SEC Comment Letter for Helmerich & Payne, Inc. (HP) (CIK 0000046765) (HP) — Jun 22, 2018
Helmerich & Payne, Inc. (HP) (CIK 0000046765)
Date: June 22, 2018 · CIK: 0000046765 · Accession: 0000000000-18-019297
AI Filing Summary & Sentiment
File numbers found in text: 001-04221
Letter
Mail Stop 4628 June 22 , 2018 Via E -Mail Mark W. Smith Chief Financial Officer Helmerich & Payne, Inc. 1437 S. Boulder Ave., Suite 1400 Tulsa, Oklahoma 74119
Re: Helmerich & Payne, Inc. Form 10-K for Fiscal Year Ended September 30, 2017 Response Dated May 16 , 2018 File No. 001-04221
Dear Mr. Smith :
We have reviewed your May 16, 2018 response to our comment letter and have the following comment s. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure.
Please respond to these comments within ten busine ss days by providing the requested information or advis e us as soon as possible when you will respon d. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response.
After reviewing your response to these comments, we may have additional comments. Unless we note otherwise, our references to prior comme nts are to comments in our April 12 , 2018 letter .
Form 10 -K for Fiscal Year Ended September 30, 2017
Consolidated Balance Sheets at September 30, 2017 and 2016, page 50
1. Reconcile the summary of rigs, by asset group, as provided in the supplemental information captioned Exhibit III, to the carrying value of contract drilling equipment for financial reporting purpose. Explain if your ten asset groups encompass the entire contract drilling equipment population. In that regard, as of September 30, 20 17, the cost of your contract drilling equipment as disclosed in the consolidated balance sheet was $8.2 billion, accumulated depreciation on all property, plant and equipment was $3.9 billion and the net property, plant and equipment was $5.0 billion wher eas, the total carrying value in Exhibit III differs.
Mark W. Smith Helmerich & Payne, Inc. June 22 , 2018 Page 2
Notes to Consolidated Financial Statements, page 54
Note 1 – Summary of Significant Accounting Policies, page 54
Valuation of Long -Lived Assets, page 56
2. You disclose on page 2 of your Form 10 -K that “the FlexRig4s are designed to efficiently drill more shallow depth wells of between 4,000 and 18,000 feet.” Considering the disclosure in your Form 10 -K regarding industry trend s toward more complex drilling and the accelerated retirement of less ca pable mechanical rigs, explain in greater detail how the assumptions for the Domestic FlexRig4 asset group were determined with respect to your rig utilization levels and rig margins in the near - and longer -term. Tell us about objective evidence used in d etermining your material assumptions and discuss the degree of uncertainty associated with these assumptions.
3. Your Form 8 -K dated April 26, 2018 includes a statement that as market conditions are tightening for FlexRigs, average dayrates for your rigs in the U.S. Land spot market are expected to accelerate. Discuss your more recent contract status, rig utilization levels , and rig margins for the Domestic FlexRig4 asset group as of May 31, 2018 and compare to similar metrics as of September 30, 2017. As part of your response , tell us whether you have conducted additional impairment evaluations, and for which asset group(s), subsequent to September 30, 2017. Include a d escri ption of (i) current events or changes in circumstances, if any, which affected the assumptions used in your last impairment evaluation , and (ii) if additional testing was performed, identify changes to your assumptions made as a result.
4. We note from your Form 8 -K dated November 16, 2017 that there is demand for rigs capable of drilling more complex horizontal wells with longer laterals and that you have the capability to upgrade your existing FlexRigs to super -spec capacity. If the demand for super -spec rigs remain s consistent, discuss management’s plans to upgrade the Domestic FlexRig 4 asset group and describe the potential impact to your liquidity and capital resources from the capital investment that would be necessary for such upgrades.
You may contact Jeannette Wong, Staff Accountant , at (202) 551 -2137 or Kimberly Calder, Assistant Chief Accountant, at (202) 551 -3701 with any questions.
Sincerely,
/s/ Ethan Horowitz
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Mail Stop 4628 June 22 , 2018 Via E -Mail Mark W. Smith Chief Financial Officer Helmerich & Payne, Inc. 1437 S. Boulder Ave., Suite 1400 Tulsa, Oklahoma 74119 Re: Helmerich & Payne, Inc. Form 10-K for Fiscal Year Ended September 30, 2017 Response Dated May 16 , 2018 File No. 001-04221 Dear Mr. Smith : We have reviewed your May 16, 2018 response to our comment letter and have the following comment s. In some of our comments , we may ask you to provide us with information so we may better understand your disclosure. Please respond to these comments within ten busine ss days by providing the requested information or advis e us as soon as possible when you will respon d. If you do not believe our comments apply to your facts and circumstances, please tell us why in your response. After reviewing your response to these comments, we may have additional comments. Unless we note otherwise, our references to prior comme nts are to comments in our April 12 , 2018 letter . Form 10 -K for Fiscal Year Ended September 30, 2017 Consolidated Balance Sheets at September 30, 2017 and 2016, page 50 1. Reconcile the summary of rigs, by asset group, as provided in the supplemental information captioned Exhibit III, to the carrying value of contract drilling equipment for financial reporting purpose. Explain if your ten asset groups encompass the entire contract drilling equipment population. In that regard, as of September 30, 20 17, the cost of your contract drilling equipment as disclosed in the consolidated balance sheet was $8.2 billion, accumulated depreciation on all property, plant and equipment was $3.9 billion and the net property, plant and equipment was $5.0 billion wher eas, the total carrying value in Exhibit III differs. Mark W. Smith Helmerich & Payne, Inc. June 22 , 2018 Page 2 Notes to Consolidated Financial Statements, page 54 Note 1 – Summary of Significant Accounting Policies, page 54 Valuation of Long -Lived Assets, page 56 2. You disclose on page 2 of your Form 10 -K that “the FlexRig4s are designed to efficiently drill more shallow depth wells of between 4,000 and 18,000 feet.” Considering the disclosure in your Form 10 -K regarding industry trend s toward more complex drilling and the accelerated retirement of less ca pable mechanical rigs, explain in greater detail how the assumptions for the Domestic FlexRig4 asset group were determined with respect to your rig utilization levels and rig margins in the near - and longer -term. Tell us about objective evidence used in d etermining your material assumptions and discuss the degree of uncertainty associated with these assumptions. 3. Your Form 8 -K dated April 26, 2018 includes a statement that as market conditions are tightening for FlexRigs, average dayrates for your rigs in the U.S. Land spot market are expected to accelerate. Discuss your more recent contract status, rig utilization levels , and rig margins for the Domestic FlexRig4 asset group as of May 31, 2018 and compare to similar metrics as of September 30, 2017. As part of your response , tell us whether you have conducted additional impairment evaluations, and for which asset group(s), subsequent to September 30, 2017. Include a d escri ption of (i) current events or changes in circumstances, if any, which affected the assumptions used in your last impairment evaluation , and (ii) if additional testing was performed, identify changes to your assumptions made as a result. 4. We note from your Form 8 -K dated November 16, 2017 that there is demand for rigs capable of drilling more complex horizontal wells with longer laterals and that you have the capability to upgrade your existing FlexRigs to super -spec capacity. If the demand for super -spec rigs remain s consistent, discuss management’s plans to upgrade the Domestic FlexRig 4 asset group and describe the potential impact to your liquidity and capital resources from the capital investment that would be necessary for such upgrades. You may contact Jeannette Wong, Staff Accountant , at (202) 551 -2137 or Kimberly Calder, Assistant Chief Accountant, at (202) 551 -3701 with any questions. Sincerely, /s/ Ethan Horowitz Ethan Horowitz Accounting Branch Chief Office of Natural Resources