QUOTE AND NEWS
Benzinga  Sep 18  Comment 
Analysts at GMP Securities initiated coverage on Helmerich & Payne (NYSE: HP) with a Hold rating. The target price for Helmerich & Payne is set to $113. Helmerich & Payne shares have jumped 49.40% over the past 52 weeks, while the S&P 500...
SeekingAlpha  Sep 16  Comment 
By Fun Trading: Helmerich & Payne, Inc. (NYSE:HP) Source: Helmerich and Payne website: Rig 205 Gulf of Mexico. The company operates as a contract drilling Company worldwide. It provides drilling rigs, equipment, personnel, and camps on a...
SeekingAlpha  Sep 12  Comment 
By FerdiS: I maintain a watch list of dividend growth stocks that I update at least once a month, sometimes more frequently. It contains all of DivGro's holdings, as well as a subset of David Fish's CCC stocks. Currently, there are 183 stocks in...
TheStreet.com  Sep 11  Comment 
NEW YORK (TheStreet) -- Helmerich & Payne shares are up 1.8% to $102.87 on Thursday after analysts at Argus upgraded the energy company to "buy" from "hold" while maintaining their $124 price target. The firm's price target represents a...
Market Intelligence Center  Sep 4  Comment 
Wednesday’s trading in Helmerich and Payne (HP) gives options traders an opportunity for a 14.29% return. By selling the Dec. '14 $105.00 call and buying the Jan. '16 call at the $75.00 level for a net debit of $26.25, traders will book a profit...
Market Intelligence Center  Aug 20  Comment 
A covered call identified by MarketIntelligececenter.com's patented algorithms on Helmerich and Payne (HP) could yield about 5.77% (14.04% annualized, for comparison purposes only) in 150 days. Pair a long position in the stock with the Jan. '15...
Benzinga  Aug 14  Comment 
Analysts at Credit Suisse upgraded Helmerich & Payne (NYSE: HP) from Underperform to Neutral. Helmerich & Payne shares have surged 56.12% over the past 52 weeks, while the S&P 500 index has gained 17.18% in the same period. Helmerich & Payne's...
SeekingAlpha  Aug 6  Comment 
By Stephen Simpson, CFA: Even the best companies can find that expectations get so high that it's almost impossible not to disappoint the Street. Helmerich & Payne (NYSE:HP) is certainly one of the best companies in the energy services sector, as...
SeekingAlpha  Jul 31  Comment 
The following audio is from a conference call that will begin on July 31, 2014 at 11:00 AM ET. The audio will stream live while the call is active, and can be replayed upon its completion. Listen now Complete Story »
Forbes  Jul 30  Comment 
Wall Street is optimistic about Helmerich & Payne, which is slated to report its third quarter results on Thursday, July 31, 2014. Analysts project a profit of $1.62 a share, a rise from $1.44 per share a year ago.The consensus estimate has risen...




 
TOP CONTRIBUTORS

With 80% of its onshore drilling rigs equipped with its FlexRig advanced drilling technologies, Helmerich & Payne may be one of the few oilfield services companies with the ability to grow in the declining American land market, thanks to its ability to extract oil from traditionally difficult-to-reach places. The company's 193 rigs are deployed across the U.S., throughout South America and across the sea in Tunisia. H&P also has a small offshore segment which operates exclusively in the shallow Gulf of Mexico. This means the company has little hope of expanding into the competitive offshore market, since most Gulf E&P companies are moving abroad because of declining production; it also means that a relatively small portion of the company will suffer from that trend. Onshore, the company's FlexRig technology allows it to benefit from growing demand for unconventional drilling and productivity-growth technology, as it can drill wells to reserves that were previously impossible or uneconomical to get to. Furthermore, rising oil prices are driving up dayrates for these coveted pieces of capital equipment, causing H&P's margins to grow as well as its revenues. H&P competes with other American onshore drilling companies, including Nabors Industries, Patterson-UTI Energy, Grey Wolf, Unit, and Pioneer Drilling Co.

Business and Financials

Helmerich & Payne is an oilfield services company specializing in onshore drilling, though the company does have a small offshore segment. Of the company's 193 rigs, 157 are deployed onshore United States, 27 are deployed onshore internationally, and 9 are offshore in the Gulf of Mexico.[1] 80% of the company's onshore rigs are FlexRigs, which are highly mobile, with different advanced drilling technologies, making them useful in unconventional oil fields like oil shales. Most of its international operations occur in South America, in Argentina, Bolivia, Columbia, Chile, Ecuador, and Venezuela; the company also has a rig in Tunisia.

BP, Marathon Oil, and Petroleos De Venezuela SA were H&P's three largest customers, making up 25% of the company's operating revenue. The 10 largest customers made up a total of 55%.

Operating revenue grew from $1.2 to $1.6 billion between 2006 and 2007; in the same period, operating income increased from $294 million to $449 million.[2]

As oil prices rise, so do H&P's financials.
As oil prices rise, so do H&P's financials.[3]
H&P Rig Metrics[4]
2007 2006 2005
U.S. Onshore Rigs
Rig Count 157 113 92
Average Utilization 97% 99% 94%
International Onshore Rigs
Rig Count 27 27 26
Average Utilization 90% 90% 77%
U.S. Offshore Rigs
Rig Counts 9 9 11
Average Utilization 65% 69% 53%

Trends and Forces

Rising Oil Prices are Increasing Dayrates for Oilfield Services Companies

Oil and gas prices have fluctuated heavily over the past few years, though since mid-2007, the trend has been up. Oil futures traded on international markets for $120/bbl in early May 2008, a record high, while natural gas traded at over $10/Mcf.[5] With oil prices so high, E&P companies are desperate to ramp up production, causing demand (and dayrates) for drilling rigs to skyrocket. Between 2006 and 2007, H&P's average land rig utilization fell from 99% to 97% while its offshore average rig utilization fell from 69% to 65%. At the same time, operating margins increased from 24% to 27.5%[6], illustrating how rising dayrates can drive up income despite decreases in productivity.

H&P's Collection of Specialized Onshore Rigs Allows the Company to Grow in the Declining American Land Market

With oil prices so high, E&P companies are desperate to ramp up production, causing demand for drilling rigs to skyrocket. In the U.S., however, many of the large, onshore, conventional reserves are maturing, causing production to decline. One major indicator of declining reserves is a short-term increase in rig count, as companies start both looking for new reserves and trying to ramp up production at existing fields. As of April 25th 2008, the U.S. had 1,842 land rigs, an increase of 95 from April 25th 2007.[7] This increase in rig count keeps dayrates for onshore drilling companies from increasing as much as they might if the number of rigs stayed constant. Some onshore drillers, in fact, have actually experienced declining dayrates, despite high oil prices because their rigs offer no specialized technologies, and so are useless in the declining American conventional land market.

H&P has been able to avoid declining onshore dayrates, however, thanks to its fleet of specialized land rigs. Almost 80% of H&P's land fleet consists of FlexRigs[8], specially-designed mobile onshore drills that have unconventional drilling technologies, like the ability to drill shallower wells or effectively extract from oil shales. Demand for these rigs has actually increased; despite the fact that utilization fell slightly between 2006 and 2007, the number of H&P rigs actually increased from 113 to 157, so the drop was probably related to structural issues of bringing the rigs online.[9] Furthermore, H&P's FlexRigs are being demanded at the few fields in the U.S. at which production is expected to grow rather than decline. For example, H&P is one of three companies that provides 91% of EOG Resources' rigs in the Barnett Shale, and, along with Nabors Industries, provides 50% ConocoPhillips' rigs in the Gulf Coast region.[10] As conventional, easy-access wells in the U.S. mature, demand for H&P's fleet of high-spec FlexRigs will continue to grow.

With All its Offshore Rigs in the Gulf of Mexico, H&P is Exposed to a Declining Market with No Hedge

H&P has nine conventional drilling platforms, its entire fleet, in the shallow-water Gulf of Mexico.[11] Historically, the Shelf has been a key producer of U.S. oil and gas; in 2007, for example, it was responsible for 7.6% of U.S. oil production and 10.2% of U.S. gas production. These production numbers, though, are part of an overall decline in production rates since 2003. The Minerals Management Service (MMS) estimates that production in the region will fall from 329,000 barrels per day to 182,000 barrels per day in the next nine years - a decline of 55%, and a big reason why many of the oil majors are leaving the shallow shelf for deeper or international waters.[12] Without deepwater oil exploration technology, which is the only sector of the Gulf that is thriving, H&P's offshore segment has little hope of surviving the move out of the Shallow Gulf.

Legislation Supporting the Development of Renewable Energy Threatens the Long-Term Strength of Hydrocarbons in the U.S.

Whether it’s because of the desire for energy independence, the rising price of oil, or fears of climate change, public opinion has turned away from petroleum, and is driving government policy changes that encourage the adoption of alternative fuels. Environmentalists have been calling for a shift to renewable energy for years, and though the river of change is running slow, it is running deep. The Energy Independence and Security Act of 2007 is the first step towards a grander series of changes. By forcing automakers to achieve 35 mpg by 2020 and setting a Renewable Fuel Standard of 36 billion gallons of biofuels in 2022[13], the Act has potential to get the ball rolling to greatly reduce American dependence on hydrocarbons.

Already, 26 states across the country have adopted Renewable Energy Standards to increase the share of renewables in their energy mixes, while both Democratic candidates for President have pledged to reduce carbon emissions by 80% below 1990 levels by 2050.[14][15] While the Republican candidate isn't so tough on climate action, he still supports a strong cap-and-trade system. In emerging markets like China and India, the drive for economic growth supersedes environmental concerns, but since the world's largest oil importer is the U.S., meaning the majority of the oil drilled with H&P's rigs are sold to the U.S., a changing American environmental and energy paradigm would be disastrous to its business without the development of some effective carbon sequestration technology.

Competition

Offshore drilling is H&P's smallest segment; for the most part, the company competes with other onshore drilling companies.

  • Nabors Industries - Nabors has 535 onshore drilling rigs, 564 domestic and 173 internationally deployed onshore well workover and well-servicing rigs, 35 offshore platform rigs, 12 jack-ups, 4 barges, and a host of marine transport units.[16] The company is the largest land driller in North America, and is rapidly expanding internationally.
  • Patterson-UTI Energy - Patterson markets 350 onshore drilling rigs in the United States, making it the second largest land drill contractor in North America.[17]
  • Unit - Unit operates 129 land rigs in Wyoming, Utah, Colorado, New Mexico, Texas, Oklahoma, Kansas, and Louisiana. Since the company is also involved in E&P, many of these rigs are used internally.[18]
  • Pioneer Drilling Co: Pioneer operates mainly around Texas, with a fleet of 67 land drilling rigs. The company is planning on expanding into international markets.[19]
  • Grey Wolf: Grey Wolf primarily focuses on drilling contracts in the US, with a fleet size of 121 drilling rigs.[20]
 This graph shows market share for the United States' onshore contract drilling market in FY 2007. Market share is determined by the number of rigs owned and operated by the respective drilling companies.
This graph shows market share for the United States' onshore contract drilling market in FY 2007. Market share is determined by the number of rigs owned and operated by the respective drilling companies.[21][22][23][24][25][26][27][28]




References

  1. HP 2007 10-K, Pages 16 and 17
  2. HP 2007 10-K, Page 20
  3. HP 2007 10-K, Page 20
  4. HP 2007 10-K, Pages 16 and 17
  5. Energy Prices Data, Accessed May 7th, 2008
  6. HP 2007 10-K
  7. RigZone: "Weekly Land-Based, Offshore Rig Counts Both Increase", April 25th, 2008
  8. H&P Website: FlexRig® Program - New Builds
  9. HP 2007 10-K, Page 16
  10. AllBusiness.com: "Gulf Coast Drilling"
  11. HP 2007 10-K
  12. Access My Library: "The Gulf of Mexico shelf: still a cash flow machine: majors out, independents in.(GULF OF MEXICO)(Cover story)"
  13. WhiteHouse.gov, Fact Sheet: Energy Independence and Security Act of 2007
  14. CNN Election Center: Issues: Environment
  15. Washington Post: "A Green(er) Obama"
  16. NBR 2007 10-K, Page 3
  17. PTEN 2007 10-K, Page 1
  18. Unit Web Site: Rig Fleet Map
  19. PDC 2007 10-KT, Page 2
  20. GW 2007 10-K, Page 4
  21. Pioneer Drilling Company Rig Fleet List
  22. Grey Wolf, Inc. Summary
  23. Nabors Industries Ltd Summary
  24. Patterson UTI Summary
  25. Helmerich & Payne Rig Fleet
  26. Rowan Companies Land Rig Fleet
  27. Parker Drilling Fleet
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