Helmerich & Payne (NYSE:HP) executives said solid operational execution and stronger-than-expected international performance helped lift results in the company’s fiscal first quarter of 2026, even as U.S. land drilling activity softened. Management also outlined a second-quarter outlook that reflects seasonal impacts in North America, offshore seasonality, and the timing shift of rig reactivation costs tied to Saudi Arabia.
Quarterly performance highlighted by international outperformance and timing benefits
Chief Executive Officer John Lindsay said adjusted EBITDA exceeded expectations at $230 million, supported by resilient results in North America Solutions and Offshore Solutions and a stronger-than-anticipated quarter in International Solutions. Lindsay noted the first quarter benefited from the timing of certain rig reactivation expenses that will be “more heavily reflected in the second quarter.” He also pointed to margin improvement from the company’s FlexRigs operating in the Jafurah gas field, adding that he is optimistic about further margin expansion during the remainder of the year.
Free cash flow was described as strong, supported by lower-than-anticipated capital spending. Vann said first-quarter capital expenditures were $68 million, below the sequential run rate due to slower spending tied to Saudi reactivation work and timing in North America. Free cash flow totaled $126 million, which helped fund $25 million of base dividends and additional debt reduction.
Segment results: North America steady, international boosted by cost timing, offshore stable
In North America Solutions, Lindsay said the company averaged 143 rigs working in the quarter. Vann reported segment direct margin of $239 million, above the midpoint of guidance, driven by a slightly higher sequential rig count and average gross margin holding above $18,000 per day. Management emphasized the role of performance-based contracts in aligning outcomes with customers.
International Solutions ended the quarter with 59 rigs working and delivered approximately $29 million in direct margins, exceeding the company’s guidance range of $13 million to $23 million. Vann attributed the outperformance primarily to lower-than-expected Saudi reactivation costs in the first quarter, with the “balance” of those costs now expected in the second quarter. He also cited improving FlexRig margins and higher utilization in the Middle East and Colombia.
Offshore Solutions generated approximately $31 million in direct margin, slightly above the midpoint of guidance. The segment had 3 active rigs and management said it operated with 33 management contracts during the quarter, while executives also referenced a base of management contracts that provides steady cash flow and longer-term visibility compared with land drilling.
Market conditions: restrained North America, stronger international momentum, gas more constructive
President Trey Adams—who is set to become CEO next month—said the company expects global energy demand to rise over time and views the current environment as “cautiously positive but uneven.” Adams said operators remain focused on disciplined capital deployment and returns, leading the company to anticipate that oil-related investment stays soft in the near term, with more upside likely beyond this year.
Adams contrasted that with a more robust outlook for gas markets, pointing to LNG demand and increased power demand tied to AI. He said Helmerich & Payne expects 2026 global upstream investment levels to remain flattish overall, though with regional variation, and called North America “likely to remain the most restrained market in the quarter ahead.”
In the U.S., Adams said Lower 48 demand moderated, and the company exited the fiscal first quarter with 139 rigs, a 4% decline from the prior quarter exit rate. For the second quarter, management expects to average 132 to 138 active rigs, and Adams said the company had 135 rigs operating at the time of the call. Executive Vice President Mike Lennox added that customer behavior has split into “two camps,” with some staying disciplined to their plans and others more sensitive to commodity prices. Lennox said the company is not wavering from its targeted 45% to 50% direct margins and is “not chasing market share.”
Internationally, Adams said activity has been more resilient, including an uptick in the Middle East. He discussed ongoing phased reactivation of suspended rigs in Saudi Arabia and said the company has raised the mast on two rigs so far, with reactivations expected to be completed by mid-2026. Management also pointed to deployments in Australia and Pakistan, engagement on Middle East and North Africa opportunities, and noted that a potential reopening of Venezuela could represent medium-term growth, subject to commercial terms and returns.
Adams also said geothermal interest remains high, noting three contract awards in Europe (Germany, Denmark, and the Netherlands) during the quarter, plus an additional geothermal rig added in North America in January. During Q&A, Adams said the company added a second geothermal rig in North America and had signed a letter of intent for a third.
FlexRobotics and automation: early deployment in the Permian Basin
Management highlighted FlexRobotics as its latest technology initiative focused on automating routine rig floor tasks. Adams said the system has been successfully deployed on three pads for a “Super Major” customer in the Permian Basin, with results “in line or better” across several operational metrics. He said FlexRobotics automates drilling, drilling connections, and tripping rig floor activities to move crews out of the rig floor “Red Zone.”
Lennox said that after drilling 10 wells and moving the rig twice, performance was roughly at “P40,” exceeding a P50 target set with the customer. Executives did not provide retrofit cost figures, but Adams said the company intends to pursue “creative commercial constructs” and will not invest without an appropriate returns profile.
Guidance: second-quarter margins step down, with improvement expected later in the year
For the fiscal second quarter, Vann said North America Solutions direct margins are expected to range from $205 million to $230 million on an anticipated average rig count of 132 to 138, reflecting typical seasonality and ongoing softness in U.S. land activity. He said the company sees signs of stabilization and expects a pickup in the back half of the year, targeting the midpoint of its full-year rig count guidance of 132 to 148 rigs.
International Solutions is expected to average 57 to 63 rigs in the second quarter, with direct margins of $12 million to $22 million. Vann said the sequential step-down largely reflects the shifting of Saudi reactivation costs into the second quarter. He also cited churn in Argentina as some rigs return to the yard for technology upgrades before redeployment. Despite the quarterly timing effects, he said the company expects third- and fourth-quarter international direct margins to be materially higher than the first quarter, after reactivation costs are behind it and FlexRig margins continue to improve.
Offshore Solutions is expected to average 30 to 35 operating rigs and management contracts, with second-quarter direct margin guidance of $20 million to $30 million, reflecting seasonality, lower revenue days, and the roll-off of some higher-margin rig management contracts in Angola. Vann reiterated confidence in the previously shared full-year offshore direct margin guidance of $100 million to $115 million.
The company also trimmed its fiscal 2026 gross capital expenditure budget to $270 million to $310 million. On leverage, Vann said Helmerich & Payne paid down $260 million of its $400 million term loan as of the end of January, and management reiterated a goal of repaying the term loan ahead of schedule by mid-2026. Vann also said the company had $269 million in cash and short-term investments at quarter-end and total liquidity of approximately $1.2 billion.
Lindsay, who said the call was his final earnings call as CEO, closed by thanking employees, customers, and shareholders, and said he has “complete confidence” in Adams and the leadership team to execute the company’s strategy.
About Helmerich & Payne (NYSE:HP)
Helmerich & Payne, Inc is a leading provider of contract drilling services to the oil and gas industry, specializing primarily in onshore drilling operations. The company designs, engineers and operates a fleet of advanced drilling rigs, including its proprietary FlexRigs, which are engineered for high efficiency, safety and rapid mobilization. Alongside core drilling services, Helmerich & Payne offers well intervention, workover and coiled tubing services, positioning itself as a comprehensive drilling solutions partner for exploration and production companies worldwide.
Founded in 1920 and headquartered in Tulsa, Oklahoma, Helmerich & Payne has grown through innovation and strategic expansion to serve diverse hydrocarbon basins.
