, respectively.

Assets Held-for-Sale

The following table summarizes the balance (in thousands) of our assets held-for-sale at the dates indicated below:


Balance at September 30, 2021	$	71,453
Plus:
Asset additions	1,459
Less:
Sale of assets held-for-sale	(15,539)
Balance at March 31, 2022	$	57,373

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In March 2021, the Company's leadership continued the execution of the current strategy, which was initially introduced in 2019, focusing on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet. As a result, the Company has undertaken a plan to sell 71 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares. The book values of those assets were written down to $13.5 million, which represents their fair value less estimated costs to sell, and were reclassified as held-for-sale in the second and third quarters of fiscal year 2021. During the fiscal year ended September 30, 2021, we completed the sale of a portion of the assets with a net book value of $6.5 million that were originally classified as held-for-sale during the second and third quarters of fiscal year 2021. Additionally, during the six months ended March 31, 2022, we completed the sale of a portion of the remaining assets with a net book value of $1.6 million that were originally classified as held-for-sale during the second and third quarters of fiscal year 2021.

During September 2021, the Company agreed to sell eight FlexRig® land rigs with an aggregate net book value of $55.6 million to ADNOC Drilling Company P.J.S.C. ("ADNOC Drilling") for $86.5 million. Two of the eight rigs were already located in the U.A.E where ADNOC Drilling is domiciled with the remaining six rigs to be shipped from the United States. We received the $86.5 million in cash consideration in advance of delivering the rigs. As part of the sales agreement, the rigs will be delivered and commissioned in stages over a twelve-month period subject to acceptance upon successful completion of final inspection on customary terms and conditions. During the second quarter of fiscal year 2022, ADNOC Drilling accepted delivery of the two rigs located in the U.A.E. with a net book value of $4.1 million and, as a result, we recognized a gain of $1.2 million, after incurring $2.4 million of selling costs, during the three months ended March 31, 2022 and the rigs were removed from assets classified as held-for-sale as of March 31, 2022. The gain of $1.2 million is recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statement of Operations for the three and six months ended March 31, 2022. The remaining cash proceeds received in advance of rig delivery and acceptance of $78.8 million is recorded in Accrued Liabilities within our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2022. Additionally, the six remaining rigs in the United States are classified as held-for-sale in the Unaudited Condensed Consolidated Balance Sheets until each rig is delivered and accepted, at which time any related gain/loss on the sale will be recognized in the Unaudited Condensed Consolidated Statement of Operations. Estimated cost to sell related to the remaining rigs is approximately $26.6 million, including approximately $11.2 million of expenses incurred during the six months ended March 31, 2022, and approximately $15.4 million of expenses to be incurred in future periods. We paid approximately $10.6 million in cash charges related to these costs during the six months ended March 31, 2022.

During the fiscal year ended September 30, 2021, we formalized a plan to sell assets related to two of our lower margin service offerings, trucking and casing running assets, which contributed approximately 2.8 percent to our consolidated revenues during fiscal year 2021, all within our North America Solutions segment. The combined net book values of these assets of $23.2 million were written down to their combined fair value less estimated cost to sell of $8.8 million, and were reclassified as held-for-sale during the fourth quarter of fiscal year 2021. During the six months ended March 31, 2022, we closed on the sale of these assets in two separate transactions. The sale of our trucking assets was completed on November 3, 2021 while the sale of our casing running assets was completed on November 15, 2021 for total consideration less costs to sell of $6.0 million, in addition to the possibility of future earnout revenue, resulting in a loss of $3.4 million. Losses related to the sale of these assets are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

During the first quarter of fiscal year 2022, we identified two partial rig substructures that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets. The combined net book value of the rig substructures of $2.0 million were written down to their estimated scrap value of $0.1 million, resulting in a non-cash impairment charge of $1.9 million within our North America Solutions segment and recorded in the Unaudited Condensed Consolidated Statement of Operations for the six months ended March 31, 2022. During the three months ended March 31, 2022, we completed the sale of a portion of the assets with a net book value of approximately $0.1 million, resulting in no gain or loss as a result of the sale.

During the first quarter of fiscal year 2022, we identified two international FlexRig® drilling rigs located in Colombia that met the asset held-for-sale criteria and were reclassified as assets held-for-sale on our Unaudited Condensed Consolidated Balance Sheets. In conjunction with establishing a plan to sell the two international FlexRig® drilling rigs, we recognized a non-cash impairment charge of $2.5 million within our International Solutions segment and recorded in the Unaudited Condensed Consolidated Statement of Operations during the six months ended March 31, 2022, as the rigs aggregate net book value of $3.4 million exceeded the fair value of the rigs less estimated cost to sell of $0.9 million. During the three months ended March 31, 2022, we completed the sale of the two international FlexRig® drilling rigs for total consideration of $0.9 million, resulting in no gain or loss as a result of the sale.

The significant assumptions utilized in the valuation of assets held-for-sale were based on our intended method of disposal, historical sales of similar assets, and market quotes and are classified as Level 2 and Level 3 inputs by ASC Topic 820, Fair Value Measurement and Disclosures. Although we believe the assumptions used in our analysis are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion.

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(Gain)/Loss on Sale of Assets

We had a gain of $6.4 million and $11.7 million, during the three and six months ended March 31, 2022, respectively, and $3.8 million and $5.9 million, during the three and six months ended March 31, 2021, respectively, related to customer reimbursement for the replacement value of lost or damaged drill pipe. Gains related to these asset sales are recorded in Gains on Reimbursement of Drilling Equipment within our Unaudited Condensed Consolidated Statements of Operations.

During the three and six months ended March 31, 2022, we had a (gain) loss of $(0.7) million and $0.3 million, respectively, related to the sale of rig equipment and other capital assets. During the first quarter of fiscal year 2022, we closed on the sale of our trucking and casing running assets resulting in a loss of $3.4 million, as mentioned above. During the second quarter of fiscal year 2022, ADNOC Drilling accepted delivery of two rigs resulting in a gain of $1.2 million, as mentioned above. The (gain) loss related to the sale of these assets are recorded in Other (Gain) Loss on Sale of Assets within our Unaudited Condensed Consolidated Statements of Operations.

During the three and six months ended March 31, 2021, we had a loss of $22.3 million and $12.1 million, respectively, related to sale of rig equipment and other capital assets. During the first quarter of fisca