Helmerich & Payne, Inc. [HP] Filings

10-Q 1 hp-20220630.htm 10-Q hp-20220630

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: June 30, 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 July 20, 2022
Common Stock, $0.10 par value						105,290,017

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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 June 30 , 2022 and September 30, 2021	3
	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2022 and 2021	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss ) for the Three and Nine Months Ended June 30, 2022 and 2021	5
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended June 30, 2022 and 2021	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30 , 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 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
	June 30,		September 30,
(in thousands except share data and share amounts)	2022		2021
ASSETS
Current Assets:
Cash and cash equivalents	$	188,663	$	917,534
Short-term investments	144,331		198,700
Accounts receivable, net of allowance of $3,032 and $2,068, respectively	397,880		228,894
Inventories of materials and supplies, net	86,091		84,057
Prepaid expenses and other, net	103,589		85,928
Assets held-for-sale	25,604		71,453
Total current assets	946,158		1,586,566

Investments	213,956		135,444
Property, plant and equipment, net	2,987,107		3,127,287
Other Noncurrent Assets:
Goodwill	45,653		45,653
Intangible assets, net	68,950		73,838
Operating lease right-of-use assets	40,539		49,187
Other assets, net	20,247		16,153
Total other noncurrent assets	175,389		184,831

Total assets	$	4,322,610	$	5,034,128

LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	119,972	$	71,996
Dividends payable	26,693		27,332
Current portion of long-term debt, net	—		483,486
Accrued liabilities	254,611		283,492
Total current liabilities	401,276		866,306

Noncurrent Liabilities:
Long-term debt, net	542,290		541,997
Deferred income taxes	527,545		563,437
Other	116,770		147,757
Noncurrent liabilities - discontinued operations	2,061		2,013
Total noncurrent liabilities	1,188,666		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 June 30, 2022 and September 30, 2021, and 105,290,017 and 107,898,859 shares outstanding as of June 30, 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	521,439		529,903
Retained earnings	2,454,726		2,573,375
Accumulated other comprehensive loss	(19,067)		(20,244)
Treasury stock, at cost, 6,932,848 shares and 4,324,006 shares as of June 30, 2022 and September 30, 2021, respectively	(235,652)		(181,638)
Total shareholders’ equity	2,732,668		2,912,618
Total liabilities and shareholders' equity	$	4,322,610	$	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 June 30,				Nine Months Ended June 30,
(in thousands, except per share amounts)	2022		2021		2022		2021
OPERATING REVENUES
Drilling services	$	547,906	$	329,774	$	1,420,810	$	868,581
Other	2,327		2,439		6,802		6,180
	550,233		332,213		1,427,612		874,761
OPERATING COSTS AND EXPENSES
Drilling services operating expenses, excluding depreciation and amortization	376,210		255,471		1,015,621		684,473
Other operating expenses	1,053		1,481		3,416		4,117
Depreciation and amortization	100,741		104,493		304,115		317,771
Research and development	6,511		5,610		19,425		16,527
Selling, general and administrative	44,933		41,719		135,699		120,371
Asset impairment charge	—		2,130		4,363		56,414
Restructuring charges	33		2,110		838		3,856
Gain on reimbursement of drilling equipment	(9,895)		(4,268)		(21,597)		(10,207)
Other (gain) loss on sale of assets	(3,075)		834		(2,762)		12,952
	516,511		409,580		1,459,118		1,206,274
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS	33,722		(77,367)		(31,506)		(331,513)
Other income (expense)
Interest and dividend income	5,313		1,527		11,301		8,225
Interest expense	(4,372)		(5,963)		(14,876)		(17,861)
Gain (loss) on investment securities	(14,310)		2,409		55,684		7,853
Loss on extinguishment of debt	—		—		(60,083)		—
Other	(1,148)		(970)		(2,166)		(3,027)
	(14,517)		(2,997)		(10,140)		(4,810)
Income (loss) from continuing operations before income taxes	19,205		(80,364)		(41,646)		(336,323)
Income tax expense (benefit)	1,730		(23,659)		(3,166)		(78,398)
Income (loss) from continuing operations	17,475		(56,705)		(38,480)		(257,925)
Income (loss) from discontinued operations before income taxes	277		1,150		(106)		10,936
Income tax provision	—		—		—		—
Income (loss) from discontinued operations	277		1,150		(106)		10,936
NET INCOME (LOSS)	$	17,752	$	(55,555)	$	(38,586)	$	(246,989)

Basic earnings (loss) per common share:
Income (loss) from continuing operations	$	0.16	$	(0.53)	$	(0.37)	$	(2.40)
Income from discontinued operations	—		0.01		—		0.10
Net income (loss)	$	0.16	$	(0.52)	$	(0.37)	$	(2.30)

Diluted earnings (loss) per common share:
Income (loss) from continuing operations	$	0.16	$	(0.53)	$	(0.37)	$	(2.40)
Income from discontinued operations	—		0.01		—		0.10
Net income (loss)	$	0.16	$	(0.52)	$	(0.37)	$	(2.30)

Weighted average shares outstanding:
Basic	105,289		107,896		106,092		107,790
Diluted	106,021		107,896		106,092		107,790

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 INCOME (LOSS)
	Three Months Ended June 30,				Nine Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net income (loss)	$	17,752	$	(55,555)	$	(38,586)	$	(246,989)
Other comprehensive income, net of income taxes:
Net change related to employee benefit plans, net of income taxes of $(41.7) thousand and $(0.3) million for the three and nine months ended June 30, 2022, respectively, and $(0.2) million and $(0.5) million for the three and nine months ended June 30, 2021.	389		460		1,177		1,374
Other comprehensive income	389		460		1,177		1,374
Comprehensive income (loss)	$	18,141	$	(55,095)	$	(37,409)	$	(245,615)

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 Nine Months Ended June 30, 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 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 loss:
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	—	—		7,945		—		—		—	—		7,945
Share repurchases	—	—		—		—		—		607	(16,641)		(16,641)

Other	—	—		(946)		—		—		—	—		(946)
Balance, March 31, 2022	112,222	$	11,222	$	514,771	$	2,463,665	$	(19,456)	6,937	$	(235,792)	$	2,734,410
Comprehensive income:
Net income	—	—		—		17,752		—		—	—		17,752
Other comprehensive income	—	—		—		—		389		—	—		389
Dividends declared ($0.25 per share)	—	—		—		(26,691)		—		—	—		(26,691)

Vesting of restricted stock awards, net of shares withheld for employee taxes	—	—		(136)		—		—		(5)	140		4
Stock-based compensation	—	—		7,051		—		—		—	—		7,051

Other	—	—		(247)		—		—		—	—		(247)
Balance, June 30, 2022	112,222	$	11,222	$	521,439	$	2,454,726	$	(19,067)	6,932	$	(235,652)	$	2,732,668

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 Nine Months Ended June 30, 2021
(in thousands, except per share amounts)	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive 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 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 loss:
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
Comprehensive loss:
Net loss	—	—		—		(55,555)		—		—	—		(55,555)
Other comprehensive income	—	—		—		—		460		—	—		460
Dividends declared ($0.25 per share)	—	—		—		(27,321)		—		—	—		(27,321)

Vesting of restricted stock awards, net of shares withheld for employee taxes	—	—		(257)		—		—		(5)	216		(41)
Stock-based compensation	—	—		6,963		—		—		—	—		6,963

Other	—	—		(295)		—		—		—	—		(295)
Balance, June 30, 2021	112,223	$	11,222	$	523,281	$	2,679,859	$	(24,814)	4,324	$	(181,641)	$	3,007,907

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
	Nine Months Ended June 30,
(in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS	$	(38,586)	$	(246,989)
Adjustment for (income) loss from discontinued operations	106		(10,936)
Loss from continuing operations	(38,480)		(257,925)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	304,115		317,771
Asset impairment charge	4,363		56,414

Amortization of debt discount and debt issuance costs	880		994
Loss on extinguishment of debt	60,083		—
Provision for credit loss	1,022		8

Stock-based compensation	21,214		21,240
Gain on investment securities	(55,684)		(7,853)
Gain on reimbursement of drilling equipment	(21,597)		(10,207)
Other (gain) loss on sale of assets	(2,762)		12,952

Deferred income tax benefit	(36,614)		(66,102)

Other	(2,765)		8,849
Change in assets and liabilities:
Accounts receivable	(173,625)		(33,075)
Inventories of materials and supplies	(2,482)		14,073
Prepaid expenses and other	9,209		(1,638)
Other noncurrent assets	1,829		(3,337)
Accounts payable	46,775		24,908
Accrued liabilities	22,511		8,643
Deferred income tax liability	454		(36)
Other noncurrent liabilities	(21,745)		4,183
Net cash provided by operating activities from continuing operations	116,701		89,862
Net cash used in operating activities from discontinued operations	(60)		(41)
Net cash provided by operating activities	116,641		89,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(174,958)		(49,173)
Other capital expenditures related to assets held-for-sale	(18,228)		—

Purchase of short-term investments	(109,318)		(234,465)
Purchase of long-term investments	(47,210)		(2,319)

Proceeds from sale of short-term investments	161,766		139,430
Proceeds from sale of long-term investments	22,042		—

Proceeds from asset sales	50,260		26,775

Other	(7,500)		—
Net cash used in investing activities	(123,146)		(119,752)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid	(80,702)		(81,815)



Payments for employee taxes on net settlement of equity awards	(5,515)		(2,160)
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)		(719)
Net cash used in financing activities	(707,622)		(84,944)
Net decrease in cash and cash equivalents and restricted cash	(714,127)		(114,875)
Cash and cash equivalents and restricted cash, beginning of period	936,716		536,747
Cash and cash equivalents and restricted cash, end of period	$	222,589	$	421,872

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest paid	$	10,889	$	11,642
Income tax paid (received), net	3,392		(31,826)
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases	9,255		13,353
Non-cash operating and investing activities:
Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment	(4,260)		(746)
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 Texas, but traditionally also operate in other states, depending upon demand. Such states include: Colorado, Louisiana, New Mexico, Nevada, North Dakota, Oklahoma, Pennsylvania, 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 Income (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.

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 $33.9 million and $51.3 million at June 30, 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 June 30, 2022 and September 30, 2021, $1.1 million and $1.5 million, respectively, is related to the acquisition of drilling technology companies, and $32.8 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.

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


	June 30,				September 30,
(in thousands)	2022		2021		2021		2020
Cash and cash equivalents	$	188,663	$	370,553	$	917,534	$	487,884
Restricted cash
Prepaid expenses and other, net	33,242		48,434		18,350		45,577
Other assets, net	684		2,885		832		3,286
Total cash, cash equivalents, and restricted cash	$	222,589	$	421,872	$	936,716	$	536,747

During the nine months ended June 30, 2022, our cash, cash equivalents, and restricted cash balance decreased approximately $714.1 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 during the nine months ended June 30, 2022. 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 June 30, 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. This update is effective for annual and interim periods beginning after December 15,2021. Early adoption of the amendment is permitted.	October 1, 2022	We plan to adopt this ASU, as required, during the first quarter of fiscal year 2023. Although we are currently evaluating the impact the new guidance may have on our Unaudited Condensed Consolidated Financial Statements and disclosures, we do not believe the adoption will have a material effect thereon.
ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	The amendments in this update clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value (i.e., the entity would not apply a discount related to the contractual sale restriction). Furthermore, an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The following disclosures for equity securities subject to contractual sale restrictions will be required: (1) the fair value of the equity securities subject to contractual sale restrictions reflected in the balance sheet, (2) the nature and remaining duration of the restriction(s), and (3) the circumstances that could cause a lapse in the restriction(s). This update is effective for annual and interim periods beginning after December 15, 2023. Early adoption of the amendment is permitted for both interim and annual financial statements.	October 1, 2022	We plan to early adopt this ASU during the first quarter of fiscal year 2023. Although we are currently evaluating the impact the new guidance may have on our Unaudited Condensed Consolidated Financial Statements and disclosures, we do not believe the adoption will have a material effect thereon.

Table of Contents

Self-Insurance

Our wholly-owned insurance captives ("Captives") incurred direct operating costs consisting primarily of adjustments to accruals for estimated losses of $3.1 million and $6.0 million for the three months ended June 30, 2022 and 2021, respectively, and $2.7 million and $8.8 million for the nine months ended June 30, 2022 and 2021, respectively, and rig casualty insurance premiums of $9.4 million and $5.6 million for the three months ended June 30, 2022 and 2021, respectively, and $26.2 million and $13.1 million for the nine months ended June 30, 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 $14.7 million and $9.4 million during the three months ended June 30, 2022 and 2021, respectively, and $41.6 million and $25.2 million during the nine months ended June 30, 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 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 June 30, 2022 and 2021 were $3.8 million and $3.2 million, respectively, and $10.6 million and $8.7 million for the nine months ended June 30, 2022 and 2021, respectively.

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, modifie