Helmerich and Payne reports solid Q4 performance, driven by international expansion and strategic rig reactivations, setting optimistic outlook for fiscal 2026.

OPERATOR - (00:00:02)

Hello and welcome everyone. Joining Helmerich & Payne's fiscal, fourth quarter and full year earnings call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Mr. Kevin Vann, CFO. Please go ahead.

Kevin Vann - Chief Financial Officer - (00:00:38)

Thank you and welcome everyone to Helmerich & Payne's conference call and webcast for the fourth quarter and fiscal full year 2025. Before we get started, I first wanted to extend a warm welcome to Chris Nichol who has joined the company as Vice President of Investor Relations. Thank you, Kevin.

Chris Nichol - Vice President of Investor Relations - (00:00:56)

Kevin will be joined on the call today by John Lindsay, CEO, Trey Adams, President and Mike Lennox, Executive Vice President of the Western Hemisphere. Before we begin our prepared remarks, I'd like to remind everyone that this call will include forward looking statements as defined under securities laws. Although management believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. Please refer to our filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward looking statements made during this call. Reconciliations of direct margin and certain GAAP to non GAAP measures can be found in our earnings release. With that, I'll turn the call over to John.

John Lindsay - Chief Executive Officer - (00:01:42)

Thank you, Chris. Hello everyone and thank you for joining us. We appreciate your interest in H&P. Fiscal 2025 was a pivotal year for H&P. We overcame several challenges and I am immensely proud of how our global team closed the year with strong fourth quarter results, setting the stage for continued success in fiscal 2026. While the oil and gas industry is Inherently cyclical, we are increasingly encouraged by the resilience of our business and the positive long term prospects. We have long held the view that the upstream sector will need to invest for decades to come in order to sustain, if not grow, production from current levels. We are pleased to see increasing alignment with this view. The recent update from IEA now projects robust demand growth for oil over the next quarter century under the current policy scenario. With energy security and affordability remaining critical. Global concerns on the gas side, the rise of AI and the surging power needs for data centers is rapidly creating a new source of demand. Coupled with the build out of significant LNG capacity on the Gulf coast, we see strong activity in the gas rich basins over the next several years. Ultimately, technology driven drilling as demand continues to grow and basins become more geologically complex, will be essential for decades and is a key differentiator for H&P operationally and financially. Our North America Solutions segment has positioned H&P as the leading driller in the US Land market. Customers are increasingly demanding efficiency and devising more complex well designs with longer laterals to maximize returns. Our success in delivering value, safety and performance is rooted in the strong partnerships we build with both large and small customers. As acreage quality becomes more challenging in unconventional shale plays, deploying the most capable rigs and cutting edge technology is crucial for success. This past year was particularly historic for our international land segment. After years of effort to develop a larger and more diverse international footprint, we exported eight flex rigs to Saudi Arabia and completed the KCAD acquisition, making H&P the largest active land driller globally. We're also very pleased to announce that seven suspended rigs will be reactivated in the coming months in Saudi Arabia. This exciting development will call for intensifying our efforts to execute strategic priorities, deliver customer value and meet our financial objectives. The KCAD acquisition also brought us a global offshore labor contract business that complemented our existing offshore Gulf of Mexico operations. We now operate in six countries, have a blue chip customer base supported by strong contractual coverage and a global geographic palette of growth for this business going forward. Despite the challenges faced by the oilfield services sector, we remain optimistic that the market is stabilizing and our expanded footprint will offer new opportunities. We anticipate the first half of 2026 will mirror 2025 with oil prices range bound between the upper 50s and mid-60s and rig activity aligning with these trends through the cycles ofs, companies must be able to make a return for our shareholders. I'm confident in our team's ability to continue refining and executing the H&P way, demonstrating leadership in international markets as we have in North America Solutions. Alongside Legacy kcad, our team has forged robust global partnerships in the Middle east and other strategic regions, enabling us to enhance our unique capabilities and strengthen customer collaborations. We're committed to nurturing leadership and promoting talent within our organization to prepare for the future. In line with this commitment, I was very pleased to announce earlier in the quarter the promotions of several key members of the management team reflecting their strong contribution to hmp. Most notably, Mike Lennox became EVP of Western Hemisphere, John Bell became EVP of Eastern Hemisphere, and lastly, Trey Adams has been promoted to President as we position for the next phase of growth at H&P. And with that, I will turn the call over to Trey to provide more details of Q4 performance and the 2026 outlook for our three segments.

Trey Adams - President - (00:06:47)

Thank you John. I will start by walking through North America Solutions. We had solid fourth quarter results driven by our ability to work safely and to deliver outsized drilling efficiencies for our customers. Our operations and sales teams continue to do an excellent job managing rig churn and creating customer value. On the operational front, average lateral lengths increased 5% while our average drilled footage per day grew at the same rate. Encouragingly, the use of our advanced digital solutions and applications increased 20% over the year. The combination of the right rigs, right people and right solutions continued to drive efficiencies for our customers over the fiscal year in the Permian Basin, the total rig count declined throughout the year as several EMPs reduced drilling activity in the face of softening oil price fundamentals. Despite these rig drops, our rig fleet showed great resilience. We actually expanded our share position in the Permian throughout the year. At the same time, natural gas oriented activity picked up through the year. Our footprint and outcome oriented approach will position us well for continued natural gas activity expansion. An important point to highlight is that the industry utilization of super spec rigs is tighter than it appears. Utilization rates of rigs that have been idled less than 12 months remain strong at more than 80%. In addition to the relative tightness of the market, lateral leaks continue to expand. Over 40% of our wells today are over 3 mile laterals and technology and drilling efficiencies continue to be a primary focus for customers. We believe that this combination provides a strong platform for North America Solutions in fiscal year 2026. Safety and customer value will continue to be our focus looking forward to and both will be underpinned by our great rig crews and continued commercial and technological innovation. Moving to our international operations, our new footprint is exciting and energizing. We now have meaningful positions in Saudi Arabia, Kuwait, Oman, Argentina, Europe, along with other countries poised for growth. As John mentioned, in Saudi Arabia we will be resuming operations on seven previously idled rigs in fiscal year 26 with operations resuming in the second fiscal quarter and continuing into the third fiscal quarter. With these seven reactivated rigs, we will go from 17 active rigs to 24. As you know, we encountered several challenges in fiscal 2025, particularly in the Eastern Hemisphere. However, through every challenge there is an opportunity. We have taken advantage of the past year to reorganize, retool and get our forward strategies aligned Our eight flex rigs in Saudi Arabia continue to improve on all fronts with a focus on safety and performance. We also continue to see margin health improve across those eight rigs and intend to realize our expected run rate margins by the end of the fiscal year 2026. The addition of seven rigs in Saudi Arabia adds scale and as those rigs are resumptions, we expect the learning curve to be expeditious and to hit the ground running in the second and third fiscal periods. Our business in Oman continues to be a particular bright spot with strong National Oil Company (NOC) and International Oil Company (IOC) relationships providing a constructive long term backdrop. Our combined organization enables further expansion across the MENA region. We now have a foundation that enables more realistic and long term oriented discussions with International Oil Company (IOC) and National Oil Company (NOC) customers across the globe. Our offshore segment continues to provide stable long horizon revenues for our consolidated business. We are active today in the Gulf of America, Caspian sea, Norway and UK, North Sea, Africa and Canada and have roughly 30% share of the global platform operations and maintenance business. Our expanded geographic exposure strategically positions us to benefit from the anticipated strong offshore investment cycle. In addition to our geographical positioning, we the integration of our operating models and safety execution between our land and offshore businesses will continue to be additive for us in the near and long term. Many of our offshore customers have robust land activity. The transference of models, approaches, technology and relationships uniquely positions us to deliver differentiated value for customers across our global operations. With that, I will turn the call over to Kevin to walk through the financial results.

Kevin Vann - Chief Financial Officer - (00:12:02)

Thanks Trey. Today I will review our fiscal fourth quarter and full year 2025 operating results and provide operational guidance for the first fiscal quarter of 2026. Additionally, I will spend some time outlining our annual fiscal 2026 projections, our financial position, and provide an update on where we stand with our deleveraging efforts and cost reduction goals. Let me start with highlights for the recently completed fourth quarter and fiscal year ended September 30, 2025 where we exceeded our Direct margin guidance in all operating regions. Despite the challenging market environment alongside our continued commercial success, we also made strong progress on the deleveraging front as we have currently paid off 210 million on our term loan and we're significantly ahead of the debt reduction goals we laid out earlier this year. During the quarter, the company generated quarterly revenues of a little over 1 billion, which is the third consecutive quarter over that billion dollar mark. Correspondingly, total Direct operating costs were 715 million for the fourth quarter versus 735 million for the previous quarter. General and administrative expenses totaled 78 million for the fourth quarter and 287 million for fiscal 2025. These results include a $10 million write off related to one of our investment securities, normalizing for that we were in line with our full year guidance. Also included in the fourth quarter results was an approximate $40 million write off of the investment in that same company for which we held the note receivable. To summarize fourth quarter's results, we are operating where we are reporting a Net loss of $0.58 per diluted share versus a net loss of $1.64 in the previous quarter. Earnings per share for the full year were a net loss of $1.66 per share. The quarterly results were negatively impacted by some unusual and non cash items and absent those items would have been a loss of a penny per share. Capital expenditures for the fourth quarter were 64 million with full year 2025 totaling 426 million. This outcome was primarily driven by accelerated CAPEX investment in the Eastern Hemisphere and increased investment in harmonizing our ERP footprint. Currently we operate in three distinct ERP platforms and our ultimate goal is to get to one platform for the company. We are continuing to invest now to capture additional synergies and cost savings in the future. Looking ahead to 2026, we expect significantly reduced capital investment levels even with the announced rig reactivations. This reflects current fleet conditions with maintenance capital expenditures approaching historically low figures and an ongoing emphasis on capital discipline. H&P generated $207 million in operating cash flow in the fourth quarter and a total of 543 million during the full year. Our cash flow Generation helped fund $100 million in base dividends. In addition to the significant progress on paying down our term loan. As we have stated, we are now on track to pay this completely down by June of 2026. Now turning to our three segments beginning with North American Solutions, we averaged 141 contracted rigs during the fourth quarter which was down from the third quarter. But consistent with industry activity and our expectations, we exited the fourth quarter with 144 rigs running segment Direct margin for North America Solutions was 242 million which was above the midpoint of our guidance range. Overall margins were slightly down from the third quarter but again consistent with our expectations and guidance. Looking ahead to the first quarter of fiscal 2026 for North American Solutions, we are anticipating our margins to stay in the same zip code of our industry leading fourth quarter numbers and we also expect our operated rig count to stay relatively flat. With fiscal fourth quarter results. Our North American Solutions team continues to deliver despite some moderate headwinds we saw during 2025. They brought their A game to the table helping our customers and us to win win outcomes. We are extremely grateful to the folks out in the field on the rigs and our great sales and marketing teams that help our customers find the solutions they need. This outcome is also evidence of our commitment to our customers and shareholders. For our customers, we benefit when they benefit via our performance based contracts. Ultimately, our goal is to help them meet their objectives of drilling consistent and timely wells and setting them up for a clean and efficient completion and production process. As of today, approximately 50% of the US active fleet is on a term contract. Additionally, as our performance contracts continue to drive alignment with our customers, we currently have roughly 50% of our rigs on them. In the North American Solutions segment, we expect direct margins in our first quarter to range between 225 to 250 million as we don't see a material change in expected margins based on our current contractual structure, Expectations around Operating cost and anticipated Rig count Our International Solutions segment ended the fourth quarter with 61 rigs working and generated approximately 30 million in direct margins above the midpoint of our expectations. This result is slightly down from the third quarter but was toward the top end of our guidance. As a reminder, we had fewer rigs working during this past quarter as many of the final Saudi rig suspensions received during the third quarter had a full negative effect during the period. As we already stated, we are ready to get back to work and are very pleased about the announced rig reactivations for the first quarter. We are anticipating between 13 and 23 million of direct margin for the international segment. This is reflective of the reactivation costs anticipated in the first quarter that are not capitalized. This trend will persist through the first half of 2026 with direct margin expected to step up materially thereafter. Further, we expect the average first quarter operating rig count to be approximately 57 to 63 rigs. For the first time, we are laying out expectations for the full year international rig count to provide greater visibility on our outlook for fiscal 2026. We believe the rig count will average between 56 to 68 rigs which includes the rigs being reactivated in Saudi. Please note that the rig count includes only partial years for those rig for those reactivated rigs and includes the expectation for some lower rig counts in non core countries where the current EBITDA contribution is minimal. Finally, with our Offshore Solutions segment, we generated a direct margin of approximately 35 million during the quarter which was above our guidance range as well. Again, we are excited about this business and the consistent and stable results that it continues to deliver. As John and Trey said, it requires minimal capital and and generate steady cash flow from a set of blue chip customers. As we look toward the first quarter of fiscal 2026 for this segment, we expect that it will generate between 27 and 33 million in direct margin with 30 to 35 management contracts and operated rigs on average. Now I want to transition to the first quarter and full year 2026 for certain consolidated and corporate items in 2026. Our strategy begins with optimizing our financial position to continue to pay down the term loan free cash flow. That will help us get closer to our goal of returning the balance sheet strength that has always been a priority at H and p. Fiscal 2026 gross capital expenditures are expected to be approximately 280 to 320 million. Maintenance, fleet upgrades and reactivation capital across the global fleet of operating drilling rigs is expected to be approximately 230 and 250 million includes all of the estimated capital for the seven rigs being reactivated in Saudi Arabia. Also included in our capital program is 40 to 60 million of investments in our North American Solution operations related to customer demand and funds the necessary upgrades to maintain our technology leading position across the market. Depreciation for fiscal 2026 is expected to be approximately 690 million. Our sales, general and administrative expenses for the full fiscal 26 year are expected to be between 265 and 285 million, which includes 50 million in savings from our original pro forma run rate. We as a company are culturally more focused on managing costs than ever. We have our eyes set on generating further savings as we evaluate systems alignment across both our Eastern and and Western Hemisphere operating models. Our investment in research and development remains largely focused on solutions for our customers such as drilling automation, wellbore quality and power management. We anticipate R and D expenditures to be roughly 25 million in 2026. Based upon our estimated fiscal 26 operating results and CapEx, we are projecting a consolidated cash tax range of 95 to 105145 million and lastly, we are expecting interest expense of 100 million during 2026. Now looking at our financial position, we had cash and short term investments of approximately 218 million on September 30, 2025. Including the availability under our revolving credit facility, our total liquidity is approximately 1.2 billion. As I mentioned earlier, as part of our deleveraging efforts, we are pleased with the progress we have made on paying down the $400 million term loan and with only $190 million currently outstanding and a clear line of sight to have it paid off by June of next year. Regarding cash returns to shareholders, we plan to maintain our long standing base dividend of approximately $100 million in 2026. Longer term, as we deliver, we will have additional flexibility to direct free cash flow to both enhance shareholder returns and invest for growth. And that concludes our prepared comments for the quarter and we'll now turn it back to the operator for questions.

OPERATOR - (00:22:28)

Thank you. Thank you. If you'd like to ask a question, press Star one on your keypad. To leave the queue at any time, press Star two. Once again, that is Star one to ask a question. We'll pause for just a moment to allow everyone a chance to join the queue. And thank you. Our first question comes from Saurabh Pant with Bank of America. Please go ahead. Your line is now open.

Saurabh Pant - Equity Analyst - (00:22:57)

Hi. Thank you. Good morning John, Trey and Kevin.

UNKNOWN - (00:23:00)

Good morning, John.

Saurabh Pant - Equity Analyst - (00:23:03)

Kevin, I don't know who wants to address this, but I want to start on the international side of things, if you don't mind. And then really I'm thinking about two things. First is the rig count. Of course it's great to see the. Seven Saudi arics coming back, but maybe just help us think about the potential for more Saudi Arabics to come back as we move through fiscal 26 and then maybe like you said, the pluses and minuses in any of the other regions. And then the other thing that I'm thinking about is international margins like you said, Kevin, I think it's being weighed down by reactivation cost and a bunch of short termish things. How should we think about normalized margins once all of that is settled?

John Lindsey - (00:23:42)

Rob, thanks for the question. It is very, very positive and we're very pleased about the reactivations. And as you can imagine, we're laser focused on execution. We think this is going to be a phased approach to the reactivations. We think we'll be finished with them mid-2026, working really closely with the customer. I'm going to let Trey's been over there recently and have him give a little feedback on what they're seeing.

Trey Adams - President - (00:24:15)

Yeah, happy to. As John pointed out, we're thrilled about the seven reactivations in Saudi Arabia as it relates to longer term growth in Saudi. Right now we're focused on these seven resumptions and focused on our core business there and getting those rig fleets back and aligned but obviously having a number of conversations more broadly across the region. Myself and the team are very active and very engaged in the Middle east today. We're encouraged by some IOC entry into the region. Obviously there's been Some long standing IOCs in the MENA region, but continued interest from some new players. It positions us well through 26 and then really sets a good table for 2027. And then as some of those discrete rigs that Kevin mentioned in his prepared remarks, many of those rigs that you saw have fallen off of our international account have come in really low scale, single rig, single string countries. And as we've kind of reorganized and continue to refocus our efforts around Saudi Arabia and core Middle Eastern countries, we're going to continue to see further growth and enhancements there on our margins. You can expect, right, that the first half of fiscal 26 with the reactivations and continued getting our flex rig fleet aligned, that we're going to have some new and increased cost and Kevin talked about that both on the OPEX and CAPEX sides of the fence. But we expect that to abate mid 26 and really expect to see some full run rate margins towards the end.

Kevin Vann - Chief Financial Officer - (00:25:57)

Of the fiscal year. Yeah, just further elaborate on that. I think what we had mentioned on the last call was we felt like the fourth quarter was kind of a bottoming out of margins as the flex rigs kind of caught their stride and we expected to see see further improvement and we do and continue to expect to see further improvement in those margins throughout fiscal year 2026. So absent the rig reactivation charges that are going to hit over the next couple of quarters, you're going to continue to see, you know, just further margin improvement across the region.

Saurabh Pant - Equity Analyst - (00:26:29)

Okay, I got it. Okay guys, thank you. I'll turn it back. Thank you.

OPERATOR - (00:26:36)

Thank you. We'll now move on to Doug Becker with Capital One. Your line is now open.

Doug Becker - Equity Analyst - (00:26:43)

Thank you. Want to touch base on North America? Revenue per day has been very resilient despite some industry headwinds. Guidance does imply daily margin declining a few hundred dollars in fiscal first quarter. Just wanted to get a little sense for how you see daily revenue and daily operating expenses going forward. Because there was a pretty sizable bump in OPEX per day. And then you know, if you look in your crystal ball, just when might daily margins trough based on a relatively stable rig count outlook from today. Hey Doug, I'll take it.

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:27:17)

This is Mike. Appreciate the question. We see the NASS market, it's going to remain consistent as long as commodity prices and Demand are intact. We do continue to expect rigs to churn. You know, our publics, they've gone down year after year by about 9 rigs. Our privates actually churn at about a 4x of what the publics do. But that's given us a good opportunity to work for new customers. And in the last year we worked for 19 new customers. And so a lot of great hard work and effort by our sales team. Really proud of what they do keeping these rigs working. We expect demand for longer wells, more complex wells, as John mentioned in his opening remarks. And that positions HMP very, very well. We've made investments in our rig fleet for the past few years. We'll continue to do that this next year, allowing for a million pound setbacks. High torque top drives. We've also continued to deploy and invest in technology. Trey mentioned it in his remarks of a 20% improvement on apps per rig. We've also on a third of our fleet now. We've got rig floor automation, which includes hex grips and slip lifters. That provides a lot of consistency and reliability for our customers as they're going to continue to drill longer and longer wells. And then we continue to invest in our people. I think that's something we're very proud of. We bring our drillers in, continue to invest in them and train them.

Doug Becker - Equity Analyst - (00:28:58)

As far as the oil and gas.

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:29:01)

Basins, we've seen an uptick in the Haynesville and in the Northeast, we went from three rigs earlier in the year to eight. We expect that demand to continue to be there. And then on the oil side in the Permian, I think Trey mentioned it in his remarks, we went from 33% market share to 37% market share. So we've seen growth in that. Even though rig count has been slightly down. We've seen growth in our market share. And then on the performance contracts, you know, that's a lever or a tool that we're going to continue to use to. You know, you asked the question on revenue, we have the leading over our peers in revenue. OpEx, we lead on that. We're lowest. And there's a lot of work that goes into keeping that OPEX check and. We fully expect to keep it in check. And so I just really want to. Applaud our people, all the hard work. That they're doing to keep all that in line.

Doug Becker - Equity Analyst - (00:30:05)

And just any. Would you expect daily operating income, operating expenses to decline this quarter from fiscal 14?

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:30:16)

Yeah, we've seen some, what I call seasonal as rich churn, we see some Costs that go up potentially, you know, it's welding cost, tubular cost, trucking cost. You know, it comes and goes and so we expect it to come down. There's some, there's some one time costs that are in there this last quarter. We do expect it to come down, but again, as long as those rigs are churning, we fully expect there to be some costs in there.

Doug Becker - Equity Analyst - (00:30:48)

Got it, thank you.

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:30:49)

And the rigs just continue to work at a much higher and higher level quarter over quarter. And so that drives costs higher as well as Mike had mentioned.

Doug Becker - Equity Analyst - (00:31:01)

Got it. Thank you.

OPERATOR - (00:31:06)

Thank you. We'll now move on to Scott Gruber with Citi. Your line is now open.

Scott Gruber - Equity Analyst - (00:31:12)

Yes, good morning. I may have missed it, but did you guys quantify the reactivation expense that's reflected in your fiscal first quarter international income?

Kevin Vann - Chief Financial Officer - (00:31:26)

No. Scott, this is Kevin. No, we did not. And I think what I mentioned was if you go back and you look at the margins that we were able to achieve during this last year during the fourth quarter for international, we kind of felt like what we had stated previously was that was a good kind of trough for bottoming out of the margins that we expected and that absent those items, you know, you would have probably continued to at least achieve the mark that we saw during the fourth quarter from a margin perspective and then with some anticipated improvement from there. Okay.

Scott Gruber - Equity Analyst - (00:32:02)

Okay. And then it looks like cash taxes will step down in fiscal 26. Is there a benefit from the recent tax law changes in the US I'm just trying to think through if there's, you know, a benefit in fiscal 26 that then lapse, you know, and doesn't recur in 27 or are you, you guys able to kind of chop that down over time? How sustainable is cash tax rate?

Kevin Vann - Chief Financial Officer - (00:32:35)

It is somewhat. Yeah, there are some benefit, there is some benefit in that cash tax number that we're projecting for 2026 because of the one big beautiful bill. But going forward, the benefit will always be contingent upon amount of capital that we're spending as well because there's certain portions of the, of the bill that allow you to accelerate some capital investment that wasn't previously being allowed to be written off during, for tax purposes during that current year.

Scott Gruber - Equity Analyst - (00:33:10)

We have, I guess.

Kevin Vann - Chief Financial Officer - (00:33:12)

Yeah, it's in there. And then going forward, it's all going to be based upon capital expenditures.

Scott Gruber - Equity Analyst - (00:33:17)

Yeah, I imagine international activity levels. Okay. Okay, thank you.

Kevin Vann - Chief Financial Officer - (00:33:25)

Thanks, Scott.

OPERATOR - (00:33:28)

Thank you. We'll now move on to Eddie Kim with Barclays. Your line is now open.

Eddie Kim - Equity Analyst - (00:33:34)

Hi, good morning. Sorry if this was asked already Maybe even in the previous question, but just wondering if you could dig down deeper in the full year CapEx guide. So you highlighted 230 to 250 million. A CapEx reflects both maintenance and reactivation related CapEx. CapEx, are you able to let us know how much is just the reactivation related capex specifically and then, and then tied to that, the reactivation related opex, is that going to be a similar amount to the capex? If you could just provide some more color there, that'd be great. Yeah, no, the 230 to 250 million does include all of the rig reactivation cost and it's difficult to give an exact number per rig because it all depends upon which rigs are going to be react or the rigs being reactivated. So it's not a homogeneous number across all the rigs. So I, I hate to, you know, give you, if we got more rig reactivations, you could expect, you know, another X amount per rig. But the 230 to 250 includes all of the maintenance and rig reactivation cost. And the question, yeah, in terms of the margin, it's not one for one, there's more capex than there is costs that are hitting operating costs. There's more capital cost than what's hitting the margins themselves. And most of the margin stuff's again going to be cleared out hopefully during the first quarter fiscal quarter, but there'll be some of that will bleed over into the second quarter as well. But again, if you look at what our fourth quarter performance was from a margin perspective internationally, we felt like that was kind of a low point for us and we expected improvement from there. Absent the, the additional cost that's hitting the margins, our international margins from the rig reactivations, we would have anticipated a little bit more improvement. Understood. Great, thank you. I'll turn it back. Thanks, Eddie.

OPERATOR - (00:35:30)

And once again, if you would like to ask a question, please press star and one on your keypad now. We'll now move on to Dan Cutts with Morgan Stanley. Your line is now open.

Dan Cutts - Equity Analyst - (00:35:43)

Hey, thanks. Good morning. So sorry to belabor this, but maybe just kind of coming at the capex guide question from a different angle, anything you can share in terms of maintenance capex for, you know, a us versus international rig or by segment? Yeah, anything you could share in terms of what's contemplated for the maintenance component of that number would be really helpful.

Kevin Vann - Chief Financial Officer - (00:36:13)

Yeah, I think this is Kevin again and I'll let Mike and Trey contribute. What we've publicly said historically is that the maintenance CAPEX on a domestic rig is somewhere around a million dollars per rig. That number is coming in slightly lower than that now, but roughly 1 million, you know, million per rig. And then on the international front called a million three to a million five per rig for the maintenance capex. And that's generally, again, depending upon the rig and what needed to be done to it in 2026. That's generally kind of where we are. Yeah.

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:36:48)

And I can give you some color on nass. Just, you know, it's come down post Covid it was spiked up coming out of that and it's been down year after year. And again we've been making investments, like I mentioned earlier, to drill these longer laterals. So that's the setback upgrades. The high torque top drives the rig floor automation. Again, that removes people from the exposures on the rig floor, but also helps as we drill the longer laterals, make up and break out of tubulars. And we expect and will continue to do some of those in 2026. So that's what most of the capex is made up of for Nassau.

Dan Cutts - Equity Analyst - (00:37:26)

Awesome. Thank you. That's really helpful. Then maybe, sorry if I missed this or if you guys talked about it, but just kind of. You guys have made a ton of progress kind of penetrating the US Market. With. The legacy HMP technology portfolio. Seeing and hearing a little bit more interest internationally and in the Middle east in particular of operators kind of adopting and appreciating some of the efficiency benefits and productivity benefits of leveraging technology like you guys offer. So just was hoping for an update or any plans or any conversations around, you know, you're leveraging your technology profile outside of the U.S. thanks.

Trey Adams - President - (00:38:25)

Yeah, this is Trey. I'll answer that one. And what I'll share is that the answer is absolutely yes. So it's a big focus for us today, conversations with customers across the Eastern Hemisphere. You know, everyone is very interested in the technology evolution and advancements we've had and the US Unconventional space. And, you know, they're all wanting to get more active in that arena. And so our one of our focuses in 25 and going into 26 will continue to be, as Kevin pointed out in his prepared remarks, you know, this drilling automation trend that we're continuing to progress. We believe that there's a lot of efficiencies and value to be created in the Western and Eastern hemispheres. And then if you couple that with a lot of the technology that Mike was describing with rig floor automation and other advancements we continue to make, there's Just a tremendous amount of opportunity on the safety and performance fronts in front of us and a lot of customer value to be created. So the answer, in short, is yes. That evolution and transformation obviously will be taking shape in earnest primarily in the Middle east, but other markets will continue to, to adopt and accelerate technology. We see a lot of interest in Argentina and Australia, Europe, name it. So really excited about that evolution.

Dan Cutts - Equity Analyst - (00:39:52)

Great. Really helpful. Thanks a lot. I'll turn it back.

OPERATOR - (00:39:59)

Thank you. We'll now move on to Dawn Christ with Johnson Rice. Your line is now open.

Dawn Christ - Equity Analyst - (00:40:05)

Morning guys. I wanted to kind of expand on the last answer you just gave on the international side. I'm just kind of curious about timing in places outside of the traditional Middle east like Libya or Turkey and Australia. Kind of timing on conversations for unconventional drilling there and when you think that. Rig count could kind of start to. Pick up over the next couple years or so.

Trey Adams - President - (00:40:35)

This is Trey. I think it depends on, on where you're talking, but I'll start in Australia. Obviously we've been in the Beetaloo for some time. Continue to see future growth opportunities there and in other parts in Australia as well. We're delivering. We have a second flex rig in country that arrived about a month ago that'll be going to work for a long string of customers and stay working in Australia for some time and then flipping over to North Africa. Obviously there's a ton of energy around Algeria and Libya. We're involved in all those conversations. We're having deep and involved technology conversations with KNOCs in both regions. We're actively engaged with IOCs and you know who those are that have signed long term agreements and we think the future is bright and we think that the transference of US unconventional and shale expertise into those regions is going to be critical for growth. As it relates to timing, you know, it all manifests over long horizons. You know, Mike talked about private EMP churn in the lower 48. We're not talking about, you know, a 30 day window. You know, these programs take a while to get formed up. But we hope over the next couple quarters that we can update you all on our progression. And then obviously some of the EMPs as they progress in their drilling programs and build up their plans for 26 and 27, that'll be notable as well. But we're very bullish on our positioning in both of those areas.

Dawn Christ - Equity Analyst - (00:42:23)

I appreciate that.

Colin - (00:42:24)

Colin, one just last one for me. Any progress on the sale of Utica Square? I know there was a comp here in Oklahoma City just Any kind of update there?

John Lindsey - (00:42:38)

This is John, really the update is the process is going on. It's going well. We have multiple parties that are interested. You know, we're hopeful that we'll have, you know, more news by the end of end of the year to the first half of 2026 is what we're hoping for. So it looks positive, but that's about all we have. Process is going well. I appreciate the color. I'll turn it back.

Colin - (00:43:08)

Thanks.

OPERATOR - (00:43:09)

Thank you. Thank you. We'll now move on to Tom Koran with stateport Research Partners. Your line is now open.

Tom Koran - (00:43:21)

Thanks. Trey, you just referenced the second rig. That will be going to work in Australia's Beetaloo Basin, where you have invested in and partnered with Camber and Resources, which I think of as sort of like a best of US shale PayPal story with both the Sheffields and Liberty Energy also involved. But beyond Australia, has H and P. Put any rigs to work or contracted to deploy any rigs for any of the existing or planned drilling campaigns and foreign shale plays by leading US EMPs? And here I'm asking specifically about EMPs, not the major. So, you know, Continental is pushing to Turkey and Argentina, Sacramento or EODs moving to Bahrain, maybe other such cases that haven't been publicized yet. Could you just expound on where HMP is at within that story and, you know, maybe your strategy more broadly beyond Australia?

Trey Adams - President - (00:44:24)

Yeah, that's a great comment. And I'd point you to, you know, we have a long history of putting rigs to work and I've done this multiple times, not working on a super major portfolio, but working with IOCs in Argentina, across the rest of Eastern Hemisphere, the conversations are very active. Obviously, you know, our positioning with those companies that you just referenced. See here in the lower, we have a long history of a lot of value creation. And so we've been in a lot of conversations recently and I mean very active even at ATTEPEC a couple weeks ago with key IOCs obviously, and super majors alike. Everyone wants to transfer this US Shale unconventional expertise into these geographies. And so, you know, we look forward to talking about, you know, how these programs get to scale and more into a firm footing. Many of them today are still in exploration phases, but as those programs mature, they're going to need a partner like H and P. And we're well positioned to deliver value for them.

Tom Koran - (00:45:41)

So it's safe for us to assume that your rate on the nexus of those conversations, like you should be.

Trey Adams - President - (00:45:48)

Oh, absolutely. We're not missing a Conversation these days?

Tom Koran - (00:45:53)

I wouldn't think so. All right, well stay tuned. Thank you.

OPERATOR - (00:46:00)

Thank you. We'll now move on to John Daniels with Daniel Energy Partners. Your line is now open.

John Daniels - (00:46:07)

Hey, good morning. Thanks for having me. Just a quick question on the fiscal year 26 guidance for activity. I know you say in the release it's based on current market trends. Just trying to make sure there's no embedded assumptions about either, you know, potential customer M and A and implications or upside from new EMP startups. And then does the guidance try to take into consideration any future drilling efficiency gains?

Trey Adams - President - (00:46:36)

Yeah, I'll take that one, John, and just start and say that, you know, obviously you know the history of the organization and as Mike pointed out, our share increase in the Permian basin even in the face of rig count declines, you know, we're anticipating a pretty range bound rig count in the US lower 48 as we look forward. Obviously we've been impacted by customer consolidation just like everyone has. But we believe that our impact and our rig count range binding has been able to really hold us up. You know, it's an interesting one, but you mentioned new EMP formations. I think this last year and for a hundred and almost 106 year old company like HMP, we worked for 19 new EMPs that we hadn't worked for in the last five years, just in the last year as we sit here and I think Mike referenced this, we, we sit in a great share position, top share position with super majors with large caps, with small and mid caps. We have more private EMP activity than anyone. So I feel like we're going to be in a good position to be pretty durable with rig counts even in the face of additional consolidation headwinds. Okay, got it.

John Daniels - (00:47:54)

And if you said this on the call, I completely miss it, but did you say where your which you are in terms of working count or contracted today?

Mike Lennox - Executive Vice President of the Western Hemisphere - (00:48:03)

Yeah, John, this is Mike. It's 1:44 today.

John Daniels - (00:48:07)

Cool. Okay, thank you.

OPERATOR - (00:48:10)

Thanks John.

John Lindsey - (00:48:14)

Thank you. At this time there are no further questions in queue. I will now turn the meeting back to John Lindsey.

OPERATOR - (00:48:22)

Thank you everyone for participating in today's call. I just want to leave you with some brief closing thoughts. Fiscal year 2025 was pivotal for HMP. And while we faced several challenges, the construct as we look forward is increasingly positive. We now have a platform where HMP can drive profitable growth across diverse global markets. Our forward thinking commercial strategies and advanced technologies set H and P apart from the competition. And our financial strength underpins growth, dividend stability and disciplined deleveraging Our differentiation is clear. And H&P's positioning continues to deliver strong results for our customers and our shareholders. So thank you all. And, operator, you may now close the call.

A - (00:49:12)

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.