Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Merrill Lynch Global Energy Mid and Small Cap Conference 2008
54 slides from Helmerich & Payne's conference presentation, Oct 1, 2008
Slide 1: Helmerich & Payne, Inc. Merrill Lynch Global Energy Mid and Small Cap Conference
Helmerich & Payne, Inc. Merrill Lynch Global Energy Mid and Small Cap Conference October 1, 2008 Investor Relations Contact: Juan Pablo Tardio – (918) 588-5383 – juanpablo.tardio@hpinc.com
Slide 2: Forward-looking information disclaimer
The information contained within this presentation is forward looking and involves risks and uncertainties that could significantly impact expected results. A discussion of these risks and uncertainties is contained in the Company’s Form 10-K filed with the Securities and Exchange Commission on Nove
Slide 3: H&P Basics
H&P Basics Activity: Contract Drilling for Oil and Gas Symbol: HP (NYSE, Since 1963) Market Cap: $5.1 (In Billions, September 24, 2008) Assets: $3.4 (In Billions, June 30, 2008) EBITDA: $849 (In Millions, 12 months ended June 30, 2008) Debt: $455 (In Millions, June 30, 2008)
Slide 4: H&P's Global Rig Fleet
U.S. Land 208 U.S. FlexRigs 169* Mobile & Conventional 39 International Land 32** H&P’s Global Rig Fleet 249 Total Rigs (Includes New Build Commitments) * Includes 23 rigs scheduled for delivery by the end of the fourth quarter of fiscal 2009. ** Includes 1 FlexRig operating in Tunisia and 7 FlexRig
Slide 5: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Includes existing rigs and announced new build commitments. 77 90 89 88 96 111 127 130 128 151 193 223 249 0 50 100 150 200 250 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E* 2009E* Fiscal Year (Ending Sept 30) Rigs Available International Land Offshore U.S. L
Slide 6: The Market Today
The world has become more “drilling-centric” Today’s drilling is increasingly more challenging A customer mindset shift in favor of efficiency versus pricing The Market Today
Slide 7: New Builds – H&P's FlexRig Program
New Builds – H&P’s FlexRig Program The FlexRig Difference: Key Advantages Increased drilling productivity and reliability Variable frequency (AC) drives with increased precision and measurability Computerized electronic driller that precisely controls weight on bit, rotation and pressure Designed to
Slide 8: A Strong Field Organization
Performance is not only about better rigs It’s also about: People Safety Experience Training Culture Supply chain Maintenance Processes Organizational network Support structure A Strong Field Organization
Slide 9: Technology and Quality Service Make a Difference: Margins
$4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 Q1CY05 Q2CY05 Q3CY05 Q4CY05 Q1CY06 Q2CY06 Q3CY06 Q4CY06 Q1CY07 Q2CY07 Q3CY07 Q4CY07 Q1CY08 Q2CY08 Average Rig Margin per Day Quarter Ended U.S. Land Average Daywork Margins H&P Peers* *Represents weighted-average rig margin per day for PTEN, NBR,
Slide 10: Technology and Quality Service Make a Difference: Utilization
60% 70% 80% 90% 100% Q1CY05 Q2CY05 Q3CY05 Q4CY05 Q1CY06 Q2CY06 Q3CY06 Q4CY06 Q1CY07 Q2CY07 Q3CY07 Q4CY07 Q1CY08 Q2CY08 Estimated Avarege Rig Utilization Quarter Ended U.S. Land Estimated Average Rig Utilization* H&P Peers** ** Represents estimated average combined utilization for PTEN, NBR, UNT and
Slide 11: H&P's Growth in Operating Income
$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Operating Income per Quarter (Millions) Quarter Ended H&P Segment Ope
Slide 12: Delivering EPS & CPS Growth to Shareholders
-20% -10% 0% 10% 20% 30% GW PTEN NBR HP Earnings per Share Growth Analyst Estimates CY2007-CY2008 (First Call Consensus - September 25, 2008) -20% -10% 0% 10% 20% 30% GW PTEN NBR HP Cash Flow per Share Growth Analyst Estimates CY2007-CY2008 (First Call Consensus - September 25, 2008) Estimated Growt
Slide 13: Returns are Ultimately Driven by Performance
12% 14% 16% 18% 20% 22% 24% PTEN NBR GW HP Return on Equity 12 Months Ended June 30, 2008 Returns are Ultimately Driven by Performance
Slide 14: Most Profitable Driller in U.S. Land Business
$0 $100 $200 $300 $400 $500 $600 GW* PTEN** NBR*** HP Operating Income (Millions) U.S. Land Drilling Operating Income 12 Months Ended June 30, 2008 Most Profitable Driller in U.S. Land Business ** PTEN’s operating income includes drilling operations in Canada. *** NBR’s operating income corresponds
Slide 15: The BH U.S. Land Rig Count Continues to Grow
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Quarter Ended Baker Hughes U.
Slide 16: H&P's U.S. Land Operations
Market conditions remain strong Expansion continues 182 of 185 rigs currently active, including 108 under term contracts FlexRigs continue to deliver outstanding field performance at 100% utilization More than half of the segment’s potential revenue days for fiscal 2009 are already contracted H&P’s
Slide 17: H&P U.S. Land Term Contracts
H&P U.S. Land Term Contracts Term Contract Status - H&P U.S. Land (Including Committed New Builds) 0 20 40 60 80 100 120 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Number of Rigs (Estimated Quarterly Average) 0% 10% 20% 30% 40% 50% 60% Estimated % of Potential Revenue Days Contracted Term Contracts - Other
Slide 18: H&P U.S. Land Rigs
108 74 0 20 40 60 80 100 120 Spot Market Under Term Number of H&P Rigs Highly Mobile Conventional FlexRigs Currently Active H&P U.S. Land Rigs
Slide 19: Well Positioned to Cope with Market Volatility
Long-term contracts – Over half of our fiscal 2009 potential U.S. land revenue days are already contracted at attractive dayrates Customer base – About 80% of our U.S. land fleet is operated by majors and very large independents Over half of H&P’s rigs in the U.S. land spot market are FlexRigs Stron
Slide 20: The Remarkable Success of the H&P FlexRig
The Remarkable Success of the H&P FlexRig FlexRig Announcements and Completions 50 67 60 Thru FY2004 FY2005 - 2006 FY2007 - 2008 0 20 40 60 80 100 120 140 160 180 200 Number of FlexRigs LT Contracts Announced Since Peak of 2006 LT Contracts Announced Thru Peak of 2006 Previously Existing FlexRigs Co
Slide 21: Growth in H&P's U.S. Land Fleet
Growth in H&P’s U.S. Land Fleet * Includes existing rigs and announced new build commitments. 30 36 40 39 49 66 83 90 90 113 157 185 208 0 25 50 75 100 125 150 175 200 225 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E* 2009E* U.S. Land Rigs Fiscal Year (Ended Sept 30)
Slide 22: Delivering Growth to Shareholders
Delivering Growth to Shareholders $906 $1,141 6.14 7.72 4.21 5.31 $0 $2 $4 $6 $8 $10 $12 $0 $200 $400 $600 $800 $1,000 $1,200 2002 2003 2004 2005 2006 2007 2008C* 2009C* Consensus EPS and CPS Expectations Consensus EBITDA Expectations (Millions) Fiscal Year** Actual and Consensus EPS, CPS and EBITDA
Slide 23: H&P is Leading the U.S. Land Retooling Effort
AC Driven New Builds Other New Builds Conventional Rigs Total Active U.S. Land Fleet (Estimates) (~2,200 Rigs) AC Driven (FlexRig 3 & 4) Other New Builds (FlexRig 1 & 2) Conventional Rigs Active H&P U.S. Land Fleet (182 Rigs as of 9/26/08) H&P is Leading the U.S. Land Retooling Effort Refurbished ri
Slide 24: In Conclusion...
H&P has proven its ability to execute and deliver Our strengths continue to be aligned with market trends We are very well positioned to cope with market volatility The U.S. land retooling effort will continue We expect to continue to lead that effort We will continue to focus on delivering incremen
Slide 25: End of Presentation
HELMERICH & PAYNE, INC. End of Presentation
Slide 26: Additional References
HELMERICH & PAYNE, INC. Additional References:
Slide 27: H&P's Differentiated Approach
Create value through efficiency and safety Provide the most innovative and advanced drilling rigs Structure the organization required to support them Drive customers’ total well costs down Seize opportunities to expand market share Deliver premium margins and sustainable growth to shareholders H&P’s
Slide 28: Value Proposition Example – H&P vs. Competitors
Value Proposition Example – H&P vs. Competitors Estimated Field H&P FlexRig3 Competitor Average 2008 1. Drilling days 13 7.8 Completion days 2 2 Moving days 5 3 Total rig revenue days per well 20 12.8 2. Drilling contractor dayrate $19,500 $26,500 Operator’s other intangible $15,000 $15,000 cost per
Slide 29: Value Proposition Example – H&P vs. Competitors
Value added from FlexRig operations Significant H&P dayrate premium Increased wells per rig per year: 10.3 wells Early production: Incremental wells on production Lowest total well cost Value Proposition Example – H&P vs. Competitors
Slide 30: FlexRig4 – Performance Sample
FlexRig4 – Performance Sample 2008 Average Spud to Spud Parachute - Conventional 2008 H&P Average - Parachute - 44 Wells 0 2,000 4,000 6,000 8,000 10,000 37% Improvement 0 2 4 6 8 10 12 14 16 Time (days) Depth (ft)
Slide 31: FlexRig4 – Performance Sample
FlexRig4 – Performance Sample FlexRig4s Barnett Shale Customer’s Target Curve H&P Average - Apr. to Aug. ’08 0 2,000 4,000 6,000 8,000 10,000 12,000 0 2 4 6 8 10 12 14 16 18 20 22 24 40% Improvement Time (days) Depth (ft)
Slide 32: H&P's Fleet in the U.S. Land Spot Market
0 10 20 30 40 50 60 70 80 Location Operator Rig Type Active H&P Spot Rigs 74 Active H&P Rigs in the U.S. Land Spot Market (As of September 25, 2008) H&P’s Fleet in the U.S. Land Spot Market Texas Oklahoma Louisiana Majors FlexRigs Conventional Large Independents Small Independents & Privates Rockies
Slide 33: H&P's Offshore Operations
Strong market conditions and daily margins Eight of nine rigs are currently active The ninth rig is contracted and expected to begin operations in early to mid 2009 H&P’s Offshore Operations
Slide 34: H&P's International Land Operations
International industry rig count is increasing H&P international land rigs currently 100% utilized Seven new FlexRigs expected to be delivered in Latin America beginning in early fiscal 2009 Actively seeking additional growth opportunities around the world H&P’s International Land Operations
Slide 35: Crude Oil & Natural Gas Prices
$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $0 $20 $40 $60 $80 $100 $120 $140 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E U.S. Dollars per Thousand Cubic Feet U.S. Dollars per Barrel Crude Oil & Natural Gas Prices West Texas Intermediate Spot Average Henry Hub
Slide 36: U.S. Land Rig Count vs. Commodity Prices
0 250 500 750 1000 1250 1500 1750 2000 $0 $2 $4 $6 $8 $10 $12 $14 $16 2000 2001 2002 2003 2004 2005 2006 2007 2008 Land Rig Count (Monthly Average) Gas Price (Monthly Average - mcf) Gas Price (Henry Hub) BHI Rig Count (Monthly Avg) U.S. Land Rig Count vs. Commodity Prices $4.50 / mcf $6.00 / mcf $3.
Slide 37: A FlexRig Success Story
0% 10% 20% 30% 40% 50% 60% 70% 80% 0 2 4 6 8 10 12 14 16 2004 2006 2008 Percentage of Operator's U.S. Land Fleet (Source: Smith Bits S.T.A.T.S.) Active U.S. Land Rigs (Sample Week in April During Each Year) An Operator's Active U.S. Land Fleet (Major) H&P FlexRigs Other H&P Rigs A FlexRig Success St
Slide 38: Another FlexRig Success Story
0% 6% 12% 18% 24% 30% 36% 0 5 10 15 20 25 30 2004 2006 2008 Percentage of Operator's U.S. Land Fleet (Source: Smith Bits S.T.A.T.S.) Active U.S. Land Rigs (Sample Week in April During Each Year) An Operator's Active U.S. Land Fleet (Large Independent) H&P FlexRigs Other H&P Rigs Another FlexRig Succ
Slide 39: Another FlexRig Success Story
0% 10% 20% 30% 40% 0 3 6 9 12 2004 2006 2008 Percentage of Operator's U.S. Land Fleet (Source: Smith Bits S.T.A.T.S.) Active U.S. Land Rigs (Sample Week in April During Each Year) An Operator's Active U.S. Land Fleet (Large Independent) H&P FlexRigs Other H&P Rigs Another FlexRig Success Story H&P’s
Slide 40: Another FlexRig Success Story
0% 10% 20% 30% 40% 50% 60% 70% 0 1 2 3 4 5 6 7 2004 2006 2008 Percentage of Operator's U.S. Land Fleet (Source: Smith Bits S.T.A.T.S.) Active U.S. Land Rigs (Sample Week in April During Each Year) An Operator's Active U.S. Land Fleet (Small Independent) H&P FlexRigs Other H&P Rigs Another FlexRig Su
Slide 41: Increased Demand for More Difficult Drilling
0 300 600 900 1200 1500 2003 2004 2005 2006 2007 2008 Number of Active Rigs (Smith Bits S.T.A.T.S.) Sample Week in April During Each Year Active Rigs in U.S. Land Drilling for Natural Gas Horizontal or Directional Drilling Vertical Drilling Increased Demand for More Difficult Drilling
Slide 42: Unconventional Natural Gas Production Growing
0 2 4 6 8 10 1990 1995 2000 2006 2010 2015 2020 2025 2030 Alaska Onshore Unconventional Offshore Onshore Conventional Projections History TCF Source: Energy Information Administration Annual Energy Outlook 2008 with projections to 2030 (June 2008) Unconventional Natural Gas Production Growing
Slide 43: Increased Demand for More Difficult Drilling: Barnett Shale
0 20 40 60 80 100 120 140 160 180 200 2003 2004 2005 2006 2007 2008 Number of Active Rigs (Smith Bits S.T.A.T.S.) Sample Week in April During Each Year Active Rigs in Barnett Shale Horizontal or Directional Drilling Vertical Drilling Increased Demand for More Difficult Drilling
Slide 44: Increased Demand for More Difficult Drilling: Piceance Basin
0 10 20 30 40 50 60 70 80 90 2003 2004 2005 2006 2007 2008 Number of Active Rigs (Smith Bits S.T.A.T.S.) Sample Week in April During Each Year Active Rigs in Piceance Basin Horizontal or Directional Drilling Vertical Drilling Increased Demand for More Difficult Drilling
Slide 45: FlexRigs in Demand for More Difficult Wells
0% 10% 20% 30% 40% 50% 60% 70% 80% Land Rigs, Industry Wide FlexRigs Percentage of Applicable Rig Fleet Active Land Rigs Drilling Horizontal or Directional Wells (Data Source: Smith International, Inc. - S.T.A.T.S. - 9/19/08) FlexRigs in Demand for More Difficult Wells
Slide 46: Leader in New Ideas & Applied Technology
AC Driven Systems & Integrated Top Drive Mechanized Tubular Handling Computerized Controls BOP Handling Driller’s Cabin Satellite Communications Rig Move Capabilities Leader in New Ideas & Applied Technology
Slide 47: Driller on a Conventional Rig vs. FlexRig
Driller on a Conventional Rig vs. FlexRig
Slide 48: Roughnecks on a Conventional Rig vs. FlexRig
Roughnecks on a Conventional Rig vs. FlexRig
Slide 49: H&P's Organizational Support Structure
H&P’s Organizational Support Structure
Slide 50: FlexRig3 Performance
Highlights of FlexRig3s 1. Field Performance vs. customer’s planned drill curves • 2219 complete wells as of August 18, 2008 • 1381 wells (62%) under or on • 713 wells (32%) over *6% of wells had no planned curves 2. 82% of FlexRig3s are currently drilling directional, more technically difficult wel
Slide 51: FlexRig4 Performance
Highlights of FlexRig4s 1. Field Performance vs. customer’s planned drill curves • 2024 complete wells as of August 18, 2008 • 1353 wells (67%) under or on • 620 wells (30%) over *3% of wells had no planned curves 2. 88% of FlexRig4s are currently drilling directional, more technically difficult wel
Slide 52: Delivering Safety – H&P vs. Industry (IADC)
Delivering Safety – H&P vs. Industry (IADC) U.S. Land Safety Performance (1994 – 2008) 12–Month Rolling Average Incidence Rates INCIDENTS PER 200,000 MANHOURS MANHOURS WORKED (MM) IADC 2Q08 = 4.17 H&P TRIR = 1.48 10.8 MM H&P MANHOURS 0 2 4 6 8 10 12 14 16 0 2 4 6 8 10 12 14 16 94 95 96 97 98 99 00 0
Slide 53: 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) Helmerich & Payne, Inc. Actual Cost Per Man Hour worked U.S. Land & Offshore Operations $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 1986 1988 1990
Slide 54: Helmerich & Payne, Inc.
HELMERICH & PAYNE, INC. 1G: JHELMERICH & PAYNE End of Document
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