FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

3 Months Ended

Dec. 31, 2025

FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

NOTE 10 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

We have certain assets and liabilities that are required to be measured and disclosed at fair value. Fair value is defined as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We use the following fair value hierarchy established in ASC 820-10 to measure fair value to prioritize the inputs:

•Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

•Level 2 — Observable inputs, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets; quoted prices for similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Fair Value Measurements

The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis and indicate the level in the fair value hierarchy in which we classify the fair value measurement as of the dates indicated below:


	December 31, 2025
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments:
Corporate debt securities	$	21,595	$	—	$	21,595	$	—
Total	21,595		—		21,595		—

Long-term Investments:
Recurring fair value measurements:
Equity securities:
Non-qualified supplemental savings plan	18,065		18,065		—		—
Investment in Tamboran	27,491		27,491		—		—
Other equity securities	1,691		1,691		—		—
Debt securities:
Geothermal debt securities, net	2,000		—		—		2,000
Other debt securities	250		—		—		250
Total	$	49,497	$	47,247	$	—	$	2,250

As of December 31, 2025, our short-term security investments in held to maturity bonds totaled $0.2 million, These investments are measured at cost, less any impairments.

As of December 31, 2025, our equity security investments in geothermal energy were $14.1 million. These investments are measured at cost, less any impairments. Our other equity security investments totaled $6.9 million, of which $3.8 million was measured at fair value as of December 31, 2025. The remaining $3.1 million were measured at cost, less any impairments.


	September 30, 2025
(in thousands)	Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments:
Corporate debt securities	$	21,302	$	—	$	21,302	$	—
Total	21,302		—		21,302		—

Long-term investments:
Recurring fair value measurements:
Equity securities:
Non-qualified supplemental savings plan	17,662		17,662		—		—
Investment in Tamboran	25,976		25,976		—		—
Other equity securities	1,449		1,449		—		—
Debt securities:
Investment in Galileo, net	—		—		—		—
Geothermal debt securities, net	2,000		—		—		2,000
Other debt securities	250		—		—		250
Total	$	47,337	$	45,087	$	—	$	2,250

As of September 30, 2025, our short-term security investments in held to maturity bonds totaled $0.2 million. These investments are measured at cost, less any impairments.

As of September 30, 2025, our equity security investments in geothermal energy and other equity security investments were $14.1 million and $6.7 million, respectively. These investments are measured at cost, less any impairments.

Recurring Fair Value Measurements

Short-term Investments

Short-term investments primarily include securities classified as trading securities. Both realized and unrealized gains and losses on trading securities are included in Other income (expense) in the Unaudited Condensed Consolidated Statements of Operations. These securities are recorded at fair value. Level 1 inputs include U.S. agency issued debt securities with active markets. For these items, quoted current market prices are readily available. Level 2 inputs include corporate bonds measured using broker quotations that utilize observable market inputs.

During September 2021, the Company made a $100.0 million cornerstone investment in ADNOC Drilling in advance of its announced initial public offering, representing 159.7 million shares of ADNOC Drilling, equivalent to a one percent ownership stake and subject to a three-year lockup period. ADNOC Drilling’s initial public offering was completed on October 3, 2021, and its shares are listed and traded on the Abu Dhabi Securities Exchange.

During the three months ended December 31, 2024, we sold our equity securities of 159.7 million shares in ADNOC Drilling and received net proceeds of approximately $193.3 million. During the three months ended December 31, 2024, we recognized a loss of $12.4 million on our Unaudited Condensed Consolidated Statements of Operations, related to this investment, of which $8.4 million was associated with the change in fair value of the investment and $4.0 million related to transaction fees associated with the sale of the securities.

Long-term Investments

Equity Securities Our long-term investments include debt and equity securities and assets held in a Non-Qualified Supplemental Savings Plan ("Savings Plan") and are recorded within Investments on our Unaudited Condensed Consolidated Balance Sheets. Our assets that we hold in the Savings Plan are comprised of mutual funds that are measured using Level 1 inputs.

Equity Securities with Fair Value Option In October 2022, we made a $14.1 million equity investment, representing 106.0 million common shares in Tamboran Resources. In December 2023, all shares of Tamboran Resources were transferred to Tamboran Corp. in exchange for depository interests in Tamboran Corp. Depository interests, referred to as CHESS Depository Interests, each representing beneficial interests of 1/200th of a share of Tamboran Corp. common stock, are listed on the Australian Stock Exchange under the ticker symbol "TBN." Tamboran Corp. is focused on developing a natural gas resource in Australia's Beetaloo Sub-basin.

On June 4, 2024, the Company entered into a convertible note agreement with Tamboran Corp. This note was utilized to relieve Tamboran's outstanding accounts receivable balance owed to the Company, and therefore no cash was exchanged as part of the transaction. The convertible note agreement provided that the notes converted into shares of common stock of Tamboran Corp. under certain circumstances in connection with an initial public offering in which its stock was listed on the NYSE or NASDAQ Stock Exchange. On June 26, 2024, Tamboran Corp. completed an initial public offering of its common stock on the NYSE and its common stock is listed on the NYSE, under the ticker "TBN". As a result of this offering, the convertible note of $9.4 million was converted into 0.5 million common shares in Tamboran Corp. Our shares received in this initial public offering were subject to a 180-day lockup period, which expired during the first fiscal quarter of 2025.

As of December 31, 2025, our combined equity ownership was approximately 5.0 percent representing 1.0 million common shares in Tamboran Corp. During the fiscal year ended September 30, 2025, our representation on the investee's board of directors ceased. As a result, we determined that we no longer have the ability to exert significant influence over the investee. We consider this investment to have a readily determinable fair value and in accordance with ASC 321, we continue to account for this investment using the fair value option with any changes in fair value recognized through net income (loss). Under the guidance, Topic 820, Fair Value Measurement, this investment is classified as a Level 1 investment based on the quoted stock price which is publicly available. Our investment is classified as a long-term equity investment within Investments on our Unaudited Condensed Consolidated Balance Sheets and measured at fair value with any gains or losses recognized through net income (loss) and recorded within Gain (loss) on investment securities on our Unaudited Condensed Consolidated Statements of Operations. During the three months ended December 31, 2025, we recognized a gain of $1.5 million as a result of the change in fair value of the investment compared to a loss of $1.1 million during the three months ended December 31, 2024.

Debt Securities During April 2022, the Company made a $33.0 million cornerstone investment in Galileo Holdco 2 Limited Technologies ("Galileo Holdco 2"), part of the group of companies known as Galileo Technologies (“Galileo”) in the form of notes with an option to convert into common shares of the parent of Galileo Holdco 2.

During the fiscal year ended September 30, 2025, we recorded a $29.6 million loss on our investment in Galileo, due to an allowance for credit loss on the convertible note, driven by heightened liquidity constraints and changes in governance, which led management to conclude that the fair value of the investment was not recoverable. As a result, the investment was fully reserved as of September 30, 2025. The loss was recognized through net income (loss) and recorded within Gain (loss) on investment securities on our Consolidated Statements of Operations. During the three months ended December 31, 2025, we released Galileo from this legal obligation, resulting in the full write-off of the investment.

Nonrecurring Fair Value Measurements

We have certain assets that are subject to measurement at fair value on a nonrecurring basis. For these nonfinancial assets, measurement at fair value in periods subsequent to their initial recognition is applicable if they are determined to be impaired. These assets generally include property, plant and equipment, goodwill, intangible assets, and operating lease right-of-use assets. If measured at fair value in the Unaudited Condensed Consolidated Balance Sheets, these would generally be classified within Level 2 or 3 of the fair value hierarchy. Further details on any changes in valuation of these assets is provided in their respective footnotes.

Equity Securities

We also hold various other equity securities without readily determinable fair values, primarily comprised of geothermal investments. These equity securities are initially measured at cost, less any impairments, and will be marked to fair value once observable changes in identical or similar investments from the same issuer occur. All of our long-term equity securities are measured using Level 3 unobservable inputs based on the absence of market activity.

The following table reconciles changes in the balance of our equity securities, without readily determinable fair values, including investments that have been marked to fair value on a nonrecurring basis, for the periods presented below:


	Three Months Ended December 31,
(in millions)	2025		2024
Assets at beginning of period	$	20,861	$	30,090
Purchases	—		646
Sales	(124)		—

Total gains:
Included in earnings	303		109

Assets at end of period	$	21,040	$	30,845

Other Financial Instruments

The carrying amount of cash and cash equivalents and restricted cash approximates fair value due to the short-term nature of these items. The majority of cash equivalents are invested in highly liquid money-market mutual funds invested primarily in direct or indirect obligations of the U.S. Government and in federally insured deposit accounts. The carrying value of accounts receivable, other current and noncurrent assets, accounts payable, accrued liabilities and other liabilities approximated fair value at December 31, 2025 and September 30, 2025.

The fair values of the long-term fixed-rate debt are based on broker quotes at December 31, 2025 and September 30, 2025. The unsecured senior notes and unsecured term loan agreement are classified within Level 2 of the fair value hierarchy as they are not actively traded in markets. The secured term agreements are classified as nonpublic debt, meaning their value was directly negotiated between the involved parties and is not observable in the market. As a result, they are categorized as Level 3. Since this debt is nonpublic, the carrying value and the fair value of the loans are identical.

The following information presents the supplemental fair value information for our long-term fixed-rate debt, net at December 31, 2025 and September 30, 2025:


	Carrying Value at December 31, 2025		Fair Value at December 31, 2025 Using Inputs Considered as:
(in thousands)			Level 1		Level 2		Level 3
Unsecured senior notes:
2027 Notes	$	347,929	$	—	$	353,014	$	—
2029 Notes	346,785		—		352,783		—
2031 Notes	546,487		—		492,129		—
2034 Notes	543,339		—		554,807		—

Unsecured term loan credit agreement:
2027 Term Loan	169,211		—		171,464		—

Secured term loan credit agreements:
2023 Oman Facility	34,633		—		—		34,633
2024 Oman Facility	37,930		—		—		37,930

Total long-term debt, net of current portion	$	2,026,314	$	—	$	1,924,197	$	72,563


	Carrying Value at September 30, 2025		Fair Value at September 30, 2025 Using Inputs Considered as:
(in thousands)			Level 1		Level 2		Level 3
Unsecured senior notes:
2027 Notes	$	347,675	$	—	$	352,261	$	—
2029 Notes	346,602		—		348,688		—
2031 Notes	546,336		—		486,343		—
2034 Notes	543,197		—		538,417		—

Unsecured term loan credit agreement:
2027 Term Loan	199,020		—		201,292		—

Secured term loan credit agreements:
2023 Oman Facility	35,465		—		—		35,465
2024 Oman Facility	38,789		—		—		38,789

Total long-term debt, net of current portion	$	2,057,084	$	—	$	1,927,001	$	74,254

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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-Topic 820
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+ Details

Helmerich & Payne, Inc. 10-Q