HP Q3 2026 Earnings Call Summary

1Key Financial Results and Metrics

Adjusted EBITDA: $236 million, exceeding guidance midpoint.

Revenue: Over $1 billion, up 11% sequentially.

Free Cash Flow: Strong at $98 million.

Direct Margin:

North America Solutions: $241 million, above guidance.

International Solutions: $31 million, at the high end of guidance.

Offshore Segment: $29 million, also exceeding guidance.

Earnings Per Share (EPS): Reported at $0.74 per diluted share; adjusted EPS was a loss of $0.11 when excluding certain items.

Capital Expenditures: $70 million, below expectations due to timing shifts.

2Strategic Updates and Business Highlights

North America Solutions: Averaged 142 rigs, with a direct margin of $18.7 thousand per day, reflecting strong pricing and performance bonuses.

International Solutions: Notable growth in Latin America, particularly in Argentina's Vaca Muerta, where HP holds a 25% market share.

Technological Advancements: Continued deployment of FlexRobotics, enhancing operational efficiency.

Geothermal Projects: Signed agreements for 3 additional rigs, aiming for a total of 6 in the U.S. and potential double-digit growth in the future.

Debt Management: Focus on reducing net debt to EBITDA ratio to 1x, with plans to retire a $350 million bond by the end of 2027.

3Forward Guidance and Outlook

Q4 Guidance:

North America Solutions expected direct margins between $245 million and $255 million, with rig count projected at 145-151.

International Solutions anticipated to generate direct margins of $25 million to $45 million, influenced by Middle East conflict dynamics.

Offshore segment expected to maintain 30-35 management contracts.

Full Year Guidance: Increased rig count range to 140-144 rigs.

Long-term Outlook: Positive sentiment for 2027 driven by strong customer demand and operational efficiencies.

4Bad News, Challenges, or Points of Concern

Middle East Conflict: Ongoing geopolitical tensions have created operational disruptions and uncertainty, particularly affecting rig reactivations in Saudi Arabia and Iraq.

Market Volatility: Commodity price fluctuations pose risks to future earnings and operational stability.

Rig Reactivation Delays: Slower-than-expected reactivation of rigs in the Middle East, with only 5 of 7 rigs reactivated.

Performance Bonus Variability: Fluctuations in performance bonuses could impact margins, as over 50% of rigs operate on performance-based contracts.

5Notable Q&A Insights

Customer Engagement: Positive discussions with customers indicate a constructive outlook for future activity and demand.

Operational Efficiency: The ability to reactivate rigs efficiently and at lower costs than competitors was highlighted as a competitive advantage.

Geothermal Market Potential: The geothermal segment is expected to grow significantly, leveraging existing technology and operational expertise.

Future Rig Count: There is potential for additional rigs in Argentina, with discussions ongoing for more contracts as the market develops. Overall, HP demonstrated strong financial performance in Q3 2026, with positive momentum in both North American and international operations, despite challenges from geopolitical tensions and market volatility. The company is well-positioned for continued growth into 2027, supported by strategic initiatives and technological advancements.