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BUSINESS COMBINATION | 12 Months Ended
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Sep. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] |
BUSINESS COMBINATION |
NOTE 3 BUSINESS COMBINATION
On January 16, 2025 (the “Closing Date” or "Acquisition Date"), H&P and certain of its wholly owned subsidiaries completed the previously announced agreement to acquire KCA Deutag. Upon closing, H&P paid aggregate cash consideration of approximately $2.0 billion, which consisted of the share purchase price of $0.9 billion and $1.1 billion which was used to contemporaneously repay or redeem certain of KCA Deutag's existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees. Of the $0.9 billion, approximately $80.0 million was deposited into a customary escrow on the Closing Date pending the resolution of certain potential tax obligations of KCA Deutag. In May 2025, these escrowed funds were subsequently released to the shareholders following a determination that KCA Deutag would not be liable for the identified obligations. As part of this release, H&P received approximately $5.2 million, primarily attributable to favorable movements in the euro foreign exchange rate since the Closing Date. This amount is reported within Foreign currency exchange loss in our Consolidated Statements of Operations for the year ended September 30, 2025. To finance the purchase price and to pay related fees and expenses, we completed a private offering of $1.25 billion aggregate principal amount of senior notes, together with the proceeds of a term loan credit agreement, cash on hand, and monetization of our investment in ADNOC Drilling. Refer to Note 7—Debt for further details on the senior notes and term loan credit agreement. The Acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, which requires the assets acquired and liabilities assumed to be recorded at their Acquisition Date fair values. Determining the fair value of acquired assets and liabilities assumed requires the use of independent valuation specialists and the use of significant estimates and assumptions with respect to future rig counts, estimated economic useful lives, operating and capital cost estimates, and a weighted average discount rate reflecting the cost of capital for market participants of 11.0 percent. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, deferred income, contingent liabilities, and provisions and other payables approximate their fair values due to their nature. The remaining assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. During September 2025, we finalized the allocation of the purchase price. The following table summarizes the final purchase price and the fair values of assets acquired and liabilities assumed at the Acquisition Date, inclusive of measurement period adjustments:
(in thousands) |
Total cash consideration | $ | 2,035,523 |
Allocation of purchase price |
Current assets acquired: |
Cash and cash equivalents | 199,447 |
Short-term investments | 33 |
Accounts receivable, net 1 | 316,207 |
Inventories of materials and supplies, net | 183,527 |
Prepaid expenses and other, net | 87,998 |
Noncurrent assets acquired: |
Investments, net | 1,146 |
Property, plant and equipment, net | 1,459,490 |
Intangible assets, net | 468,809 |
Operating lease right-of-use assets | 46,162 |
Total assets acquired | 2,762,819 |
Current liabilities assumed: |
Accounts payable and accrued liabilities | 479,976 |
Current portion of long-term debt, net | 6,755 |
Noncurrent liabilities assumed: |
Deferred income | 6,163 |
Long-term debt, net | 78,188 |
Deferred income taxes | 202,050 |
Retirement benefit obligations | 99,043 |
Other | 52,999 |
Total liabilities assumed | 925,174 |
Net assets acquired | $ | 1,837,645 |
Add: Fair value of non-controlling interests acquired | 116,061 |
Goodwill | $ | 313,939 |
(1)The fair value of accounts receivable is $316.2 million, with the gross contractual amount being $329.3 million. The Company estimates $13.1 million to be uncollectible. Refer to Note 6—Goodwill and Intangible Assets for more information on measurement period adjustments made during the year ended September 30, 2025. Inventory Inventory includes materials, supplies and spare parts used as part of contract drilling operations and was valued at fair value using a replacement cost approach. Property, Plant and Equipment Property, plant and equipment consists primarily of drilling rigs and equipment and will be depreciated on a straight-line basis over the estimated useful lives of the assets. These assets were valued using a combination of replacement cost and a market approach. Intangible Assets Intangible assets included in the Acquisition consist of developed technology, customer relationships, a trade name, and in-process research and development. The fair values were determined using a combination of the income and market approach. These assets will be amortized over their respective periods of expected benefit. Refer to Note 6—Goodwill and Intangible Assets for estimated amortization expense over the next five years. The values assigned to each intangible asset and the corresponding useful lives, as of the Acquisition Date, are as follows:
(in thousands) | Amount |  | Weighted Average Useful life (Years)
Customer relationships | $ | 432,200 |  |  | 9 years
Trade name | 10,860 |  |  | 10 years
Developed technology | 21,420 |  |  | 11 years
In-process research and development | 4,329 |  |  | Indefinite
Estimated fair value of acquired intangible assets | $ | 468,809 |  |  |
As of September 30, 2025, the acquired customer relationships had a weighted average remaining term of 2.0 years until their next contract renewal or extension. Operating Lease Right-of-Use Assets In connection with the Acquisition, we acquired operating lease right-of-use assets and corresponding current and noncurrent liabilities as summarized below:
(in thousands) | Amount
Real estate properties | $ | 34,369 |
Drilling equipment | 11,793 |
Total Operating lease right-of-use asset | $ | 46,162 |
Current portion of lease liabilities within Accounts payable and Accrued liabilities | $ | 16,557 |
Noncurrent portion of operating lease liabilities within Other noncurrent liabilities | 39,377 |
We measured the lease liability at the present value of the remaining lease payments, applying a weighted average discount rate of 5.6 percent, as if the acquired lease was a new lease of H&P at the Acquisition Date. The right-of-use asset was measured at the same amount as the lease liability and adjusted by $9.8 million to reflect unfavorable terms of the leases when compared to market terms. We have elected to apply the short-term lease measurement and recognition exemption to leases that have a remaining lease term of 12 months or less at the Acquisition Date. The weighted average remaining lease term for the acquired leases is approximately 10.1 years as of September 30, 2025. Goodwill The amount of goodwill recognized in the Acquisition represents the excess of the gross consideration transferred and the amount of any non-controlling interest over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed. Goodwill is attributed to the assembled workforce, anticipated operational synergies, and the allocation of proceeds in excess of the fair value of net identifiable assets acquired. Goodwill arising from the Acquisition is not expected to be deductible for tax reporting purposes. During the year ended September 30, 2025, goodwill increased by $15.8 million due to certain measurement period adjustments which primarily consisted of a $17.4 million increase resulting from the finalization of deferred tax liabilities and a $4.0 million decrease resulting from the refinement of the fair value calculation of the inventory and intangible asset balances. Separately, during the same period, we recognized an impairment of a portion of the goodwill arising from the Acquisition. Refer to Note 6—Goodwill and Intangible Assets for further information. Long-Term Debt As discussed above, we paid $1.1 billion to contemporaneously repay or redeem certain of KCA Deutag's existing debt upon consummation of the acquisition. As of the Closing Date, we assumed an aggregate $84.9 million in secured term loan borrowings comprised of two separate agreements as summarized in Note 7—Debt—2024 KCA Deutag Oman Facility and —2023 KCA Deutag Oman Facility. End-of-Service Benefit Plans As a result of the Acquisition, we assumed a liability of $44.8 million related to end-of-service benefit plans. This liability arises from KCA Deutag's compliance with local legislation in various Middle Eastern and South American countries, where end-of-service benefit plans are mandated. These plans require payments to employees upon the conclusion of their service, calculated based on their most recent salary and years of service. These plans are not pre-funded. A significant portion of this liability stems from operations in the Middle East for which we relied on independent actuaries to assess the value of these obligations. The primary costs associated with these plans include the present value of benefits accrued for an additional year of service and the interest on the obligation related to employee service in previous years. This liability is presented within Accrued liabilities on our Consolidated Balance Sheets. Defined Benefit Pension Plans As a result of the Acquisition, we now maintain pension plans in Germany and the United Kingdom "UK". Refer to Note 14—Employee Benefit Plans for additional details. Non-controlling Interest The non-controlling interests acquired represents the portion of certain consolidated subsidiaries that are owned by third-parties and were recorded at estimated fair market value. The non-controlling interests are presented as a separate component of equity in our Consolidated Balance Sheets and the consolidated net income attributable to non-controlling interests is disclosed separately in the Consolidated Statements of Operations. Results of Operations KCA Deutag's results of operations for its land operations and offshore management contract operations are reported within our International Solutions and Offshore Solutions operating segments, respectively. KCA Deutag's manufacturing and engineering operations results are included in "Other". The results of operations attributable to the Acquisition have been included in our Consolidated Financial Statements since the date of the acquisition, on January 16, 2025, through September 30, 2025. Revenue and net loss attributable to the net assets acquired for the period January 16, 2025 through September 30, 2025, were $1.0 billion and $337.2 million, respectively. During the year ended September 30, 2025, we recognized approximately $54.7 million in acquisition transaction costs associated with the Acquisition, as compared to $15.0 million for the year ended September 30, 2024.These non-recurring costs are primarily related to third-party legal, advisory and valuation services and are included in Acquisition transaction costs on the Consolidated Statements of Operations. Pro Forma Financial Information The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the Acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, and is not indicative of future results of operations. The summarized unaudited pro forma financial information reflects several adjustments to reflect final purchase price accounting and differences in accounting policies between International Financial Reporting Standards ("IFRS") and U.S. GAAP. These adjustments account for incremental depreciation and amortization expenses based on the fair value of KCA Deutag’s assets, the elimination of interest expenses from KCA Deutag’s historical borrowings, and the addition of H&P debt to fund the acquisition. The pro forma adjustments are based upon currently available information and certain assumptions that H&P believes are reasonable under the circumstances. The tax impact of these adjustments was determined using statutory tax rates. The following unaudited pro forma combined financial information presents results for the year ended September 30, 2025 and 2024, as if we had completed the Acquisition on October 1, 2023:
(in thousands) | September 30, 2025 |  | September 30, 2024
Revenue | $ | 4,232,105 |  |  | $ | 4,468,207 |
Net income (loss) | (239,660) |  |  | 172,107 |
Net income attributable to non-controlling interest | 7,728 |  |  | 12,947 |
Net income (loss) attributable to Helmerich & Payne, Inc. | $ | (247,388) |  |  | $ | 159,160 |

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