REVENUE FROM CONTRACTS WITH CUSTOMERS

6 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

REVENUE FROM CONTRACTS WITH CUSTOMERS

NOTE 9 REVENUE FROM CONTRACTS WITH CUSTOMERS

Drilling Services Revenue

The releases for rigs under term contracts result in early termination compensation owed to us, while releases for rigs under well-to-well contracts given outside the notification window provided for in the contract result in notification fees owed to us. During the three months ended March 31, 2022, we recognized $0.7 million in early termination revenue associated with term contracts compared to $1.9 million during the three months ended March 31, 2021. During the six months ended March 31, 2022, we also recognized $0.7 million in early termination revenue associated with term contracts compared to $7.7 million during the six months ended March 31, 2021.

With most drilling contracts, we also receive payments contractually designated for the mobilization and demobilization of drilling rigs and other equipment to and from the client’s drill site. Revenues associated with the mobilization and demobilization of our drilling rigs to and from the client’s drill site do not relate to a distinct good or service. These revenues are deferred and recognized ratably over the related contract term that drilling services are provided. For any contracts that include a provision for pooled term days at contract inception, followed by the assignment of days to specific rigs throughout the contract term, we have elected, as a practical expedient, to recognize revenue in the amount to which the entity has a right to invoice, as permitted by ASC 606.

On November 12, 2021, we settled a drilling contract dispute related to drilling services provided from fiscal years 2016 through 2019 with YPF S.A. (Argentina) ("YPF"). The settlement required that YPF make a one-time cash payment to H&P in the amount of $11.0 million and enter into drilling service contracts for three drilling rigs, each with multi-year terms. In addition, both parties were released of all outstanding claims against each other, and as a result, H&P recognized $5.4 million in revenue primarily due to accrued contingent liabilities for disputed amounts. Total revenue recognized as a result of the settlement in the amount of $16.4 million is included in Drilling Services Revenue within the International Solutions segment on our Unaudited Condensed Consolidated Statements of Operations for the six months ended March 31, 2022.

Contract Costs

We had capitalized fulfillment costs of $8.1 million and $4.3 million as of March 31, 2022 and September 30, 2021, respectively.

Remaining Performance Obligations

The total aggregate transaction price allocated to the unsatisfied performance obligations, commonly referred to as backlog, as of March 31, 2022 was approximately $727.7 million, of which approximately $437.8 million is expected to be recognized during the remainder of fiscal year 2022, approximately $226.4 million during fiscal year 2023, and approximately $63.5 million during fiscal year 2024 and thereafter. These amounts do not include anticipated contract renewals. Additionally, contracts that currently contain month-to-month terms are represented in our backlog as one month of unsatisfied performance obligations. Our contracts are subject to cancellation or modification at the election of the customer, but also carry certain early termination provisions customers abide by in cases of cancellation or modification. Due to the level of capital deployed by our customers on underlying projects, we have not been materially adversely affected by contract cancellations or modifications in the past.

Contract Assets and Liabilities

The following tables summarize the balances of our contract assets (net of allowance for estimated credit losses) and liabilities at the dates indicated below:

(in thousands)	March 31, 2022		September 30, 2021
Contract assets, net	$	5,166	$	4,513

(in thousands)	March 31, 2022
Contract liabilities balance at September 30, 2021	$	9,286
Payment received/accrued and deferred	25,382
Revenue recognized during the period	(20,113)
Contract liabilities balance at March 31, 2022	$	14,555