Leading U.S. unconventional driller Helmerich & Payne Inc. (H&P) has joined the chorus in warning the onshore rig count will continue to decline this year.

CEO John Lindsay helmed a conference call to discuss fiscal 3Q2019 results for the Tulsa-based operator, noting that H&P exited the quarter with a lower-than-expected rig count.

“Our expectation of seeing the bottom of the company’s rig count during the quarter turned out to be premature, as the full effect of the industry’s emphasis on disciplined capital spending continues to reverberate through the oilfield services sector,” he said.

H&P exited the quarter with 214 active U.S. rigs, slightly below the low end of its guidance range.

“We are reluctant to predict another bottom and see further softening during our fourth fiscal quarter as our guidance would indicate.”

The comments about the downward slide in the U.S. onshore mirror comments by other oilfield services executives this earnings season, including by Halliburton Co., Patterson-UTI Energy Inc., Superior Energy Services Inc. and Schlumberger Ltd.

H&P’s U.S land segment’s operating income decreased by $244.3 million sequentially to a loss of $138.2 million primarily because of the drilling equipment impairment and downsizing the Flex4 fleet.

The number of quarterly revenue days in the segment decreased sequentially by about 7%. Adjusted average rig revenue/day improved by $498 to $26,122, while the adjusted average rig expense/day increased sequentially by $667 to $14,862. Corresponding adjusted average rig margin/day decreased $169 to $11,260.

Quarterly U.S. land adjusted rig revenue on average increased by more than $495/day, up 2% sequentially, while the adjusted average rig margin fell by about 2% sequentially to $170/day.

In its outlook for fiscal 4Q2019, management said the U.S. land segment should see revenue days fall by 5-6% sequentially, representing a 6-7% decline in the average number of active rigs. H&P expects to exit the quarter with 193-203 active rigs. Average rig revenue/day in the Lower 48 is expected to fall slightly to $25,250-25,750, excluding early termination revenue, while rig expense/day on average is forecast at $14,350-14,850.

On the upside, the industry’s use of high-tech, super-spec rigs favored H&Ps Flex line, which is close to 90% utilization. In addition, “pricing remains firm for the best-in-class fleet” for the rigs and related technology, Lindsay said.

AutoSlide, the drilling automation technology, has been deployed commercially in the Permian Basin’s Midland formation, the Eagle Ford and Bakken shales, as well as in Oklahoma’s stacked plays. The technology is to expand into the Permian Delaware later this year. Internationally, two rigs now are working in Bahrain, and the first super-spec was delivered to Argentina to drill in the Vaca Muerta Basin.

Net losses for the quarter totaled $155 million (minus $1.42/share), versus year-ago profits of $61 million (55 cents). Operating revenues fell to $688 million from $721 million. A one-time impairment charge of $224 million was related to excess drilling equipment and spares, primarily driven by the reduction of 53 rigs within the FlexRig4 fleet.

After completing an extensive evaluation of the Flex4 rig fleet and the expected future utilization of the related drilling equipment and spares on hand, H&P concluded that the older rigs “are not currently economical candidates for upgrades or conversions to super-spec,” CFO Mark Smith said.

“Second, H&P started building these rigs in 2005 and has already received its full investment payback as well as generated excess returns over our internal hurdle rate on the Flex4 fleet.” Over the “next few quarters,” H&P expects to realize more than $1.5 million, or around $25-50/revenue day in permanent cash cost savings resulting from the reduced costs associated with decommissioning the FlexRig4s as they are removed from the H&P fleet.

Capital expenditures for 2019 now are expected to be in the lower end of guidance at $500-530 million with roughly 35% budgeted for super-spec upgrades, 33-38% for maintenance and 27-32% for continued reactivations and other bulk purchases.