Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — UBS Global Oil and Gas Conference 2015
47 slides from Helmerich & Payne's conference presentation, May 20, 2015
Slide 1: Helmerich & Payne, Inc. UBS Global Oil and Gas Conference
Helmerich & Payne, Inc. UBS Global Oil and Gas Conference May 20-21, 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 Low oil prices continue to depress demand levels for drilling services. There is still uncertainty in the market and our customers remain cautious, but there are some indications that the trough may be nearing. We have contracted a handful of FlexRigs in the spot
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 segment had 161 contracted rigs generating revenue as of May 15, 2015, down from 179 on March 31, 2015. H&P’s U.S. Land segment had 169 idle AC drive FlexRigs as of May 15, 2015, providing H&P with unprecedented leverage to significantly
Slide 6: 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 7: 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 8: 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 9: H&P vs. Peers Credit Statistics
H&P vs. Peers Credit Statistics (As of March 31, 2015) Very Strong Balance Sheet 1. Total Capitalization is defined as Total Debt plus Shareholders' Equity. 2. Net Debt is defined as Total Debt minus Cash and Cash Equivalents. Total-Debt-to-Total-Capitalization Ratio1 Net-Debt-to-Total-Capitalizatio
Slide 10: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and new build commitments as of May 15, 2015 and exclude nine conventional rigs decommissioned at the end of fiscal 2014 and 17 SCR powered FlexRigs decommissioned at the end of 2Q fiscal 2015. Focus on Organic Growth
Slide 11: Organic U.S. Land Fleet Growth
Organic U.S. Land Fleet Growth * Estimates include existing rigs and announced new build commitments. 354 49 Focus on Organic Growth
Slide 12: H&P's U.S. Land Market Share
H&P’s U.S. Land Market Share As of October 2008 (Peak) (~1,900 Active Rigs in U.S. Land) As of May 2015 (~850 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, the drawwor
Slide 13: 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. Market Leader
Slide 14: 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. Most Advanced Fleet
Slide 15: Innovation & Applied Technology – FlexRig AC Driven Systems
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
Slide 16: 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 17: 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 18: Delivering Safety – H&P vs. Industry (IADC)
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 Best-in-Class Safety
Slide 19: 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) Best-in-Class Safety
Slide 20: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) * Excludes gains from the sale of investment securities and abandonment (non-cash) charges in 4QFY14 and 2QFY15. H&P's unadjusted ROIC resulted in 13.7%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring charges
Slide 21: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract Strong Backlog The above term contract coverage excludes long-term contracts for which the Company received early contract termination notifications as of 5/15/15. During the first and second fiscal quarters the Company generated approximately $23 and $72 million
Slide 22: 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. High Quality Customer Base
Slide 23: H&P Customer Credit Ratings
H&P Customer Credit Ratings * As of March 31, 2015. Consists of 179 contracted U.S. Land rigs, 8 contracted Offshore rigs, and 22 contracted International Land rigs. Includes approximately 54 customers with active/contracted H&P rigs. ** The figures above represent H&P’s customer commitments for ter
Slide 24: 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. Multiple wells being drilled from a single pad. Customers continue to focus on drilling efficiency, technology and safety. The replacement cycl
Slide 25: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 26: 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 27: 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 28: 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 29: Leading Replacement Cycle
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 greater than 600 horsepower. Certain assu
Slide 30: 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 31: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety and operational excellence Customer satisfaction Financial strength
Slide 32: Additional References
Additional References
Slide 33: Third Quarter H&P Operations Outlook
Third Quarter H&P Operations Outlook Drilling Operations Outlook for 3Q of Fiscal 2015 Compared to 2Q of Fiscal 2015 U.S. Land Segment Revenue days expected to decrease by roughly 32% Average rig revenue per day expected to decrease to roughly $27,000 (excluding the impact from early termination rev
Slide 34: H&P Activity as of May 15, 2015
H&P Activity as of May 15, 2015 Rigs Working/ Contracted 161 161 0 8 20 189 Rigs Available 338 330 8 9 40 387 16 403 % Contracted 48% 49% 0% 89% 50% 49% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Total Fleet 53% is pad-capable. 65% is pad-capable. Re
Slide 35: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity (1) Includes completed new builds pending delivery and not generating revenue days.
Slide 36: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller * Includes 16 announced new FlexRigs with customer commitments scheduled for delivery in calendar 2015 and first half calendar 2016. (177 H&P Contracted Land Rigs as of 5/15/15*)
Slide 37: H&P's International Land Operations
Active In-Transit Idle Total Long-term Contracts(1) Argentina 13 6 19 10 Bahrain 1 2 3 1 Colombia 2 6 8 1 Ecuador 2 4 6 Tunisia 2 2 U.A.E. 2 2 Total 20 0 20 40 12 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. This also includes rigs
Slide 38: H&P Global Fleet Under Term Contract
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average, Including Announced New Builds - as of 5/15/15) H&P Global Fleet Under Term Contract Segment Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY15 FY15 FY16 FY16 FY16 FY16 FY17 U.S. Land 130.1 117.6 112.4 109.9 104.3 100.3 93.8 International Land 1
Slide 39: The FlexRig Difference: Key Advantages
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 40: 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 41: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of May 18, 2015.
Slide 42: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of May 18, 2015.
Slide 43: Return on Equity
Return on Equity Superior ROIC and ROE * Excludes gains from the sale of investment securities and abandonment (non-cash) charges in 4QFY14 and 2QFY15. H&P's unadjusted ROE resulted in 14.7%. ** The corresponding ROE values for the selected companies exclude certain extraordinary, non-recurring char
Slide 44: Current Dividend Yields
Current Dividend Yields Source: Thomson Reuters. Yields calculated as of market close on May 18, 2015.
Slide 45: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Thomson Reuters Oil Prices Natural Gas Prices
Slide 46: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 47: End of Document
End of Document
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