BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

12 Months Ended

Sep. 30, 2019

BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

NOTE 17 BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

Description of the Business

We are a global contract drilling services company based in Tulsa, Oklahoma with operations in all major U.S. onshore basins as well as South America and the Middle East. Our contract drilling services operations consist mainly of contracting Company-owned drilling equipment primarily to large oil and gas exploration companies. We are the recognized industry leader in drilling as well as technological innovation.

Effective October 1, 2018, and during the fourth quarter of fiscal year 2019, we implemented organizational changes, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. Effective October 1, 2018, technology reporting units previously reported in “Other” within our segment disclosures are now managed and presented within the new H&P Technologies reportable segment. As a result, beginning with the reporting of first quarter of fiscal year 2019, our operations are organized into the following reportable business segments: U.S. Land, Offshore, International Land and H&P Technologies. Additionally, during the fourth quarter of fiscal year 2019, we migrated our FlexApp offerings into our H&P Technologies segment. The activity of our FlexApps was previously included in our U.S. Land segment. Our real estate operations and our incubator program for new research and development projects are included in "Other". All segment disclosures have been restated, as practicable, for these segment changes. Consolidated revenues and expenses reflect the elimination of intercompany transactions.

At September 30, 2019, our contract drilling services business includes the following reportable operating segments:


•	U.S. Land


•	Offshore


•	International Land


•	H&P Technologies

Each reportable operating segment is a strategic business unit that is managed separately, and consolidated revenues and expenses reflect the elimination of all material intercompany transactions. Other includes additional non-reportable operating segments. Revenues included in “Other” primarily consist of rental income.

Segment Performance

We evaluate segment performance based on income or loss from continuing operations (segment operating income) before income taxes which includes:


•	Revenues from external and internal customers


•	Direct operating costs


•	Depreciation and amortization


•	Allocated general and administrative costs


•	Asset impairment charges

but excludes corporate costs for other depreciation, income from asset sales, other corporate income and expense, and corporate assets.

General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which we believe to be a reasonable reflection of the utilization of services provided.



	September 30, 2019
(in thousands)	U.S. Land		Offshore		International Land		H&P Technologies			Other		Eliminations		Total
External Sales	$	2,366,201	$	147,635	$	211,731	$	59,990		$	12,933	$	—	$	2,798,490
Intersegment	—		—		—		—			—		—		—
Total Sales	2,366,201		147,635		211,731		59,990			12,933		—		2,798,490

Segment Operating Income (Loss)	93,088		19,594		5,366		(12,190		)	3,375		—		109,233
Depreciation and Amortization	496,770		10,010		35,466		7,696			1,523		—		551,465
Total Assets	5,099,583		102,442		217,094		184,558			32,532		—		5,636,209



	September 30, 2018
(in thousands)	U.S. Land ₍₂₎		Offshore		International Land			H&P Technologies _{(1) (2)}			Other ₍₁₎		Eliminations	Total
External Sales	$	2,063,362	$	142,500	$	238,356		$	30,239		$	12,811	—	2,487,268
Intersegment	—		—		—			—			—			—
Total Sales	$	2,063,362	$	142,500	$	238,356		$	30,239		$	12,811	—	2,487,268

Segment Operating Income (Loss)	148,251		26,124		(683		)	(39,554		)	5,883		—	140,021
Depreciation and Amortization	504,805		10,392		46,826			7,153			1,486		—	570,662
Total Assets	5,007,548		105,439		362,033			151,787			29,525		—	5,656,332


(1)	Prior period information has been restated to reflect the change in operating segments structure.


(2)	Prior period information has been restated to reflect the transfer of FlexApp revenue and the related costs from U.S. Land to H&P Technologies. Certain FlexApp revenue not separately priced in drilling contracts, and recorded in the U.S. Land segment, was impracticable to retrospectively quantify, and as such was not restated.



	September 30, 2017
(in thousands)	U.S. Land ₍₂₎			Offshore		International Land			H&P Technologies _{(1) (2)}			Other ₍₁₎		Eliminations	Total
External Sales	$	1,437,427		$	136,263	$	212,972		$	5,815		$	12,264	—	1,804,741
Intersegment	—			—		—			—			—		—	—
Total Sales	$	1,437,427		$	136,263	$	212,972		$	5,815		$	12,264	—	1,804,741

Segment Operating Income (Loss)	(97,231		)	24,201		(7,224		)	(13,356		)	6,065		—	(87,545	)
Depreciation and Amortization	499,272			11,764		53,622			3,915			1,424		—	569,997
Total Assets	4,962,808			99,533		413,392			110,468			26,883		—	5,613,084


(1)	Prior period information has been restated to reflect the change in operating segments structure.


(2)	Prior period information has been restated to reflect the transfer of FlexApp revenues and the related costs from U.S. Land to H&P Technologies. Certain FlexApp revenue not separately priced in a drilling contract, and recorded in the U.S. Land segment, was impracticable to retrospectively quantify, and as such was not restated.

The following table reconciles segment operating income (loss) to income from continuing operations before income taxes as reported on the Consolidated Statements of Operations:



	Year Ended September 30,
(in thousands)	2019			2018			2017
				As adjusted, Note 2
Segment operating income (loss)	109,233			140,021			(87,545		)
Gain on sale of assets	39,691			22,660			20,627
Corporate depreciation	(11,338		)	(13,140		)	(15,546		)
Corporate selling, general and administrative costs	(117,004		)	(116,577		)	(86,623		)
Operating income (loss) from continuing operations	20,582			32,964			(169,087		)
Other income (expense)
Interest and dividend income	9,468			8,017			5,915
Interest expense	(25,188		)	(24,265		)	(19,747		)
Gain (loss) on investment securities	(54,488		)	1			—
Other	(1,596		)	(876		)	(1,679		)
Total unallocated amounts	(71,804		)	(17,123		)	(15,511		)
Income (loss) from continuing operations before income taxes	$	(51,222	)	$	15,841		$	(184,598	)

The following table reconciles segment total assets to total assets as reported on the Consolidated Balance Sheets:



	Year Ended September 30,
(in thousands)	2019		2018
Segment assets	$	5,636,209	$	5,656,332
Corporate assets	203,306		558,535
Total consolidated assets	$	5,839,515	$	6,214,867

The following table presents revenues from external customers and long-lived assets by country based on the location of service provided:



	Year Ended September 30,
(in thousands)	2019		2018		2017
Operating revenues
United States	$	2,585,008	$	2,247,400	$	1,591,769
Argentina	165,718		190,038		157,257
Colombia	29,757		38,793		37,554
Ecuador	—		—		6
Other Foreign	18,007		11,037		18,155
Total	$	2,798,490	$	2,487,268	$	1,804,741
Property, plant and equipment, net
United States	$	4,269,405	$	4,591,913	$	4,686,235
Argentina	132,321		133,617		155,978
Colombia	61,757		74,042		81,798
Ecuador	12		10,781		22,298
Other Foreign	38,589		47,029		54,742
Total	$	4,502,084	$	4,857,382	$	5,001,051