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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended: March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                          to
Commission File Number: 1-4221
HELMERICH & PAYNE, INC.
(Exact name of registrant as specified in its charter)
Delaware73-0679879
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

1437 South Boulder Avenue, Suite 1400, Tulsa, Oklahoma, 74119
(Address of principal executive offices) (Zip Code)
(918) 742-5531
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock ($0.10 par value)HPNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  No 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
CLASSOUTSTANDING AT April 23, 2021
Common Stock, $0.10 par value107,893,998


Table of Contents
HELMERICH & PAYNE, INC.
INDEX TO FORM 10-Q
Page

2

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HELMERICH & PAYNE, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
March 31,September 30,
(in thousands except share data and share amounts)20212020
Assets
Current Assets:
Cash and cash equivalents$427,243 $487,884 
Short-term investments134,491 89,335 
Accounts receivable, net of allowance of $1,806 and $1,820, respectively
209,402 192,623 
Inventories of materials and supplies, net96,504 104,180 
Prepaid expenses and other, net97,857 89,305 
Assets held-for-sale13,076  
Total current assets978,573 963,327 
Investments34,569 31,585 
Property, plant and equipment, net3,374,235 3,646,341 
Other Noncurrent Assets:
Goodwill45,653 45,653 
Intangible assets, net77,430 81,027 
Operating lease right-of-use asset56,474 44,583 
Other assets, net21,170 17,105 
Total other noncurrent assets200,727 188,368 
Total assets$4,588,104 $4,829,621 
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable$63,934 $36,468 
Dividends payable27,327 27,226 
Accrued liabilities160,342 155,442 
Total current liabilities251,603 219,136 
Noncurrent Liabilities:
Long-term debt, net481,647 480,727 
Deferred income taxes604,536 650,675 
Other163,063 147,180 
Noncurrent liabilities - discontinued operations3,559 13,389 
Total noncurrent liabilities1,252,805 1,291,971 
Commitments and Contingencies (Note 14)
Shareholders' Equity:
Common stock, $.10 par value, 160,000,000 shares authorized, 112,222,865 and 112,151,563 shares issued as of March 31, 2021 and September 30, 2020, respectively, and 107,893,998 and 107,488,242 shares outstanding as of March 31, 2021 and September 30, 2020, respectively
11,222 11,215 
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued
  
Additional paid-in capital516,870 521,628 
Retained earnings2,762,735 3,010,012 
Accumulated other comprehensive loss(25,274)(26,188)
Treasury stock, at cost, 4,328,867 shares and 4,663,321 shares as of March 31, 2021 and September 30, 2020, respectively
(181,857)(198,153)
Total shareholders’ equity3,083,696 3,318,514 
Total liabilities and shareholders' equity$4,588,104 $4,829,621 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents
HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
Six Months Ended
March 31,
(in thousands, except per share amounts)2021202020212020
Operating revenues
Drilling services$294,026 $630,290 $538,807 $1,241,688 
Other2,145 3,349 3,741 6,608 
296,171 633,639 542,548 1,248,296 
Operating costs and expenses
Drilling services operating expenses, excluding depreciation and amortization230,313 417,743 429,002 817,072 
Other operating expenses1,274 1,315 2,636 2,737 
Depreciation and amortization106,417 132,006 213,278 262,137 
Research and development5,334 6,214 10,917 13,092 
Selling, general and administrative39,349 41,978 78,652 91,786 
Asset impairment charge54,284 563,234 54,284 563,234 
Restructuring charges1,608  1,746  
(Gain) loss on sale of assets18,515 (10,310)6,179 (14,589)
457,094 1,152,180 796,694 1,735,469 
Operating loss from continuing operations(160,923)(518,541)(254,146)(487,173)
Other income (expense)
Interest and dividend income4,819 3,566 6,698 5,780 
Interest expense(5,759)(6,095)(11,898)(12,195)
Gain (loss) on investment securities2,520 (12,413)5,444 (9,592)
Gain on sale of subsidiary   14,963 
Other(577)(398)(2,057)(797)
1,003 (15,340)(1,813)(1,841)
Loss from continuing operations before income taxes (159,920)(533,881)(255,959)(489,014)
Income tax benefit(36,624)(113,413)(54,739)(99,275)
Loss from continuing operations(123,296)(420,468)(201,220)(389,739)
Income from discontinued operations before income taxes2,293 6,067 9,786 13,524 
Income tax provision 6,139  13,720 
Income (loss) from discontinued operations2,293 (72)9,786 (196)
Net loss$(121,003)$(420,540)$(191,434)$(389,935)
Basic earnings (loss) per common share:
Loss from continuing operations$(1.15)$(3.88)$(1.87)$(3.61)
Income from discontinued operations0.02  0.09  
Net loss$(1.13)$(3.88)$(1.78)$(3.61)
Diluted earnings (loss) per common share:
Loss from continuing operations$(1.15)$(3.88)$(1.87)$(3.61)
Income from discontinued operations0.02  0.09  
Net loss$(1.13)$(3.88)$(1.78)$(3.61)
Weighted average shares outstanding:
Basic107,861 108,557 107,738 108,556 
Diluted107,861 108,557 107,738 108,556 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents
HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
Three Months Ended
March 31,
Six Months Ended
March 31,
(in thousands)2021202020212020
Net loss$(121,003)$(420,540)$(191,434)$(389,935)
Other comprehensive income, net of income taxes:
Minimum pension liability adjustments, net of income taxes of $(0.1) million and $(0.3) million for the three and six months ended March 31, 2021, respectively, and $(0.2) million and $(0.3) million for the three and six months ended March 31, 2020, respectively
457 516 914 1,032 
Other comprehensive income457 516 914 1,032 
Comprehensive loss$(120,546)$(420,024)$(190,520)$(388,903)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents
HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Shareholders’ Equity
Three and Six Months Ended March 31, 2021
(Unaudited)
(in thousands, except per share amounts)Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
SharesAmountSharesAmountTotal
Balance, September 30, 2020112,151 $11,215 $521,628 $3,010,012 $(26,188)4,663 $(198,153)$3,318,514 
Comprehensive income:
Net loss— — — (70,431)— — — (70,431)
Other comprehensive income— — — — 457 — — 457 
Dividends declared ($0.25 per share)
— — — (27,324)— — — (27,324)
Vesting of restricted stock awards, net of shares withheld for employee taxes72 7 (16,742)— — (295)14,618 (2,117)
Stock-based compensation— — 7,451 — — — — 7,451 
Cumulative effect adjustment for adoption of ASU No. 2016-13— — — (1,251)— — — (1,251)
Other— — (381)— — — — (381)
Balance, December 31, 2020
112,223 $11,222 $511,956 $2,911,006 $(25,731)4,368 $(183,535)$3,224,918 
Comprehensive income:
Net loss— — — (121,003)— — — (121,003)
Other comprehensive income— — — — 457 — — 457 
Dividends declared ($0.25 per share)
— — — (27,268)— — — (27,268)
Vesting of restricted stock awards, net of shares withheld for employee taxes— — (1,678)— — (39)1,678  
Stock-based compensation— — 6,826 — — — — 6,826 
Other— — (234)— — — — (234)
Balance, March 31, 2021112,223 $11,222 $516,870 $2,762,735 $(25,274)4,329 $(181,857)$3,083,696 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Shareholders’ Equity
Three and Six Months Ended March 31, 2020
(Unaudited)
(in thousands, except per share amounts)Common StockAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury Stock
SharesAmountSharesAmountTotal
Balance, September 30, 2019112,080 $11,208 $510,305 $3,714,307 $(28,635)3,642 $(194,962)$4,012,223 
Comprehensive income:
Net income— — — 30,605 — — — 30,605 
Other comprehensive income— — — — 516 — — 516 
Dividends declared ($0.71 per share)
— — — (78,652)— — — (78,652)
Exercise of employee stock options, net of shares withheld for employee taxes— — (3,103)— — (110)7,148 4,045 
Vesting of restricted stock awards, net of shares withheld for employee taxes71 7 (18,126)— — (258)14,718 (3,401)
Stock-based compensation— — 10,201 — — — — 10,201 
Balance, December 31, 2019
112,151 $11,215 $499,277 $3,666,260 $(28,119)3,274 $(173,096)$3,975,537 
Comprehensive income:
Net income— — — (420,540)— — — (420,540)
Other comprehensive income— — — — 516 — — 516 
Dividends declared ($0.71 per share)
— — — (76,754)— — — (76,754)
Exercise of employee stock options, net of shares withheld for employee taxes— — (47)— — — 47  
Vesting of restricted stock awards, net of shares withheld for employee taxes— — (53)— — (1)53  
Stock-based compensation— — 10,751 — — — — 10,751 
Share repurchases— — — — — 1,460 (28,504)(28,504)
Balance, March 31, 2020
112,151 11,215 509,928 3,168,966 (27,603)4,733 (201,500)3,461,006 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

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HELMERICH & PAYNE, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended March 31,
(in thousands)20212020
Cash flows from operating activities:
Net loss$(191,434)$(389,935)
Adjustment for (income) loss from discontinued operations(9,786)196 
Loss from continuing operations(201,220)(389,739)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization213,278 262,137 
Asset impairment charge54,284 563,234 
Amortization of debt discount and debt issuance costs920 900 
Provision for credit loss(227)1,779 
Provision for obsolete inventory423 684 
Stock-based compensation14,277 20,952 
(Gain) loss on investment securities(5,444)9,592 
(Gain) loss on sale of assets 6,179 (14,589)
Gain on sale of subsidiary (14,963)
Deferred income tax benefit(46,068)(106,878)
Other3,646 (3,779)
Change in assets and liabilities:
Accounts receivable(8,498)(37,717)
Inventories of materials and supplies7,159 (2,064)
Prepaid expenses and other(7,951)(15,962)
Other noncurrent assets(3,696)10,107 
Accounts payable25,277 21,764 
Accrued liabilities(451)(68,146)
Other noncurrent liabilities6,939 (4,642)
Net cash provided by operating activities from continuing operations58,827 232,670 
Net cash used in operating activities from discontinued operations(25)(28)
Net cash provided by operating activities58,802 232,642 
Cash flows from investing activities:
Capital expenditures(30,745)(94,312)
Purchase of investments(106,731)(36,336)
Proceeds from sale of investments63,742 43,894 
Proceeds from sale of subsidiary 15,056 
Proceeds from asset sales13,419 24,799 
Other (51)
Net cash used in investing activities(60,315)(46,950)
Cash flows from financing activities:
Dividends paid(54,230)(155,890)
Proceeds from stock option exercises 4,100 
Payments for employee taxes on net settlement of equity awards(2,119)(3,455)
Payment of contingent consideration from acquisition of business(250)(4,250)
Share repurchases (28,504)
Other (445)
Net cash used in financing activities(56,599)(188,444)
Net decrease in cash and cash equivalents and restricted cash(58,112)(2,752)
Cash and cash equivalents and restricted cash, beginning of period536,747 382,971 
Cash and cash equivalents and restricted cash, end of period$478,635 $380,219 
Supplemental disclosure of cash flow information:
Cash paid during the period:
Interest paid$11,473 $11,440 
Income tax paid (received), net(31,965)43,509 
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases8,970 9,626 
Non-cash operating and investing activities:
Changes in accounts payable and accrued liabilities related to purchases of property, plant and equipment(1,296)189 
Changes in accounts receivable, property, plant and equipment and other noncurrent assets related to the sale of equipment9,290  
Cumulative effect adjustment for adoption of ASU No. 2016-13(1,251) 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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HELMERICH & PAYNE, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 1 NATURE OF OPERATIONS
Helmerich & Payne, Inc. (“H&P,” which, together with its subsidiaries, is identified as the “Company,” “we,” “us,” or “our,” except where stated or the context requires otherwise) through its operating subsidiaries provides performance-driven drilling solutions and technologies that are intended to make hydrocarbon recovery safer and more economical for oil and gas exploration and production companies.
During the third quarter of fiscal year 2020, we restructured our operations to accommodate scale during an industry downturn and reorganized our operations to align to new marketing and management strategies. This is consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Operations previously reported within the former U.S. Land and H&P Technologies operating and reportable segments are now managed and presented within the North America Solutions reportable segment. As a result, beginning with the third quarter of fiscal year 2020, our drilling services operations were organized into the following reportable operating business segments: North America Solutions, Offshore Gulf of Mexico and International Solutions. All segment disclosures have been recast for these segment changes. Our real estate operations, our incubator program for new research and development projects and our wholly-owned captive insurance companies are included in "Other." Refer to Note 15—Business Segments and Geographic Information for further details on our reportable segments.
Our North America Solutions operations are primarily located in Colorado, Louisiana, Ohio, Oklahoma, New Mexico, North Dakota, Texas, West Virginia and Wyoming. Additionally, Offshore Gulf of Mexico operations are conducted in Louisiana and in U.S. federal waters in the Gulf of Mexico and our International Solutions operations have rigs primarily located in four international locations: Argentina, Bahrain, Colombia and United Arab Emirates. 
We also own and operate limited commercial real estate properties. Our real estate investments, which are located exclusively within Tulsa, Oklahoma, include a shopping center and undeveloped real estate.
Fiscal Year 2020 Dispositions
In December 2019, we closed on the sale of a wholly-owned subsidiary of Helmerich & Payne International Drilling Co. ("HPIDC"), TerraVici Drilling Solutions, Inc. ("TerraVici"). As a result of the sale, 100% of TerraVici's outstanding capital stock was transferred to the purchaser in exchange for approximately $15.1 million, resulting in a total gain on the sale of TerraVici of approximately $15.0 million. Prior to the sale, TerraVici was a component of the North America Solutions operating segment. This transaction did not represent a strategic shift in our operations and will not have a significant effect on our operations and financial results going forward.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, RISKS AND UNCERTAINTIES
Interim Financial Information
The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in our 2020 Annual Report on Form 10-K and other current filings with the SEC. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of Helmerich & Payne, Inc. and its domestic and foreign subsidiaries. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the fiscal year are included in the Unaudited Condensed Consolidated Statements of Operations and Statements of Comprehensive Loss from the date the Company gains control until the date when the Company ceases to control the subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
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COVID-19 and OPEC+ Production Impacts

The outbreak of a novel strain of coronavirus (“COVID-19”) and its development into a pandemic has resulted in significant global economic disruption, including North America and many of the other geographic areas where we operate, or where our customers are located, or suppliers or vendors operate. Actions taken to prevent the spread of COVID-19 by governmental authorities around the world, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby resulting in lower demand for crude oil. In particular, the travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers. Governmental authorities have also implemented multi-step policies with the goal of reopening various sectors of the economy. However, certain jurisdictions began reopening only to return to restrictions in the face of increases in new COVID-19 cases, while other jurisdictions are continuing to reopen or have nearly completed the re-opening process despite increases in COVID-19 cases. Despite the increased availability of vaccines in certain jurisdictions, the COVID-19 outbreak may worsen during the upcoming months, including as a result of the emergence of more infectious strains of the virus or increased business and social activities, which may cause governmental authorities to reconsider restrictions on business and social activities. In the event governmental authorities increase restrictions, the reopening of the economy may be further curtailed. We have experienced, and expect to continue to experience, some disruptions to our business operations, as these restrictions have significantly impacted, and may continue to impact, many sectors of the economy. Depressed economic conditions exacerbated by COVID-19 restrictions in one foreign jurisdiction where we operate have led to an increase in community strikes which resulted in a suspension of our operations. In addition, the perceived risk of infection and health risk associated with COVID-19, and the illness of many individuals across the globe, has and will continue to alter behaviors of consumers and policies of companies around the world; such altered behaviors and policies have many of the same effects intended by governmental authorities to stop the spread of COVID-19, such as self-imposed or voluntary social distancing, quarantining, and remote work policies. We are complying with local governmental jurisdiction policies and procedures where our operations reside. In some cases, policies and procedures are more stringent in our foreign operations than in our North America operations
In early March 2020, the increase in crude oil supply resulting from production escalations from the Organization of the Petroleum Exporting Countries and other oil producing nations (“OPEC+”) combined with a decrease in crude oil demand stemming from the global response and uncertainties surrounding the COVID-19 pandemic resulted in a sharp decline in crude oil prices. Consequently, we saw a significant decrease in customer 2020 capital budgets and a corresponding dramatic decline in the demand for land rigs. Although OPEC+ agreed in April 2020 to cut oil production and has extended production cuts through July 2021 with gradual reductions in cuts from May to July, there is no assurance that the agreement will continue or be observed by its parties. Although crude oil prices have modestly recovered since March 2020, oil and natural gas prices are expected to continue to be volatile as a result of the near-term production instability and the ongoing COVID-19 outbreak and as changes in oil and natural gas inventories, industry demand and global and national economic performance are reported.
These events have had, and could continue to have, an adverse impact on numerous aspects of our business, financial condition and results of operations. The ultimate extent of the impact of COVID-19 and prolonged excess oil supply on our business, financial condition and results of operations will depend largely on future developments, including the duration and spread of the COVID-19 outbreak within the United States and the parts of the world in which we operate and the related impact on the oil and gas industry, the impact of governmental actions designed to prevent the spread of COVID-19 and the development, availability and timely distribution of effective treatments and vaccines worldwide, all of which are highly uncertain and cannot be predicted with certainty at this time.

    From a financial perspective, we believe the Company is operationally and financially well positioned to continue operating even through a more protracted disruption caused by COVID-19, oil oversupply and low oil prices. At March 31, 2021, the Company had cash and cash equivalents and short-term investments of $561.7 million. The 2018 Credit Facility (as defined within Note 6—Debt) has $750.0 million in aggregate availability with a maximum of $75.0 million available for use as letters of credit. As of March 31, 2021, there were no borrowings or letters of credit outstanding, leaving $750.0 million available to borrow under the 2018 Credit Facility. We currently do not anticipate the need to draw on the 2018 Credit Facility. Furthermore, the Company 2025 Notes (as defined within Note 6—Debt) do not mature until March 19, 2025.

On April 16, 2021, lenders with $680.0 million of commitments under the 2018 Credit Facility exercised their option to extend the maturity of the 2018 Credit Facility from November 13, 2024 to November 12, 2025. See Note 17—Subsequent Events.
Leases
We lease various offices, warehouses, equipment and vehicles. Rental contracts are typically made for fixed periods of one to 15 years but may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.
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As we continue to take measures to adjust our cost structure lower based on activity levels, during the three months ended March 31, 2021, we downsized and relocated our Houston assembly facility to a new location. Refer to Note 16—Restructuring Charges for additional details. As a result, during the second quarter of fiscal year 2021, we entered into a lease agreement for a new assembly facility located in Texas. This lease agreement commenced on January 1, 2021 and will expire on December 31, 2030; however, we have one renewal option for a minimum of five years and a maximum of 10 years, which was not recognized as part of our right-of-use assets and lease liabilities. This contract was accounted for as an operating lease resulting in an operating lease right-of-use asset and minimum lease liability of approximately $15.5 million as of March 31, 2021.
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents include cash on hand, demand deposits with banks and all highly liquid investments with original maturities of three months or less.  Our cash, cash equivalents and short-term investments are subject to potential credit risk, and certain of our cash accounts carry balances greater than the federally insured limits.
We had restricted cash of $51.4 million and $44.1 million at March 31, 2021 and 2020, respectively, and $48.9 million and $35.0 million at September 30, 2020 and 2019, respectively. Of the total at March 31, 2021 and September 30, 2020, $3.2 million and $3.6 million, respectively, is related to the acquisition of drilling technology companies, $3.1 million and $2.0 million, respectively, is from the initial capitalization of the captive insurance companies, and $45.1 million and $43.1 million, respectively, represents an additional amount management has elected to restrict for the purpose of potential insurance claims in our wholly-owned captive insurance companies. The restricted amounts are primarily invested in short-term money market securities.
The cash, cash equivalents, and restricted cash are reflected within the following line items on the Unaudited Condensed Consolidated Balance Sheets:
March 31,September 30,
(in thousands)2021202020202019
Cash and cash equivalents$427,243 $336,089 $487,884 $347,943 
Restricted cash
Prepaid expenses and other, net48,457 40,744 45,577 31,291 
Other assets, net2,935 3,386 3,286 3,737 
Total cash, cash equivalents, and restricted cash$478,635 $380,219 $536,747 $382,971 
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Recently Issued Accounting Updates
Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of Accounting Standards Updates ("ASUs") to the FASB Accounting Standards Codification ("ASC"). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and determined to be either not applicable, clarifications of ASUs listed below, immaterial, or already adopted by the Company.
The following table provides a brief description of recent accounting pronouncements and our analysis of the effects on our financial statements:
Standard
Description
Date of
Adoption
Effect on the Financial Statements or Other Significant Matters
Recently Adopted Accounting Pronouncements
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) and related ASUs issued subsequent
This ASU introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income (loss), and (4) beneficial interests in securitized financial assets. This update is effective for annual periods beginning after December 15, 2019.    
October 1, 2020
We adopted this ASU during the first quarter of fiscal year 2021, as required. Refer to "—Allowance for Credit Losses" below for additional information.
Standards that are not yet adopted as of March 31, 2021
ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans—General (Topic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans
This ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit, pension and other postretirement plans. This update is effective for annual periods ending after December 15, 2020.
October 1, 2021
We are currently evaluating the impact the new guidance may have on our unaudited condensed consolidated financial statements and disclosures.
ASU No. 2019-12, Financial Instruments – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
This ASU simplifies the accounting for income taxes by removing certain exceptions related to Topic 740. The ASU also improves consistent application of and simplifies GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update is effective for annual and interim periods beginning after December 15, 2020. Early adoption of the amendment is permitted, including adoption in any interim period for public entities for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. Upon adoption, the amendments addressed in this ASU will be applied either prospectively, retrospectively or on a modified retrospective basis through a cumulative effect adjustment to retained earnings. This update is effective for annual periods beginning after December 15, 2020.    
October 1, 2021
We are currently evaluating the impact the new guidance may have on our unaudited condensed consolidated financial statements and disclosures.
Allowance for Credit Losses
On October 1, 2020, we adopted ASU 2016-13 on a modified retrospective basis through a cumulative-effect adjustment without restating comparative periods, as permitted under the adoption provisions. Upon adoption, we recognized a $1.6 million increase to our allowance for credit losses and a corresponding cumulative adjustment to reduce retained earnings, net of income taxes, of $1.3 million. This transition adjustment reflects the development of our models to estimate expected credit losses over the life of our financial assets, which primarily consist of our accounts receivable. Pursuant to ASU 2016-13, we have evaluated our customers’ financial strength and liquidity based on aging of accounts receivable, payment history, and other relevant information, including ratings agency, credit ratings and alerts, and publicly available reports.
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Self-Insurance
We have accrued a liability for estimated workers' compensation and other casualty claims incurred based upon cash reserves plus an estimate of loss development and incurred but not reported claims. The estimate is based upon historical trends. Insurance recoveries related to such liability are recorded when considered probable.
We self-insure a significant portion of expected losses relating to workers’ compensation, general liability and automobile liability. Generally, deductibles range from $1 million to $10 million per occurrence depending on the coverage and whether a claim occurs outside or inside of the United States. Insurance is purchased over deductibles to reduce our exposure to catastrophic events. Estimates are recorded for incurred outstanding liabilities for workers’ compensation, general, and automobile liability claims that are incurred but not reported. Estimates are based on adjusters' estimates, historical experience and statistical methods commonly used within the insurance industry that we believe are reliable. We have also engaged a third-party actuary to perform a review of our domestic casualty losses as well as losses in our captive insurance companies. Nonetheless, insurance estimates include certain assumptions and management judgments regarding the frequency and severity of claims, claim development and settlement practices. Unanticipated changes in these factors may produce materially different amounts of expense that would be reported under these programs.
On October 1, 2019, we elected to utilize a wholly-owned insurance captive (“Captive”) to insure the deductibles for our workers’ compensation, general liability and automobile liability insurance programs. Casualty claims occurring prior to October 1, 2019 will remain recorded within each of the operating segments and future adjustments to these claims will continue to be reflected within the operating segments. Reserves for legacy claims occurring prior to October 1, 2019, will remain as liabilities in our operating segments until they have been resolved. Changes in those reserves will be reflected in segment earnings as they occur. We will continue to utilize the Captive to finance the risk of loss to equipment and rig property assets. The Company and the Captive maintain excess property and casualty reinsurance programs with third-party insurers in an effort to limit the financial impact of significant events covered under these programs. Our operating subsidiaries are paying premiums to the Captive, typically on a monthly basis, for the estimated losses based on an external actuarial analysis. These premiums are currently held in a restricted account, resulting in a transfer of risk from our operating subsidiaries to the Captive. Direct operating costs consisted primarily of adjustments to accruals for estimated losses of $2.3 million and $6.0 million allocated to the Captive during the three months ended March 31, 2021 and 2020, respectively, and $2.8 million and $14.7 million for the six months ended March 31, 2021 and 2020, respectively, and were recorded within drilling services operating expenses in our Unaudited Condensed Consolidated Statement of Operations. Intercompany premium revenues recorded by the Captive during the three months ended March 31, 2020 and 2020 amounted to $8.7 million and $10.5 million, respectively, and $15.8 million and $18.2 million during the six months ended March 31, 2021 and 2020, respectively, which were eliminated upon consolidation. These intercompany insurance premiums are reflected as segment operating expenses within the North America Solutions, Offshore Gulf of Mexico, and International Solutions reportable operating segments and are reflected as intersegment sales within "Other." The Company self-insures employee health plan exposures in excess of employee deductibles. Starting in the second quarter of fiscal year 2020, the Captive insurer issued a stop-loss program that will reimburse the Company's health plan for claims that exceed $50,000. This program will also be reviewed at the end of each policy year by an outside actuary. One hundred percent of the stop-loss premium is being set aside by the Captive as reserves. The stop-loss program does not have a material impact on a consolidated basis.
International Solutions Drilling Risks
International Solutions drilling operations may significantly contribute to our revenues and net operating income. There can be no assurance that we will be able to successfully conduct such operations, and a failure to do so may have an adverse effect on our financial position, results of operations, and cash flows. Also, the success of our International Solutions operations will be subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general and regional economic conditions, fluctuations in currency exchange rates, modified exchange controls, changes in international regulatory requirements and international employment issues, risk of expropriation of real and personal property and the burden of complying with foreign laws. Additionally, in the event that extended labor strikes occur or a country experiences significant political, economic or social instability, we could experience shortages in labor and/or material and supplies necessary to operate some of our drilling rigs, thereby potentially causing an adverse material effect on our business, financial condition and results of operations.
Many of the countries in which we operate have implemented measures in response to the COVID-19 pandemic. These measures, including imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions, have significantly reduced global economic activity, thereby, resulting in lower demand for crude oil. For example, our rigs in the United Arab Emirates remain stacked due to the COVID-19 pandemic-induced downturn and continuing oil demand uncertainties. The travel restrictions in certain countries where we operate, including the closure of their borders to travel into the country, have, at times, also resulted in an inability to effectively staff or rotate personnel at, and thereby operate, certain of our rigs and could lead to an inability to fulfill our contractual obligations under contracts with customers.
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We have also experienced certain risks related to our Argentine operations. In Argentina, while our dayrate is denominated in U.S. dollars, we are paid in Argentine pesos. The Argentine branch of one of our second-tier subsidiaries remits U.S. dollars to its U.S. parent by converting the Argentine pesos into U.S. dollars through the Argentine Foreign Exchange Market and repatriating the U.S. dollars. Argentina also has a history of implementing currency controls which restrict the conversion and repatriation of U.S. dollars, including controls that were implemented in September 2019. In September 2020, Argentina implemented additional currency controls in an effort to preserve Argentina's U.S. dollar reserves. As a result of these currency controls, our ability to remit funds from our Argentine subsidiary to its U.S. parent has been limited. In the past, the Argentine government has also instituted price controls on crude oil, diesel and gasoline prices and instituted an exchange rate freeze in connection with those prices. These price controls and an exchange rate freeze could be instituted again in the future. In addition, in March 2020, the Argentine government introduced labor regulations that prohibit employee dismissals or suspensions without just cause, for lack of (or reduction in) work or due to force majeure, subject to certain exceptions that may result in the payment of compensation to suspended employees and/or increased severance costs to the company. These prohibitions have resulted in significant challenges for our Argentine operations and it remains uncertain for how long they will be in effect. Further, there are additional concerns regarding Argentina's debt burden, notwithstanding Argentina's restructuring deal with international bondholders in August 2020, as Argentina attempts to manage its substantial sovereign debt issues. These concerns could further negatively impact Argentina's economy and adversely affect our Argentine operations. Argentina’s economy is considered highly inflationary, which is defined as cumulative inflation rates exceeding 100 percent in the most recent three-year period based on inflation data published by the respective governments. Nonetheless, all of our foreign subsidiaries use the U.S. dollar as the functional currency and local currency monetary assets and liabilities are remeasured into U.S. dollars with gains and losses resulting from foreign currency transactions included in current results of operations.
For the three and six months ended March 31, 2021, we recorded aggregate foreign currency losses of $2.4 million and $4.2 million, respectively. For the three and six months ended March 31, 2020, we recorded aggregate foreign currency losses of $3.4 million and $2.8 million, respectively. In the future, we may incur larger currency devaluations, foreign exchange restrictions or other difficulties repatriating U.S. dollars from Argentina or elsewhere, which could have a material adverse impact on our business, financial condition and results of operations. As of March 31, 2021, our cash balance in Argentina was $22.2 million.
Because of the impact of local laws, our future operations in certain areas may be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which we hold only a minority interest or pursuant to arrangements under which we conduct operations under contract to local entities. While we believe that neither operating through such entities nor pursuant to such arrangements would have a material adverse effect on our operations or revenues, there can be no assurance that we will in all cases be able to structure or restructure our operations to conform to local law (or the administration thereof) on terms acceptable to us.
Although we attempt to minimize the potential impact of such risks by operating in more than one geographical area, during the three and six months ended March 31, 2021, approximately 5.2 percent and 4.9 percent of our operating revenues were generated from international locations in our drilling business compared to 8.2 percent and 8.0 percent during the three and six months ended March 31, 2020, respectively. During the three and six months ended March 31, 2021, approximately 51.4 percent and 37.6 percent of operating revenues from international locations were from operations in South America, compared to 66.4 percent and 76.2 percent during the three and six months ended March 31, 2020, respectively. Substantially all of the South American operating revenues were from Argentina and Colombia. The future occurrence of one or more international events arising from the types of risks described above could have a material adverse impact on our business, financial condition and results of operations.
NOTE 3 DISCONTINUED OPERATIONS
Noncurrent liabilities from discontinued operations is an uncertain tax liability related to the country of Venezuela. Expenses incurred for in-country obligations are reported as discontinued operations within our Unaudited Condensed Consolidated Statements of Operations. 
The activity for the three and six months ended March 31, 2021 was primarily due to the remeasurement of uncertain tax liabilities as a result of the devaluation of the Venezuela Bolivar.  Early in 2018, the Venezuelan government announced that it changed the existing dual-rate foreign currency exchange system by eliminating its heavily subsidized foreign exchange rate, which was 10 Bolivars per United States dollar, and relaunched an exchange system known as DICOM. The Venezuela government also established a new currency called the “Sovereign Bolivar,” which was determined by the elimination of five zeros from the old currency. The DICOM floating rate was approximately 1,987,185 Bolivars per United States dollar at March 31, 2021, compared to 436,677 and 80,946 Bolivars per United States dollar at September 30, 2020, and March 31, 2020, respectively. The DICOM floating rate might not reflect the barter market exchange rates.
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NOTE 4 PROPERTY, PLANT AND EQUIPMENT 
Property, plant and equipment as of March 31, 2021 and September 30, 2020 consisted of the following:
(in thousands)Estimated Useful LivesMarch 31, 2021September 30, 2020
Drilling services equipment
4 - 15 years
$6,479,582 $7,313,234 
Tubulars4 years606,036 615,281 
Real estate properties
10 - 45 years
43,398 43,389 
Other
2 - 23 years
468,392 464,704 
Construction in progress (1)
  52,383 49,592 
  7,649,791 8,486,200 
Accumulated depreciation  (4,275,556)(4,839,859)
Property, plant and equipment, net  $3,374,235 $3,646,341 
Assets held-for-sale$13,076 $ 
(1)Included in construction in progress are costs for projects in progress to upgrade or refurbish certain rigs in our existing fleet.  Additionally, we include other capital maintenance purchase-orders that are open/in process.  As these various projects are completed, the costs are then classified to their appropriate useful life category.
Depreciation
Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $104.6 million and $130.2 million, including $0.5 million and $0.9 million in abandonments, for the three months ended March 31, 2021 and 2020, respectively. Depreciation expense in the Unaudited Condensed Consolidated Statements of Operations was $209.7 million and $258.5 million, including $0.4 million and $1.7 million in abandonments for the six months ended March 31, 2021 and 2020, respectively.
Assets Held-for-Sale
In March 2021, the Company's leadership executed the current strategy, which was initially introduced in 2019, focusing on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet. As a result, the Company has undertaken a plan to sell 68 Domestic non-super-spec rigs, all within our North America Solutions segment, the majority of which were previously decommissioned, written down and/or held as capital spares. The book values of those assets were written down to their net realizable value of $13.1 million, and were reclassified as held-for-sale on our Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021. As a result, we recognized a non-cash impairment charge of $54.3 million, during the three months ended March 31, 2021, in the Unaudited Condensed Consolidated Statement of Operations. The significant assumptions utilized in the valuation were based on our intended method of disposal, historical sales of similar assets, and market quotes and are classified as Level 2 and Level 3 inputs by ASC Topic 820, Fair Value Measurement and Disclosures. Although we believe the assumptions used in our analysis are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion.
Impairments
During the three months ended March 31, 2020, several significant economic events took place that severely impacted the demand on drilling services, including the significant drop in crude oil prices caused by OPEC+'s price war coupled with a decrease in the demand due to the COVID-19 pandemic. To maintain a competitive edge in a challenging market, the Company’s management introduced a new strategy focused on operating various types of highly capable upgraded rigs and phasing out the older, less capable fleet. This resulted in grouping the super-spec rigs of our legacy Domestic FlexRig3 asset group with our FlexRig5 asset group, creating a new "Domestic super-spec FlexRig" asset group, while combining the legacy Domestic conventional asset group, FlexRig4 asset group and FlexRig3 non-super-spec rigs into one asset group (Domestic non-super- spec asset group). Given the low utilization, previously projected, for our Domestic non-super-spec asset group and all International asset groups, we considered these economic factors to be indicators that these asset groups may be impaired.
At March 31, 2020, we performed impairment testing on our Domestic non-super-spec and International conventional, FlexRig3, and FlexRig4 asset groups, which had an aggregate net book value of $605.8 million. We concluded that the net book value of each asset group was not recoverable through estimated undiscounted cash flows and recorded a non-cash impairment charge of $441.4 million in the Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2020. Of the $441.4 million total impairment charge recorded, $292.4 million and $149.0 million was recorded in the North America Solutions and International Solutions segment, respectively. Impairment was measured as the amount by which the net book value of each asset group exceeds its fair value.
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The Company also recorded an additional non-cash impairment charge related to in-progress drilling equipment and rotational inventory of $44.9 million and $38.6 million, respectively, which had aggregate book values of $68.4 million and $38.6 million, respectively, in the Unaudited Condensed Consolidated Statement of Operations during the three and six months ended March 31, 2020. Of the $83.5 million total impairment charge recorded for in-progress drilling equipment and rotational inventory, $75.8 million and $7.7 million was recorded in the North America Solutions and International Solutions segment, respectively.
(Gain) Loss on Sale of Assets
We had a (gain) loss on sale of assets of $18.5 million and $(10.3) million for the three months ended March 31, 2021 and 2020, respectively, and $6.2 million and $(14.6) million for the six months ended March 31, 2021 and 2020, respectively. During the second quarter of fiscal year 2021, we sold excess drilling equipment and spares, which resulted in a net loss of $23.0 million for the three months ended March 31, 2021. This loss was offset by various gains on asset sales related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations.
During the first quarter of fiscal year 2021, we closed on the sale of an offshore platform rig within our Offshore Gulf of Mexico operating segment for total consideration of $12.0 million with an aggregate net book value of $2.8 million, resulting in a gain of $9.2 million.
NOTE 5 GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price over the fair values of the assets acquired and liabilities assumed in a business combination, at the date of acquisition. Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis, or when indications of potential impairment exist. All of our goodwill is within our North America Solutions reportable segment. 
During the three and six months ended March 31, 2021, we had no additions or impairments to goodwill. As of March 31, 2021 and September 30, 2020, the goodwill balance was $45.7 million.
Intangible Assets
Finite-lived intangible assets are amortized using the straight-line method over the period in which these assets contribute to our cash flows and are evaluated for impairment in accordance with our policies for valuation of long-lived assets.  All of our intangible assets are within our North America Solutions reportable segment. Intangible assets consist of the following:
 March 31, 2021September 30, 2020
(in thousands)Weighted Average Estimated Useful LivesGross
Carrying
Amount
Accumulated
Amortization
NetGross
Carrying
Amount
Accumulated
Amortization
Net
Finite-lived intangible asset:      
Developed technology15 years$89,096 $19,205 $69,891 $89,096 $16,222 $72,874 
Intellectual property13 years1,500 159 1,341 1,500 103 1,397 
Trade name20 years5,865 1,000 4,865 5,865 842 5,023 
Customer relationships5 years4,000 2,667 1,333 4,000 2,267 1,733 
$100,461 $23,031 $77,430 $100,461 $19,434 $81,027 
Amortization expense in the Unaudited Condensed Consolidated Statements of Operations was $1.8 million for both the three months ended March 31, 2021 and 2020, respectively, and $3.6 million and $3.7 million for the six months ended March 31, 2021 and 2020, respectively. Amortization is estimated to be approximately $3.6 million for the remainder of fiscal year 2021, approximately $7.2 million for fiscal year 2022, approximately $6.5 million for fiscal year 2023, and approximately $6.4 million for fiscal years 2024 and 2025.
Impairments
During the three months ended March 31, 2020, due to the market conditions described in Note 4—Property, Plant and Equipment, we concluded that goodwill and intangible assets might be impaired and tested the H&P Technol