Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (June 2017)
58 slides from Helmerich & Payne's investor presentation, Jun 26, 2017
Slide 1: 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 2: About Helmerich & Payne (H&P)
Very strong balance sheet Most capable land drilling fleet Market share leader in the U.S. Robust term contract backlog Operational strategy focused on continued innovation, safety, performance excellence, reliability and customer satisfaction About Helmerich & Payne (H&P)
Slide 3: H&P's Strong Balance Sheet
H&P’s Strong Balance Sheet (As of March 31, 2017) 1. Total Capitalization is defined as Total Debt plus Shareholders' Equity. Total-Debt-to-Total-Capitalization Ratio1 Source: Company Filings.
Slide 4: Current Dividend Yields
Current Dividend Yields Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on June 19, 2017.
Slide 5: Current Dividend Yields
Current Dividend Yields 6% 5% 4% 3% Dividend Yield (*) HP NBR PTEN PDs ‘Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on June 19, 2017.
Slide 6: U.S. Land Market Share Leader
U.S. Land Market Share Leader As of June 2017 (~960 Active Rigs in U.S. Land) Note: The above estimates corresponding to market share are derived from Rig Data. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greater than 600 horsepower. Values fo
Slide 7: 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 6/26/17. Given notifications as of 6/26/17, the Company expects to generate approximately $5 million in the third fiscal qu
Slide 8: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions As expected, we see the rate of increase in activity slowing to a more modest pace. Rig specification requirements have been increasing during this recovery due to more complex well designs. Many contractors’ existing idle rigs are not suitable for upgrades, and
Slide 9: 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 and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greater than 600 ho
Slide 10: Active AC Drive U.S. Rig Market Share
(~630 Rigs as of June 2017) Active AC Drive U.S. Rig Market Share Note: The above estimates corresponding to rig activity are derived from multiple sources including Rig Data and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was greater than
Slide 11: Capturing Opportunities in U.S. Land Market
Capturing Opportunities in U.S. Land Market H&P’s total U.S. land market share (at ~19%) has risen since the peak (~15%) H&P’s market share has also grown in the AC drive rig segment (~29%), which continues to expand H&P’s average spot pricing for the 2016-2017 cycle has increased by similar levels
Slide 12: H&P Uniquely Positioned – Family of Solutions
H&P Uniquely Positioned – Family of SolutionsTM Positioned to take market share in a strong or moderate market recovery Uniquely leveraged to provide E&P companies the rig of choice Design of the FlexRig fleet allows for a broad range of rig upgrades
Slide 13: H&P U.S. Land Fleet – Family of Solutions
* Roughly 65% are optimal for multiple-well pad drilling applications. H&P U.S. Land Fleet – Family of SolutionsTM 1,500 hp AC Drive FlexRigs*, including 270 Upgraded or Upgradeable to Rig Specifications in High Demand** 350 Available H&P U.S. Land Rigs ** AC drive FlexRigs with 1,500 hp drawworks a
Slide 14: AC Fleet Size Creates Opportunity
AC Fleet Size Creates Opportunity We have greater scale than any competitor with the ability to upgrade and deploy a total of 270 FlexRigs to rig specifications in highest demand without investing in new builds. With 137 FlexRigs remaining that can receive upgrades (52 of which are already contracte
Slide 15: 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 1,500 hp AC Drive fleets with a 750,000 lbs. mast hookload are derived from Rig Data and corporate filings. ** Values for PTEN include active AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *
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 1,500 hp AC Drive fleets with a 750,000 lbs. mast hookload are derived from Rig Data and corporate filings. ** Values for PTEN include active AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *
Slide 17: 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 1,500 hp AC Drive fleets with a 750,000 lbs. mast hookload are derived from Rig Data and corporate filings. ** Values for PTEN include active AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *
Slide 18: H&P U.S. Land Fleet – Family of Solutions
H&P U.S. Land Fleet – Family of SolutionsTM 1,500 hp AC Drive FlexRigs*, including 189 Upgraded or Upgradeable to Rig Specifications in High Demand** 191 Contracted H&P U.S. Land Rigs ** AC drive FlexRigs with 1,500 hp drawworks and 750,000# hookload ratings (189) that do not already have 7,500 psi
Slide 19: U.S. Land Market Share Gains Since 2014 Peak
U.S. Land Market Share Gains Since 2014 Peak Note: The above estimates corresponding to market share are derived from Rig Data. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greater than 600 horsepower. * Values for PTEN do not include active ri
Slide 20: U.S. Land Market Share Gains Since 2016 Trough
U.S. Land Market Share Gains Since 2016 Trough (As Every Contractor’s Best Rigs Competed for Work) Note: The above estimates corresponding to market share are derived from Rig Data. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greater than 600
Slide 21: H&P's Experience and Expertise
H&P’s Experience and Expertise Have the people, systems and the operational support structures to drive high performance and reliability Over 1,900 rig years of AC drive operational experience Our expertise within an integrated business model (designing, building and upgrading the fleet) provides th
Slide 22: Benefits of an Integrated Model
Benefits of an Integrated Model CONTINUOUS IMPROVEMENT DESIGN (and redesign) FABRICATE (and upgrade) OPERATE (and improve)
Slide 23: FlexRig Family of Solutions - Pad Design
FlexRig Family of SolutionsTM - Pad Design The FlexRig3 skid system is designed to meet the requirements for standard pad drilling. Typically customers drill 2-4 wells per pad. The “Walking” option for the FlexRig3 is designed to meet the unique case for which a skid design may not be as well suited
Slide 24: H&P's Family of Solutions Matches Pad Drilling Trends
The H&P Family of SolutionsTM provides options that clearly match pad drilling trends. Source: Coras Research, LLC % of Horizontal Wells Drilled (Permian ONLY) H&P’s Family of SolutionsTM Matches Pad Drilling Trends
Slide 25: Walking Option in FlexRig Family of Solutions
We have designed a new walking system for a FlexRig3 as we believe this could lead to incremental market share gains with some customers that have unique locations. The advantages of the FlexRig3 walking system will allow H&P to provide a new design into the market for a much lower investment than h
Slide 26: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity (1) Includes rigs on standby dayrates. Includes completed new builds pending delivery and not generating revenue days. (2)
Slide 27: Ongoing U.S. Land Market Trends
Ongoing U.S. Land Market Trends Unconventional plays continue to shape the landscape. Well designs are increasingly complex, including longer laterals and more challenging drilling requirements. Customers continue to focus on safety, efficiency, technology, and reliable drilling performance. AC driv
Slide 28: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (191 H&P Contracted Land Rigs as of 6/26/17)
Slide 29: Unconventional Drilling in the Permian
Unconventional Drilling in the Permian Note: The above estimates are derived from Rig Data. Additionally, the drawworks capacity of each land rig included in the above analysis was greater than or equal to 600 horsepower. (As of June 2017)
Slide 30: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 31: 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 and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was greater than or equal to 600 horsepowe
Slide 32: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~120 E&P Operators (~550 Active Rigs by Power Type) Top 10 E&P Operators (~210 Active Rigs by Power Type) Remaining E&P Operators (~200 Active Rigs by Power Type) Top 10 E&P Operators Next ~120 E&P Operators Remaining E&P Operators They represent the 10
Slide 33: 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) As of June 2017 (~960 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activity ar
Slide 34: AC Drive Gains Share with Relatively Flat Rig Count
Source: The above estimates corresponding to AC Drive market share are derived from Rig Data. AC Drive Gains Share with Relatively Flat Rig Count (Historical Example: January 2013 – January 2014)
Slide 35: U.S. Land Horizontal and Directional Activity
U.S. Land Horizontal and Directional Activity (~865 Rigs as of June 2017) Note: The above estimates corresponding to rig activity are derived from multiple sources including Rig Data and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was great
Slide 36: 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 Uniform Fleet Size & Scale Operational Support Network Processes/Data Maintenance Supply Chain
Slide 37: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 38: Acquisition of MOTIVE Drilling Technologies, Inc.
Acquisition of MOTIVE Drilling Technologies, Inc. Completed acquisition of MOTIVE for $75 million on June 2, 2017, plus up to $25 million in potential earnout payments based on future performance. MOTIVE’s proprietary Bit Guidance System is a unique directional drilling technology. Industry leader i
Slide 39: Acquisition of MOTIVE (Continued)
Acquisition of MOTIVE (Continued) “We have a strong and longstanding technology and innovation focus that has been an important part of our organization for many years. Motive is an exciting example of that opportunistic approach.” * * Selected comments from H&P President and CEO, John Lindsay – May
Slide 40: H&P / Motive Strategic Integration
H&P / Motive Strategic Integration Technology Leaders: H&P Provides- Industry Leader for High Performance Rigs Largest and Most Standardized AC rig Fleet/Platform Solutions for Controls & Automation Market Share Leader in US Land Rig Deployment MOTIVE Provides- Leading Directional Decision Automatio
Slide 41: Customer Satisfaction Matters
Customer Satisfaction Matters Value creation for the customer is not only driven by having the right rig. It is also driven by service; the ability of an organization to deliver top performance with that rig. Better service drives value, customer satisfaction, market share and pricing. H&P has been
Slide 42: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 43: Estimated H&P Activity as of June 26, 2017
Estimated H&P Activity as of June 26, 2017 Rigs Working/ Contracted 191 191 0 6 14 211 Rigs Available 350 348 2 8 38 396 % Contracted 55% 55% 0% 75% 37% 53% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total The remaining SCR rigs in the U.S. Land segment have a 3,000 hp drawwor
Slide 44: Number of Rigs Already Under Long-Term Contracts
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average, Including Announced New Builds - as of 6/26/17) H&P Global Fleet Under Term Contract Segment Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY17 FY17 FY18 FY18 FY18 FY18 FY19 U.S. Land 94.4 93.8 81.0 52.9 42.3 32.4 26.8 International Land 11.0 10
Slide 45: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 10 9 19 10 Bahrain 1 2 3 Colombia 3 5 8 Ecuador 6 6 U.A.E. 2 2 Total 14 24 38 10 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. 10 of 25 FlexRigs, included in the international fleet
Slide 46: 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. The category “Large Operators” includes majors and large independent E&P operators.
Slide 47: H&P's FlexRig Advantage
The FlexRig Difference: Key Advantages Increased drilling productivity and reliability Variable frequency AC technology providing precise control and increased capability Computerized electronic driller more precisely controls down-hole parameters FlexRig designs are suited for both efficient well t
Slide 48: The Value Proposition: The Power of Efficiency
Theoretical 20% Efficiency 40% Efficiency Base Case Improvement Improvement 1. Drilling days average 13.5 10.8 8.1 Other days average 5.0 4.0 3.0 Moving days average (several multi-well pads) 1.5 1.2 0.9 Total rig days per well 20.0 16.0 12.0 Efficiency (Reduced Well Cycle Time) - 20% 40% 2. Drillin
Slide 49: H&P's Margin Premium
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. H&P’s Margin Premium (1) (2)
Slide 50: 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. ** Values for PTEN include AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number of all other available AC Driv
Slide 51: 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. ** Values for PTEN include AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number of all other available AC Driv
Slide 52: H&P Very Well Positioned to Gain Share
H&P Very Well Positioned to Gain Share Note: The above estimates are derived from multiple sources including Rig Data and corporate filings. * Includes ~90 FlexRigs that have been or can be upgraded to what some industry followers refer to as “super-spec” rigs. ** Values for PTEN include AC drive ri
Slide 53: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 54: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Nasdaq IR Insight (FactSet) as of June 19, 2017.
Slide 55: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Nasdaq IR Insight (FactSet) as of June 19, 2017.
Slide 56: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 57: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Nasdaq IR Insight (FactSet). Oil Prices Natural Gas Prices
Slide 58: Oil and Natural Gas Prices
n British Thermal Units USS. Dollars per $6 $4 $2 Henry Hub Spot —wWest Texas Intermediate Spot . Oil Prices KS Natural Gas Prices $0 s OPE Se en oe So 8 BS fo CANS AY AY A> > Cah ah 30 10 90 00 OM of it FA FM FM FH IF OH WF OH OF A Daily Prices Source: Energy Information Administration and Nasdaq I
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