Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Scotia Howard Weil 43rd Annual Energy Conference 2015
49 slides from Helmerich & Payne's conference presentation, Mar 24, 2015
Slide 1: Scotia Howard Weil 43rd Annual Energy Conference
Helmerich & Payne, Inc. Scotia Howard Weil 43rd Annual Energy Conference March 24-25, 2015
Slide 2: Forward-looking statements
Statements within this presentation are “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and are based on current expectations and assumptions that are subject to risks and uncertainties. All statements other than statements of hi
Slide 3: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions Given low oil prices, drilling activity and spot pricing have significantly declined in the U.S. The total rig count reduction thus far has been more swift than many expected. Rig count reductions have been indiscriminate of rig performance and include rigs with
Slide 4: Declining Drilling Activity in the U.S.
Declining Drilling Activity in the U.S.
Slide 5: H&P's U.S. Land Activity and Pricing Comments
H&P’s U.S. Land Activity and Pricing Comments H&P’s U.S. Land active rig count was 190 as of March 15, 2015, down from 294 at the beginning of the calendar year; we could have less than 175 rigs active by the end of the second fiscal quarter. Average FlexRig spot pricing continues to decline; it was
Slide 6: Well Positioned for Opportunities Ahead
Well Positioned for Opportunities Ahead Our experience indicates that in the face of a very negative market like we see today, and a growing perception and panic of weaker-forever-prices, the market does work and eventually, if the past is any indication for the future, oil fundamentals improve. H&P
Slide 7: About Helmerich & Payne (H&P)
A premier land drilling contractor founded in 1920 Very strong balance sheet U.S. land drilling market share leader Most modern and capable land drilling fleet Leader in ongoing industry land rig replacement cycle Focused on superior innovation, safety and returns on capital Strong term-contracted b
Slide 8: H&P Highlights
H&P Highlights Superior ROIC and ROE Market Leader Strong Multi-Year Backlog Focus on Organic Growth Best-in-Class Safety Very Strong Balance Sheet High Quality Customer Base Most Advanced Fleet
Slide 9: H&P's Conservative Financial Practices
H&P’s Conservative Financial Practices Conservatively managed balance sheet throughout its history Over the last 20 years, H&P’s average total-debt-to-total-capitalization ratio has been under 10%, peaking twice at ~20% during that timeframe Even after the very recent debt issuance of $500 million,
Slide 10: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and new build commitments as of March 15, 2015 and exclude nine conventional rigs decommissioned at the end of fiscal 2014.
Slide 11: Organic U.S. Land Fleet Growth
Organic U.S. Land Fleet Growth * Estimates include existing rigs and announced new build commitments. 371 49
Slide 12: H&P Continues to Capture Market Share
H&P Continues to Capture Market Share As of October 2008 (Peak) (~1,900 Active Rigs in U.S. Land) As of March 2015 (~1,070 Active Rigs in U.S. Land) Note: The above estimates corresponding to market share are derived from Rig Data. PDS’ market share includes both PDS and Grey Wolf rigs. Additionally
Slide 13: U.S. Land Active Rig Count
U.S. Land Active Rig Count BHI Industry Rig Count Through Fourth Quarter of Calendar 2014
Slide 14: U.S. Land Average Daywork Margins
U.S. Land Average Daywork Margins(1) (1) Does not include the impact of early contract termination revenue. Through Fourth Quarter of Calendar 2014
Slide 15: Ten Year Profit Comparison
* NBR’s operating income corresponds to its U.S. Lower 48, U.S. Offshore, and Alaska business units. Ten Year Profit Comparison ** PTEN’s operating income includes drilling operations in Canada.
Slide 16: H&P's Lead in U.S. Land AC Drive Rigs
H&P’s Lead in U.S. Land AC Drive Rigs * The above estimates corresponding to U.S. lower 48 AC Drive fleets are derived from Rig Data and corporate filings. **Estimated number of all other available AC Drive rigs not including those owned by HP, NBR, PTEN, and PDS.
Slide 17: Innovation & Applied Technology – FlexRig
Innovation & Applied Technology – FlexRig® AC Driven Systems & Integrated Top Drive Mechanized Tubular Handling Computerized Controls BOP Handling Driller’s Cabin Satellite Communications Rig Move Capabilities 31
Slide 18: Technology & Quality Service Make a Difference
Technology & Quality Service Make a Difference (1) Does not include the impact of early contract termination revenue. (2) Represents weighted-average rig margin per day for PTEN, NBR, PDS, and UNT. (3) Utilization is herein calculated to be average active rigs divided by estimated available marketab
Slide 19: Performance is Not Only About Better Rigs
Performance is Not Only About Better Rigs Our competitive advantage is also about: People Safety Experience Training Culture Support Structure Processes Organizational Network Maintenance Supply Chain
Slide 20: Delivering Safety – H&P vs. Industry
Delivering Safety – H&P vs. Industry (IADC) U.S. Land Safety Performance (2005 – 2014) OSHA Recordable Injury Incidence Rates H&P IADC w/o H&P Injuries per 200,000 Man Hours
Slide 21: Safety Excellence Also Generates Savings
Safety Excellence Also Generates Savings Reduced Workers Comp and General Liability Losses per Man Hour EMR = Experience Modifier Ratio (Industry Average = 1.00)
Slide 22: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) * Excludes gains from the sale of investment securities and 4QFY14 abandonment (non-cash) charges. H&P's unadjusted ROIC resulted in 15.2%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring charges.
Slide 23: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract The above term contract coverage excludes long-term contracts for which the Company received early contract termination notifications as of 3/15/15. During the first fiscal quarter the Company generated approximately $23 million in revenues corresponding to long-
Slide 24: H&P Term Contract Overview
H&P new build contracts Average term contract duration of ~3 years Firm “take-or-pay” early termination provisions* protect daily cash margin Attractive economic returns during term (with annual ROIC averages in mid-to-high teens) Close to 90% cash-on-cash payback after cash taxes during original 3
Slide 25: H&P Customer Credit Ratings
H&P Customer Credit Ratings * As of December 31, 2014. Consists of 294 active U.S. Land rigs, 9 active and contracted Offshore rigs, and 22 active International Land rigs. Includes approximately 70 customers with active H&P rigs. ** The figures above represent H&P’s customer commitments for term con
Slide 26: H&P vs. Industry U.S. Land Customer Base
H&P vs. Industry U.S. Land Customer Base Note: The above estimates corresponding to the active rig fleet in the U.S. are derived from multiple sources including Rig Data and corporate filings.
Slide 27: Underlying U.S. Land Market Trends
Underlying U.S. Land Market Trends Unconventional plays continue to shape the landscape. AC drive rigs are best suited for more complex horizontal drilling. Customers continue to focus on drilling efficiency, technology and safety. The replacement cycle is expected to continue.
Slide 28: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 29: U.S. Land Horizontal and Directional Activity
Note: The above estimates corresponding to horizontal and directional rig activity by power type are derived from multiple sources including Rig Data, Smith Bits, and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was greater than 600 horsepow
Slide 30: The Replacement Cycle Continues
As of October 2014 (Peak) (~1,930 Active Rigs in U.S. Land By Power Type) The Replacement Cycle Continues As of October 2008 (Peak) (~1,925 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activity are derived from multiple sources including Rig Data, Smith Bits
Slide 31: U.S. Activity by Well and Rig Type
U.S. Activity by Well and Rig Type Note: The above estimates corresponding to rig activity and rig type are derived from multiple sources including Rig Data, Smith Bits, and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greate
Slide 32: U.S. Activity by Well and Rig Type
U.S. Activity by Well and Rig Type Note: The above estimates corresponding to rig activity and rig type are derived from multiple sources including Rig Data, Smith Bits, and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greate
Slide 33: New Build FlexRigs
New Build FlexRigs 40 new FlexRigs are scheduled to be completed during fiscal 2015 and six during early fiscal 2016 All 46 of the above new FlexRigs are supported with multi-year term contracts that are expected to generate attractive economic returns for the Company Currently building at a cadence
Slide 34: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety and operational excellence Customer satisfaction Financial strength
Slide 35: Additional References
ry mee Additional References
Slide 36: Second Quarter H&P Operations Outlook
Second Quarter H&P Operations Outlook Drilling Operations Outlook for 2Q of Fiscal 2015 Compared to 1Q of Fiscal 2015 U.S. Land Segment Revenue days expected to decrease by roughly 25% Average rig revenue per day expected to decrease to between $27,000 and $27,500 (excluding the impact from early te
Slide 37: H&P Activity as of March 15, 2015
H&P Activity as of March 15, 2015 Rigs Working/ Contracted 190 190 0 8 27 225 Rigs Available 347 322 25 9 40 396 24 420 % Contracted 55% 59% 0% 89% 68% 57% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Total Fleet Reflects announced new build commitment
Slide 38: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity (1) (1) Includes completed new builds pending delivery and not generating revenue days.
Slide 39: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller * Includes 24 announced new FlexRigs with customer commitments scheduled for delivery in calendar 2015. (214 H&P Contracted Land Rigs as of 3/15/15*)
Slide 40: H&P's International Land Operations
Active In-Transit Idle Total Long-term Contracts Argentina 11 4 4 19 10 Bahrain 3 3 1 Colombia 5 2 7 1 Ecuador 1 5 6 1 Mozambique 1 1 Tunisia 2 2 U.A.E. 2 2 Total 23 4 13 40 13 H&P’s International Land Operations (2) Rig Fleet Status (as of March 15, 2015) Rigs on term contract that have greater tha
Slide 41: H&P Global Fleet Under Term Contract
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average, Including Announced New Builds - as of 3/15/15) H&P Global Fleet Under Term Contract Segment Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY15 FY15 FY15 FY16 FY16 FY16 FY16 U.S. Land 159.4 136.8 127.6 121.4 112.1 105.2 103.1 International Land
Slide 42: Changes in Lower U.S. Land Rig Count
Changes in Lower 48 U.S. Land Rig Count * PDS’ active rig count includes both PDS and Grey Wolf rigs.
Slide 43: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of March 20, 2015.
Slide 44: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of March 20, 2015.
Slide 45: Return on Equity
Return on Equity * Excludes gains from the sale of investment securities and 4QFY14 abandonment (non-cash) charges. H&P's unadjusted ROE resulted in 15.6%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring charges.
Slide 46: Current Dividend Yields
Current Dividend Yields Source: Thomson Reuters. Yields calculated as of market close on March 20, 2015.
Slide 47: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Thomson Reuters Oil Prices Natural Gas Prices
Slide 48: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 49: End of Document
End of Document
Helmerich & Payne — Scotia Howard Weil 43rd Annual Energy Conference 2015 on 6ix