Helmerich & Payne (H&P) has announced it is implementing additional cost controls and re-evaluating its capital allocation to proactively preserve its strong financial position in response to a combination of a weakened commodity price environment, broader uncertainties related to COVID-19 and the resulting high market volatility. Concurrently, due to the rapidly evolving market conditions over the past few weeks, the company feels that it is appropriate to withdraw its fiscal Q2 guidance, which was previously provided on 3 February 2020.
The company regularly reviews its costs, both operational and SG&A, as well as capital expenditures and is doing so now in light of the precipitous fall in the active rig count following the recent OPEC meeting in mid-March 2020 and the increasing concerns over the ultimate impact of COVID-19, which together manifested in the lowest oil prices in 20 years this past week. H&P is reassessing its cost structure based on newly developing rig activity levels and will provide updated guidance as part of the upcoming fiscal Q2 results process.
In addition to these measures, the company and its board of directors are currently reassessing optimal cash deployment plans, including the levels of future dividends, in order to balance the company’s commitment to shareholder returns while maintaining its ongoing financial strength. At the same time, H&P remains committed to paying the previously announced $0.71 per share dividend on 1 June 2020 to stockholders of record at the close of business on 11 May 2020.
“The preservation of a strong financial position for the company is paramount, and one of the primary reasons we have been in business for 100 years,” John Lindsay, President and Chief Executive Officer, said. “H&P is deeply committed to returning cash to shareholders as demonstrated by our long-standing and 48-year increasing dividend. We have always done what we believe is in the best interest of our shareholders for the long-term, so the decision to reevaluate the current level of shareholder returns at this time is prudent. Dividends will continue to be a top priority as the company reevaluates its capital allocation options going forward. Maintaining our conservative capital structure is core to H&P’s long term success.”
“The adverse and abrupt changes in market conditions we have experienced in these last few weeks have culminated this past week in being severe enough to cause us to withdraw our previous guidance for our fiscal Q2,” Mark Smith, Senior Vice-President and Chief Financial Officer, said. “We are moving forward to rapidly decrease costs and reduce levels of capital expenditures. Our balance sheet remains strong, with a debt-to-capitalization of 11% and over $1 billion in liquidity. After repurchasing approximately 1.5 million shares of common stock recently, we still have approximately $370 million in cash and short-term investments on hand as of March 20, 2020. H&P remains very well positioned to face the challenging times ahead.”