HP 8-K/A
Helmerich & Payne, Inc. (HP)
8-K/A
2025-04-04
For: 2025-01-16
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 16, 2025
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of principal executive offices and zip code)
(918 ) 742-5531
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Explanatory Note
This Amendment No. 1 on Form 8-K/A (this “Amendment”) is being filed by Helmerich & Payne, Inc., a Delaware corporation (the “Company”), to amend and supplement its Current Report on Form 8-K filed with the Securities and Exchange Commission on January 16, 2025 (the “Original Report”). As previously disclosed in the Original Report, on January 16, 2025, the Company completed its acquisition of the entire issued share capital of KCA Deutag International Limited, a private company limited by shares incorporated in Jersey (“KCA Deutag”).
The Company is filing this Amendment solely to supplement Item 9.01 of the Original Report to file (i) the audited consolidated financial statements of KCA Deutag as of and for the years ended December 31, 2024 and 2023 and (ii) the unaudited pro forma condensed combined balance sheet of the Company and its subsidiaries as of December 31, 2024, the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2024 and the three months ended December 31, 2024 and the related notes. Except for the foregoing, this Amendment does not modify or update any other disclosure contained in the Original Report.
| Item 9.01. | Financial Statements and Exhibits. | ||||
(a) Financial statements of businesses acquired.
The audited consolidated balance sheets of KCA Deutag as of December 31, 2024 and 2023 and the audited consolidated statements of comprehensive income, statements of changes in shareholders’ equity and cash flow statements for each of the years ended December 31, 2024 and 2023, and the related notes thereto, are filed herewith and attached hereto as Exhibit 99.1, and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined balance sheet of the Company and its subsidiaries as of December 31, 2024, the unaudited pro forma condensed combined statements of operations for the year ended September 30, 2024 and the three months ended December 31, 2024 and the related notes thereto are filed herewith and attached hereto as Exhibit 99.2, and are incorporated herein by reference.
(d) Exhibits.
| Exhibit No. | Description | |||||||
| 23.1 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover page Interactive Data File - the cover page XBRL tags are embedded within the inline XBRL document. | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| HELMERICH & PAYNE, INC. | |||||||||||||||||
| By: | /s/ J. Kevin Vann | ||||||||||||||||
| Name: | J. Kevin Vann | ||||||||||||||||
| Title: | Senior Vice President and Chief Financial Officer | ||||||||||||||||
| Date: | April 4, 2025 | ||||||||||||||||
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 Nos. 333-264553 and 333-264553-01) of Helmerich & Payne, Inc. and Helmerich & Payne International Drilling Co.;
(2) Registration Statement (Form S-8 No. 333-176911) pertaining to the Helmerich & Payne, Inc. 2010 Long-Term Incentive Plan;
(3) Registration Statement (Form S-8 No. 333-213053) pertaining to the Helmerich & Payne, Inc. 2016 Omnibus Incentive Plan;
(4) Registration Statement (Form S-8 No. 333-237161) pertaining to the Helmerich & Payne, Inc. Amended and Restated 2020 Omnibus Incentive Plan;
(5) Registration Statement (Form S-8 No. 333-264546) pertaining to the Helmerich & Payne, Inc. Amended and Restated 2020 Omnibus Incentive Plan; and
(6) Registration Statement (Form S-8 No. 333-277456) pertaining to the Helmerich & Payne, Inc. 2024 Omnibus Incentive Plan
of our report dated 4 April 2025, relating to the consolidated financial statements of KCA Deutag International Limited as of and for the years ended 31 December 2024 and 2023 appearing in this Current Report on Form 8-K/A of Helmerich & Payne, Inc.
/s/ Ernst & Young LLP
Aberdeen, United Kingdom
4 April 2025
| KCA Deutag International Limited | ||
| Annual Report and Financial Statements | ||
| for the year ended 31 December 2024 and 2023 | ||
| Registered Number: 132385 | ||
KCA Deutag International Limited
Annual Report and Financial Statements
for the year ended 31 December 2024 and 2023
Contents
Page | |||||
Independent auditors’ report to the members of KCA Deutag International Limited | 3 | ||||
Consolidated Income Statement for the years ended 31 December 2024 and 2023 | 5 | ||||
Consolidated Statement of Comprehensive Income for the years ended 31 December 2024 and 2023 | 5 | ||||
Consolidated Balance Sheets as at 31 December 2024 and 2023 | 6 | ||||
Consolidated Statement of Changes in Shareholders’ Equity for the years ended 31 December 2024 and 2023 | 7 | ||||
Consolidated Cash Flow Statements for the years ended 31 December 2024 and 2023 | 9 | ||||
Notes to the consolidated financial statements for the years ended 31 December 2024 and 2023 | 10 | ||||
Independent auditors' report to the members of KCA Deutag International Limited
Opinion
We have audited the consolidated financial statements of KCA Deutag International Limited (the Company), which comprise the consolidated balance sheets as of 31 December 2024 and 2023, and the related consolidated income statement, statement of comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at 31 December 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
•Exercise professional judgment and maintain professional scepticism throughout the audit.
•Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
3
Independent auditors' report to the members of KCA Deutag International Limited
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ Ernst & Young LLP
Aberdeen, United Kingdom
4 April 2025
d well and facibe the key audit matters to be communicated in our report. This is not a complete list of al
4
KCA Deutag International Limited
Consolidated Income Statement
for the years ended 31 December 2024 and 2023
| 2024 | 2023 | ||||||||||
| Note | $m | $m | |||||||||
| Revenue | 5 | 1,711.6 | 1,614.5 | ||||||||
| Cost of sales | (1,445.2) | (1,370.9) | |||||||||
| Gross profit | 266.4 | 243.6 | |||||||||
| Administrative expenses | (48.5) | (49.2) | |||||||||
| Net impairment (loss) gain on financial and contract assets | 16 | (0.1) | 3.0 | ||||||||
| Amortisation of intangible assets | 13 | (7.8) | (8.8) | ||||||||
| Operating profit before exceptional items | 210.0 | 188.6 | |||||||||
| Exceptional items | 10 | (85.8) | (21.8) | ||||||||
| Operating profit | 124.2 | 166.8 | |||||||||
| Finance costs | 7 | (170.9) | (169.5) | ||||||||
| Finance income | 7 | 14.7 | 7.7 | ||||||||
| (Loss) income before taxation | 8 | (32.0) | 5.0 | ||||||||
| Taxation | 9 | (53.6) | (47.2) | ||||||||
Loss from continuing operations | (85.6) | (42.2) | |||||||||
| Profit from discontinued operations | - | 8.5 | |||||||||
| Loss for the year | 5 | (85.6) | (33.7) | ||||||||
| Loss attributable to: | |||||||||||
| Owners | (102.8) | (49.7) | |||||||||
| Non controlling interests | 17.2 | 16.0 | |||||||||
| (85.6) | (33.7) | ||||||||||
Consolidated Statement of Comprehensive Income
for the years ended 31 December 2024 and 2023
for the years ended 31 December 2024 and 2023
| 2024 | 2023 | |||||||||||||
| Note | $m | $m | ||||||||||||
| Loss for the year | (85.6) | (33.7) | ||||||||||||
| Other comprehensive expense: | ||||||||||||||
| Fair value movement on cash flow hedges | (2.6) | 0.2 | ||||||||||||
| Exchange differences on foreign operations | (10.2) | (5.9) | ||||||||||||
| Remeasurements on defined benefit pension schemes | (3.2) | (7.8) | ||||||||||||
| Remeasurement on value of investment | 14 | (1.0) | (3.7) | |||||||||||
| Total other comprehensive expense for year - net of tax | (17.0) | (17.2) | ||||||||||||
| Total comprehensive expense for the year - net of tax | (102.6) | (50.9) | ||||||||||||
| Comprehensive expense attributable to: | ||||||||||||||
| Owners | (119.8) | (66.9) | ||||||||||||
| Non controlling interests | 17.2 | 16.0 | ||||||||||||
| (102.6) | (50.9) | |||||||||||||
All items, with the exception of the remeasurements on defined benefit pension schemes and equity instruments that have been designated as financial assets at fair value through other comprehensive income, may subsequently be reclassified to the Income Statement.
The Notes on pages 10 to 55 form an integral part of the financial statements.
5
KCA Deutag International Limited
Consolidated Balance Sheets as at 31 December 2024 and 2023
| 2024 | 2023 | ||||||||||
| Note | $m | $m | |||||||||
| Assets | |||||||||||
| Non-current assets | |||||||||||
| Property, plant and equipment | 11 | 988.3 | 948.3 | ||||||||
| Right of use assets | 29 | 106.3 | 147.6 | ||||||||
| Goodwill | 12 | 365.5 | 374.1 | ||||||||
| Other intangible assets | 13 | 28.9 | 33.9 | ||||||||
| Investments | 14a,b | 1.1 | 2.7 | ||||||||
| Deferred tax assets | 23 | 59.5 | 60.4 | ||||||||
| 1,549.6 | 1,567.0 | ||||||||||
| Current assets | |||||||||||
| Inventories and work in progress | 15 | 211.3 | 193.4 | ||||||||
| Trade and other receivables | 16 | 370.7 | 385.8 | ||||||||
| Financial assets - derivative financial instruments | 21 | - | 0.6 | ||||||||
| Cash and cash equivalents | 18 | 231.3 | 230.1 | ||||||||
| 813.3 | 809.9 | ||||||||||
| Total assets | 2,362.9 | 2,376.9 | |||||||||
| Liabilities | |||||||||||
| Current liabilities | |||||||||||
| Trade and other payables | 19 | (477.1) | (415.2) | ||||||||
| Amounts owed to subsidiaries | 33 | - | - | ||||||||
| Tax liabilities | 9 | (23.7) | (33.0) | ||||||||
| Financial liabilities – derivative financial instruments | 21 | (2.0) | (1.6) | ||||||||
| Financial liabilities – borrowings | 20 | (1,123.7) | (3.1) | ||||||||
| Lease liabilities | 29 | (45.2) | (60.4) | ||||||||
| Provisions | 22 | (1.3) | (1.3) | ||||||||
| (1,673.0) | (514.6) | ||||||||||
| Non-current liabilities | |||||||||||
| Deferred income | (6.2) | (6.3) | |||||||||
| Financial liabilities – borrowings | 20 | (78.2) | (1,112.2) | ||||||||
| Deferred tax liabilities | 23 | (69.3) | (61.8) | ||||||||
| Retirement benefit obligations | 27 | (99.0) | (106.6) | ||||||||
| Lease liabilities | 29 | (72.7) | (96.0) | ||||||||
| Provisions and other payables | 22 | (2.3) | (2.0) | ||||||||
| (327.7) | (1,384.9) | ||||||||||
| Total liabilities | (2,000.7) | (1,899.5) | |||||||||
| Net assets | 362.2 | 477.4 | |||||||||
| Capital and reserves | |||||||||||
| Share capital | 24 | 0.1 | 0.1 | ||||||||
| Share premium | 25 | 919.2 | 919.2 | ||||||||
| Other reserves | 2,711.4 | 2,724.2 | |||||||||
| Accumulated losses | (3,291.2) | (3,184.2) | |||||||||
| 339.5 | 459.3 | ||||||||||
| Non controlling interest | 22.7 | 18.1 | |||||||||
Total equity | 362.2 | 477.4 | |||||||||
The financial statements on pages 5 to 55 were approved by the Board of Directors on 4 April 2025 and signed on its behalf by
| J Porter | Registered Number: 132385 | ||||
| Director | |||||
6
KCA Deutag International Limited
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 31 December 2024
| Other reserves | |||||||||||||||||||||||||||||
| Share capital | Share premium | Retained earnings | Merger reserve | Hedging reserves | Currency translation reserves | Non- controlling interests | Total equity | ||||||||||||||||||||||
| $m | $m | $m | $m | $m | $m | $m | $m | ||||||||||||||||||||||
(Note 24) | (Note 25) | ||||||||||||||||||||||||||||
| At 1 January 2024 | 0.1 | 919.2 | (3,184.2) | 2,733.7 | 1.0 | (10.5) | 18.1 | 477.4 | |||||||||||||||||||||
| Comprehensive expense | |||||||||||||||||||||||||||||
| Loss for the year | - | - | (102.8) | - | - | - | 17.2 | (85.6) | |||||||||||||||||||||
| Other comprehensive expense | |||||||||||||||||||||||||||||
| Fair value movement on cash flow hedges | - | - | - | - | (2.6) | - | - | (2.6) | |||||||||||||||||||||
| Exchange differences on foreign operations | - | - | - | - | - | (10.2) | - | (10.2) | |||||||||||||||||||||
| Remeasurements on defined benefit pension schemes, net of tax | - | - | (3.2) | - | - | - | - | (3.2) | |||||||||||||||||||||
| Remeasurement on value of investment (Note 14) | - | - | (1.0) | - | - | - | - | (1.0) | |||||||||||||||||||||
| Total other comprehensive expense | - | - | (4.2) | - | (2.6) | (10.2) | - | (17.0) | |||||||||||||||||||||
| Total comprehensive expense | - | - | (107.0) | - | (2.6) | (10.2) | 17.2 | (102.6) | |||||||||||||||||||||
| Transactions with owners | |||||||||||||||||||||||||||||
| Dividend paid to minority shareholder | - | - | - | - | - | - | (12.6) | (12.6) | |||||||||||||||||||||
| At 31 December 2024 | 0.1 | 919.2 | (3,291.2) | 2,733.7 | (1.6) | (20.7) | 22.7 | 362.2 | |||||||||||||||||||||
Other reserves in the Balance Sheet consist of the hedging reserve, merger reserve, currency translation reserve, capital contribution reserve and non-controlling interests.
At 31 December 2024, the Group recorded a $1.0 million reduction in the value of its investment in Clean Power Hydrogen plc to reflect the market value applicable at that date.
7
KCA Deutag International Limited
Consolidated Statement of Changes in Shareholders' Equity
for the year ended 31 December 2023
| Other reserves | ||||||||||||||||||||||||||
| Share capital | Share premium | Accumulated losses | Merger reserve | Hedging reserves | Currency translation reserves | Non- controlling interests | Total equity | |||||||||||||||||||
| $m | $m | $m | $m | $m | $m | $m | $m | |||||||||||||||||||
(Note 24) | (Note 25) | |||||||||||||||||||||||||
| At 1 January 2023 | 0.1 | 918.0 | (3,123.7) | 2,733.7 | 0.8 | (4.6) | 16.4 | 540.7 | ||||||||||||||||||
| Comprehensive expense | ||||||||||||||||||||||||||
| Loss for the year | - | - | (49.7) | - | - | - | 16.0 | (33.7) | ||||||||||||||||||
| Other comprehensive (expense)/income | ||||||||||||||||||||||||||
| Fair value movement on cash flow hedges | - | - | - | - | 0.2 | - | - | 0.2 | ||||||||||||||||||
| Exchange differences on foreign operations | - | - | - | - | - | (5.9) | - | (5.9) | ||||||||||||||||||
| Remeasurements on defined benefit pension schemes | - | - | (7.8) | - | - | - | - | (7.8) | ||||||||||||||||||
| Remeasurement on value of investment (Note 14) | - | - | (3.7) | - | - | - | - | (3.7) | ||||||||||||||||||
| Total other comprehensive expense | - | - | (11.5) | - | 0.2 | (5.9) | - | (17.2) | ||||||||||||||||||
| Total comprehensive expense | - | - | (61.2) | - | 0.2 | (5.9) | 16.0 | (50.9) | ||||||||||||||||||
| Transactions with owners | ||||||||||||||||||||||||||
| Capital contribution arising from Group restructuring | - | - | 1.2 | - | - | - | - | 1.2 | ||||||||||||||||||
| Dividend paid to minority shareholder | - | - | (0.5) | - | - | - | (14.3) | (14.8) | ||||||||||||||||||
| Issue of shares | - | 1.2 | - | - | - | - | - | 1.2 | ||||||||||||||||||
| At 31 December 2023 | 0.1 | 919.2 | (3,184.2) | 2,733.7 | 1.0 | (10.5) | 18.1 | 477.4 | ||||||||||||||||||
Non-controlling interests represent the share of profits or losses attributable to non-Group shareholders of certain subsidiaries.
During 2023 the Company received $1.2 million from the trustees administering the 2020 restructuring of the KCA Deutag Group.
8
KCA Deutag International Limited
Consolidated Cash Flow statements
for the years ended 31 December 2024 and 2023
| 2024 | 2023 | ||||||||||
| Note | $m | $m | |||||||||
| Cash generated from (used in) operating activities | 28 | 378.7 | 315.2 | ||||||||
| Tax paid | (60.7) | (27.1) | |||||||||
| Net cash generated from (used in) operating activities | 318.0 | 288.1 | |||||||||
| Cash flows from investing activities | |||||||||||
| Acquisition of subsidiary, net of cash acquired | (14.0) | (63.5) | |||||||||
| Purchase of property, plant and equipment | (151.3) | (122.2) | |||||||||
| Proceeds from sale of property, plant and equipment | 0.3 | 0.5 | |||||||||
| Purchase of intangible assets | (3.0) | (3.0) | |||||||||
| Investment in an unconsolidated entity | (0.1) | (0.1) | |||||||||
| Interest received | 7.3 | 7.3 | |||||||||
| Net cash (used in) generated from investing activities | (160.8) | (181.0) | |||||||||
| Cash flows from financing activities | |||||||||||
| Proceeds from issue of ordinary shares | - | 1.2 | |||||||||
| Drawdown from Oman debt | 45.1 | 41.5 | |||||||||
| Lease payments | 29 | (70.5) | (73.9) | ||||||||
| Interest paid, including capitalised interest | (115.8) | (112.7) | |||||||||
| Dividend paid to minority shareholders | (12.6) | (14.8) | |||||||||
| Net cash used in financing activities | (153.8) | (158.7) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (2.2) | 1.0 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 1.2 | (50.6) | |||||||||
| Cash and cash equivalents at beginning of year | 230.1 | 280.7 | |||||||||
| Cash and cash equivalents at end of year | 18 | 231.3 | 230.1 | ||||||||
Cash and cash equivalents as set out in the above Cash Flow Statement include overdraft facilities which form part of the Group’s cash management strategy.
9
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 1 | General information | ||||
KCA Deutag International Limited ('the Company') is a holding company whose principal subsidiary undertakings provide drilling and related well and facilities engineering services on a worldwide basis to the energy industry.
The Company is a private company, limited by shares, incorporated in Jersey. The address of its registered office is 13-14 Esplanade, St Helier, JE2 3QA.
| 2 | Basis of preparation | ||||
The Group financial statements have been prepared under International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated financial statements have been prepared on a historical cost basis, except for investment properties, derivative financial instruments, debt and equity financial assets and contingent consideration that have been measured at fair value. A summary of the significant Group accounting policies is set out below.
The Group regularly monitors its funding position throughout the year to ensure that it has access to sufficient funds to meet its forecast cash requirements. Forecasts are regularly produced to give management’s best estimates of forward liquidity, leverage and forecast covenant compliance as defined in the Group’s loan documentation. This is done to identify risks to liquidity and covenant compliance and to enable management to formulate appropriate and timely mitigation strategies.
Subsequent to the year end, KCA Deutag International Limited and its subsidiaries (“the Group”) were sold to HP Global Holdings Limited, a subsidiary of Helmerich and Payne LLC. As part of the transaction on 16 January 2025, the majority of the Group’s external debt has been repaid replaced by an intercompany loan from Helmerich and Payne LLC.
The Directors have considered the going concern period to 30 April 2026. In assessing whether the financial statements for the Group should be prepared on the going concern basis, the Directors have considered current market conditions and the outlook for the Group. The Group has net assets at the Balance sheet date of $362.2 million (2023: $477.4 million).
Whilst the Group is expected to generate positive cashflows within the going concern period, the funding of the Group is dependent upon the overall funding position of Helmerich & Payne ("the H&P Group"). The H&P Group regularly monitors its funding position throughout the year to ensure that it has access to sufficient funds to meet its forecast cash requirements. Forecasts are regularly produced to give management's best estimates of forward liquidity, leverage and forecast covenant compliance as defined in the Group's loan documentation. This is done to identify risks to liquidity and covenant compliance and to enable management to formulate appropriate and timely mitigation strategies.
For the Group to continue as a going concern, it is reliant upon the provision of financial support from its parent. As such, the Directors have obtained written confirmation that the H&P Group intend to support the Group through the going concern period.
10
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information | ||||
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
| a) | Basis of consolidation | ||||
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company for the year to 31 December 2024. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated or deconsolidated from the effective date control is transferred to or from the Company. On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any excess of the fair values of the identifiable net assets over the cost of acquisition is recognised directly in the Income Statement.
All intra-group transactions, balances, income and expenses are eliminated on consolidation. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.
(ii) Associates and joint ventures
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in the financial statements using the equity method of accounting. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the Income Statement within operating profit and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Losses of the associates in excess of the Group’s interest in those associates are not recognised.
Any excess of the costs of acquisition over the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill and included within the carrying amount of the associate. Any excess of the Group’s share of the fair values of the identifiable net assets of the associate over the costs of acquisition is recognised directly in the Income Statement.
Where a Group company transacts with an associate, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
11
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| b) | Foreign currency translation | ||||
(i) Functional and presentation currency
The consolidated financial statements are presented in US Dollars. Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operated (the functional currency). The Company’s functional and presentation currency is the US Dollar.
The exchange rates used in respect of the major currencies in which the Group operates, compared to the US Dollar, are as follows:
| Average rate for year | Closing rate | |||||||
| GBP | 0.7827 | 0.7991 | ||||||
| NOK | 10.7402 | 11.3730 | ||||||
| EUR | 0.9252 | 0.9638 | ||||||
(ii) Transactions and balances
Transactions denominated in foreign currencies are translated and recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the Balance Sheet date. Gains and losses arising on retranslation are recognised in the Income Statement for the year, except where hedge accounting is applied.
(iii) Group companies
On consolidation, the assets and liabilities of the Group’s non US Dollar functional entities are translated at exchange rates prevailing on the Balance Sheet date. Income and expense items are translated at average monthly exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the actual transaction rate will be used).
All resulting exchange differences are recognised as a separate component of equity. Such translation differences are recognised in the Income Statement in the year in which the operation is disposed of.
(iv) Goodwill and fair value adjustments
Goodwill and fair value adjustments arising on the acquisition of a non US Dollar functional entity are treated as assets and liabilities of the non US Dollar functional entity and translated at the closing exchange rate.
| c) | Business combinations and goodwill | ||||
(i) Business combinations accounted for using the acquisition method
Business combinations are accounted for using the acquisition method. All assets and liabilities of the acquiree are measured at fair value at the date of acquisition. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed and included in administrative expenses.
Goodwill arising on acquisition (representing the excess of fair value of the consideration given over the fair value of the separable net assets acquired) is recognised as an asset and reviewed for impairment at least annually. On disposal of an entity, the attributable amount of remaining goodwill is included in the determination of profit and loss on disposal.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability will be recognised through the Income Statement. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity.
12
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
When deferred consideration is payable on the acquisition of a business, an estimate of the amount payable is made at the date of acquisition and reviewed regularly thereafter, with any subsequent change in the estimated liability being reflected in the Income Statement. Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest
13
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| c) | Business combinations and goodwill (continued) | ||||
(ii) Business combinations under common control
It is the Group’s policy to account for business combinations involving entities under common control using predecessor accounting. Under predecessor accounting, the Group has elected to include the acquired entity’s results and capital structure from the date of acquisition.
A merger reserve, recognised in equity, represents the differences on consolidation arising on the adoption of predecessor accounting. This comprises the difference between consideration paid and the book value of net assets acquired in the transaction. No additional goodwill is created or gain recognised.
| d) | Other intangible assets | ||||
Intangible assets are recognised at cost less accumulated amortisation and any provision for impairment. On acquisition of an entity, intangible assets are identified and evaluated to determine the fair value on the acquisition Balance Sheet. Amortisation is provided to write off the cost of each asset over its estimated useful life, using the straight-line method, on the following basis:
| Trade names | up to 21 years | ||||
| Customer relationships and contracts | up to 13 years | ||||
| Technology | up to 10 years | ||||
We perform an annual review of our intangible assets to determine the appropriateness of their carrying values. When determining the impairment charge for each intangible asset category management has assessed the current and likely future benefit obtained from the specific assets, taking into account the current market environment.
| e) | Property, plant and equipment | ||||
Property, plant and equipment held for use in the Group’s operations, or for administrative purposes, are stated in the Balance Sheet at cost, net of accumulated depreciation and any provision for impairment. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy.
Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write off the cost, less estimated residual value, of each asset over their estimated useful life.
Assets are depreciated by the straight line method on the following basis:
| Freehold buildings | 50 years | ||||
| Leasehold improvements - land and buildings | 50 years (or over the unexpired lease, if shorter) | ||||
| Plant, machinery and vehicles | 2-10 years | ||||
| Drilling rigs and equipment: | |||||
| - Mast and Substructure | 11-16 years | ||||
| - Rig Components | 4-11 years | ||||
| - Tubulars | 4 years | ||||
Assets in the course of construction are not depreciated until ready for use.
The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the Income Statement.
Asset lives and residual values are assessed at each Balance Sheet date. Where an impairment trigger is identified with relation to specific assets, a review is undertaken to confirm the appropriateness of the carrying value taking into account factors such as comparable asset values and available third party valuations.
14
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| f) | Goodwill impairment | ||||
The Group performs impairment reviews in respect of goodwill annually, and other intangible assets and property, plant and equipment when circumstances indicate that the carrying amount may not be recoverable. An impairment charge is recognised when the recoverable amount of an asset, calculated as the higher of the asset’s recoverable amount and its value per an independent third party valuation, is less than its carrying amount. In the absence of comparable market transactions, a discounted cash flow model would have been used to value the assets, as such a model is equivalent to what a market participant would use as a methodology for asset valuation. For the 2024 goodwill impairment assessment, a Fair Value Less Cost to Dispose calculation has been performed with reference to the transaction price achieved for the sale of the KCA Deutag business to Helmerich and Payne in January 2025.
For the purpose of impairment testing, assets are allocated to the appropriate cash generating unit ("CGU"). The CGUs are aligned to the structure the Group uses to manage its business. Cash flows are discounted in determining the recoverable amount.
| g) | Net borrowing costs and interest income | ||||
Borrowing costs directly attributable to the construction of qualifying assets such as property, plant and equipment are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised in the Income Statement in the year in which they are incurred. Interest income is accrued on a time basis, by reference to the principal amount outstanding and the effective interest rate applicable.
| h) | Investments in subsidiaries, associates and intercompany loans | ||||
Investments held as non-current assets are measured at cost less appropriate provision for impairment where the Directors consider that an impairment in value has occurred. The same process used to determine ECLs for trade and other receivables is also applied for intercompany loans (Note 16). Investments are considered for impairment at least annually. In respect of the accounting treatment for investments in associates for Group purposes see Note 3a) above.
| i) | Inventories | ||||
Inventories of spare parts which are held for use in the Group’s drilling operations are stated at weighted average cost less a provision in respect of those spares attached to the older rigs and equipment. Other inventory and work in progress are valued at the lower of cost and net realisable value. Cost is calculated using the weighted average method.
| j) | Cash and cash equivalents | ||||
Cash and cash equivalents comprise cash in hand, deposits with maturities of less than three months held with banks and bank overdrafts.
| k) | Trade receivables | ||||
Trade receivables, including contract assets, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for an expected credit loss, if applicable. When determining the level of expected credit loss provision, management consider the age of the outstanding receivable along with prior experience in relation to the specific customer as well as the jurisdiction in which the balance is due before booking any provision.
When determining the level of expected credit loss provision required in respect of trade receivable balances, management also consider the creditworthiness and probability of the default of the customer.
| l) | Taxation | ||||
The tax charge represents the sum of tax currently payable, deferred tax and management’s estimated provision for current tax claims. Tax currently payable is based on the taxable profit for the year. Taxable profit differs from the profit reported in the Income Statement due to items that are not taxable or deductible in any year and also due to items that are taxable or deductible in a different year. The Group’s liability for current tax is calculated using tax rates enacted or substantively enacted at the Balance Sheet date.
Deferred income tax is provided, using the full liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
15
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| l) | Taxation (continued) | ||||
The principal temporary differences arise from depreciation on property, plant and equipment, pension liabilities, tax losses carried forward and, in relation to acquisitions, the difference between the fair values of the net assets acquired and their tax base.
Tax rates enacted, or substantively enacted, by the Balance Sheet date are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Future taxable profits are determined based on business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
In relation to uncertain tax positions, a tax charge is created to reflect management’s best estimate of the amount payable in relation to a portfolio of tax claims and the risk of occurrence of each claim as at the Balance Sheet date.
| m) | Employee benefits | ||||
(i) Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan.
Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the Balance Sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
The interest income on scheme assets and the increase during the period in the present value of the scheme’s liabilities arising from the passage of time are included in finance income/expense.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.
Past-service costs are recognised immediately in the Income Statement.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(ii) End of service benefit accruals
As required under local legislation in a number of Middle East countries, the Group operates post-employment benefit schemes where payments are made to employees at the end of their service based on most recent salary and number of service years. These plans are not funded.
Accordingly, valuations of the obligations under the plans are carried out by an independent actuaries based on the projected unit credit method. The costs relating to such plans primarily consist of the present value of the benefits attributed on an equal basis to each year of service and the interest on this obligation in respect of employee service in previous years.
16
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| m) | Employee benefits (continued) | ||||
Current and past service costs related to post-employment benefits are recognised immediately in profit or loss while unwinding of the liability at discount rates used are recorded in profit or loss. Any changes in net liability due to actuarial valuations and changes in assumptions are taken as re-measurement in other comprehensive income.
Re-measurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised directly in other comprehensive income and transferred to retained earnings in the statement of changes in equity in the period in which they occur.
Changes in the present value of the defined benefit obligations resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs.
End of service payments are based on employees’ final salaries and allowances and their cumulative years of service, as stated under applicable national laws.
| n) | Financial assets and liabilities | ||||
Financial assets and financial liabilities are recognised on the Group’s Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
(i) Derivative financial instruments and hedge accounting
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange forward contracts and interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes.
The Group have elected to carry financial asset investments in listed equity investments at fair value through Other Comprehensive Income.
Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as either: hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); hedges of highly probable forecast transactions (cash flow hedges); or hedges of net investments in foreign operation (net investment hedges). The Group currently only uses cash flow hedges and did not enter into any fair value or net investment hedges during the reporting period.
Where hedging is to be undertaken, the Group documents at the inception of the transactions the relationship between the hedging instrument and the hedged item, as well as its risk management objective and strategy for undertaking the hedge transaction.
The Group also documents its assessment, both at hedge inception and on an on-going basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The Group performs effectiveness testing on an annual basis.
Changes in the fair value of cash flow hedges that are designated and effective as hedges of future cash flows are recognised directly in other comprehensive income and the ineffective portion is recognised immediately in the Income Statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of a non-financial asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the year.
For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the Income Statement in the same year in which the hedged item affects net profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs.
17
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| n) | Financial assets and liabilities (continued) | ||||
Fair value measurements are classified using a fair value hierarchy that reflects the significance of the inputs used in the measurements, according to the following levels:
•The fair value of the interest rate swaps is estimated based on the discounting of expected future cash flows at prevailing interest rates at the Balance Sheet date, which is classified as level 2.
•The fair value of forward currency contracts has been estimated based on market forward exchange rates at the Balance Sheet date, which is classified as level 2.
(ii) Bank borrowings
Interest-bearing bank loans and overdrafts are initially recorded at fair value including directly attributable transaction costs. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income Statement over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down and are amortised over the period of the loan.
(iii) Embedded derivatives
Embedded derivatives are recognised at fair value based on calculations using an established option pricing model, and are subsequently annually remeasured at their fair value. The carrying amount of an embedded derivative is reported within the same consolidated Balance Sheet category as the host contract.
| o) | Capital management and financing | ||||
During 2024 the Group has sought to secure long term debt financing which provides access to funds for a number of years into the future. At the Balance Sheet date, there are secured long-term debt facilities which have no significant capital repayments required until December 2025. The Group has sought to diversify its access to debt markets away from wholly traditional bank debt towards institutional debt by way of the corporate bond markets. The Group has sought to refinance these debt facilities as repayment dates get closer and to take advantage of market conditions. The Group also looked to secure debt facilities with a light covenant structure and monitors these closely. Periodic reviews of interest rate exposures are also made looking at fixed rate and variable rate exposures with the aim of maintaining a balance between fixed and variable rates. The Group also works closely with its principal shareholders to discuss potential future financing requirements. All significant growth capital expenditure is approved by the Board.
With the sale of the Group to Helmerich & Payne in January 2025, it is expected that capital management policies will be driven by Helmerich & Payne group policies.
| p) | Provisions | ||||
Provisions are measured at the net present value of the Directors’ best estimate of the expenditure required to settle the present obligation at the Balance Sheet date. A discount is applied to the provision for the time value of money where this is significant. Provisions are provided where there is a present obligation based on past events that it is probable that an outflow will be required and the financial outcome can be reliably measured.
| q) | Revenue recognition | ||||
Revenue is recognised based on the gross amount received or receivable for services provided in the normal course of business, net of value-added tax and other sales related taxes. Revenue from Land drilling, Offshore services’ platform drilling operations and Kenera operations is recognised in the accounting period in which the services are rendered, typically based on a day rate for rigs and/or manpower provided to the customer.
In Offshore services, the Group provides personnel to operate and maintain customer owned assets based on contractually agreed rates.
18
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| q) | Revenue recognition (continued) | ||||
In Land drilling, the Group typically provides the drilling rig and crew to the customer on a day rate which varies dependent on activity. In our day rate drilling contracts, we typically receive compensation and incur costs for mobilisation, equipment modification or other activities prior to the commencement of a contract. Any such compensation may be paid through a lump-sum payment or other daily compensation.
Pre-contract compensation and costs are deferred until the contract commences and then spread on a straight-line basis over the primary term of the relevant drilling contract. The deferred pre-contract compensation and costs are amortised, using the straight-line method, into income or loss over the term of the initial contract period, regardless of the activity taking place, in a manner consistent with the economics of the customer contract. Where there are no elements of up-front consideration in a drilling contract, the Group recognises revenue in line with the amount to which we are contractually able to invoice the customer for performance obligations which have been completed to date. Therefore, the IFRS 15 expedient allowing the Group to recognise revenue in line with its right to invoice its customers has been applied in preparing these financial statements.
Mobilisation costs which are incurred in relation to the mobilisation of new rigs are capitalised and depreciated over the life of the rig. Mobilisation costs incurred on moving rigs to locations under a new customer contract are amortised on a straight line basis over the primary period of the new contracts.
Revenues which are expected to be incurred or earned in relation to the demobilisation of rigs are accrued over the primary term of the drilling contract. Costs in relation to the demobilisation of rigs are expensed as incurred.
Any rig move costs for moving the rigs to new locations while operating under a drilling contract are expensed as incurred, with the relevant revenue being recognised when the rig move is complete.
Early termination fees in relation to Land drilling contracts are recognised as a point in time revenue stream at the time they are agreed with the customer and the Group has no future performance obligations under the relevant contract.
Incentive income is recognised when earned. Incentive income is earned in respect of contract Key Performance Indicators (KPIs) detailed in customer contracts, and revenue is recognised only when a KPI has been achieved and achievement has been agreed with a customer.
In Kenera, the Group provides personnel on a time-cost basis to customers to work on engineering projects as well as a number of contracts that are accounted for as engineering contracts as described in s) below.
Recognition of revenue from Kenera engineering contracts is described in s) below. For all other Kenera revenue streams revenue is recognised based upon completion of the relevant service or delivery of goods.
The Group recognises flow through revenue, which relates to reimbursable costs, based on the gross amount received or receivable in respect of its performance under the sales contract with the customer.
Interest income is accrued on a time basis, by reference to the principal amount outstanding and the effective interest rate applicable.
| r) | Engineering contracts | ||||
Where the outcome of a long term engineering contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the Balance Sheet date dependent on the relevant provisions in the contract with the customer. This is measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion or the contractual position prevents this treatment in accordance with IFRS 15, which results in revenue being recognised at a point in time rather than with reference to the stage of completion of the contract. Revenue variations in contract work, claims and incentive payments are included to the extent that they have been agreed in writing by the customer. Typically the performance obligation in respect of these contracts is fulfilled on delivery.
When it is probable that total contract costs will exceed total revenue, the expected loss is recognised in full as an expense immediately.
Deferred income represents the value of advance payments received from customers for engineering contracts which are in excess of the value of work done at the Balance Sheet date.
19
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| s) | Leases | ||||
Where the Group is a lessee almost all leases are recognised on the Balance Sheet. An asset (the right to use the leased item) and a financial liability to pay rentals are recognised.
The lease liability is measured at the present value of the future lease payments. The lease term includes all periods covered by extension options if exercise of the extension is reasonably certain. The present value is calculated based on an appropriate discount rate being the Group’s incremental borrowing rate.
The right-of-use asset is initially measured based on the calculated lease liability plus any indirect costs, payments at or prior to lease commencement, dilapidation provisions less any lease incentives. Subsequent measurement is at cost less depreciation and any provision for impairment. The right-of-use asset is also adjusted based on any re-measurement of the lease liability.
The Group has also chosen to take advantage of the exemptions as allowed in the standard for certain short term leases and leases of low value assets:
i) Short term leases
This is defined as a lease which has a lease term of 12 months or less and does not contain a purchase option. In terms of assessing the duration of a lease, if a lease is more likely than not to be extended to a duration in excess of 12 months, then lessee accounting under IFRS 16 will apply.
ii) Low-value assets
The standard does not specify a value which would ensure an asset was of low-value however this is likely to apply to items such as tablets and personal computers and small items of office furniture and telephones. An asset can only be low-value if the lessee can benefit from the use of the asset on its own and the asset is not highly dependent on other assets.
Leases which meet the exemptions above continue to be charged to profit or loss on a straight-line basis over the period of the lease (net of any incentives received from the lessor).
| t) | Trade payables | ||||
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are initially recognised at fair value and subsequently held at amortised cost.
| u) | Exceptional items | ||||
Exceptional items shown within operating profit are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s financial performance. Transactions which may give rise to operational exceptional items include write-downs or impairments of assets including goodwill, restructuring costs, asset or business disposals and litigation settlements.
Exceptional items shown below operating profit are those significant non-operational items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s financial performance. Transactions which may give rise to non-operational exceptional items include gains or losses arising on financial restructuring.
| v) | Share capital | ||||
Ordinary shares and share premiums are classified as equity.
| w) | Dividends | ||||
Dividend distributions on ordinary shares are recognised as a liability in the Group’s financial statements when they have been approved by Company’s shareholders. Interim dividends are recognised when paid. Dividend income is recognised when the right to receive payment is established.
20
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 3 | Summary of material accounting policy information (continued) | ||||
| x) | Disclosure of impact of accounting standards (continued) | ||||
i) New and amended standards adopted by the group
The Group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 January 2024:
•Classification of Liabilities as Current or Non- Current - amendments to IAS 1
•Lease Liability in a Sale and Leaseback - amendments to IFRS 16
•Non-current Liabilities with Covenants - amendments to IAS
•Supplier Finance Arrangements - amendments to IAS 7 and IFRS 7
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
ii) New standards, amendments and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2024 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
| y) | Discontinued operations | ||||
The results of discontinued operations are reflected in a single line on the income statement. Additional disclosures are provided in Note 5. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.
| 4 | Significant accounting judgements and estimates | ||||
| a) | Critical accounting estimates and assumptions | ||||
(i)Estimated impairment of non current assets
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in Note 3g). The recoverable amounts of the cash generating units (CGUs) have been determined based on value in use calculations. These calculations require the use of certain estimates of the future profitability and cash flows of each CGU. These are subject to the impact of changing market conditions, our competitors and the future operational performance of the Group. See Note 12 for the disclosure, key assumptions and sensitivity analysis in relation to the impairment calculation. This applies to 2023 only. For 2024, the recoverable amounts were calculated with reference to the transaction to sell the KCA Deutag Group to Helmerich and Payne LLC.
During the year ended 31 December 2024 a review was undertaken of the Group’s intangible assets to determine the appropriateness of their carrying values. This review took account of current as well as forecast market conditions experienced by the Group. The benefit obtained from our customer relationships and contracts and trade names was assessed with respect to each business unit.
During the year ended 31 December 2024 a review was undertaken of the carrying values of the Group’s Land drilling rigs. Factors considered included the age of the rig, client contract backlog and forecast utilisation, comparable rig data across the Group’s fleet as well as current and forecast market conditions within the country in which the rig operates.
(ii) Retirement benefit obligations
The Group has an obligation to pay pension benefits to certain employees and former employees under defined benefit pension arrangements. The cost of these benefits and the present value of the obligation depend on a number of factors, including life expectancy, future salary increases, inflation, asset valuations and the discount rate on high quality corporate bonds. Management, with the assistance of qualified actuaries, estimates these factors in determining the net pension obligation at each Balance Sheet date. The assumptions reflect historical experience and estimated future trends. See Note 27 for the disclosures and key assumptions in relation to the retirement benefit obligations.
21
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 4 | Significant accounting judgements and estimates (continued) | ||||
| b) | Critical judgements in applying the accounting policies | ||||
(i)Income taxes
The Group is subject to income taxes in numerous jurisdictions and judgement is required in determining the provision for uncertain tax positions in respect of income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
(ii)Recoverability of deferred tax balances
The Group exercises judgement in determining if deferred tax assets can be recognised. They will only be recognised to the extent that it is probable that future taxable profits will be available. These are determined based on business plans for individual subsidiaries in the Group.
(iii)Provisions and contingent liabilities
We exercise judgement in determining the timing and quantum of all provisions to be recognised. Our assessment includes consideration of whether we have a present obligation, whether payment is probable and if so whether the amount can be estimated reliably. As part of this assessment, we also assess the likelihood of contingent liabilities occurring in the future which are not recognised as liabilities on our Balance Sheet. By their nature, contingent liabilities will be resolved only when one or more uncertain future events occur or fail to occur. We assess the likelihood that a potential claim or liability will arise and also quantify the possible range of financial outcomes.
(iv) Revenue recognition - performance obligations satisfied over time
Performance obligations arising from lump sum upfront payments such as mobilisation and demobilisation fees or customer funded capital expenditure, are amortised on a straight line basis over the primary period of the drilling contract. This treatment, in the Group’s judgement, is consistent with the economics of the contract agreed with the customer.
22
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 5 | Business unit reporting | ||||
The Group is currently organised into three continuing business segments, which are as follows:
| Operating Business Unit | Principal Activities | ||||
| Offshore services | the provision of offshore platform drilling services | ||||
| Kenera | the provision of design, construction and components and engineering services to traditional hydrocarbon and energy transition markets | ||||
| Land drilling | the provision of land rig drilling services | ||||
Business units are identified as those that when aggregated represent at least 75% or more of the Group’s external revenue. Discontinued operations represent the results of the Group’s previously operated Russian businesses which were exited during 2022. Central overheads have been shown separately to provide additional information as a reconciliation to the primary statements. Central overheads consist of administration and related expenses of the Group. The KPI used to measure divisional profitability is EBITDA, before exceptional items.
EBITDA, a non-GAAP profit measure, is used as a simple proxy for pre-tax cash flows from operating activities. It is calculated as operating profit before exceptional items, share of associates’ post-tax results, interest, tax, depreciation, impairment and amortisation.
The following tables present revenue, profit (loss) and certain asset and liability information regarding the Group’s business units for the year ended 31 December 2024.
| Year ended 31 December 2024 | Offshore Services | Kenera | Land Drilling | Central Overheads | Eliminations | Total | ||||||||||||||
| $m | $m | $m | $m | $m | $m | |||||||||||||||
| Revenue | ||||||||||||||||||||
| External revenue | 585.4 | 115.4 | 1,010.8 | - | - | 1,711.6 | ||||||||||||||
| Inter segment revenue | - | 67.5 | 0.7 | 0.5 | (68.7) | - | ||||||||||||||
| Total revenue | 585.4 | 182.9 | 1,011.5 | 0.5 | (68.7) | 1,711.6 | ||||||||||||||
| Results | ||||||||||||||||||||
| EBITDA | 104.0 | 10.5 | 318.9 | (17.8) | - | 415.6 | ||||||||||||||
| Exceptional items - net operating | - | - | - | (85.8) | - | (85.8) | ||||||||||||||
| Depreciation of property, plant and equipment | (2.6) | (1.5) | (118.9) | (12.8) | - | (135.8) | ||||||||||||||
| Depreciation of right of use assets | (4.8) | (0.2) | (55.9) | (1.1) | - | (62.0) | ||||||||||||||
| Intangible asset amortisation | (0.1) | (1.0) | (4.4) | (2.3) | - | (7.8) | ||||||||||||||
| Net finance costs | - | - | - | (156.2) | - | (156.2) | ||||||||||||||
| Profit (loss) before taxation | 96.5 | 7.8 | 139.7 | (276.0) | - | (32.0) | ||||||||||||||
| Taxation | (53.6) | |||||||||||||||||||
| Loss for the year | (85.6) | |||||||||||||||||||
Assets and liabilities | ||||||||||||||||||||
| Segment assets | 403.5 | 170.0 | 1,543.6 | 20.4 | - | 2,137.5 | ||||||||||||||
| Unallocated assets | 225.4 | |||||||||||||||||||
| Total assets | 2,362.9 | |||||||||||||||||||
| Segment liabilities | (135.8) | (63.5) | (488.0) | (113.8) | - | (801.1) | ||||||||||||||
| Unallocated liabilities | (1,199.6) | |||||||||||||||||||
| Total liabilities | (2,000.7) | |||||||||||||||||||
| Other segment information | ||||||||||||||||||||
| Capital expenditure | ||||||||||||||||||||
| Property, plant and equipment - total | 0.6 | 0.5 | 150.0 | 0.2 | - | 151.3 | ||||||||||||||
| Intangible assets | - | 1.4 | 0.3 | 1.3 | - | 3.0 | ||||||||||||||
23
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 5 | Business unit reporting (continued) | ||||
The following tables present revenue, profit (loss) and certain asset and liability information regarding the Group’s business units for the year ended 31 December 2023.
| Year ended 31 December 2023 | Offshore Services | Kenera | Land Drilling | Central Overheads | Eliminations | Total | ||||||||||||||
| $m | $m | $m | $m | $m | $m | |||||||||||||||
| Revenue | ||||||||||||||||||||
| External revenue | 583.5 | 90.2 | 940.8 | - | - | 1,614.5 | ||||||||||||||
| Inter segment revenue | - | 55.6 | 0.7 | 0.5 | (56.8) | - | ||||||||||||||
| Revenue - continuing operations | 583.5 | 145.8 | 941.5 | 0.5 | (56.8) | 1,614.5 | ||||||||||||||
| EBITDA - total | 94.2 | 7.8 | 305.8 | (23.7) | - | 384.1 | ||||||||||||||
| EBITDA - continuing operations | 384.1 | |||||||||||||||||||
| Exceptional items - net operating | (0.4) | 1.7 | 8.5 | (23.1) | - | (13.3) | ||||||||||||||
| Depreciation of property, plant and equipment | (2.2) | (1.5) | (109.8) | (10.3) | - | (123.8) | ||||||||||||||
| Depreciation of right of use assets | (4.8) | (0.2) | (56.8) | (1.1) | - | (62.9) | ||||||||||||||
| Intangible asset amortisation | (0.1) | (1.1) | (6.3) | (1.3) | - | (8.8) | ||||||||||||||
| Operating profit (loss) - total | 86.7 | 6.7 | 141.4 | (59.5) | - | 175.3 | ||||||||||||||
Operating profit (loss) - discontinued operations | 8.5 | |||||||||||||||||||
| Operating profit (loss) - continuing operations | 166.8 | |||||||||||||||||||
| Net finance costs | - | - | - | (161.8) | - | (161.8) | ||||||||||||||
Profit (loss) before taxation | 86.7 | 6.7 | 141.4 | (221.3) | - | 13.5 | ||||||||||||||
| Profit (loss) before taxation - discontinued operations | 8.5 | |||||||||||||||||||
| Profit (loss) before taxation - continuing operations | 5.0 | |||||||||||||||||||
| Taxation | (47.2) | |||||||||||||||||||
Loss for the year | (42.2) | |||||||||||||||||||
| Profit for the year - discontinued operations | 8.5 | |||||||||||||||||||
| (Loss) for the year - continuing operations | (33.7) | |||||||||||||||||||
Assets and liabilities | ||||||||||||||||||||
| Segment assets | 395.4 | 145.0 | 1,581.0 | 22.0 | - | 2,143.4 | ||||||||||||||
| Unallocated assets | 233.5 | |||||||||||||||||||
| Total assets | 2,376.9 | |||||||||||||||||||
| Segment liabilities | (117.9) | (69.7) | (562.0) | (27.5) | - | (777.1) | ||||||||||||||
| Unallocated liabilities | (1,122.4) | |||||||||||||||||||
| Total liabilities | (1,899.5) | |||||||||||||||||||
| Other segment information | ||||||||||||||||||||
| Capital expenditure | ||||||||||||||||||||
| Property, plant and equipment - total | 0.2 | 0.2 | 121.8 | 0.4 | - | 122.6 | ||||||||||||||
| Intangible assets - total | - | 1.0 | - | 2.0 | - | 3.0 | ||||||||||||||
| 2024 | 2023 | |||||||
| Included in the above revenue figures are the following amounts of flow-through turnover: | $m | $m | ||||||
| Offshore services | 91.9 | 110.2 | ||||||
| Kenera | 16.4 | 21.0 | ||||||
| Land drilling | 12.5 | 9.9 | ||||||
Flow-through turnover is defined as turnover in respect of the purchase of equipment and materials on behalf of customers which is recharged at minimal or no margin. The Group is a principal for these agreements.
The element of revenue recognised over time is not material.
Unallocated assets and liabilities represent investments, cash, derivatives, tax and borrowings.
All inter-segment revenues are priced on an arm’s length basis and are fully eliminated on consolidation. Results arising from revenues between segments are not material.
24
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 6 | Business combinations | ||||
During 2022 the Group signed a sale and purchase agreement to acquire Saipem SPA's Onshore Drilling Business. This acquisition is being completed in a number of phases across 2022 to 2024. On 30 June 2024, the Group completed the final stage of the Saipem Onshore Drilling acquisition following the transfer of the remaining six rigs in Argentina, Kazakhstan and Romania (Phase 4) where 100% of the ordinary share capital of each company was acquired. The difference between the net assets acquired and the allocated consideration from the Phase 4 completion, was accounted for as a reduction to the overall goodwill previously recognised rather than as a credit to the current year profit or loss, because it arose due to the preliminary allocation of the consideration between the phases in the prior year that has now been finalised.
The fair value of the identifiable assets and liabilities of the acquired group as at the date of acquisition are set out in the table below. the cash outflow of $14.0 million per the Cash Flow Statements represents the cash consideration paid to the sellers.
Total Fair value 2023 | Phase 4 2024 | Total Fair value 2024 | |||||||||
| $m | $m | $m | |||||||||
| Assets | |||||||||||
| Property, plant and equipment | 595.0 | 23.3 | 618.3 | ||||||||
| Right of use leased assets | 8.2 | - | 8.2 | ||||||||
| Intangible assets | 22.8 | - | 22.8 | ||||||||
| Inventories and work in progress | 39.2 | 0.6 | 39.8 | ||||||||
| Trade and other receivables | 104.0 | - | 104.0 | ||||||||
| Deferred tax asset | 13.2 | - | 13.2 | ||||||||
782.4 | 23.9 | 806.3 | |||||||||
| Liabilities | |||||||||||
| Trade and other payables | 88.8 | 1.3 | 90.1 | ||||||||
| Deferred income | 7.4 | - | 7.4 | ||||||||
| Tax liabilities | 1.2 | - | 1.2 | ||||||||
| Deferred tax liability | 53.2 | - | 53.2 | ||||||||
150.6 | 1.3 | 151.9 | |||||||||
| Total identifiable net assets | 631.8 | 22.6 | 654.4 | ||||||||
| Goodwill arising on acquisition | 14.3 | (8.6) | 5.7 | ||||||||
| Purchase consideration transferred | 646.1 | 14.0 | 660.1 | ||||||||
| Purchase consideration | |||||||||||
| Cash | 540.6 | 14.0 | 554.6 | ||||||||
| Less cash acquired | (15.0) | - | (15.0) | ||||||||
| Shares issued, at fair value | 92.5 | - | 92.5 | ||||||||
| Other | 28.0 | - | 28.0 | ||||||||
| Total consideration | 646.1 | 14.0 | 660.1 | ||||||||
Shares representing 10% of the voting rights were issued in 2022 by the Company to the seller as part of the consideration on behalf of the Group.
The revenue included in the consolidated income statement of 2024 contributed by the whole group acquired under this transaction including Phase 4 was $549.4 million (2023: $518.0 million). The acquired group also contributed EBITDA of $201.3 million (2023: $197.2 million) over the same period.
If the acquired group had been consolidated from 1 January 2024, the consolidated income statement would include full year revenue of $563.6 million (2023: $568.7 million) and EBITDA of $204.4 million (2023: $202.3 million) resulting in statutory revenue of $1,722.4 million (2023: $1,665.2 million) and EBITDA of $333.6 million (2023: $390.7 million) for continuing operations.
25
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 7 | Finance costs - net | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
Interest payable on bank borrowings | (138.6) | (129.3) | ||||||
Less: amounts included in the cost of drilling rigs & equipment | 1.7 | 0.8 | ||||||
Interest payable on finance leases | (12.5) | (11.6) | ||||||
| Commitment fees | (4.2) | (4.3) | ||||||
| Amortisation of arrangement fees | (4.9) | (4.6) | ||||||
| Other finance costs (a) | (9.9) | (10.3) | ||||||
| Exchange losses (b) | (2.5) | (10.2) | ||||||
| Finance costs | (170.9) | (169.5) | ||||||
| Bank interest receivable | 7.3 | 7.7 | ||||||
| Exchange gains (c) | 7.4 | - | ||||||
| Finance income | 14.7 | 7.7 | ||||||
| Finance costs - net | (156.2) | (161.8) | ||||||
a) Other finance costs include guarantee fees of $7.3 million (2023: $8.3 million).
b) Exchange losses include the exchange movements during the year on cash held during the year in Naira in Nigeria, primarily from the translation losses incurred in the conversion and repatriation of the cash out of Nigeria. The exchange losses also include the exchange movements on cash held during the year in Kwanzas in Angola and in Pesos in Argentina.
c) Exchange gains include the exchange movements during the year on non-functional currency pension liabilities which are largely denominated in Euros, and on non-functional currency inter-company positions.
| 8 | (Loss) before taxation | ||||
| 2024 | 2023 | |||||||
| The following items have been included in arriving at the Group’s (loss) before taxation: | $m | $m | ||||||
| Included within cost of sales: | ||||||||
| - Cost of inventories consumed | 90.0 | 44.5 | ||||||
| - Depreciation of property, plant and equipment (Note 11) | 135.7 | 123.8 | ||||||
| - Depreciation of right of use assets (Note 29) | 62.0 | 62.9 | ||||||
| - Net gain on disposal of property, plant and equipment | (0.1) | (0.3) | ||||||
| - Net foreign exchange operating loss | 0.5 | 1.1 | ||||||
| Included within both cost of sales and administration expenses: | ||||||||
- Employee benefit expense - cost of sales (Note 26) | 27.9 | 29.1 | ||||||
- Employee benefit expense - administration expenses (Note 26) | 666.7 | 587.1 | ||||||
| 694.6 | 617.2 | |||||||
Loss/(gain) on financial and contract assets (Note 16) | 0.1 | (3.0) | ||||||
Amortisation of other intangible assets (Note 13) | 7.8 | 8.8 | ||||||
| 9 | Taxation | ||||
| 2024 | 2023 | |||||||
$m | $m | |||||||
| Current tax | 48.4 | 37.7 | ||||||
| Adjustments in respect of previous years | (0.2) | 1.4 | ||||||
| 48.2 | 39.1 | |||||||
| Deferred tax | 2.8 | 16.4 | ||||||
| Adjustments in respect of previous years | 2.6 | (8.3) | ||||||
| 5.4 | 8.1 | |||||||
| Total tax charge | 53.6 | 47.2 | ||||||
26
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 9 | Taxation (continued) | ||||
The tax charge for the year varied from the standard effective rate of corporation tax for 2024 of 20% (2023: 20%) due to the following factors:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| (Loss) before taxation | (32.0) | 13.5 | ||||||
| (Loss) before taxation at standard effective rate of corporation tax of 20% (2023: 20%) | (6.4) | 2.7 | ||||||
| Effects of: | ||||||||
| Adjustments in respect of previous years | 2.4 | (0.3) | ||||||
| Reallocation of deferred tax through other comprehensive income | - | (6.6) | ||||||
| Non-recognition of current year losses | 4.7 | 9.6 | ||||||
| Derecognition/(recognition) of UK deferred tax asset | - | 6.1 | ||||||
| Deferred tax only adjustments | - | 0.8 | ||||||
| Deferred tax on future remittances | 5.0 | - | ||||||
| Deemed profit tax on overseas profits | 11.7 | 7.0 | ||||||
| Different effective tax rates on overseas profits | (7.0) | (10.9) | ||||||
| Movement in deferred tax not recognised | 2.4 | 4.7 | ||||||
| Deferred tax not recognised on restricted interest | 16.6 | 30.4 | ||||||
| Non-deductible expenses | 16.3 | - | ||||||
| Other permanent differences | 7.9 | 3.7 | ||||||
| Total tax charge | 53.6 | 47.2 | ||||||
The Group's core businesses are Saudi Arabia (Land) and Azerbaijan (Offshore) therefore the above total tax charge has been reconciled to the standard corporate tax rate of these countries at 20% rather than the UK statutory rate of 25%.
Non-deductible expenses of $16.3 million were all incurred in connection with the acquisition of the Group by H&P Group.
Other permanent differences relate to legal and professional fees (not related to the above mentioned acquisition), foreign exchange and transfer pricing adjustments.
The Group has substantial activities in overseas jurisdictions where different rates of tax apply. The Group’s effective rate of tax is therefore subject to fluctuations depending upon where the Group obtains contracts, the effective tax rates in the countries concerned and the availability of double tax relief. In many countries the Group’s tax liability is calculated on the profits earned in local currency including exchange differences on the translation of US Dollar assets and liabilities into the local currency.
The Company, KCA Deutag International Limited, is tax resident in United Kingdom.
Summary of current tax assets and liabilities
The main UK corporation tax rate, substantively enacted on 24 May 2021, increased from 19% to 25% from 1 April 2023.
| Summary of current tax liabilities: | 2024 | 2023 | ||||||
| $m | $m | |||||||
| At 1 January | 33.0 | 21.6 | ||||||
| Charge to Income Statement - continuing | 48.2 | 39.1 | ||||||
| Tax paid | (60.7) | (27.1) | ||||||
| Exchange and other movements | 3.2 | (0.6) | ||||||
| At 31 December | 23.7 | 33.0 | ||||||
Net income tax liabilities in the Group Balance Sheet include $10.1 million (2023: $9.1 million) relating to uncertain tax positions where management has had to exercise judgement in determining the most likely outcome in respect of the relevant issue. Due to the uncertainty associated with such tax positions, it is possible that at a future date, on conclusion of these open tax positions, the final outcome may vary significantly. While a range of outcomes is reasonably possible, based on management’s historic experiences of these issues, we believe a likely range of outcomes is additional liabilities of up to $1.1 million and a reduction in liabilities of around $4.0 million. The range of sensitivities depends upon quantification of the liability, risk of technical error and difference in approach taken by tax authorities in different jurisdictions.
27
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 9 | Taxation (continued) | ||||
Pillar Two
On 20 June 2023, the UK Finance Bill was substantively enacted in the UK, including legislation to implement the OECD Pillar Two income taxes rules. The Group is within the scope rules and the first period for which a Pillar Two tax return will be required for the Group is the accounting period ending on the 31 December 2024.
The Group has applied the exception in the Amendments to IAS 12 issued May 2023 and has neither recognised nor disclosed information about deferred tax assets or liabilities relating to Pillar Two income taxes.
The Group has performed the necessary analysis in preparation of complying with the Pillar Two rules for the year ended 31 December 2024. Based on the results of this, the Group has identified one jurisdiction which does not satisfy the Safe Harbour provisions, however, this is not expected to give rise to any top up tax liability under the Pillar Two rules.
| 10 | Exceptional items | ||||
| 2024 | 2023 | ||||||||||
| Exceptional items included in operating profit (loss) | $m | $m | |||||||||
| Reorganisation costs | (i) | (76.5) | (5.7) | ||||||||
| Kenera dispute | (ii) | - | 0.9 | ||||||||
| Saipem integration and transaction costs | (iii) | (9.3) | (18.5) | ||||||||
| Other | (iv) | - | 0.7 | ||||||||
| Gain on disposal of Kenera prototype | (v) | - | 0.8 | ||||||||
| Net charge | (85.8) | (21.8) | |||||||||
i) Reorganisation costs in 2024 of $76.5 million (2023: $5.7 million) primarily relate to the Group’s cost reduction, restructuring and redundancy expenditure along with professional fees associated with the Group’s strategic activities, including looking at potential mergers and acquisitions. Included within reorganisation costs for 2024 are accrued amounts in respect of bonuses and advisor fees totalling $63.6 million in relation to the transaction to sell the Group to H&P Group.
ii) In 2023 the Group booked a credit of $0.9 million relating to the settlement of contractual disputes with customers and suppliers in its Kenera business.
iii) Integration and transaction costs of $9.3 million (2023: $18.5 million) are associated with the purchase of the Saipem Onshore Drilling business.
iv) In 2023 included within other exceptional items is a gain of $1.0 million recognised in relation to the cash generated from the sales of Senior Secured Notes which have gone unclaimed since the Group debt restructuring completed in 2020.
v) In 2023 the Group booked a credit of $0.8 million in relation to a gain arising on the disposal of a Kenera prototype.
28
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 11 | Property, plant and equipment | ||||
Land and buildings- long leasehold improvements and freehold | Drilling rigs and equipment | Plant, machinery and vehicles | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Cost | ||||||||||||||
| At 1 January 2024 | 41.5 | 1,968.0 | 88.7 | 2,098.2 | ||||||||||
| Additions arising on acquisitions | - | 23.3 | - | 23.3 | ||||||||||
| Additions at cost | - | 146.4 | 6.6 | 153.0 | ||||||||||
| Disposals | - | (21.2) | (1.7) | (22.9) | ||||||||||
| Exchange adjustments | 0.5 | 4.2 | (4.2) | 0.5 | ||||||||||
| At 31 December 2024 | 42.0 | 2,120.7 | 89.4 | 2,252.1 | ||||||||||
| Accumulated depreciation and impairment | ||||||||||||||
| At 1 January 2024 | 11.3 | 1,131.2 | 7.4 | 1,149.9 | ||||||||||
| Charge for year | 1.1 | 130.5 | 4.1 | 135.7 | ||||||||||
| Disposals | - | (21.1) | (1.7) | (22.8) | ||||||||||
| Exchange adjustments | 0.2 | 4.8 | (4.0) | 1.0 | ||||||||||
| At 31 December 2024 | 12.6 | 1,245.4 | 5.8 | 1,263.8 | ||||||||||
| Net carrying amount | ||||||||||||||
| At 31 December 2024 | 29.4 | 875.3 | 83.6 | 988.3 | ||||||||||
Land and buildings- long leasehold improvements and freehold | Drilling rigs and equipment | Plant, machinery and vehicles | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Cost | ||||||||||||||
| At 1 January 2023 | 38.2 | 1,746.1 | 83.9 | 1,868.2 | ||||||||||
| Additions arising on acquisitions | - | 107.8 | 1.5 | 109.3 | ||||||||||
| Additions at cost | 3.0 | 114.6 | 5.0 | 122.6 | ||||||||||
| Disposals | - | (3.2) | (0.5) | (3.7) | ||||||||||
| Exchange adjustments | 0.3 | 2.7 | (1.2) | 1.8 | ||||||||||
| At 31 December 2023 | 41.5 | 1,968.0 | 88.7 | 2,098.2 | ||||||||||
| Accumulated depreciation | ||||||||||||||
| At 1 January 2023 | 9.4 | 1,013.2 | 4.6 | 1,027.2 | ||||||||||
| Charge for the year | 1.7 | 118.1 | 4.0 | 123.8 | ||||||||||
| Disposals | - | (2.0) | (0.1) | (2.1) | ||||||||||
| Exchange adjustments | 0.2 | 1.9 | (1.1) | 1.0 | ||||||||||
| At 31 December 2023 | 11.3 | 1,131.2 | 7.4 | 1,149.9 | ||||||||||
| Net carrying amount | ||||||||||||||
| At 31 December 2023 | 30.2 | 836.8 | 81.3 | 948.3 | ||||||||||
As at 31 December 2024 cumulative capitalised interest of $2.5 million (2023: $0.8 million) is included in the carrying value of drilling rigs and equipment. There were two loans relating to capitalised interest in 2024. The rates of interest were 6.25% and 7.00% on these loans.
In relation to assets in the course of construction as at 31 December 2024, there are amounts included as follows: $121.5 million (2023: $92.7 million) included in drilling, rigs and equipment; $1.4 million (2023: $1.8 million) in plant, machinery and vehicles. No depreciation has been charged in respect of these assets.
29
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 12 | Goodwill | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Cost and carrying amount | ||||||||
As at 1 January | 374.1 | 391.1 | ||||||
| Arising on acquisition of Saipem Onshore Drilling business | (8.6) | (28.6) | ||||||
| Reclassification from intangible assets | - | 11.6 | ||||||
| At 31 December 2024 | 365.5 | 374.1 | ||||||
The negative movement on goodwill in 2024 was due to the final phase of the sale and purchase agreement to acquire Saipem SPA's Onshore Drilling Business (see note 6).
The carrying amounts of goodwill by business segment are Offshore services $205.2 million (2023: $205.2 million), Land drilling $103.4 million (2023: $112.0 million), and Kenera $56.9 million (2023: $56.9 million). The Directors will continue to keep the carrying value of goodwill, intangible and tangible assets under review in the coming year. There are no impairment charges in 2024.
Accumulated impairments as at 31 December 2024 for each CGU are as follows: Offshore services $229.6 million (2023: $229.6 million); Land drilling $613.2 million (2023: $613.2 million) and Kenera $319.0 million (2023: $319.0 million).
The Group tests goodwill annually for impairment or more frequently if there are any indications that goodwill may be impaired. Goodwill acquired through business combinations is allocated, at acquisition, to relevant CGUs.
For 2024, the recoverable amounts of the CGUs have been determined from an allocation of the c. $2.0 billion fair value less costs to dispose received for the sale of the entire KCA Deutag business to Helmerich & Payne, which completed in January 2025. For 2023, recoverable amounts were determined from discounted cash flow calculations. The key assumptions for the discounted cash flow calculations are those regarding discount rates, growth rates, rig day rates, rig utilisation and capital investment. Management estimates discount rates using post tax rates that reflect current market assessments of the time value of money and risks specific to each of the CGUs.
| Offshore services | Land drilling | Kenera | ||||||||||||
| Recoverable amount of the CGU ($ million) | 2024 | 672.0 | 1,167.2 | 133.3 | ||||||||||
| 2023 | 385.3 | 1,294.6 | 456.1 | |||||||||||
| Carrying value of goodwill ($ million) | 2024 | 205.2 | 103.4 | 56.9 | ||||||||||
| 2023 | 205.2 | 112.0 | 56.9 | |||||||||||
| Headroom ($ million) | 2024 | 436.2 | 162.2 | 33.1 | ||||||||||
| 2023 | 107.3 | 276.3 | 381.4 | |||||||||||
The Group prepared updated financial forecasts in 2023, including cash flows for five years and extrapolated cash flows for the period beyond the initial five year plan based on expected growth rates for each CGU. These forecasts took into account current market conditions combined with management’s view of future market conditions including rig day rates and rig utilisations, and capital investment. A terminal value has been applied to take account of the expected growth of each CGU into perpetuity.
Key assumptions used in the 2023 impairment test were:
| Offshore services | Land drilling | Kenera | ||||||||||||
| Revenue growth rate | 2023 | (2.9)% | 4.8% | 46.1% | ||||||||||
| Discount rate (pre tax) | 2023 | 18.0% | 16.7% | 10.5% | ||||||||||
| Discount rate (post tax) | 2023 | 12.5% | 13.0% | 10.0% | ||||||||||
| EBITDA margin | 2023 | 18.1% | 34.8% | 12.7% | ||||||||||
| Annual undiscounted free cash flow ($ million) | 2023 | 40.0 | 148.6 | 25.5 | ||||||||||
| Annual capital expenditure ($ million) | 2023 | 1.7 | 107.4 | 1.6 | ||||||||||
30
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 12 | Goodwill (continued) | ||||
Revenue growth rate is the average annual anticipated increase in each of the CGU’s revenues over the five year forecast period. The long term growth rate for 2023 was assumed to be 2.0% for each of the CGUs after the end of the five year growth period.
As part of the annual impairment review in 2023, an assessment was made of the discount rates applicable to each CGU.
EBITDA margin is annual EBITDA expressed as a percentage of annual revenues. The percentages in the table above show the average EBITDA margins for each of the CGUs over the five year forecast period.
Free cash flow is the average annual operating cash flow for each of the CGUs over the five year period.
Annual capital expenditure represents the average annual amount spent to purchase tangible fixed assets in the five year forecast period for the Group’s Land drilling fleet.
Headroom | Offshore services | Land drilling | Kenera | |||||||||||
| Headroom ($ million) | 2024 | 436.2 | 162.2 | 33.1 | ||||||||||
| 2023 | 107.3 | 276.3 | 381.4 | |||||||||||
The table above showing headroom for each CGU demonstrates that each CGU has sufficient headroom. Based on sensitivity analysis performed for 2023 it was believed that there were no reasonably possible changes which could cause an impairment.
The table below shows the potential reduction on CGU recoverable amounts of a 1% movement in each of our CGUs’ key assumptions:
Sensitivity analysis - 2023 only | Offshore services $m | Land drilling $m | Kenera $m | |||||||||||
| Terminal revenue growth rate: 1% decrease | 2023 | 17.8 | 66.9 | 37.3 | ||||||||||
| Discount rate (post tax): 1% increase | 2023 | 30.6 | 100.3 | 55.1 | ||||||||||
| EBITDA margin: 1% decrease | 2023 | 44.9 | 102.8 | 53.6 | ||||||||||
| Short-term revenue growth rate: 1% decrease | 2023 | 32.1 | 133.7 | 22.7 | ||||||||||
Given the change in basis of assessment from Value In Use to Fair Value less Cost to Dispose, based on the transaction price for the sale of the Group being agreed consideration, sensitivity analysis has not been performed for 2024.
31
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 13 | Other intangible assets | ||||
Customer relationships and contracts | Trade names | Technology | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Cost | ||||||||||||||
| At 1 January 2024 | 277.5 | 176.3 | 54.8 | 508.6 | ||||||||||
| Additions | - | - | 3.0 | 3.0 | ||||||||||
| Exchange | - | - | (1.4) | (1.4) | ||||||||||
| At 31 December 2024 | 277.5 | 176.3 | 56.4 | 510.2 | ||||||||||
| Accumulated amortisation and impairment | ||||||||||||||
| At 1 January 2024 | 259.1 | 170.1 | 45.5 | 474.7 | ||||||||||
| Charge for the year | 3.1 | 1.5 | 3.2 | 7.8 | ||||||||||
| Exchange | - | - | (1.2) | (1.2) | ||||||||||
| At 31 December 2024 | 262.2 | 171.6 | 47.5 | 481.3 | ||||||||||
| Net carrying amount | ||||||||||||||
| At 31 December 2024 | 15.3 | 4.7 | 8.9 | 28.9 | ||||||||||
| Remaining useful life | 1-10 years | 5 years | 1-3 years | |||||||||||
| Customer relationships and contracts | Trade names | Technology | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Cost | ||||||||||||||
| At 1 January 2023 | 287.8 | 176.3 | 50.0 | 514.1 | ||||||||||
| Additions | - | - | 3.0 | 3.0 | ||||||||||
| Additions arising on acquisition | 1.3 | - | - | 1.3 | ||||||||||
| Reclassification to goodwill | (11.6) | - | - | (11.6) | ||||||||||
| Exchange | - | - | 1.8 | 1.8 | ||||||||||
| At 31 December 2023 | 277.5 | 176.3 | 54.8 | 508.6 | ||||||||||
| Accumulated amortisation | ||||||||||||||
| At 1 January 2023 | 254.8 | 168.6 | 41.2 | 464.6 | ||||||||||
| Charge for the year | 4.3 | 1.5 | 3.0 | 8.8 | ||||||||||
| Exchange | - | - | 1.3 | 1.3 | ||||||||||
| At 31 December 2023 | 259.1 | 170.1 | 45.5 | 474.7 | ||||||||||
| Net carrying amount | ||||||||||||||
| At 31 December 2023 | 18.4 | 6.2 | 9.3 | 33.9 | ||||||||||
| Remaining useful life | 3 years | 5 years | 1-2 years | |||||||||||
| 14 | Investments | ||||
A list of subsidiary undertakings is given in Note 31.
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Other investments | ||||||||
| At 1 January | 2.7 | 6.3 | ||||||
| Change in value of listed investment | (1.0) | (3.7) | ||||||
| Funding to joint venture | 0.1 | 0.1 | ||||||
| Exchange adjustments | (0.7) | - | ||||||
| At 31 December | 1.1 | 2.7 | ||||||
32
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 14 | Investments (continued) | ||||
During the year to 31 December 2024 the Group made funding contributions to its joint venture KCA Deutag Kazakhstan LLP of $0.1 million. At 31 December 2024, the Group recorded a $1.0 million reduction in the value of its investment in Clean Power Hydrogen plc to reflect the market value applicable at that date.
| 15 | Inventories and work in progress | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Materials and consumables | 190.6 | 161.3 | ||||||
| Work in progress - engineering contracts | 20.7 | 32.1 | ||||||
| 211.3 | 193.4 | |||||||
The value of provisions against inventory was $75.6 million (2023: $100.9 million).
| 16 | Trade and other receivables | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Trade receivables | 287.7 | 310.8 | ||||||
| Other receivables | 21.8 | 20.6 | ||||||
| Other tax receivable | 24.1 | 18.6 | ||||||
| Prepayments | 28.7 | 20.0 | ||||||
| Costs to fulfil | 4.0 | 5.7 | ||||||
| Contract assets | 4.4 | 10.1 | ||||||
| 370.7 | 385.8 | |||||||
The Group operates in over 20 countries around the world and in certain of these countries slow or late payment of outstanding accounts is the norm.
| 2024 | 2023 | |||||||
| The following table details the age of the Group’s trade receivables: | $m | $m | ||||||
| Total | 300.8 | 323.8 | ||||||
| Less provision for doubtful trade receivables | (13.1) | (13.0) | ||||||
| Total trade receivables, net | 287.7 | 310.8 | ||||||
| 2024 | 2024 | 2024 | 2023 | |||||||||||
| Gross receivables | Provision for impairment | Net receivables | Net receivables | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Current | 237.9 | - | 237.9 | 249.6 | ||||||||||
| Past due less than 90 days | 48.2 | (1.1) | 47.1 | 57.7 | ||||||||||
| Past due more than 90 days less than 180 days | 2.7 | - | 2.7 | 3.5 | ||||||||||
| Past due more than 180 days | 12.0 | (12.0) | - | - | ||||||||||
| Total trade receivables | 300.8 | (13.1) | 287.7 | 310.8 | ||||||||||
| The movement on the provision of impairment for trade receivables is as follows: | 2024 | 2023 | ||||||
| $m | $m | |||||||
| At 1 January | (13.0) | (16.0) | ||||||
| Provided | (0.8) | (0.4) | ||||||
| Released | 0.1 | 2.1 | ||||||
| Exchange difference | 0.6 | 1.3 | ||||||
| At 31 December | (13.1) | (13.0) | ||||||
33
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 16 | Trade and other receivables (continued) | ||||
The Group applies lifetime Expected Credit Losses (“ECLs”) to trade receivables, accrued revenue, and contract assets upon their initial recognition.
The Group assesses the ECLs on its receivables, which are based on the age of the outstanding receivable along with prior experience in relation to the specific customer, an estimate of the credit worthiness of each customer as well as the jurisdiction in which the balance is due before booking any provision. As well as considering historical factors, the Group also considers each customer’s risk of default when determining the level of ECL provision.
Receivables are appropriately grouped by geographical region, product type or type of customer within each business unit, and separate calculations produced, if historical or forecast credit loss experience shows significantly different loss patterns for different customer segments.
Actual credit loss experience is then adjusted to reflect differences in economic conditions over the period the historical data was collected, current economic conditions, forward-looking information and the Group’s view of economic conditions over the expected lives of the receivables.
The following tables present the Group’s trade receivables by business segment:
| Gross receivables | Expected credit loss | Net receivables | Receivable days | |||||||||||
| Year ended 31 December 2024 | $m | $m | $m | |||||||||||
| Offshore services | 107.0 | - | 107.0 | 57 | ||||||||||
| Land drilling | 192.2 | (12.7) | 179.5 | 66 | ||||||||||
| Kenera | 1.6 | (0.4) | 1.2 | 61 | ||||||||||
| Total at 31 December 2024 | 300.8 | (13.1) | 287.7 | 62 | ||||||||||
| Gross receivables | Expected credit loss | Net receivables | Receivable days | |||||||||||
| Year ended 31 December 2023 | $m | $m | $m | |||||||||||
| Offshore services | 108.8 | - | 108.8 | 64 | ||||||||||
| Land drilling | 199.9 | (12.7) | 187.2 | 66 | ||||||||||
| Kenera | 15.1 | (0.3) | 14.8 | 47 | ||||||||||
| Total at 31 December 2023 | 323.8 | (13.0) | 310.8 | 64 | ||||||||||
Receivable days are calculated by allocating the closing trade receivables balance to current and prior year revenue. A receivable days calculation of 62 indicates that closing trade receivables represents the most recent 62 days of revenue.
| 17 | Contract assets and liabilities | ||||
The following table provides information about contract assets and contract liabilities from contracts with customers:
| 2024 | 2023 | ||||||||||
| $m | $m | ||||||||||
| Contract assets | 4.4 | 10.1 | |||||||||
| Contract liabilities | 20.3 | 25.0 | |||||||||
Contract assets relate to accrued revenue, these contract assets will be reclassified to trade receivables upon invoicing. Contract liabilities relate to deferred revenue. Of the contract liabilities existing as at 1 January 2024, $16.5 million (2023: $8.5 million) were recognised as revenue during the year.
34
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 18 | Cash and cash equivalents | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Cash at bank and in hand | 111.8 | 100.1 | ||||||
| Cash held on money market funds | 119.5 | 130.0 | ||||||
| Cash and cash equivalents - net | 231.3 | 230.1 | ||||||
The Group has a cash pooling working capital facility in which individual entities such as the Company can hold overdraft balances provided that the overall cash value held by all companies within the facility is in net credit. As at 31 December 2024, Group’s overall net facility was in credit by $41.0 million (2023: $33.2 million). At consolidated Group level, the net credit value of $41.0 million is included within the ‘cash at bank and in hand’ value of $111.8 million. As at 31 December 2024, the Company’s accounts were in credit by less than $0.1 million.
At 31 December 2024, the Group held cash on a money market fund account of $119.5 million (2023: $130.0 million). The fund has a “AAA” credit rating. The funds are immediately accessible, and the yield on the account as at 31 December 2024 was 4.47% (2023: 5.32%).
| At 1 January 2024 | Cash flow | Non-cash movements | Reclassification re maturity | At 31 December 2024 | |||||||||||||
| Analysis of liabilities arising from financing activities | $m | $m | $m | $m | $m | ||||||||||||
| Financial liabilities - borrowings short term | (3.1) | (3.7) | - | (1,113.5) | (1,120.3) | ||||||||||||
| Financial liabilities - borrowings long term | (1,109.3) | (41.5) | (40.9) | 1,113.5 | (78.2) | ||||||||||||
| Financial liabilities - Payment In Kind Notes - accrued interest | (2.9) | - | (0.5) | - | (3.4) | ||||||||||||
| Accruals - finance costs | (9.7) | 115.8 | (113.5) | - | (7.4) | ||||||||||||
| Lease liabilities | (156.4) | 70.5 | (32.1) | - | (118.0) | ||||||||||||
| (1,281.4) | 141.1 | (187.0) | - | (1,327.3) | |||||||||||||
The non-cash movements on long-term borrowings of $40.9 million consist of:
a) $37.3 million being the formal addition of unpaid interest to the payment in kind notes liability value (see note 20), and
b) $3.6 million being amortisation of capitalised arrangement fees.
| 19 | Trade and other payables | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Trade payables | 98.9 | 99.1 | ||||||
| Other tax and social security payable | 28.8 | 26.4 | ||||||
| Other payables | 40.8 | 38.5 | ||||||
| Accruals | 293.9 | 229.0 | ||||||
| Payments received on account | 0.6 | 3.5 | ||||||
| Deferred income | 14.1 | 18.7 | ||||||
| 477.1 | 415.2 | |||||||
35
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 20 | Financial liabilities - borrowings | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Current borrowings | ||||||||
| Bank loans - secured | 102.3 | 3.1 | ||||||
| Senior Secured Notes | 747.3 | - | ||||||
| Payment In Kind Notes | 270.7 | - | ||||||
| 1,120.3 | 3.1 | |||||||
| Current accrued interest | ||||||||
| Payment In Kind Notes - accrued interest | 3.4 | - | ||||||
| Total current financial liabilities | 1,123.7 | 3.1 | ||||||
| Non-current borrowings | ||||||||
| Bank loans - secured | 78.2 | 131.6 | ||||||
| Senior Secured Notes | - | 744.7 | ||||||
| Payment In Kind Notes | - | 233.0 | ||||||
| 78.2 | 1,109.3 | |||||||
| Non-current accrued interest | ||||||||
| Payment In Kind Notes - accrued interest | - | 2.9 | ||||||
| Total non-current financial liabilities | 78.2 | 1,112.2 | ||||||
Maturity of financial liabilities
| The maturity profile of the carrying amount of the current financial liabilities at the Balance Sheet date was as follows: | 2024 | 2023 | ||||||
| $m | $m | |||||||
| In less than one year: | ||||||||
| Bank loans - secured | 106.8 | - | ||||||
| Senior Secured Notes - fixed rate notes | 500.0 | - | ||||||
| Senior Secured Notes - floating rate notes | 250.0 | - | ||||||
| Payment In Kind Notes | 272.2 | - | ||||||
| Payment In Kind Notes - accrued interest | 3.4 | - | ||||||
| 1,132.4 | - | |||||||
| Less: net capitalised arrangement fees (bank loans) | (4.5) | - | ||||||
| Less: net capitalised arrangement fees (Senior Secured Notes - fixed rate notes) | (1.8) | - | ||||||
| Less: net capitalised arrangement fees (Senior Secured Notes - floating rate notes) | (0.9) | - | ||||||
| Less: net capitalised arrangement fees (Payment In Kind Notes) | (1.5) | - | ||||||
| 1,123.7 | - | |||||||
| The maturity profile of the carrying amount of the non-current financial liabilities at the Balance Sheet date was as follows: | 2024 | 2023 | ||||||
| $m | $m | |||||||
| In more than one year, but not more than five years: | ||||||||
| Bank loans - secured | 29.3 | 112.5 | ||||||
| Senior Secured Notes - fixed rate notes | - | 500.0 | ||||||
| Senior Secured Notes - floating rate notes | - | 250.0 | ||||||
| Payment In Kind Notes | - | 234.9 | ||||||
| Payment In Kind Notes - accrued interest | - | 2.9 | ||||||
| 29.3 | 1,100.3 | |||||||
| In more than five years: | ||||||||
| Bank loans - secured | 50.6 | 25.9 | ||||||
| 50.6 | 25.9 | |||||||
| Less: net capitalised arrangement fees (bank loans) | (1.7) | (6.8) | ||||||
| Less: net capitalised arrangement fees (Senior Secured Notes - fixed rate notes) | - | (3.3) | ||||||
| Less: net capitalised arrangement fees (Senior Secured Notes - floating rate notes) | - | (2.0) | ||||||
| Less: net capitalised arrangement fees (Payment In Kind Notes) | - | (1.9) | ||||||
| 78.2 | 1,112.2 | |||||||
36
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 20 | Financial liabilities - borrowings (continued) | ||||
The average interest rate of the Group’s borrowings at the Balance Sheet date including interest rate swaps was 11.6% (2023: 12.8%).
As at 31 December 2024, the secured bank loan borrowings comprise of:
(a) term loan borrowings of $100 million (2023: $100.0 million), which bear interest payable on 3 month terms based on Term SOFR plus margins ranging from 6.25% to 6.50%. These secured bank loans are wholly denominated in US Dollars. The scheduled maturity date of these bank loan facilities was in October 2027, but following the acquisition of KCA Deutag International Limited by HP Global Holdings Limited in January 2025, these loans were repaid in full (see note 32). As all conditions precedent in the sales agreement between the Group and H&P were completed prior to 31 December 2024 these loans have been presented on the balance sheet as current liabilities and not as non-current liabilities as at the year end.
(b) term loan borrowings of $42.4 million (2023: $41.5 million), which bear interest payable quarterly at a fixed rate of 6.25%. Of these $42.4 million borrowings, a value of $3.5 million is payable within one year. These secured bank loans are wholly denominated in Omani Rials. The value of these borrowings in Omani Rials is OMR 16.3 million. The maturity date of these bank loan facilities is in December 2033.
(c) term loan borrowings of $44.3 million (2023: nil), which bear interest payable quarterly at a fixed rate of 7.00%. Of these $ 44.3m borrowings, a value of $3.3m is payable within one year. These secured bank loans are wholly denominated in Omani Rials. The value of these borrowings in Omani Rials is OMR 17.0 million. The maturity date of these bank loan facilities is in December 2034.
The liabilities of $500 million in relation to the Senior Secured Fixed Rate Notes arose on completion of a $500 million bond completed in December 2020. The Senior Secured Notes of $500 million are wholly denominated in US Dollars and bear interest at a fixed rate of 9.9% payable every 6 months. The scheduled maturity date of the senior secured notes of $500 million was in December 2025, but following the acquisition of KCA Deutag International Limited by HP Global Holdings Limited in January 2025, these loans were repaid in full (see note 32). As all conditions precedent in the sales agreement between the Group and H&P were completed prior to 31 December 2024 these loans have been presented on the balance sheet as current liabilities and not as non-current liabilities as at the year end. The senior secured notes are listed on The International Stock Exchange (TISE).
The liabilities of $250 million in relation to the senior secured floating rate notes arose on completion of a $250 million issue completed in October 2022. The senior secured floating rate notes of $250 million are wholly denominated in US Dollars and bear interest at a floating rate based on Term SOFR plus a margin of 9.0%, payable every 6 months. The scheduled maturity date of the senior secured floating rate notes of $250 million was in December 2025, but following the acquisition of KCA Deutag International Limited by HP Global Holdings Limited in January 2025, these loans were repaid in full (see note 32). As all conditions precedent in the sales agreement between the Group and H&P were completed prior to 31 December 2024 these loans have been presented on the balance sheet as current liabilities and not as non-current liabilities as at the year end. The senior secured floating rate notes were listed on The International Stock Exchange (TISE).
The liabilities of $272.2 million (2023: $234.9 million) in relation to the payment in kind notes arose on completion of a $200 million issue completed in October 2022. The payment in kind notes are wholly denominated in US Dollars and carry interest which is being accrued at a fixed rate of 15.0%. During 2024, a total of $37.3 million (2023: $34.9 million) of unpaid interest has been formally added to the payment in kind notes liability value. The scheduled maturity date of the payment in kind notes was in October 2027, but following the acquisition of KCA Deutag International Limited by HP Global Holdings Limited in January 2025, these loans were repaid in full (see note 32). As all conditions precedent in the sales agreement between the Group and H&P were completed prior to 31 December 2024 these loans have been presented on the balance sheet as current liabilities and not as non-current liabilities as at the year end.
37
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 21 | Financial instruments | ||||
The Group’s multi-national operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates and interest rates. The Group has in place a risk management policy that seeks to limit the adverse effects on the financial performance of the Group by using foreign currency financial instruments and other instruments to fix interest rates.
a) Market risk
(i) Foreign exchange risk
The Group has a number of subsidiary companies whose revenue and expenses are denominated in currencies other than the US Dollar. The Group is exposed to foreign exchange risks primarily with respect to the US Dollar, Sterling, Euro, Norwegian Krone, Canadian Dollar, Angolan Kwanza, Pakistan Rupee, Colombian Peso and Argentine Peso. The Company is exposed to foreign exchange risks primarily with respect to Sterling.
In order to protect the Group's Balance Sheet from movements in exchange rates, whenever practical, the Group seeks to achieve natural hedging by ensuring that expenses are borne in the same currency as related income. Where this is not possible, the Group has entered, to an extent, into forward exchange contracts to hedge the foreign currency exposure of its subsidiary companies. Changes in the forward contract fair values are booked through the Income Statement. At 31 December 2024, the Group had 19 foreign exchange forward contracts (2023: 14).
A movement of 10% is considered to represent a material fluctuation of exchange rates. Movements in all of the Group's major exchange rate pairings against the US Dollar have been considered as each has the potential to impact on the reported US Dollar consolidated profit/loss and net assets/liabilities.
If the US Dollar became 10% stronger against all other main currencies of the Group, as at 31 December 2024 this would give rise to exchange losses of $0.7 million impacting on operating profit (2023: losses of $0.3 million). If the US Dollar became 10% stronger against all other main currencies of the Company, as at 31 December 2024 this would give rise to exchange gains of $0.3 million impacting on operating profit (2023: gains of less than $0.2 million).
If the US Dollar became 10% weaker against all other main currencies of the Group, as at 31 December 2024 this would give rise to exchange gains of $0.8 million impacting on operating profit (2023: gains of $0.3 million). If the US Dollar became 10% weaker against all other main currencies of the Company, as at 31 December 2024 this would give rise to exchange losses of $0.3 million impacting on operating profit (2023: losses of less than $0.3 million).
If the US Dollar became 10% stronger against all other main currencies of the Group, as at 31 December 2024 this would give rise to a decrease in net finance costs of $13.2 million (2023: decrease in costs of $9.9 million).
If the US Dollar became 10% weaker against all other main currencies of the Group, as at 31 December 2024 this would give rise to an increase in net finance costs of $14.5 million (2023: increase in costs of $10.9 million).
(ii) Interest rate risk
The Group is exposed to interest rate risk on its interest-bearing borrowings and on its interest-generating cash balances. The Group’s policy is to maintain a large percentage of its borrowings at fixed interest rates to generate the desired interest profile. As at 31 December 2024, approximately 71% (2023: 69%) of current and non-current borrowings were at fixed rates.
(iii) Price risk
The Group is not exposed to any significant price risk in relation to financial instruments.
b) Credit risk
The Group's credit risk relates primarily to its trade receivables. The Group has a small number of customers who are primarily either well established international or national companies, or joint ventures thereof. An evaluation is carried out of the credit risk of each new customer, and when appropriate, suitable protections put in place through the use of trade finance instruments.
Each month, management review an aged debtor analysis and focus on debts which are overdue for payment. In addition, there is always a level of unbilled receivables which arise through certain contractual mechanisms and attention is also focused on getting these amounts billed to customers as quickly as possible.
A table showing the ageing of trade receivables is provided in Note 16.
The Group’s policy is to deposit cash at institutions with an 'A' rating or better where possible. The Group held $119.5 million on a money market fund account with a 'AAA' rating at 31 December 2024 (2023: $130.0 million).
38
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 21 | Financial instruments (continued) | ||||
c) Liquidity risk
At 31 December 2024, the Group is financed with $750.0 million of other Senior Secured Notes, $272.2 million of payment in kind notes, $186.7 million of secured bank loans and a positive cash balance of $231.3 million. At 31 December 2024, 6.5% (2023: 99.7%) of the Group's borrowing facilities were due to mature in more than one year.
d) Capital risk
The Group monitors its capital risk with reference to its long-term funding structure and leverage ratios such as gross debt to EBITDA and net debt to EBITDA.
The table below analyses the Group’s derivative and non-derivative financial liabilities into relevant maturity groupings based on the remaining period from the Balance Sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than 1 year | Between 1 and 5 years | Greater than 5 years | |||||||||
| At 31 December 2024 | $m | $m | $m | ||||||||
| Borrowings – bank loans and Senior Secured Notes | 1,145.1 | 36.1 | 80.8 | ||||||||
| Payment In Kind Notes - accrued interest | 3.4 | - | - | ||||||||
| Lease liabilities | 47.0 | 62.0 | 40.7 | ||||||||
| Trade and other payables | 433.6 | - | - | ||||||||
Less than 1 year | Between 1 and 5 years | Greater than 5 years | |||||||||
| At 31 December 2023 | $m | $m | $m | ||||||||
| Borrowings - bank loans and Senior Secured Notes | 3.2 | 1,480.5 | 39.0 | ||||||||
| Payment In Kind Notes - accrued interest | - | 2.9 | - | ||||||||
| Lease liabilities | 62.5 | 88.2 | 51.8 | ||||||||
| Trade and other payables | 366.6 | - | - | ||||||||
The table below analyses the Group’s derivative financial instrument liabilities into relevant maturity groupings based on the remaining period from the Balance Sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Less than 1 year | Between 1 and 5 years | |||||||
| At 31 December 2024 | $m | $m | ||||||
| Forward foreign exchange contracts | ||||||||
| Outflow - settlement | 2.0 | - | ||||||
Less than 1 year | Between 1 and 5 years | |||||||
| At 31 December 2023 | $m | $m | ||||||
| Foreign exchange contracts | ||||||||
| Outflow - settlement | 1.6 | - | ||||||
The Group had 19 forward foreign exchange contracts at 31 December 2024. The maturity dates of these contracts range from January 2025 to December 2025.
The Group did not have any derivative financial instrument assets as at 31 December 2024 (2023: $0.6 million). All of the Group’s forward exchange contracts are categorised as cash flow hedges.
39
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 21 | Financial instruments (continued) | ||||
e) Fair value of non-derivative financial assets and financial liabilities
The fair value of short-term borrowings, trade and other payables, trade and other receivables, short-term deposits and cash at bank and in hand approximates to the carrying amount because of the short maturity of interest rates in respect of these instruments. Senior Secured Notes are publicly traded and as such the fair value is subject to fluctuation.
| 2024 | 2023 | 2024 | 2023 | |||||||||||
Book value | Book value | Fair value | Fair value | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Fair value of borrowings | ||||||||||||||
Senior Secured Notes (Note 20) – level 1 | 747.3 | 744.7 | 747.3 | 754.1 | ||||||||||
Bank borrowings (Note 20) – level 2 | 180.5 | 131.6 | 180.5 | 131.6 | ||||||||||
| Payment In Kind Notes (Note 20) - level 2 | 270.7 | 233.0 | 270.7 | 233.0 | ||||||||||
| Payment In Kind Notes - accrued interest (Note 20) - level 2 | 3.4 | 2.9 | 3.4 | 2.9 | ||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||
Book value | Book value | Fair value | Fair value | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Fair value of other financial assets and financial liabilities | ||||||||||||||
| Primary financial instruments held or issued to finance the Group’s operations: | ||||||||||||||
Trade and other receivables (Note 16) – level 2 | 370.7 | 385.8 | 370.7 | 385.8 | ||||||||||
Cash and cash equivalents (Note 18) – level 2 | 111.8 | 100.1 | 114.4 | 100.1 | ||||||||||
| Cash held on money market funds (Note 18) - level 2 | 119.5 | 130.0 | 119.5 | 130.0 | ||||||||||
Trade and other payables (Note 19) – level 2 | 433.6 | 366.6 | 433.6 | 366.6 | ||||||||||
The levels referred to in the table above relate to the following Fair Value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that can be accessed at the measurement date;
Level 2: Valuations containing inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly; and
Level 3: Valuations containing unobservable inputs.
f) Derivative financial instruments
The fair value of derivative financial instruments at the Balance Sheet date was as follows:
| 2024 | 2023 | 2024 | 2023 | |||||||||||
| Assets | Assets | Liabilities | Liabilities | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Forward foreign exchange contracts – cash flow hedges – current (level 2) | - | 0.6 | 2.0 | - | ||||||||||
| Foreign exchange contracts – current (level 2) | - | - | - | 1.6 | ||||||||||
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability if the maturity of the hedged item is less than 12 months.
The Group’s derivative financial instruments have been classified using the fair value hierarchy set out in the fair value accounting policy. The level in the fair value hierarchy that each instrument is categorised in is detailed in the table above.
There was no ineffectiveness recognised in the Income Statement from cash flow hedges in the year.
(i) Forward foreign exchange contracts
The notional principal amount of the outstanding forward foreign exchange contracts at 31 December 2024 was $56.3 million (2023: $33.4 million).
40
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 21 | Financial instruments (continued) | ||||
The Group had no outstanding interest rate swaps at either 31 December 2024 or 2023. The Group only uses cash flow hedges and did not enter into any fair value or net investment hedges during the reporting year.
| 22 | Provisions | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| At 1 January | 3.3 | 2.7 | ||||||
| Provided during the year | 12.7 | 1.8 | ||||||
| Utilised | (11.4) | (1.2) | ||||||
| Released | (0.2) | (0.1) | ||||||
| Exchange adjustments | (0.8) | 0.1 | ||||||
| At 31 December | 3.6 | 3.3 | ||||||
Provisions have been analysed between current and non-current as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Current | 1.3 | 1.3 | ||||||
| Non-current | 2.3 | 2.0 | ||||||
| 3.6 | 3.3 | |||||||
Provisions of $2.2 million (2023: $2.1 million) relate mainly to warranty obligations in respect of guarantees provided in the normal course of business relating to equipment supplied. These are normally for a period of not more than two years. Dilapidation provisions of $1.4 million (2023: $1.3 million) are provided on leased premises for which the majority of leases expire in 2036.
| 23 | Deferred tax | ||||
| Fair market value | Plant, property & Equipment | Retirement benefit obligations | Other including tax losses | Total | |||||||||||||
| $m | $m | $m | $m | $m | |||||||||||||
| At 1 January 2023 | (47.2) | 35.2 | 0.2 | 16.5 | 4.7 | ||||||||||||
| Opening balance acquired | 7.4 | - | - | - | 7.4 | ||||||||||||
| Credit (charge) to Income Statement | - | (15.0) | 7.7 | (0.6) | (7.9) | ||||||||||||
| Credit (charge) to equity | - | - | (5.4) | - | (5.4) | ||||||||||||
| Exchange adjustments | - | - | 2.3 | (2.5) | (0.2) | ||||||||||||
| At 31 December 2023 | (39.8) | 20.2 | 4.8 | 13.4 | (1.4) | ||||||||||||
| Credit (charge) to Income Statement | 2.4 | (0.3) | 0.2 | (7.7) | (5.4) | ||||||||||||
| Charge to equity | - | - | (0.5) | - | (0.5) | ||||||||||||
| Exchange adjustments | - | - | - | (2.5) | (2.5) | ||||||||||||
| At 31 December 2024 | (37.4) | 19.9 | 4.5 | 3.2 | (9.8) | ||||||||||||
At 31 December 2024 the Group had deferred tax assets of $1.4 million arising from tax losses (2023: $1.3 million).
Fair market value relates to the unwinding of deferred tax liabilities arising from the acquisitions of assets from Saipem Onshore Drilling business in 2022 and Abbot Group plc in 2008.
Certain deferred tax assets and liabilities have been offset, including the asset balances analysed in the table above.
41
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 23 | Deferred tax (continued) | ||||
The following is an analysis of the deferred tax balances for financial reporting purposes:
| 2024 | 2023 | |||||||
| Group | Group | |||||||
| $m | $m | |||||||
| Deferred tax assets | 59.5 | 60.4 | ||||||
| Deferred tax liabilities | (69.3) | (61.8) | ||||||
| (9.8) | (1.4) | |||||||
The $59.5 million deferred tax asset is primarily made up of $24.4 million for the UK, $12.1 million for fair value on Saipem Onshore business, $8.5 million for Saudi Arabia, $7.8 million for Oman, $2.3 million for Azerbaijan and $2.4 million for Norway. The balance of $2.0 million is made up of a number of smaller items. The deferred tax asset comprises of $30.1 million of fixed asset timing differences, $12.1 million of FMV adjustments, $4.3 million of retirement obligations, $1.3 million tax losses and $11.7 million of other timing differences.
During the year ended 31 December 2024, the Group recognised a UK deferred tax asset of $24.4 million (2023: $24.0 million). It is anticipated that taxable profits will arise in the foreseeable future in the UK against which the deferred tax asset will be offset.
At 31 December 2024, the Group has an unrecognised deferred tax asset of $181.0 million (2023: $160.0 million) in respect of the corporate interest expense carry forwards arising from the Corporate Interest Restriction rules under the UK tax legislation. These carry forwards are available to offset against future taxable profits. However, a deferred tax asset has not been recognised due to the uncertainty of sufficient future taxable profits.
The gross amount and expiry dates of losses available to carry forward as at 31 December 2024 are as follows:
| Expiring within 5 years | Expiring beyond 6 years | Unlimited | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Losses for which a deferred tax asset is recognised | 1.4 | - | - | 1.4 | ||||||||||
| Losses for which no deferred tax asset is recognised | 69.4 | 1.0 | 363.7 | 434.1 | ||||||||||
| 70.8 | 1.0 | 363.7 | 435.5 | |||||||||||
The losses recognised of $1.4 million are in relation to Oman. These losses are forecast to be utilised in the next 5 years. The deferred tax asset recognised on these losses is supported by calculations using business forecasts which account for any material tax adjustments.
The losses not recognised primarily relate to $256.7 million for the UK, $60.1 million for Germany, $30.1 million for Saudi Arabia, $3.0 million for Iraq, $24.7 million for Algeria and $15.1 million for Kuwait. The $45.8 million balance of losses is made up of smaller items.
The increase of losses, for which no deferred tax asset is recognised, primarily relates to restrictions on our ability to group relieve the UK losses in FY24 and FY25.
The gross amount and expiry dates of losses available to carry forward as at 31 December 2023.
| Expiring within 5 years | Expiring beyond 6 years | Unlimited | Total | |||||||||||
| $m | $m | $m | $m | |||||||||||
| Losses for which a deferred tax asset is recognised | 2.7 | - | - | 2.7 | ||||||||||
| Losses for which no deferred tax asset is recognised | 63.6 | 2.0 | 171.9 | 237.5 | ||||||||||
| 66.3 | 2.0 | 171.9 | 240.2 | |||||||||||
Deferred tax of $10.0 million (2023: $3.0 million) has been recognised on unremitted earnings from overseas subsidiaries where payment is imminent. Where we control the payee, and no payment is expected deferred tax is not recognised.
42
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 24 | Share capital | ||||
The nominal share capital of the Company is in US Dollar and is translated at the ruling exchange rate at the date of the transaction. The nominal value of each share is $0.01 for A shares and $0.001 for B, C and D.
| 2024 | 2023 | |||||||
| Authorised, issued and fully paid shares | Number of shares | Number of shares | ||||||
| A ordinary shares US$0.01 | 11,602,318 | 11,602,318 | ||||||
| B ordinary shares US$0.001 | 309,278 | 309,278 | ||||||
| C ordinary shares US$0.001 | 217,038 | 217,038 | ||||||
| D ordinary shares US$0.001 | 1,199,535 | 1,199,535 | ||||||
| At 31 December | 13,328,169 | 13,328,169 | ||||||
Ordinary A shares carry voting rights but no voting rights attach to the ordinary B, C and D shares. Ordinary A shares participate in the proceeds of an exit, winding up or other return of capital in all circumstances, with ordinary B, C and D shares only participating above certain hurdle thresholds which are set out in the Articles of Association of the Company.
| 25 | Share premium | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| At 1 January | 919.2 | 918.0 | ||||||
| Issue of shares | - | 1.2 | ||||||
| At 31 December | 919.2 | 919.2 | ||||||
| 26 | Employees and Directors | ||||
2024 | 2023 | |||||||
| Employee benefit expense for the Group during the year: | $m | $m | ||||||
| Wages and salaries | 590.6 | 527.3 | ||||||
| Social security costs | 78.3 | 69.3 | ||||||
Other pension and end of service benefit costs | 25.7 | 20.6 | ||||||
694.6 | 617.2 | |||||||
The other pension and end of service benefit costs shown above of $25.7 million (2023: $20.6 million) relate to contributions to defined contribution schemes and current service costs relating to the defined benefit schemes, as well as accruals made in relation to end of service benefit.
| 2024 | 2023 | |||||||
| Average monthly number of people (including Executive Directors) employed: | Number | Number | ||||||
| Drilling and engineering | 8,209 | 8,011 | ||||||
| Support and administration | 2,611 | 2,379 | ||||||
| 10,820 | 10,390 | |||||||
2024 | 2023 | |||||||
| Key management compensation: | $m | $m | ||||||
| Salaries and short-term employee benefits | 60.2 | 12.3 | ||||||
| Post-employment benefits | 0.2 | 0.2 | ||||||
| 60.4 | 12.5 | |||||||
43
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 26 | Employees and Directors (continued) | ||||
| 2024 | 2023 | |||||||
| The key management compensation figures include remuneration of seven Directors: | $m | $m | ||||||
| Aggregate emoluments, including retirement benefits | 52.8 | 7.3 | ||||||
Included above are the emoluments of seven Directors of the Company. The emoluments of the highest paid director, including retirement benefit contributions, were $35.0 million (2023: $4.3 million). The Directors have no retirement benefits accruing under a defined benefit scheme.
Included in key management compensation are payments totalling $49.4 million mainly in respect of bonuses due as a result of the sale of the Company's shares to HP Global Holdings Limited on 16 January 2025, regulatory approval for which was received prior to the year end with only completion formalities to take place in 2025.
As at 31 December 2024, the Company employed the Group's five Non Executive Directors. On completion of the sale of the KCA Deutag Group in 2025, the Non Executive Directors resigned.
| 27 | Retirement benefit obligations | ||||
The Group operates a number of pension schemes in various countries. In respect of defined benefit schemes, the Group operates two funded schemes in the UK, whilst in Germany the particular schemes are unfunded in line with local practice in those countries.
a) UK schemes
The Group operates two funded defined benefit schemes in the UK as follows:
(i) The KCA Drilling defined benefit scheme has been closed to new members for a number of years with existing members continuing to accrue benefits based on their current salary and number of years’ service with the Group.
The triennial actuarial valuation of the scheme is ongoing for 31 December 2022 by the Group’s pension advisers and based on their year-end review as at 31 December 2024 the principal assumptions made by the actuaries were:
| 2024 | 2023 | |||||||
| % | % | |||||||
| Rate of increase in pensions in payment and deferred pensions | 2.3 | 2.2 | ||||||
| Discount rate | 5.5 | 4.6 | ||||||
| Inflation assumption | 3.5 | 3.4 | ||||||
The expected return on plan assets is based on market expectation at the beginning of the period for returns over the entire life of the benefit obligation.
The life expectancy of a male member currently aged 40, retiring at age 65, is 88 years (2023: 88 years). The life expectancy of a female member currently aged 40, retiring at age 65, is 91 years (2023: 91 years).
| The amounts recognised in the Balance Sheet are determined as follows: | 2024 | 2023 | ||||||
$m | $m | |||||||
Present value of funded obligations | (32.0) | (36.2) | ||||||
Fair value of scheme assets | 28.4 | 31.0 | ||||||
Net liability | (3.6) | (5.2) | ||||||
The amounts recognised in the consolidated Income Statement are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Service cost (including administration expenses) | 0.1 | 0.2 | ||||||
| Interest cost | 1.6 | 1.6 | ||||||
| Interest income | (1.4) | (1.3) | ||||||
| Total included within the Income Statement | 0.3 | 0.5 | ||||||
44
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 27 | Retirement benefit obligations (continued) | ||||
Changes in the present value of the defined benefit obligation are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Present value of obligations at 1 January | 36.2 | 33.6 | ||||||
| Interest cost | 1.6 | 1.6 | ||||||
| Remeasurements: | ||||||||
| (Gain) loss from change in financial assumptions | (3.4) | 1.3 | ||||||
| Loss (gain) from change in demographic assumptions | 0.2 | (0.9) | ||||||
| (Gain) loss from effect of experience adjustments | (0.2) | (0.1) | ||||||
| Benefits paid | (1.9) | (1.4) | ||||||
| Exchange difference | (0.5) | 2.1 | ||||||
| Present value of obligations, 31 December | 32.0 | 36.2 | ||||||
Changes in the fair value of plan assets are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Fair value of plan assets at 1 January | 31.0 | 28.9 | ||||||
| Service cost (including administration expenses) | (0.1) | (0.2) | ||||||
| Interest income | 1.4 | 1.3 | ||||||
| Remeasurement: return on plan assets, excluding amounts included in interest expense/income | (2.2) | (0.5) | ||||||
| Employer contributions | 0.9 | 1.0 | ||||||
| Benefits paid | (1.9) | (1.4) | ||||||
| Exchange difference | (0.7) | 1.9 | ||||||
| Fair value of plan assets, 31 December | 28.4 | 31.0 | ||||||
Analysis of the movement in the Balance Sheet liability:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| At 1 January | 5.2 | 4.7 | ||||||
| Total expense as above | 0.3 | 0.5 | ||||||
| Contributions | (0.9) | (1.0) | ||||||
| Remeasurements | (1.2) | 0.8 | ||||||
| Exchange difference | 0.2 | 0.2 | ||||||
| At 31 December | 3.6 | 5.2 | ||||||
Contributions expected to be paid to the plan during the year beginning after the Balance Sheet date are $0.9 million (2023: $0.8 million).
Average life expectancy:
| 2024 | 2023 | |||||||
| Longevity at age 65 for current pensioners | ||||||||
| - Men | 22 | 22 | ||||||
| - Women | 25 | 25 | ||||||
| Longevity at age 65 for future pensioners | ||||||||
| - Men | 23 | 23 | ||||||
| - Women | 26 | 26 | ||||||
The average duration of the defined benefit plan obligation at the end of the reporting period is 12 years (2023: 13 years). The sensitivity of the defined obligation to changes in the weighted principal assumption is:
| Impact on obligations | |||||||||||
| Change in assumption | Increase in assumption | Decrease in assumption | |||||||||
| $m | $m | ||||||||||
| Discount rate | 0.50% | (1.7) | 1.8 | ||||||||
| Inflation rate | 0.50% | 0.8 | (0.7) | ||||||||
45
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 27 | Retirement benefit obligations (continued) | ||||
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous year.
The fair value of the plan assets was:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Cash | 0.7 | 3.5 | ||||||
| Equity | 3.0 | 3.5 | ||||||
| Debt | 24.7 | 24.0 | ||||||
| 28.4 | 31.0 | |||||||
(ii) The OIS Teesside Limited defined benefit scheme is closed and the Group is responsible for the ongoing funding of the scheme.
The most recent triennial actuarial valuation of the scheme was carried out as at 31 December 2021 by the Group’s pension advisers and based on their year-end review as at 31 December 2024 the principal assumptions made by the actuaries were:
| 2024 | 2023 | |||||||
| % | % | |||||||
| Rate of increase in pensions in payment and deferred pensions | 3.3 | 3.3 | ||||||
| Discount rate | 5.5 | 4.6 | ||||||
| Inflation assumption | 3.5 | 3.4 | ||||||
The life expectancy of a male member currently aged 40, retiring at age 65, is 87 years (2023: 88 years). There are no female plan members. The amounts recognised in the Balance Sheet are determined as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Present value of funded obligations | (5.0) | (6.3) | ||||||
| Fair value of plan assets | 4.6 | 5.4 | ||||||
| Net asset (liability) | (0.4) | (0.9) | ||||||
The amounts recognised in the consolidated Income Statement are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Service cost (including administration expenses) | 0.1 | 0.1 | ||||||
| Interest cost | 0.3 | 0.2 | ||||||
| Interest income | (0.2) | (0.3) | ||||||
| Total included within the Income Statement | 0.2 | - | ||||||
Changes in the present value of the defined benefits obligation are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Present value of obligations at 1 January | 6.3 | 4.7 | ||||||
| Interest cost | 0.3 | 0.2 | ||||||
| Remeasurements: | ||||||||
| Gain from change in demographic assumptions | (0.1) | (0.1) | ||||||
| (Gain) loss from change in financial assumptions | (0.5) | 0.2 | ||||||
| Experience (gains) losses | (0.4) | 1.2 | ||||||
| Benefits paid | (0.3) | (0.3) | ||||||
| Exchange difference | (0.3) | - | ||||||
| Present value of obligations, 31 December | 5.0 | 5.9 | ||||||
46
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 27 | Retirement benefit obligations (continued) | ||||
| Changes in the fair value of plan assets are as follows | ||||||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Fair value of plan assets at 1 January | 5.4 | 5.3 | ||||||
| Service cost (including administration expenses) | (0.1) | (0.1) | ||||||
| Interest income | 0.2 | 0.3 | ||||||
| Benefits paid | (0.3) | (0.3) | ||||||
| Remeasurement: return on plan assets, excluding amounts included in interest expense/income | (0.5) | (0.2) | ||||||
| Exchange difference | (0.1) | 0.4 | ||||||
| Fair value of plan assets, 31 December | 4.6 | 5.4 | ||||||
Analysis of the movement in the Balance Sheet (asset) liability:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| At 1 January | 0.9 | (0.6) | ||||||
| Total expense as above | 0.2 | - | ||||||
| Remeasurements | (0.5) | 1.5 | ||||||
| Exchange difference | (0.2) | - | ||||||
| At 31 December | 0.4 | 0.9 | ||||||
Contributions expected to be paid during the annual year after the Balance Sheet date are nil (2023: nil).
Average life expectancy:
| 2024 | 2023 | |||||||
| Longevity at age 65 for current pensioners | ||||||||
| - Men | 22 | 22 | ||||||
| - Women | n/a | n/a | ||||||
| Longevity at age 65 for future pensioners | ||||||||
| - Men | 22 | 23 | ||||||
| - Women | 25 | 26 | ||||||
The sensitivity of the defined obligation to changes in the weighted principal assumption is:
| Impact on obligations | |||||||||||
| Change in assumption | Increase in assumption | Decrease in assumption | |||||||||
| $m | $m | ||||||||||
| Discount rate | 0.50% | (0.3) | 0.3 | ||||||||
| Inflation rate | 0.50% | 0.2 | (0.2) | ||||||||
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied when calculating the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous year.
The fair value of the plan assets was:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Cash | 0.4 | 0.6 | ||||||
| Equity | 0.2 | 0.4 | ||||||
| Debt | 4.0 | 4.4 | ||||||
| 4.6 | 5.4 | |||||||
47
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 27 | Retirement benefit obligations (continued) | ||||
Virgin Media v NTL Trustees
The judgement in the above High Court case has implications for Defined Benefit schemes which previously contracted-out of the state pension system between 1997 and 2016. The judge in this case ruled that, where benefit changes were made without a valid ‘Section 37’ certificate from the Scheme Actuary, those changes could be considered void. The Court of Appeal dismissed an appeal to this judgment on 25 July 2024. The judgment could have material consequences for some Defined Benefit schemes which previously contracted-out of the state pension scheme, but uncertainty around the ruling persists due to expectations of further court cases and potential intervention from the UK Government. The Company Directors are in dialogue with the Schemes’ trustees over this issue and will continue to monitor developments as they arise. Preliminary analysis from the trustees suggests there is no reason to suspect there will be any additional material liability as a result of this ruling. Due to the uncertainty in terms of the potential impact on the pension deficits for the two schemes, no adjustment has been made for this case in these financial statements.
b) Germany schemes
The Group operates four defined benefit schemes in Germany. The schemes are unfunded in common with local practice and the total liabilities of the schemes are included as a Balance Sheet provision.
The schemes have been closed to new members for a number of years with existing members continuing to accrue benefits based on their current salary levels and number of years’ service with the Group.
The life expectancy of a male member currently aged 40, retiring at age 65, is 88 years (2023: 88 years). The life expectancy of a female member currently aged 40, retiring at age 65, is 91 years (2023: 91 years).
The most recent actuarial valuation of the schemes was carried out at 31 December 2024 by the Group’s pension advisers and the principal assumptions made by the actuaries were:
| 2024 | 2023 | |||||||
| % | % | |||||||
| Rate of increase in pensionable salaries | 4.0 | 3.5 | ||||||
| Rate of increase in pensions in payment and deferred pensions | 2.5 | 3.7 | ||||||
| Discount rate | 3.4 | 3.5 | ||||||
| Inflation assumption | 2.5 | 2.5 | ||||||
The amount recognised in the Balance Sheet is:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Present value of unfunded obligations | 95.0 | 100.5 | ||||||
The amounts recognised in the consolidated Income Statement are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Current service cost | 0.3 | 0.3 | ||||||
| Interest cost | 3.4 | 3.5 | ||||||
| Total included within the Income Statement | 3.7 | 3.8 | ||||||
Changes in the present value of the defined benefit obligations as included in the Balance Sheet are as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Present value of obligations at 1 January | 100.5 | 95.8 | ||||||
| Service cost | 0.3 | 0.3 | ||||||
| Interest cost | 3.4 | 3.5 | ||||||
| Remeasurements: | ||||||||
| Loss (gain) from change in financial assumptions | 1.2 | 0.8 | ||||||
| Experience (gain) loss | 1.4 | (3.3) | ||||||
| Benefits paid | (5.2) | (5.0) | ||||||
| Exchange difference | (6.6) | 8.4 | ||||||
| Present value of obligations, 31 December | 95.0 | 100.5 | ||||||
48
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 27 | Retirement benefit obligations (continued) | ||||
Average life expectancy:
| 2024 | 2023 | |||||||
| Longevity at age 65 for current pensioners | ||||||||
| - Men | 20 | 20 | ||||||
| - Women | 24 | 24 | ||||||
| Longevity at age 65 for future pensioners | ||||||||
| - Men | 23 | 23 | ||||||
| - Women | 26 | 26 | ||||||
The sensitivity of the defined obligation to changes in the weighted principal assumption is:
| Impact on obligations | |||||||||||
| Change in assumption | Increase in assumption $m | Decrease in assumption $m | |||||||||
| Discount rate | 0.25% | (2.7) | 2.9 | ||||||||
| Inflation rate | 0.25% | 2.8 | (2.7) | ||||||||
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied when calculating the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to previous year.
c) Total
The total provision in the consolidated Balance Sheet relating to pension liabilities is analysed as follows:
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| UK schemes | ||||||||
| - KCA | 3.6 | 5.2 | ||||||
| - OIS | 0.4 | 0.9 | ||||||
| Germany schemes | 95.0 | 100.5 | ||||||
| At 31 December | 99.0 | 106.6 | ||||||
The Group also made contributions to defined contribution plans of $25.0 million (2023: $20.6 million).
49
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 28 | Cash generated from (used in) operating activities | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Cash generated from (used in) operating activities | ||||||||
| (Loss) profit before taxation | (32.0) | 5.0 | ||||||
| Adjustments for: | ||||||||
- depreciation of property plant and equipment | 135.7 | 123.8 | ||||||
- depreciation of right of use assets | 62.0 | 62.9 | ||||||
- amortisation of intangible assets - other | 7.8 | 8.8 | ||||||
- gain on sale of property, plant and equipment | (0.1) | (0.3) | ||||||
| Net movement in provisions and other liabilities and retirement benefit obligations | (6.1) | 1.5 | ||||||
| Net finance costs | 156.2 | 161.8 | ||||||
| Changes in working capital: | ||||||||
- increase in inventories and work in progress | (17.2) | (24.4) | ||||||
- decrease (increase) in trade and other receivables | 21.0 | (69.8) | ||||||
- increase in trade and other payables | 57.7 | 53.6 | ||||||
Net exchange differences from operating activities | (6.3) | (7.7) | ||||||
| Cash generated from (used in) operating activities - total | 378.7 | 315.2 | ||||||
| 29 | Leases | ||||
This note provides information for leases where the Group is a lessee.
(i) Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
| 2024 | 2023 | ||||||||||
| $m | $m | ||||||||||
| Right of Use Assets: | |||||||||||
| Properties | 33.8 | 37.6 | |||||||||
| Drilling rigs and equipment | 13.2 | 28.2 | |||||||||
| Vehicles, Plant & Equipment | 59.3 | 81.8 | |||||||||
| 106.3 | 147.6 | ||||||||||
| Lease Liabilities: | |||||||||||
| Current | 45.2 | 60.4 | |||||||||
| Non-Current | 72.7 | 96.0 | |||||||||
| 117.9 | 156.4 | ||||||||||
Additions to the right-of-use assets during the year were $22.7 million (2023: $29.7 million).
ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to leases:
2024 | 2023 | ||||||||||
| Depreciation charge of right-of-use assets | $m | $m | |||||||||
| Properties | 12.7 | 13.5 | |||||||||
| Drilling rigs & Equipment | 15.6 | 15.3 | |||||||||
| Vehicles, Plant & Equipment | 33.7 | 34.1 | |||||||||
| 62.0 | 62.9 | ||||||||||
| Interest expense (included in finance cost) | 12.5 | 11.6 | |||||||||
| Expense relating to short-term leases | 0.1 | 0.1 | |||||||||
The total cash outflow for leases in 2024 was $70.5 million (2023: $73.9 million).
50
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
| 30 | Capital and other financial commitments | ||||
| 2024 | 2023 | |||||||
| $m | $m | |||||||
| Contracts placed for future capital expenditure not provided in the financial statements | 43.3 | 44.4 | ||||||
| 31 | Subsidiary undertakings, other related undertakings and ultimate controlling party | ||||
At 31 December 2024, KCA Deutag International Limited is a private limited Company registered in Jersey. There is no shareholder which holds 25% or more of the shares in the Company and the Company is controlled by its Directors.
A full list of subsidiaries and joint ventures is shown below.
The Group’s subsidiaries registered at 1 Park Row, Leeds, LS1 5AB are as follows:
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA Deutag International 2 Limited | Direct subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA Deutag International 3 Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA Deutag PIKCO Plc | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA Deutag Alpha Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
Abbot Group Limited | Direct subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG Rig Co. Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG (Land Rig) Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG UK Finance Plc | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG Enterprises Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
Rig Design Services Holdings Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
RDS Energy Solutions Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
Abbot Investments (North Africa) Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
Abbot Holdings Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG Drilling Group Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA European Holdings Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
KCA DEUTAG Caspian Limited | Indirect subsidiary | England and Wales | 100% | ||||||||||||||||||||
| The Group’s subsidiaries registered at Group Headquarters, Bankhead Drive, City South Office Park, Portlethen, Aberdeenshire, AB12 4XX are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Europe BV | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
SET Drilling Company Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
KCA DEUTAG Drilling Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
KCA DEUTAG Drilling Services (UK) Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
KCA DEUTAG Technical Support Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
KCA DEUTAG Rig Design Services Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
KCA DEUTAG Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
Kenera Energy Solutions Limited (UK) | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
ProRig Limited | Indirect subsidiary | Scotland | 100% | ||||||||||||||||||||
51
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
31 Subsidiary undertakings, other related undertakings and ultimate controlling party (continued) The Group’s subsidiaries registered at 206 E 9th Street, STE 1300, Austin, TX, USA are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG LLC | Indirect subsidiary | USA | 100% | ||||||||||||||||||||
| The Group’s subsidiaries registered at Vasili Vryonidi, 6 Gala Court Chambers,5th Floor, Limassol, 3095, Cyprus are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Overseas Limited | Indirect subsidiary | Cyprus | 100% | ||||||||||||||||||||
KCA DEUTAG Holdings Limited | Indirect subsidiary | Cyprus | 100% | ||||||||||||||||||||
KCA DEUTAG (Cyprus) Limited | Indirect subsidiary | Cyprus | 100% | ||||||||||||||||||||
The Group’s subsidiaries registered at Deilmannstrasse 1, 48455 Bad Bentheim, Germany are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Abbot Verwaltungsgesellschaft mbH | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
KCA DEUTAG GmbH | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
KCA DEUTAG Tiefbohrgesellschaft mbH | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
KCA DEUTAG Drilling GmbH | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
Bentec GmbH Drilling and Oilfield Systems | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
Bentec Personalservice GmbH | Indirect subsidiary | Germany | 100% | ||||||||||||||||||||
The Group’s subsidiaries registered at Espehaugen 37, 5258 Blomsterdalen, 4601 Bergen, Norway are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Holdings Norge AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
KCA DEUTAG Drilling Norge AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
KCA DEUTAG MODU Operations AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
Abbot Holdings Norge AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
KCA DEUTAG Offshore AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
| KCA DEUTAG Drilling Offshore Services AS | Indirect subsidiary | Norway | 100% | ||||||||||||||||||||
The Group’s subsidiaries registered at Jan Tinbergenstraat 432, 7559, St Hengelo, the Netherlands are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Nederland BV | Indirect subsidiary | Netherlands | 100% | ||||||||||||||||||||
KCA DEUTAG Investments BV | Indirect subsidiary | Netherlands | 100% | ||||||||||||||||||||
| KCA Deutag Rider Cooperatief U.A. | Indirect subsidiary | Netherlands | 100% | ||||||||||||||||||||
The Group’s subsidiaries registered at One Marina Boulevard # 28-00 Singapore 018989 are as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Tender Barges (Offshore) Pte Ltd | Indirect subsidiary | Singapore | 100% | ||||||||||||||||||||
KCA DEUTAG PTE Limited | Indirect subsidiary | Singapore | 100% | ||||||||||||||||||||
52
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
31 Subsidiary undertakings, other related undertakings and ultimate controlling party (continued) The Group’s associate registered at 23B, Jalan 52/1, 46200 Petaling Jaya, Selangor, Malaysia is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Global Tender Barges Malaysia Sdn Bhd (in liquidation) | Indirect subsidiary | Malaysia | 30% | ||||||||||||||||||||
| The Group’s subsidiary registered at San Blas 2 San Joaquin, Ciudad del Carmen, Campeche 24157 is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Global Tender Barges Mexico, S. de R.L. de C.V. | Indirect subsidiary | Mexico | 99% | ||||||||||||||||||||
The Group’s subsidiary registered at 5-9 Main Street, Gibraltar, GX11 1AA is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
International Air Drilling Company Limited | Indirect subsidiary | Gibraltar | 100% | ||||||||||||||||||||
| The Group’s subsidiary registered at Erbil, English Village, Villa 210, Kurdistan is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Performance Drilling for Oil Services Limited | Indirect subsidiary | Iraq | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at Caledonian House, PO Box 1043, George Town, Grand Cayman, KY1-1102 Cayman Islands is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
ILI Corporation Limited | Indirect subsidiary | Cayman Islands | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at 2/F Palm Grove House, PO Box 3340, Road Town, Tortola, British Virgin Islands is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Investments Limited | Indirect subsidiary | British Virgin Islands | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at Ar Rumays, Barka, P.O. Box 739, Postal Code 116, Sultanate of Oman is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Oman KCA DEUTAG Drilling Company (LLC) | Indirect subsidiary | Oman | 70% | ||||||||||||||||||||
The Group’s subsidiary registered P.O Box 12 78, Postal Code 133, Al-Khuwai, Sultanate of Oman is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
International Drilling Technology (LLC) | Indirect subsidiary | Oman | 76% | ||||||||||||||||||||
53
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
31 Subsidiary undertakings, other related undertakings and ultimate controlling party (continued) The Group’s subsidiary registered at Km 16, PH-Aba Expressway, Opposite INTELS, Rumukurusi, Port-Harcourt, Nigeria is as follows: | |||||||||||||||||||||||
Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA DEUTAG Nigeria Limited | Indirect subsidiary | Nigeria | 38% | ||||||||||||||||||||
The Group’s subsidiary registered at Schottegatweg Oost 44, Willemstad, Curaçao is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
Deutag Overseas (Curaçao) NV | Indirect subsidiary | Netherlands Antilles | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at PO Box 1216, Al Khobar 31952, Kingdom of Saudi Arabia is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| KCA DEUTAG Drilling Saudi Arabia Limited | Indirect subsidiary | Saudi Arabia | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at 45 Hebron Way, Suite 201, St. John’s NF, A1A 0P9, Canada is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| KCA DEUTAG Drilling Canada Inc. | Indirect subsidiary | Canada | 100% | ||||||||||||||||||||
The Group’s subsidiary registered at Unit No. 804, DMCC Business Centre, Level No , Jewellery & Gemplex 3, Dubai, UAE is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| KCA DEUTAG Operations Services DMCC | Indirect subsidiary | UAE | 100% | ||||||||||||||||||||
| The Group’s joint venture registered at 15 Chaikovsky Street, Almaty, Republic of Kazakhstan is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| Bentec Kazakhstan Limited Liability Partnership | Joint venture | Kazakhstan | 50% | ||||||||||||||||||||
| The Group’s subsidiary registered at 14th Floor ISR Plaza, 69 Nizami Street, Baku, AZ 1000 Azerbaijan is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| Turan Drilling & Engineering Company LLC | Indirect subsidiary | Azerbaijan | 49% | ||||||||||||||||||||
| The Group’s subsidiaries registered at Ar Rumays, Barka, P.O. Box 739, 116 Muscat Governorate, Sultanate of Oman are as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
KCA Deutag Energy Global LLC KCA Deutag Energy National LLC | Indirect subsidiary Indirect subsidiary | Oman Oman | 99% 99% | ||||||||||||||||||||
| KCA Deutag Energy LLC | Indirect subsidiary | Oman | 70% | ||||||||||||||||||||
| KCA Deutag Energy International LLC | Indirect subsidiary | Oman | 99% | ||||||||||||||||||||
| KCA Deutag Energy Rigs SPC | Indirect subsidiary | Oman | 100% | ||||||||||||||||||||
54
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
31 Subsidiary undertakings, other related undertakings and ultimate controlling party (continued) The Group’s subsidiary registered at Office G5, Ground Floor, Gulf Axis Dana Office Building, Al Dana Al Shamalia, P.O Box: 34258, Dhahran 34258, Kingdom of Saudi Arabia is as follows: | |||||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||||||||||||||
| KCA Deutag Gulf Drilling Limited | Indirect subsidiary | Saudi Arabia | 100% | ||||||||||||||||||||
| Kenera Energy Solutions Middle East Limited | Indirect subsidiary | Saudi Arabia | 100% | ||||||||||||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
| Clean Power Hydrogen plc | Indirect subsidiary | England and Wales | 6% | ||||||||
The Group’s subsidiary registered at 04050, Ukraine, Kyiv, Mykoly Pymonenka Street 13, build. 1-B, office 31 is as follows:
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
| Bentec TOB | Indirect subsidiary | Ukraine | 100% | ||||||||
The Group’s subsidiaries registered at PO Box 536, 13-14 Esplanade, St Helier, Jersey, JE4 5UR is as follows:
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
| International Energy Services Jersey Holding Co. Ltd | Indirect subsidiary | Jersey | 100% | ||||||||
| International Energy Services ROW Jersey Ltd | Indirect subsidiary | Jersey | 100% | ||||||||
| International Energy Services KSA Jersey Ltd | Indirect subsidiary | Jersey | 100% | ||||||||
| International Energy Services South America Co. Ltd | Indirect subsidiary | Jersey | 100% | ||||||||
The Group’s subsidiary registered at Unit No. 2936, DMCC Business Centre, Level No , Jewellery & Gemplex 3, Dubai, UAE is as follows: | |||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
KCAD International DMCC | Indirect subsidiary | UAE | 100% | ||||||||
The Group’s subsidiary registered at 8993 Duhuran, 3389-34521, Kingdom of Saudi Arabia is as follows: | |||||||||||
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
| Saudi International Energy Services Company Ltd | Indirect subsidiary | Saudi Arabia | 100% | ||||||||
The Group’s joint venture registered at St Smagulova, 4A, Atyrau, 060005, Republic of Kazakhstan is as follows:
| Name | Relationship to Company | Country of Incorporation | Percentage of ordinary shares held | ||||||||
| KCA Deutag Kazakhstan LLP | Joint venture | Kazakhstan | 51% | ||||||||
55
KCA Deutag International Limited
Notes to the consolidated financial statements
for the years ended 31 December 2024 and 2023
32 Post balance sheet events
On 16 January 2025 (the “Closing Date”), HP Global Holdings Limited (H&P) completed the Acquisition of 100% of the share capital of KCA Deutag International Limited pursuant to the Purchase Agreement signed in July 2024. 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 existing debt, including, as applicable, the payment of all accrued and unpaid interest, premiums, and fees.
The $1.1 billion repayment or redemption of certain KCA Deutag existing debt consisted of:
(a) the redemption in full of all of:
(i) KCA Deutag UK Finance PLC’s outstanding $500 million aggregate principal amount of 9.875% Senior Secured Notes due 2025;
(ii) KCA Deutag UK Finance PLC’s outstanding $250 million aggregate principal amount of Senior Secured Floating Rate Notes due 2025 and;
(iii) KCA Deutag PIKCO PLC’s outstanding $272.2 million aggregate principal amount (which includes approximately $72.2 million of accrued and capitalized interest) of 15.0%/17.5% Payment-In-Kind Notes due 2027, and
(b) the repayment of all of the:
(i) approximately $50 million of outstanding borrowings under KCA Deutag’s Senior Secured Guarantee and Revolving Credit Facilities provided by Barclays Bank plc and;
(ii) approximately $50 million of outstanding borrowings under KCA Deutag’s Senior Secured Revolving Credit Facilities provided by Deutsche Bank AG, in each case including, as applicable, the payment of all accrued and unpaid interest, premiums and fees in connection with each such redemption or repayment.
56
Exhibit 99.2
| UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS | ||||||||||||||
The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Helmerich & Payne, Inc. (“H&P” or the “Company”) and KCA Deutag International Ltd. (“KCA Deutag”) and present the Company’s pro forma financial position and results of operations resulting from the Company’s acquisition of KCA Deutag (the “Acquisition”) and the related financing.
On January 16, 2025 (the “Closing Date”), H&P completed the Acquisition pursuant to that certain Sale and Purchase Agreement, dated as of July 24, 2024, by and among H&P, KCA Deutag and the other parties thereto (as amended, the “Purchase Agreement”). 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 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 account on the Closing Date pending the resolution of certain potential tax obligations of KCA Deutag. On the Closing Date, the Company drew an aggregate principal amount of $400.0 million under an unsecured term loan credit agreement (“Term Loan Credit Agreement”) for purposes of financing the Acquisition. The cash consideration was funded through a combination of net proceeds from the Company’s September 2024 senior notes offering, net proceeds from the funding of the Company’s Term Loan Credit Agreement, cash on hand, and monetization of the Company’s investment in ADNOC Drilling.
The Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2024 (the “Pro Forma Balance Sheet”) gives effect to the Acquisition as if it had occurred on December 31, 2024, combining the unaudited condensed consolidated balance sheet of H&P at December 31, 2024 and the audited consolidated balance sheet of KCA Deutag at December 31, 2024.
The Unaudited Pro Forma Condensed Combined Statements of Operations for the fiscal year ended September 30, 2024 and for the three months ended December 31, 2024 (the “Pro Forma Statements of Operations”) give effect to the Acquisition as if it had occurred on October 1, 2023, combining the audited results of H&P for the fiscal year ended September 30, 2024 and the audited results of KCA Deutag for the fiscal year ended December 31, 2024, and combining the unaudited results of H&P and KCA Deutag for the three months ended December 31, 2024. Therefore, the results of KCA Deutag for the three months ended December 31, 2024, are included in the Pro Forma Statements of Operations for both the year ended September 30, 2024 and the three months ended December 31, 2024.
The Pro Forma Balance Sheet and the Pro Forma Statements of Operations and the accompanying notes are hereafter collectively referred to as the “Pro Forma Financial Statements.”
The Pro Forma Financial Statements are provided for illustrative purposes only and do not represent the actual financial position and results of operations of H&P that would have been achieved had the Acquisition and related financing transactions occurred on the Closing Date assumed above, and do not reflect adjustments for any anticipated integration costs, synergies, operating efficiencies, tax savings or cost savings. The actual financial condition and results of operations may differ from the amounts set forth in the Pro Forma Financial Statements and in the accompanying notes herein. Therefore, it is possible that the actual adjustments will differ from the pro forma adjustments, and it is possible such differences may be material. There can be no assurance that additional information and analyses will not result in material changes. Adjustments are based on preliminary information available to H&P’s management during the preparation of the Pro Forma Financial Statements and assumptions that H&P’s management believes are reasonable and supportable. The pro forma adjustments, which are described in the accompanying notes, may be revised by H&P as additional information becomes available and is evaluated.
The Pro Forma Financial Statements should be read in conjunction with the following:
•the audited consolidated financial statements and notes as of and for the fiscal year ended September 30, 2024, included in H&P’s Annual Report on Form 10-K, filed with the SEC on November 13, 2024 (“H&P’s 2024 Form 10-K”);
•the unaudited condensed consolidated financial statements and notes as of and for the three months ended December 31, 2024, included in H&P’s Quarterly Report on Form 10-Q, filed with the SEC on February 5, 2025 (“H&P’s Q1 2025 Form 10-Q”); and
•the audited consolidated financial statements and notes of KCA Deutag as of and for the fiscal years ended December 31, 2024 and 2023 included as exhibit 99.1 to the Current Report on Form 8-K/A filed by H&P on April 4, 2025.
1
| UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET | |||||||||||||||||||||||||||||
AS OF DECEMBER 31, 2024 | |||||||||||||||||||||||||||||
| Historical | Historical (Reclassified) | U.S. GAAP Conversion and Accounting Policy Adjustments | Transaction Accounting and Other Adjustments | Pro Forma Combined | |||||||||||||||||||||||||
(in thousands) | (Note 2) | ||||||||||||||||||||||||||||
| H&P | KCA Deutag | (Note 3) | (Note 4) | ||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 391,179 | $ | 231,306 | $ | — | $ | (393,602) | (a) | $ | 228,883 | ||||||||||||||||||
| Restricted cash | 73,216 | — | — | — | 73,216 | ||||||||||||||||||||||||
| Short-term investments | 135,317 | — | — | — | 135,317 | ||||||||||||||||||||||||
| Accounts receivable, net | 426,933 | 366,342 | — | — | 793,275 | ||||||||||||||||||||||||
| Inventories of materials and supplies, net | 127,288 | 211,339 | — | (17,740) | (b) | 320,887 | |||||||||||||||||||||||
| Prepaid expenses and other, net | 70,898 | 4,400 | — | — | 75,298 | ||||||||||||||||||||||||
| Total current assets | 1,224,831 | 813,387 | — | (411,342) | 1,626,876 | ||||||||||||||||||||||||
| Investments | 101,652 | 1,146 | — | — | 102,798 | ||||||||||||||||||||||||
| Property, plant and equipment, net | 3,009,360 | 988,291 | — | 472,442 | (b) | 4,470,093 | |||||||||||||||||||||||
| Other Noncurrent Assets: | |||||||||||||||||||||||||||||
| Goodwill | 45,653 | 365,461 | — | (47,640) | (b)(c) | 363,474 | |||||||||||||||||||||||
| Intangible assets, net | 52,547 | 28,859 | — | 439,804 | (b) | 521,210 | |||||||||||||||||||||||
| Operating lease right-of-use assets | 67,510 | 106,327 | (61,740) | (b) | 1,867 | (b) | 113,964 | ||||||||||||||||||||||
Restricted cash | 1,242,124 | — | — | (1,242,124) | (a) | — | |||||||||||||||||||||||
| Other assets, net | 72,944 | — | — | — | 72,944 | ||||||||||||||||||||||||
| Total other noncurrent assets | 1,480,778 | 500,647 | (61,740) | (848,093) | 1,071,592 | ||||||||||||||||||||||||
| Total assets | $ | 5,816,621 | $ | 2,303,471 | $ | (61,740) | $ | (786,993) | $ | 7,271,359 | |||||||||||||||||||
| LIABILITIES & SHAREHOLDERS' EQUITY | |||||||||||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||||||||||
| Accounts payable | $ | 148,752 | $ | 96,282 | $ | — | $ | — | $ | 245,034 | |||||||||||||||||||
| Dividends payable | 25,154 | — | — | — | 25,154 | ||||||||||||||||||||||||
| Accrued liabilities | 261,807 | 451,048 | (27,372) | (a)(b)(g) | 11,137 | (d)(e) | 696,620 | ||||||||||||||||||||||
| Derivative financial instruments | — | 1,981 | — | — | 1,981 | ||||||||||||||||||||||||
| Long-term debt - current portion | — | 1,123,719 | — | (1,116,964) | (e) | 6,755 | |||||||||||||||||||||||
| Total current liabilities | 435,713 | 1,673,030 | (27,372) | (1,105,827) | 975,544 | ||||||||||||||||||||||||
| Noncurrent Liabilities: | |||||||||||||||||||||||||||||
| Long-term debt, net | 1,781,674 | 78,188 | — | 400,000 | (a) | 2,259,862 | |||||||||||||||||||||||
| Deferred income taxes | 485,682 | 9,788 | 815 | (o) | 174,247 | (c) | 670,532 | ||||||||||||||||||||||
| Other | 166,771 | 180,265 | (36,754) | (b) | 11,175 | (b) | 321,457 | ||||||||||||||||||||||
| Total noncurrent liabilities | 2,434,127 | 268,241 | (35,939) | 585,422 | 3,251,851 | ||||||||||||||||||||||||
| Shareholders' Equity: | |||||||||||||||||||||||||||||
| Common stock, $0.10 par value | 11,222 | 100 | — | (100) | 11,222 | ||||||||||||||||||||||||
| Preferred stock, no par value | — | — | — | — | — | ||||||||||||||||||||||||
| Additional paid-in capital | 501,516 | 919,200 | — | (919,200) | 501,516 | ||||||||||||||||||||||||
Retained earnings (accumulated deficit) | 2,913,211 | (3,291,200) | 1,571 | (a)(g)(o) | 3,271,595 | (d) | 2,895,177 | ||||||||||||||||||||||
| Other reserves | — | 2,733,700 | — | (2,733,700) | — | ||||||||||||||||||||||||
| Accumulated other comprehensive loss | (5,987) | (22,300) | — | 22,300 | (5,987) | ||||||||||||||||||||||||
| Treasury stock, at cost | (473,181) | — | — | — | (473,181) | ||||||||||||||||||||||||
Non-controlling interest | — | 22,700 | — | 92,517 | (b)(c) | 115,217 | |||||||||||||||||||||||
| Total shareholders’ equity | 2,946,781 | 362,200 | 1,571 | (266,588) | 3,043,964 | ||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 5,816,621 | $ | 2,303,471 | $ | (61,740) | $ | (786,993) | $ | 7,271,359 | |||||||||||||||||||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Statements.
2
| UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||
FOR THE YEAR ENDED SEPTEMBER 30, 2024 | |||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | H&P | KCA Deutag | U.S. GAAP and Policy Adjustments | (Note 3) | Transaction Accounting and Other Adjustments | (Note 4) | Pro Forma Combined | ||||||||||||||||||||||
| Historical | Historical (Reclassified) (Note 2) | ||||||||||||||||||||||||||||
Year Ended September 30, 2024 | Year Ended December 31, 2024 | ||||||||||||||||||||||||||||
| OPERATING REVENUES | |||||||||||||||||||||||||||||
| Drilling services | $ | 2,746,128 | $ | 1,711,600 | $ | (2,180) | (g) | $ | — | $ | 4,455,548 | ||||||||||||||||||
| Other | 10,479 | — | — | — | 10,479 | ||||||||||||||||||||||||
| 2,756,607 | 1,711,600 | (2,180) | — | 4,466,027 | |||||||||||||||||||||||||
| OPERATING COSTS AND EXPENSES | |||||||||||||||||||||||||||||
| Drilling services operating expenses, excluding depreciation and amortization | 1,630,225 | 1,261,300 | 83,768 | (a)(c)(h) | — | 2,975,293 | |||||||||||||||||||||||
| Other operating expenses | 4,483 | — | — | — | 4,483 | ||||||||||||||||||||||||
| Depreciation and amortization | 397,344 | 205,600 | (62,000) | (c) | 57,133 | (f) | 598,077 | ||||||||||||||||||||||
| Research and development | 40,967 | — | 900 | (j) | — | 41,867 | |||||||||||||||||||||||
| Selling, general and administrative | 244,877 | 34,700 | (3,800) | (c)(d) | — | 275,777 | |||||||||||||||||||||||
Acquisition transaction costs | 14,982 | 85,800 | — | 18,109 | (d) | 118,891 | |||||||||||||||||||||||
| Gain on reimbursement of drilling equipment | (33,309) | — | — | — | (33,309) | ||||||||||||||||||||||||
Other loss on sale of assets | 5,139 | — | — | — | 5,139 | ||||||||||||||||||||||||
| 2,304,708 | 1,587,400 | 18,868 | 75,242 | 3,986,218 | |||||||||||||||||||||||||
| OPERATING INCOME (LOSS) | 451,899 | 124,200 | (21,048) | (75,242) | 479,809 | ||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||
| Interest and dividend income | 41,168 | 14,700 | (4,900) | (d) | — | 50,968 | |||||||||||||||||||||||
| Interest expense | (29,093) | (170,900) | 12,500 | (c) | 49,886 | (g) | (137,607) | ||||||||||||||||||||||
Gain (loss) on investment securities | 13,953 | — | (1,000) | (l) | — | 12,953 | |||||||||||||||||||||||
| Other | 3,093 | — | — | — | 3,093 | ||||||||||||||||||||||||
| 29,121 | (156,200) | 6,600 | 49,886 | (70,593) | |||||||||||||||||||||||||
Income (loss) before income taxes | 481,020 | (32,000) | (14,448) | (25,356) | 409,216 | ||||||||||||||||||||||||
| Income tax expense | 136,855 | 53,600 | (3,394) | (n) | (4,291) | (l) | 182,770 | ||||||||||||||||||||||
NET INCOME (LOSS) | $ | 344,165 | $ | (85,600) | $ | (11,054) | $ | (21,065) | $ | 226,446 | |||||||||||||||||||
Net income (loss) attributable to non-controlling interest | — | 17,200 | — | (16,251) | (h) | 949 | |||||||||||||||||||||||
Net income (loss) attributable to owners | 344,165 | (102,800) | (11,054) | (4,814) | 225,497 | ||||||||||||||||||||||||
| $ | 344,165 | $ | (85,600) | $ | (11,054) | $ | (21,065) | $ | 226,446 | ||||||||||||||||||||
Earnings attributable to owners per share: | |||||||||||||||||||||||||||||
| Basic | $ | 3.43 | $ | 2.23 | |||||||||||||||||||||||||
| Diluted | $ | 3.43 | $ | 2.23 | |||||||||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||
| Basic | 98,857 | 98,857 | |||||||||||||||||||||||||||
| Diluted | 99,067 | 99,067 | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Statements.
3
| UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED DECEMBER 31, 2024 | |||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | H&P | KCA Deutag | U.S. GAAP and Policy Adjustments | (Note 3) | Transaction Accounting and Other Adjustments | (Note 4) | Pro Forma Combined | ||||||||||||||||||||||
| Historical | Historical (Reclassified) (Note 2) | ||||||||||||||||||||||||||||
For Three Months Ended December 31, 2024 | For Three Months Ended December 31, 2024 | ||||||||||||||||||||||||||||
| OPERATING REVENUES | |||||||||||||||||||||||||||||
| Drilling services | $ | 674,613 | $ | 424,100 | $ | (1,240) | (g) | $ | — | $ | 1,097,473 | ||||||||||||||||||
| Other | 2,689 | — | — | — | 2,689 | ||||||||||||||||||||||||
| 677,302 | 424,100 | (1,240) | — | 1,100,162 | |||||||||||||||||||||||||
| OPERATING COSTS AND EXPENSES | |||||||||||||||||||||||||||||
| Drilling services operating expenses, excluding depreciation and amortization | 411,857 | 322,300 | 19,873 | (a)(e)(i) | — | 754,030 | |||||||||||||||||||||||
| Other operating expenses | 1,156 | — | — | — | 1,156 | ||||||||||||||||||||||||
| Depreciation and amortization | 99,080 | 54,400 | (15,655) | (e) | 9,489 | (i) | 147,314 | ||||||||||||||||||||||
| Research and development | 9,359 | — | 225 | (k) | — | 9,584 | |||||||||||||||||||||||
| Selling, general and administrative | 63,062 | 4,000 | (13,000) | (f) | — | 54,062 | |||||||||||||||||||||||
Acquisition transaction costs | 10,535 | 68,500 | — | — | 79,035 | ||||||||||||||||||||||||
| Gain on reimbursement of drilling equipment | (9,403) | — | — | — | (9,403) | ||||||||||||||||||||||||
Other loss on sale of assets | 1,673 | — | — | — | 1,673 | ||||||||||||||||||||||||
| 587,319 | 449,200 | (8,557) | 9,489 | 1,037,451 | |||||||||||||||||||||||||
| OPERATING INCOME (LOSS) | 89,983 | (25,100) | 7,317 | (9,489) | 62,711 | ||||||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||||||||
| Interest and dividend income | 21,741 | 14,900 | (13,000) | (f) | — | 23,641 | |||||||||||||||||||||||
| Interest expense | (22,298) | (41,300) | 2,900 | (e) | 13,296 | (j) | (47,402) | ||||||||||||||||||||||
Loss on investment securities | (13,367) | — | (300) | (l) | — | (13,667) | |||||||||||||||||||||||
| Other | 360 | — | — | — | 360 | ||||||||||||||||||||||||
| (13,564) | (26,400) | (10,400) | 13,296 | (37,068) | |||||||||||||||||||||||||
Income (loss) before income taxes | 76,419 | (51,500) | (3,083) | 3,807 | 25,643 | ||||||||||||||||||||||||
| Income tax expense | 21,647 | 16,600 | (647) | (m) | 1,465 | (l) | 39,065 | ||||||||||||||||||||||
NET INCOME (LOSS) | 54,772 | (68,100) | (2,436) | 2,342 | (13,422) | ||||||||||||||||||||||||
Net income (loss) attributable to non-controlling interest | — | 4,200 | — | (4,062) | (k) | 138 | |||||||||||||||||||||||
Net income (loss) attributable to owners | 54,772 | (72,300) | (2,436) | 6,404 | (13,560) | ||||||||||||||||||||||||
| $ | 54,772 | $ | (68,100) | $ | (2,436) | $ | 2,342 | $ | (13,422) | ||||||||||||||||||||
Earnings attributable to owners per share: | |||||||||||||||||||||||||||||
| Basic | $ | 0.55 | $ | (0.14) | |||||||||||||||||||||||||
| Diluted | $ | 0.54 | $ | (0.14) | |||||||||||||||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||||||||||
| Basic | 98,867 | 98,867 | |||||||||||||||||||||||||||
| Diluted | 99,159 | 99,159 | |||||||||||||||||||||||||||
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Combined Financial Statements.
4
| NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS | ||||||||||||||
| NOTE 1 BASIS OF PRESENTATION | ||||||||||||||
The Pro Forma Financial Statements were prepared in accordance with Article 11 of Regulation S-X, as amended, and reflect the acquisition of the entire equity interest of KCA Deutag. The Acquisition will be accounted for using the acquisition method of accounting, as prescribed in Accounting Standards Codification 805, Business Combinations, (“ASC 805”), under U.S. GAAP, which requires an allocation of the acquisition price to the assets acquired and liabilities assumed, based on their fair values as of the date of the Acquisition. H&P performed a detailed valuation study necessary to arrive at the required preliminary estimates of the fair value of KCA Deutag’s assets acquired, and liabilities assumed and the related allocations of acquisition price.
The H&P historical financial information included in the Pro Forma Financial Statements has been derived from the financial statements included within H&P’s 2024 Form 10-K and H&P’s Q1 2025 Form 10-Q. The KCA Deutag historical financial information included in the Pro Forma Financial Statements has been derived from KCA Deutag’s audited consolidated financial statements as of and for the year ended December 31, 2024 and the unaudited statement of operations for the three months ended December 31, 2024.
The Pro Forma Balance Sheet gives effect to the Acquisition as if it had occurred on December 31, 2024, combining the unaudited condensed consolidated balance sheet of H&P at December 31, 2024 and the audited consolidated balance sheet of KCA Deutag at December 31, 2024.
The Pro Forma Statements of Operations give effect to the Acquisition as if it had occurred on October 1, 2023, combining the audited results of H&P for the fiscal year ended September 30, 2024 and the audited results of KCA Deutag for the fiscal year ended December 31, 2024, and combining the unaudited results of H&P and KCA Deutag for the three months ended December 31, 2024.
The historical consolidated financial statements of H&P were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and are shown in U.S. dollars. The historical consolidated financial statements of KCA Deutag were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and are shown in U.S. dollars. Refer to Note 2 for certain reclassification adjustments that have been made to conform KCA Deutag’s historical financial statement presentation to H&P’s financial statement presentation. Refer to Note 4 for the adjustments identified by H&P to preliminarily convert KCA Deutag’s historical financial statements prepared in accordance with IFRS to U.S. GAAP and align KCA Deutag’s accounting policies to H&P’s accounting policies.
H&P prepares its consolidated financial statements on the basis of a fiscal year ended September 30th. The consolidated financial statements of KCA Deutag have historically been prepared on a basis of a fiscal year ended December 31st. In accordance with applicable SEC rules, if the fiscal year-end of an acquired entity differs from the acquirer’s fiscal year end by one quarter or less, the entities may combine their historical financial information in pro forma financial statements without any recasting of periods. The Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended September 30, 2024 was prepared using the audited statements of operations for H&P and KCA Deutag for the fiscal years ended September 30, 2024 and December 30, 2024, respectively. The Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended December 31, 2024 was prepared using the unaudited condensed consolidated statements of operations for H&P and KCA Deutag for the three months ended December 31, 2024. Therefore, the results of operations of KCA Deutag for the three months ended December 31, 2024, are included in the Pro Forma Statements of Operations for both the year ended September 30, 2024, and the three months ended December 31, 2024.
The Pro Forma Statements of Operations disclose the basic and diluted earnings per share from continuing operations on both a historical and pro forma basis. The Acquisition has no impact on the weighted average shares outstanding used in the computation of earnings per share.
| NOTE 2 RECLASSIFICATION OF KCA DEUTAG’S HISTORICAL FINANCIAL STATEMENT PRESENTATION | ||||||||||||||
Certain reclassification adjustments have been made to conform KCA Deutag’s historical financial statement presentation to H&P’s financial statement presentation. Refer to the table below for a reconciliation of the historical financial information of KCA Deutag’s reconciliation to H&P’s presentation.
5
| KCA DEUTAG BALANCE SHEET RECLASSIFICATION ADJUSTMENTS TO CONFORM TO H&P’S PRESENTATION | |||||||||||||||||||||||
| AS OF DECEMBER 31, 2024 | |||||||||||||||||||||||
| (in millions) | Historical | Reclassification Adjustments | Historical (Reclassified) | Mapping to H&P’s Financial Statements | |||||||||||||||||||
| KCA Deutag | (Note 2) | KCA Deutag | |||||||||||||||||||||
Assets | |||||||||||||||||||||||
| Noncurrent Assets: | |||||||||||||||||||||||
| Property, plant and equipment | $ | 988.3 | $ | — | $ | 988.3 | Property, plant and equipment, net | ||||||||||||||||
| Right-of-use leased assets | 106.3 | — | 106.3 | Operating lease right-of-use assets | |||||||||||||||||||
| Goodwill | 365.5 | — | 365.5 | Goodwill | |||||||||||||||||||
| Other intangible assets | 28.9 | — | 28.9 | Intangible assets, net | |||||||||||||||||||
| Investments | 1.1 | — | 1.1 | Investments | |||||||||||||||||||
| Deferred tax assets | 59.5 | (59.5) | (a) | — | |||||||||||||||||||
| 1,549.6 | (59.5) | 1,490.1 | |||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||||
| Inventories and work in progress | 211.3 | — | 211.3 | Inventories of materials and supplies, net | |||||||||||||||||||
| Trade and other receivables | 370.7 | (4.4) | (e) | 366.3 | Accounts receivable, net | ||||||||||||||||||
Prepaid expenses and other, net | — | 4.4 | (e) | 4.4 | Prepaid expenses and other, net | ||||||||||||||||||
| Cash and cash equivalents | 231.3 | — | 231.3 | Cash and cash equivalents | |||||||||||||||||||
| 813.3 | — | 813.3 | |||||||||||||||||||||
| Total assets | $ | 2,362.9 | $ | (59.5) | $ | 2,303.4 | |||||||||||||||||
Liabilities & Shareholders’ Equity | |||||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||||
| Trade and other payables | $ | 477.1 | $ | (380.8) | (d) | $ | 96.3 | Accounts payable | |||||||||||||||
Accrued liabilities | — | 451.0 | (c) | 451.0 | Accrued liabilities | ||||||||||||||||||
| Tax liabilities | 23.7 | (23.7) | (c) | — | |||||||||||||||||||
| Financial liabilities - derivative financial instruments | 2.0 | — | 2.0 | Derivative financial instruments | |||||||||||||||||||
| Financial liabilities - borrowings | 1,123.7 | — | 1,123.7 | Long-term debt - Current portion | |||||||||||||||||||
| Lease liabilities | 45.2 | (45.2) | (c) | — | |||||||||||||||||||
Provisions and other payable | 1.3 | (1.3) | (c) | — | |||||||||||||||||||
| Total current liabilities | $ | 1,673.0 | $ | — | $ | 1,672.9 | |||||||||||||||||
| Noncurrent Liabilities: | |||||||||||||||||||||||
| Deferred income | $ | 6.2 | $ | (6.2) | (b) | $ | — | ||||||||||||||||
| Financial liabilities - borrowings | 78.2 | — | 78.2 | Long-term debt, net | |||||||||||||||||||
| Deferred tax liabilities | 69.3 | (59.5) | (a) | 9.8 | Deferred income taxes | ||||||||||||||||||
| Retirement benefit obligations | 99.0 | (99.0) | (b) | — | |||||||||||||||||||
| Lease liabilities | 72.7 | (72.7) | (b) | — | |||||||||||||||||||
| Provisions and other payables | 2.3 | (2.3) | (b) | — | |||||||||||||||||||
Other | — | 180.3 | (b) | 180.3 | Other | ||||||||||||||||||
| Total noncurrent liabilities | 327.7 | (59.5) | 268.2 | ||||||||||||||||||||
| Net Assets | $ | 362.2 | $ | — | $ | 362.3 | |||||||||||||||||
| Shareholders' Equity: | |||||||||||||||||||||||
| Share capital | $ | 0.1 | $ | — | $ | 0.1 | Common stock | ||||||||||||||||
| Share premium | 919.2 | — | 919.2 | Additional paid-in-capital | |||||||||||||||||||
| Other reserves | 2,711.4 | 22.3 | (f) | 2,733.7 | Other reserves | ||||||||||||||||||
| Accumulated losses | (3,291.2) | — | (3,291.2) | Retained earnings (accumulated deficit) | |||||||||||||||||||
Accumulated other comprehensive loss | — | (22.3) | (f) | (22.3) | Accumulated other comprehensive loss | ||||||||||||||||||
| $ | 339.5 | $ | — | $ | 339.5 | ||||||||||||||||||
| Non-controlling interest | 22.7 | — | 22.7 | ||||||||||||||||||||
| Total shareholders’ equity | $ | 362.2 | $ | — | $ | 362.2 | |||||||||||||||||
6
| KCA DEUTAG STATEMENTS OF OPERATIONS RECLASSIFICATION ADJUSTMENTS TO CONFORM TO H&P’S PRESENTATION | |||||||||||||||||||||||
FOR THE THREE MONTHS ENDED DECEMBER 31, 2024 | |||||||||||||||||||||||
| (in millions) | Historical | Reclassification Adjustments | Historical (Reclassified) | Mapping to H&P’s Financial Statements | |||||||||||||||||||
| KCA Deutag | (Note 2) | KCA Deutag | |||||||||||||||||||||
| Revenue | $ | 424.1 | $ | — | $ | 424.1 | Drilling services revenue | ||||||||||||||||
| Cost of sales | (370.0) | 47.7 | (j) | (322.3) | Drilling services operating expenses, excluding depreciation and amortization | ||||||||||||||||||
| Gross profit | 54.1 | 47.7 | 101.8 | ||||||||||||||||||||
| Administrative expenses | (8.7) | 4.7 | (i)(j) | (4.0) | Selling, general and administrative | ||||||||||||||||||
| Depreciation and amortization | — | (54.4) | (j) | (54.4) | Depreciation and amortization | ||||||||||||||||||
Acquisition transaction costs | — | (68.5) | (k) | (68.5) | Acquisition transaction costs | ||||||||||||||||||
| Net impairment gain on financial and contract assets | (0.1) | 0.1 | (i) | — | |||||||||||||||||||
| Amortization of intangible assets | (1.9) | 1.9 | (j) | — | |||||||||||||||||||
Operating profit before exceptional items | 43.4 | (68.5) | (25.1) | ||||||||||||||||||||
| Exceptional items - Net operating costs | (68.5) | 68.5 | (k) | — | |||||||||||||||||||
Operating profit | (25.1) | — | (25.1) | Operating income (loss) | |||||||||||||||||||
| Net finance costs | (26.4) | (14.9) | (l) | (41.3) | Interest expense | ||||||||||||||||||
| Finance income | — | 14.9 | (l) | 14.9 | Interest and dividend income | ||||||||||||||||||
| Profit before taxation | (51.5) | — | (51.5) | Income (loss) before income taxes | |||||||||||||||||||
| Taxation | (16.6) | — | (16.6) | Income tax expense | |||||||||||||||||||
Loss from continuing operations | (68.1) | — | (68.1) | Net income (loss) | |||||||||||||||||||
Income (loss) attributable to: | |||||||||||||||||||||||
Non-controlling interest | 4.2 | — | 4.2 | Net income (loss) attributable to non-controlling interest | |||||||||||||||||||
Owners | (72.3) | — | (72.3) | Net income (loss) attributable to owners | |||||||||||||||||||
| $ | (68.1) | $ | — | $ | (68.1) | ||||||||||||||||||
7
| KCA DEUTAG STATEMENTS OF OPERATIONS RECLASSIFICATION ADJUSTMENTS TO CONFORM TO H&P’S PRESENTATION | |||||||||||||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2024 | |||||||||||||||||||||||
| (in millions) | Historical | Reclassification Adjustments | Historical (Reclassified) | Mapping to H&P’s Financial Statements | |||||||||||||||||||
| KCA Deutag | (Note 2) | KCA Deutag | |||||||||||||||||||||
| Revenue | $ | 1,711.6 | $ | — | $ | 1,711.6 | Drilling services revenue | ||||||||||||||||
| Cost of sales | (1,445.2) | 183.9 | (g) | (1,261.3) | Drilling services operating expenses, excluding depreciation and amortization | ||||||||||||||||||
| Gross profit | 266.4 | 183.9 | 450.3 | ||||||||||||||||||||
| Administrative expenses | (48.5) | 13.8 | (i)(g) | (34.7) | Selling, general and administrative | ||||||||||||||||||
| Depreciation and amortization | — | (205.6) | (g) | (205.6) | Depreciation and amortization | ||||||||||||||||||
Acquisition transaction costs | — | (85.8) | (h) | (85.8) | Acquisition transaction costs | ||||||||||||||||||
| Net impairment gain on financial and contract assets | (0.1) | 0.1 | (i) | — | |||||||||||||||||||
| Amortization of intangible assets | (7.8) | 7.8 | (g) | — | |||||||||||||||||||
Operating profit before exceptional items | 210.0 | (85.8) | 124.2 | ||||||||||||||||||||
| Exceptional items - Net operating costs | (85.8) | 85.8 | (h) | — | |||||||||||||||||||
Operating profit | 124.2 | — | 124.2 | Operating income (loss) | |||||||||||||||||||
| Finance costs | (170.9) | — | (170.9) | Interest expense | |||||||||||||||||||
| Finance income | 14.7 | — | 14.7 | Interest and dividend income | |||||||||||||||||||
| Profit before taxation | (32.0) | — | (32.0) | Income (loss) before income taxes | |||||||||||||||||||
| Taxation | (53.6) | — | (53.6) | Income tax expense | |||||||||||||||||||
Loss from continuing operations | $ | (85.6) | $ | — | $ | (85.6) | Net income (loss) | ||||||||||||||||
Income (loss) attributable to: | |||||||||||||||||||||||
Non-controlling interest | 17.2 | — | 17.2 | Net income (loss) attributable to non-controlling interest | |||||||||||||||||||
Owners | (102.8) | — | (102.8) | Net income (loss) attributable to owners | |||||||||||||||||||
| $ | (85.6) | $ | — | $ | (85.6) | ||||||||||||||||||
(a)A reclassification adjustment is included to present a net deferred tax balance for KCA Deutag, consistent with the H&P balance sheet presentation. Additional adjustments to deferred tax liabilities are recorded as part of the acquisition accounting entries. Refer to Note 3 for further details.
(b)Reclassification adjustments related to the following KCA Deutag noncurrent liabilities to Other noncurrent liabilities as follows:
| (in millions) | |||||
| Deferred income | $ | 6.2 | |||
| Retirement benefit obligations | 99.0 | ||||
| Lease liabilities | 72.7 | ||||
| Provisions and other payables | 2.3 | ||||
Total reclassification adjustment to Other noncurrent liabilities | $ | 180.2 | |||
(c)Reclassification adjustments related to the following KCA Deutag current liabilities into Accrued liabilities as follows:
| (in millions) | |||||
| Number of payable accounts within Trade and other payables - Note 2(d) | $ | 380.8 | |||
| Lease liabilities - current portion | 45.2 | ||||
| Tax liabilities | 23.7 | ||||
Provisions and other payables | 1.3 | ||||
| Total reclassification adjustment to Accrued liabilities | $ | 451.0 | |||
8
(d)Reclassification adjustments related to the following KCA Deutag current liabilities from Trade and other payables as follows:
| (in millions) | |||||
| Other tax and social security payable | $ | 22.1 | |||
| Other payables | 47.5 | ||||
| Accruals | 296.5 | ||||
Payments received | 0.6 | ||||
Deferred income within Trade and other payables to Accrued liabilities | 14.1 | ||||
| Total reclassification adjustment to trade and other payables | $ | 380.8 | |||
(e)Other reclassification adjustments for the following:
| (in millions) | |||||
| Accrued demobilization revenue from Trade and other receivables to Prepaid expenses and other, net | $ | (4.4) | |||
(f)Reclassification for cumulative translation adjustments and hedging gains/losses from Other reserves to Accumulated other comprehensive income (loss) as follows:
| (in millions) | |||||
| Cumulative translation adjustment | $ | (20.7) | |||
| Hedging reserves | (1.6) | ||||
| Total reclassification adjustment to Accumulated other comprehensive income (loss) | $ | (22.3) | |||
(g)Reclassification of depreciation expense included in selling, general and administrative expense and cost of sales, in addition to the amortization of intangible assets, into depreciation and amortization to conform to H&P’s presentation as follows:
| (in millions) | |||||
Reclassify depreciation expenses from Cost of sales | $ | (183.9) | |||
Reclassify depreciation expenses from Selling, general & administrative expense | (13.9) | ||||
Reclassify Amortization of intangible assets | (7.8) | ||||
| Total reclassification adjustment to Depreciation and amortization | $ | (205.6) | |||
(h)KCA Deutag presents exceptional, infrequent, and nonrecurring transactions in one line item within operating income labeled as “Exceptional items - Net operating costs” while H&P presents infrequent and nonrecurring items as separate lines on the statement of operations within operating income. This pro forma adjustment is to reclassify exceptional items into Transaction costs on the H&P statement of operations as follows:
| (in millions) | |||||
| Transaction costs incurred in connection with the acquisition of KCA Deutag by H&P | $ | (76.5) | |||
| Transaction costs incurred in connection with the acquisition of Saipem | (9.3) | ||||
Reclassify transaction costs within exceptional items to Transaction costs | $ | (85.8) | |||
(i)During 2024, KCA Deutag recovered/collected accounts receivable that were previously impaired; as such, the company recorded a gain from the reversal of bad debt expense, while H&P records the recovery of bad debt expense within selling, general & administrative expense.
(j)Reclassification of depreciation expense included in Selling, general & administrative expense and Cost of sales, in addition to the Amortization of intangible assets, into Depreciation and amortization as follows:
| (in millions) | |||||
Reclassify depreciation expenses from Cost of sales | $ | (47.7) | |||
Reclassify depreciation expenses from Selling, general & administrative expense | (4.8) | ||||
Reclassify Amortization of intangible assets | (1.9) | ||||
| Total reclassification adjustment to Depreciation and amortization | $ | (54.4) | |||
9
(k)KCA Deutag presents exceptional, infrequent, and nonrecurring transactions in one line item within operating income labeled as “Exceptional items - Net operating costs” while H&P presents infrequent and nonrecurring items as separate lines on the statement of operations within operating income. This pro forma adjustment is to reclassify exceptional items into Transaction costs on the H&P statement of operations as follows:
| (in millions) | |||||
| Transaction costs incurred in connection with the acquisition of KCA Deutag by H&P | $ | (66.4) | |||
| Transaction costs incurred in connection with the acquisition of Saipem | (2.1) | ||||
Reclassify transaction costs within exceptional items to Transaction costs | $ | (68.5) | |||
(l)Reclassification of interest income netted with interest expense to interest income.
NOTE 3 PRELIMINARY IFRS TO U.S. GAAP CONVERSION ADJUSTMENTS AND POLICY ADJUSTMENTS | ||||||||||||||
IFRS differs in certain material respects from U.S. GAAP. The following adjustments have been made to reflect KCA Deutag’s historical audited and unaudited consolidated statements of operations and consolidated balance sheet on a U.S. GAAP basis for the purposes of the unaudited pro forma financial information. The Pro Forma Financial Statements reflects the adjustments necessary to convert KCA Deutag’s historical financial statements to U.S. GAAP and to conform to H&P’s accounting policies based on an initial policy conversion assessment performed by management. Additional differences were identified; however no adjustments were made as the impact of these differences were deemed immaterial.
(a)KCA Deutag's accounting policy is to accrue and recognize demobilization costs of rigs in profit and loss over the primary term of the drilling contract on a straight line basis while H&P's accounting policy is to expense the demobilization costs as incurred. This adjustment is to eliminate the balance of accrued demobilization costs from the balance sheet of KCA Deutag as of December 31, 2024, with a corresponding adjustment recorded to retained earnings (accumulated deficit) of KCA Deutag as of the same date. In addition, demobilization costs accrued for but not yet incurred by KCA Deutag during fiscal year 2024 and the three months ended December 31, 2024 but accrued for as of December 31, 2024 were estimated through the change between the beginning and ending balances of accrued demobilization costs and then added to the drilling services operating expenses for each of these periods. The following table illustrates the balances of accrued demobilization cost and the related change by period:
| (in thousands) | |||||
Accrued demobilization costs as of December 31, 2024 | $ | 4,566 | |||
Accrued demobilization costs as of September 30, 2024 | 4,744 | ||||
Pro forma adjustment to drilling services operating expenses for the three months ended December 31, 2024 | $ | 178 | |||
Accrued demobilization costs as of December 31, 2024 | $ | 4,566 | |||
Accrued demobilization costs as of December 31, 2023 | 10,375 | ||||
Pro forma adjustment to drilling services operating expenses for the year ended December 31, 2024 | $ | 5,809 | |||
(b)KCA Deutag leases a number of cranes, vehicles and other transportation equipment under purchase orders. KCA Deutag’s management estimates the lease term as being the same length as the customer contract on which the equipment will be used, on the basis that the equipment will be needed to deliver that contract. Accordingly, a corresponding lease liability and right of use asset is recognized. This estimate differs from H&P’s management estimate where the lease term for cranes is deemed to be a short term lease (12 months or less). The following pro forma adjustment is to eliminate the lease liability and the corresponding right of use assets that are recorded in KCA Deutag's historical balance sheet as of December 31, 2024:
| (in thousands) | |||||
| Lease liabilities - current | $ | 24,986 | |||
| Lease liabilities - noncurrent | 36,754 | ||||
| Operating lease right-of-use assets | $ | 61,740 | |||
10
(c)Under IFRS, KCA Deutag recognizes right-of-use assets and lease liabilities for its leases. However, as required by IFRS, KCA Deutag does not distinguish between operating leases and finance leases and accounts for all leases recorded on the balance sheet similarly to finance leases under U.S. GAAP. KCA Deutag records depreciation on all right-of-use assets and interest expense on all lease liabilities, while a straight-line operating expense is presented for operating leases under U.S. GAAP. The impact on the statement of operations for the year ended December 31, 2024 is as follows:
| (in thousands) | Drilling services operating expenses, excluding depreciation and amortization | Selling, general and administrative expense | Total | ||||||||||||||
| Reclassification of the amortization of the right-of-use asset from depreciation and amortization to: | $ | 60,900 | $ | 1,100 | $ | 62,000 | |||||||||||
Reclassification of interest on lease liabilities from interest expense to: | 12,500 | — | 12,500 | ||||||||||||||
| $ | 73,400 | $ | 1,100 | $ | 74,500 | ||||||||||||
(d)KCA Deutag's accounting policy is to report foreign exchange transaction gains and losses in the line items to which they relate, while H&P aggregates all transaction gains and losses and presents the net amount in a single caption within operating income in the statement of operations. During the year ended December 31, 2024, KCA Deutag recognized $4.9 million of exchange gains, resulting from the translation of pension liabilities which are largely denominated in Euros and classified as finance costs within the KCA Deutag historical financials. This adjustment reclassifies the foreign exchange gains from interest expense into operating expenses to conform with H&P’s accounting policy.
(e)Under IFRS, KCA Deutag recognizes right-of-use assets and lease liabilities for its leases. However, as required by IFRS, KCA Deutag does not distinguish between operating leases and finance leases and accounts for all leases recorded on the balance sheets similarly to finance leases under U.S. GAAP. KCA Deutag records depreciation on all right-of-use assets and interest expense on all lease liabilities, while a straight-line operating expense is presented for operating leases under U.S. GAAP. The impact on the statement of operations for the three months ended December 31, 2024 is as follows:
| (in thousands) | Drilling services operating expenses, excluding depreciation and amortization | Selling, general and administrative expense | Total | ||||||||||||||
| Reclassification of the amortization of the right-of-use asset from depreciation and amortization to: | $ | 15,655 | $ | — | $ | 15,655 | |||||||||||
Reclassification of interest on lease liabilities from interest expense to: | 2,900 | — | 2,900 | ||||||||||||||
| $ | 18,555 | $ | — | $ | 18,555 | ||||||||||||
(f)KCA Deutag's accounting policy is to report foreign exchange transaction gains and losses in the line items to which they relate while H&P aggregates all transaction gains and losses and classify the net amount in a single caption within operating income in the statement of operations. During the three months ended December 31, 2024, KCA Deutag recognized $13.0 million of exchange gains, resulting from the translation of pension liabilities which are largely denominated in Euros and classified as finance costs within the KCA Deutag historical financials. This adjustment reclassifies the foreign exchange gains from interest expense into operating expenses to conform to H&P’s accounting policy.
(g)KCA Deutag’s accounting policy is to recognize revenue related to capital upgrades on drilling rigs requested by the customer, when invoiced, whereas H&P policy is to defer these revenues and recognize in profit and loss over the primary term of the drilling contract on a straight line basis. This adjustment is to derecognize KCA Deutag revenues by $1.2 million and $2.2 million for revenue that would have been deferred under H&P’s accounting policy during the three months ended December 31, 2024 and the year ended December 31, 2024, respectively.
(h)Under IFRS, KCA Deutag’s actuarial gains or losses resulting from the remeasurement of its pension plans are recognized in Other comprehensive income and are not subsequently recognized in Net income, whereas U.S. GAAP requires actuarial gains or losses to be recognized in net income in future periods after they are initially recognized in Other comprehensive income. This adjustment of $4.6 million is intended to adjust KCA Deutag’s benefit costs with the amortization of actuarial gains and loss recorded in Other comprehensive income that would have been recognized in net income during the year ended December 31, 2024.
(i)Under IFRS, KCA Deutag’s actuarial gains or losses resulting from the remeasurement of its pension plans are recognized in Other comprehensive income and are not subsequently recognized in Net income, whereas U.S. GAAP requires actuarial gains or losses to be recognized in net income in future periods after they are initially recognized in Other comprehensive income. This adjustment of $1.1 million is intended to adjust KCA Deutag’s benefit costs with the amortization of actuarial gains and loss recorded in Other comprehensive income that would have been recognized in net income during the three months ended December 31, 2024.
(j)Under IFRS, KCA Deutag’s costs related to certain research activities are expensed as incurred and costs relating to development activities are capitalized after meeting certain conditions, whereas U.S. GAAP requires costs relating to research and development activities to be expensed as incurred. This adjustment of $0.9 million is to expense development costs capitalized by KCA Deutag during the year ended December 31, 2024.
11
(k)Under IFRS, KCA Deutag’s costs related to certain research activities are expensed as incurred and costs relating to development activities are capitalized after meeting certain conditions, whereas U.S. GAAP requires costs relating to research and development activities to be expensed as incurred. This adjustment of $0.2 million is to expense development costs capitalized by KCA Deutag during the three months ended December 31, 2024.
(l)Under both U.S. GAAP and IFRS, investments in equity securities are carried and measured at fair value; however, KCA Deutag has elected the IFRS option to recognize changes in fair value of equity investments in other comprehensive income (OCI). This adjustment of $(0.3) million and $(1.0) million is to record the loss on investments in equity securities carried at fair value on the statement of operations rather than OCI during the three months and year ended December 31, 2024, respectively.
(m)Adjustment represents the preliminary assessment of the tax impact of all the U.S. GAAP and policy alignment adjustments as applicable. The tax rates applicable for U.S. GAAP and policy adjustments affecting H&P and KCA Deutag are the statutory tax rates. Actual results might significantly differ than this preliminary assessment. The table below provides details about the tax impact of these adjustments, as applicable, during the three months ended December 31, 2024:
(in thousands) except tax rates | Applicable Tax Rate | Adjustment Amount Income (Loss) | Tax Benefit | ||||||||||||||
Adjustment to increase the KCA Deutag demobilization expenses (Note 3a) | 25 | % | $ | (178) | $ | (45) | |||||||||||
Deferral of capital upgrades recognized in Oman (Note 3g) | 15 | (1,240) | (186) | ||||||||||||||
Additional benefit costs related to the pension plans (Note 3i) | 25 | (1,140) | (285) | ||||||||||||||
Expensing of development costs capitalized (Note 3k) | 25 | (225) | (56) | ||||||||||||||
Expensing loss on investments in securities carried at fair value (Note 3l) | 25 | (300) | (75) | ||||||||||||||
| $ | (3,083) | $ | (647) | ||||||||||||||
(n)Adjustment represents the preliminary assessment of the tax impact of all the U.S. GAAP and policy alignment adjustments as applicable. The tax rates applicable for U.S. GAAP and policy adjustments affecting H&P and KCA Deutag are the statutory tax rates. Actual results might significantly differ than this preliminary assessment. The table below provides details about the tax impact of these adjustments, as applicable, during the year ended December 31, 2024:
(in thousands) except tax rates | Applicable Tax Rate | Adjustment Amount Income (Loss) | Tax Benefit | ||||||||||||||
Adjustment to increase the KCA Deutag demobilization expenses (Note 3a) | 25 | % | $ | (5,809) | $ | (1,452) | |||||||||||
Deferral of capital upgrades recognized in Oman (Note 3g) | 15 | (2,180) | (327) | ||||||||||||||
Additional benefit costs related to the pension plans (Note 3h) | 25 | (4,559) | (1,140) | ||||||||||||||
Expensing of development costs capitalized (Note 3j) | 25 | (900) | (225) | ||||||||||||||
Expensing loss on investments in securities carried at fair value (Note 3l) | 25 | (1,000) | (250) | ||||||||||||||
| $ | (14,448) | $ | (3,394) | ||||||||||||||
(o)Adjustment represents the preliminary assessment of the tax impact of all the U.S. GAAP and policy alignment adjustments as applicable. The tax rates applicable for U.S. GAAP and policy adjustments affecting H&P and KCA Deutag are the statutory tax rates. Actual results might significantly differ than this preliminary assessment. The table below provides details about the tax impact of these adjustments, as applicable, as of December 31, 2024:
(in thousands) except tax rates | Applicable Tax Rate | Adjustment Amount Increase (Decrease) | Deferred Tax Liability Increase (Decrease) | ||||||||||||||
Elimination of accrued demobilization balance (Note 3a) | 25 | % | $ | (4,566) | $ | 1,142 | |||||||||||
Deferral of capital upgrades recognized in Oman (Note 3g) | 15 | 2,180 | (327) | ||||||||||||||
| $ | (2,386) | $ | 815 | ||||||||||||||
NOTE 4 TRANSACTION ACCOUNTING AND OTHER ADJUSTMENTS | ||||||||||||||
PRELIMINARY PURCHASE PRICE ALLOCATION
The total purchase consideration for the Acquisition has been allocated to the assets acquired and liabilities assumed for purposes of the unaudited pro forma condensed combined financial information based on their estimated relative fair values. The allocation of the purchase consideration herein is preliminary. The final allocation of the purchase consideration for the Acquisition will be determined after the completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed but in no event later than one year following the completion of the Acquisition.
Accordingly, the final acquisition accounting adjustments could differ materially from the preliminary amounts presented in these unaudited pro forma condensed combined financial statements.
12
Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of H&P following the Acquisition due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities.
The below summarizes the preliminary purchase price allocation of the purchase price to the assets acquired and liabilities assumed of KCA Deutag for the purposes of the unaudited pro forma condensed combined financial statements as of the Closing Date.
| (in thousands) | |||||
Total cash consideration | $ | 2,035,726 | |||
Current assets acquired: | |||||
| Cash and cash equivalents | $ | 231,306 | |||
| Accounts receivable, net | 370,741 | ||||
| Inventory and work in progress | 193,599 | ||||
Non-current assets acquired: | |||||
| Investments | 1,146 | ||||
| Property, plant and equipment, net | 1,460,733 | ||||
| Intangible assets, net | 468,663 | ||||
| Operating lease right-of-use assets | 108,194 | ||||
| Total assets acquired | $ | 2,834,382 | |||
Current liabilities assumed: | |||||
| Trade and other payables | $ | 467,796 | |||
| Current tax liabilities | 23,662 | ||||
| Financial liabilities - derivative financial instruments | 1,981 | ||||
Financial liabilities - current borrowings | 6,755 | ||||
| Lease liabilities - current | 45,241 | ||||
Provisions and other payables - current | 1,346 | ||||
Contingent liabilities | 11,178 | ||||
Non-current liabilities assumed: | |||||
Deferred income | 6,163 | ||||
Financial liabilities - non-current borrowings | 78,188 | ||||
| Deferred tax liabilities | 184,849 | ||||
Retirement benefit obligations | 99,043 | ||||
Lease liabilities - non-current | 72,717 | ||||
Provisions and other payables - non-current | 2,341 | ||||
| Total liabilities assumed | $ | 1,001,260 | |||
| Estimated preliminary fair value of net assets | $ | 1,833,122 | |||
Add: Estimated preliminary fair value of non-controlling interests acquired | 115,217 | ||||
| Goodwill | $ | 317,821 | |||
13
The following adjustments have been made to the Pro Forma Financial Statements to reflect certain preliminary purchase price accounting and other pro forma adjustments. Further review may identify additional adjustments that could have a material impact on the Pro Forma Financial Statements.
(a)Adjustment reflects H&P’s funding for the $2.0 billion total consideration for the Acquisition, 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 with a combination of cash on hand and from borrowings. The following table summarizes the preliminary sources of funding for the Acquisition:
| (in thousands) | |||||
Base price | $ | 946,369 | |||
Payoff of sellers’ pre-existing debt | 1,138,941 | ||||
Transaction fees | 203 | ||||
Less: Sellers’ transaction fees | (49,787) | ||||
Preliminary purchase price | $ | 2,035,726 | |||
Cash restricted from the issuance of senior notes to finance the purchase price and to repay certain outstanding indebtedness of KCA Deutag | $ | 1,242,124 | |||
Proceeds from Term Loan Credit Agreement | 400,000 | ||||
| H&P cash utilized to acquire KCA Deutag’s shares and pay off its borrowings | $ | 393,602 | |||
(b)These pro forma adjustments reflect the preliminary purchase price accounting adjustment for the following:
| (in thousands) | Elimination of KCA Deutag’s carrying values | Preliminary fair value/Balances | Net pro forma transaction accounting adjustments | ||||||||||||||
| Property, plant and equipment | $ | 988,291 | $ | 1,460,733 | $ | 472,442 | |||||||||||
| Operating lease right-of-use | 106,327 | 108,194 | 1,867 | ||||||||||||||
| Goodwill | 365,461 | 162,452 | (203,009) | ||||||||||||||
| Intangible assets | 28,859 | 468,663 | 439,804 | ||||||||||||||
Inventories and work in progress | 211,339 | 193,599 | (17,740) | ||||||||||||||
| Contingent liabilities | — | 11,175 | 11,175 | ||||||||||||||
| Non-controlling interest | 22,700 | 134,095 | 111,395 | ||||||||||||||
(c)Adjustment to reflect the preliminary assessment of deferred taxes resulting from the purchase price accounting adjustment for KCA Deutag and the related impact on the goodwill and non-controlling interest as follows:
| (in thousands) | |||||
| Deferred tax liabilities | $ | 174,247 | |||
| Non-controlling interest share of the deferred tax liabilities | (18,878) | ||||
| Net pro forma adjustment to the goodwill related to the deferred tax liabilities | $ | 155,369 | |||
As a result, the total net pro forma adjustment to goodwill amounts to $317.8 million, which consists of the preliminary purchase price accounting adjustment in the amount of $162.5 million (Note 4b) plus the adjustment for the preliminary assessment of deferred taxes in the amount of $155.4 million (above).
(d)H&P preliminarily estimated total transaction costs (excluding finance costs) incurred and to be incurred in connection with the Acquisition. This adjustment is to reflect the additional transaction costs expected to be incurred subsequent to December 31, 2024 through the Closing Date as follows:
| (in thousands) | |||||
Actual transaction costs incurred as of the Closing Date | $ | 43,626 | |||
Transaction costs incurred as of December 31, 2024 | (25,517) | ||||
Estimate for additional transaction costs to be accrued | $ | 18,109 | |||
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(e)Adjustments to eliminate KCA Deutag’s borrowings and the related accrued interest (excluding the Oman Facility) that were repaid or redeemed contemporaneous with the acquisition of KCA Deutag. Per the Purchase Agreement, H&P was required to pay off substantially all of KCA Deutag’s outstanding borrowings, excluding the Oman Facility, on the Closing Date as a condition to the consummation of the Acquisition. The details of KCA Deutag’s borrowings as of December 31, 2024 are as follows:
| (in thousands) | |||||
Total current portion of long-term debt | $ | 1,123,719 | |||
Remaining current portion of Oman Facility | (6,755) | ||||
Net current portion of long-term debt | $ | 1,116,964 | |||
Accrued interest | $ | (6,972) | |||
(f)Adjustment reflects the recording of the incremental depreciation and amortization expenses based on the estimated fair value of KCA Deutag’s property and equipment and intangible assets as a result of the Acquisition. For pro forma purposes, it is assumed that the Acquisition occurred on October 1, 2023. The pro forma adjustments to depreciation and amortization expense for fiscal year 2024 were estimated to be $57.1 million.
(g)Adjustment reflects the elimination of interest expense related to the KCA Deutag historical borrowings and the addition of H&P debt to fund the purchase price of KCA Deutag’s shares in addition to the payoff of KCA Deutag’s borrowings. The net pro forma adjustment to interest expense is as follows:
| (in thousands) | |||||
| H&P additional interest expense assuming additional borrowings to finance the transaction | $ | (91,031) | |||
| Elimination of KCA Deutag’s interest expense related to long-term borrowings assuming those borrowings were paid as of October 1, 2023 | 140,917 | ||||
| Net pro forma adjustment to interest expense | $ | 49,886 | |||
(h)Adjustment represents the non-controlling interest (“NCI”) share in the additional depreciation and amortization resulting from the purchase price adjustments of KCA Deutag’s property, plant and equipment and intangible assets during the year ended December 31, 2024 as follows:
(in thousands) except tax rates | Applicable Tax Rate | Pre-tax | Tax effect | Post-tax | |||||||||||||||||||
Turan Drilling & Engineering Company NCI share of 12 months of additional depreciation and amortization adjustments | 20 | % | $ | 18,824 | $ | (3,765) | $ | 15,059 | |||||||||||||||
International Drilling Tech LLC NCI share of 12 months of additional depreciation and amortization adjustments | 15 | % | 1,402 | (210) | 1,192 | ||||||||||||||||||
Net adjustment | $ | 16,251 | |||||||||||||||||||||
(i)Adjustment reflects the recording of the incremental depreciation and amortization expenses based on the estimated fair value of KCA Deutag’s property, plant and equipment and intangible assets as a result of the Acquisition. For pro forma purposes, it is assumed that the Acquisition occurred on October 1, 2023. The pro forma adjustments to depreciation and amortization expense for the three months ended December 31, 2024 were estimated to be $9.5 million.
(j)Adjustment reflects the elimination of interest expense related to the KCA Deutag historical borrowings and the addition of H&P debt to fund the purchase price of KCA Deutag's shares in addition to the payoff of the KCA Deutag’s borrowings. The net pro forma adjustment to interest expense is as follows:
| (in thousands) | |||||
| H&P additional interest expense assuming additional borrowings to finance the transaction | $ | (22,758) | |||
| Elimination of KCA Deutag’s interest expense related to long-term borrowings assuming those borrowings were paid as of October 1, 2023 | 36,054 | ||||
| Net pro forma adjustment to interest expense | $ | 13,296 | |||
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(k)Adjustment represents the NCI share in the additional depreciation and amortization resulting from the purchase price adjustments of KCA Deutag’s property, plant and equipment and intangible assets during the three months ended December 31, 2024 as follows:
(in thousands) except tax rates | Applicable Tax Rate | Pre-tax | Tax effect | Post-tax | |||||||||||||||||||
Turan Drilling & Engineering Company NCI share of three months of additional depreciation and amortization adjustments | 20 | % | $ | 4,706 | $ | (941) | $ | 3,765 | |||||||||||||||
International Drilling Tech LLC NCI share of three months of additional depreciation and amortization adjustments | 15 | % | 350 | (53) | 297 | ||||||||||||||||||
Net adjustment | $ | 4,062 | |||||||||||||||||||||
(l)Adjustment represents the preliminary assessment of the tax impact of all U.S. GAAP and policy alignment adjustments, as applicable. The impact of the adjustments to Deferred income tax is recorded to the goodwill balance as of the same date. The tax rates applicable to these adjustments represent the statutory tax rates. Actual results might significantly differ from this preliminary assessment. The table below provides details about the tax impact of these adjustments, as applicable:
Fiscal Year 2024 | Three months ended December 31, 2024 | ||||||||||||||||||||||||||||
(in thousands) except tax rates | Applicable tax rate | Adjustment amount | Tax expense (benefit) | Adjustment amount | Tax expense (benefit) | ||||||||||||||||||||||||
Increase in interest expense for additional debt at H&P (Notes 4g & 4j) | 22.75 | % | $ | (91,031) | $ | (20,710) | $ | (22,758) | $ | (5,177) | |||||||||||||||||||
Elimination of interest expense related to KCA Deutag borrowings (Notes 4g & 4j) | 25.00 | 140,917 | 35,229 | 36,054 | 9,014 | ||||||||||||||||||||||||
KCA Deutag’s incremental depreciation and amortization expense (Notes 4f & 4i) | 25.00 | (57,133) | (14,283) | (9,489) | (2,372) | ||||||||||||||||||||||||
Estimate for the additional transaction costs to be accrued (Note 4d) | 25.00 | (18,109) | (4,527) | — | — | ||||||||||||||||||||||||
| $ | (25,356) | $ | (4,291) | $ | 3,807 | $ | 1,465 | ||||||||||||||||||||||
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