Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Howard Weil Energy Conference 2010
43 slides from Helmerich & Payne's conference presentation, Mar 22, 2010
Slide 1: Helmerich & Payne, Inc. Howard Weil Energy Conference
Investor Relations Contact: Juan Pablo Tardio – (918) 588-5383 – juanpablo.tardio@hpinc.com Helmerich & Payne, Inc. Howard Weil Energy Conference March 22, 2010
Slide 2: The information contained within this presentation is forward looking and involves risks and uncertainties
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 “Risk Factors” and “Management’s Discussion & Analysis of Results of Operatio
Slide 3: The Market Today
Oil prices remain strong, but natural gas spot prices are below $5 per mcf. U.S. land and international rig counts are recovering. A colder than average winter left U.S. natural gas inventories slightly above the five-year average. The number of U.S. rigs drilling horizontal wells is at an all-time
Slide 4: Continuing Debate on U.S. Natural Gas
Economic recovery and political uncertainty Impact of increasing shale gas potential LNG import potential Is the rig count too high? Continuing Debate on U.S. Natural Gas
Slide 5: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2003 2004 2005 2006 2007 2008 2009 2010 Percentage of Active U.S. Rigs (BHI North American Rotary Rig Count) Week Ended U.S. Rig Activity by Drilling Type Vertical Drilling Horizontal or Directional Drilling
Slide 6: The Impact of Unconventional Plays
Unconventional plays are a “game changer.” Not just for E&P companies but for land drillers, too. “Shale gas divides the world into haves and have nots.” (Large Operator) The Impact of Unconventional Plays
Slide 7: H&P is Leading the U.S. Land Retooling Effort
H&P is Leading the U.S. Land Retooling Effort Refurbished rigs, built between 1940s and 1982 74% 11% 15% 18% 74% 8% Note: The above estimates corresponding to the total available U.S. land fleet are derived from multiple sources including Rig Data, Smith Bits and corporate filings. Only rigs with eq
Slide 8: H&P and U.S. Land Fleet (by Rig Type)
H&P and U.S. Land Fleet (by Rig Type) 55% 30% 15% 22% 74% Note: The above estimates corresponding to the total available U.S. land fleet are derived from multiple sources including Rig Data, Smith Bits and corporate filings. Only rigs with equal to or greater than 600 horsepower drawworks ratings ar
Slide 9: Technology and Quality Service Make a Difference: H&P's Margin Premium
** Represents the weighted-average rig margin per day for PTEN, NBR and UNT in the Lower 48. * Does not include the impact of early contract termination revenue. Technology and Quality Service Make a Difference H&P’s Margin Premium $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 Q1CY05 Q2CY05 Q
Slide 10: H&P's Utilization Premium
** Represents estimated average combined utilization for PTEN, NBR and UNT in the Lower 48. * Utilization is herein calculated to be average active rigs divided by estimated available marketable rigs during the period. H&P’s Utilization Premium Technology and Quality Service Make a Difference 0% 10%
Slide 11: Most Profitable Driller in U.S. Land Business
Most Profitable Driller in U.S. Land Business * PTEN’s operating income includes drilling operations in Canada. ** NBR’s operating income corresponds to its U.S. Lower 48 Land Drilling segment. - $50 $50 $150 $250 $350 $450 $550 PTEN* UNT NBR** HP Operating Income (Millions) U.S. Land Drilling Opera
Slide 12: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity ** Includes delayed new builds (in gray) which generated revenue but did not generate revenue days. * Active rigs on term (in blue) generated both revenue and revenue days, including a few rigs on standby. 116 128 143 148 155 0 20 40 60 80 100 120 140 160 180 Avg. Q4FY
Slide 13: H&P's U.S. Land Fleet Status
H&P’s U.S. Land Fleet Status * Includes six FlexRigs with signed contracts. All of the remaining 18 uncontracted FlexRigs are FlexRig4’s, which target shallower depth wells. (as of March 22, 2010) 104 46 24 49 106 57 0 15 30 45 60 75 90 105 Under Term Spot Market Active Spot Market Stacked* Number o
Slide 14: H&P's U.S. Land Operations
The Company recently secured three multi-year term contracts to build and operate three new FlexRigs, two in the Bakken Shale and one in the Haynesville Shale. In addition, the Company recently secured four five-year term contracts to operate four FlexRigs in the Bakken Shale. These FlexRigs were bu
Slide 15: H&P's Global Rig Fleet
H&P’s Global Rig Fleet 264 Total Rigs (Includes New Build Commitments) Offshore * Includes four new rigs with customer commitments scheduled for completion by the end of fiscal 2010. ** Includes 15 FlexRigs. U.S. Land 216* U.S. FlexRigs 178* Mobile & Conventional 38 9 International Land 39**
Slide 16: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and announced new build commitments. 77 90 89 88 96 111 127 130 128 151 193 224 254 264 0 50 100 150 200 250 300 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E* Rigs Available Fiscal Year (Ending Sept 30) International
Slide 17: H&P's Global Fleet Under Term Contracts
H&P’s Global Fleet Under Term Contracts * Includes delayed new builds which are expected to generate revenue but not revenue days. 0 20 40 60 80 100 120 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Number of Rigs Under Long - Term Contracts (Estimated Quarterly Average) Term Contract Status - H&
Slide 18: H&P's International Land Operations
Active Contracted Idle Total Long-term Contracts Argentina 5 4 9 4 Colombia 4 2 6 2 Ecuador 4 4 Mexico 6 6 6 Tunisia 1 1 2 Venezuela 11 11 Other 1 1 1 Total 20 1 18 39 13 H&P’s International Land Operations Rig Fleet Status (As of March 22, 2010) 1) Includes one rig under a long-term contract still
Slide 19: H&P's Offshore Operations
Seven of the Company’s nine offshore platform rigs are active. Two of the seven active rigs are under long-term contracts. Average rig margins are expected to decline but remain strong at over $20,000 per day. We are now working on three platform rigs owned by customers under management contracts, t
Slide 20: H&P's Capex Estimate for Fiscal 2010
Given improving market conditions and a significant increase in U.S. land rig activity, the company has increased its fiscal 2010 capital expenditures estimate by $65 million to $330 million. Incremental spending includes: Incremental maintenance related expenditures Components required for an addit
Slide 21: Peer Group Return on Equity
Peer Group Return on Equity * NBR’s, PTEN’s and UNT's calculations exclude charges that were a result of asset retirements and impairments, including ceiling test write-downs. - 3% 0% 3% 6% 9% 12% PTEN NBR UNT HP Estimated ROE Return on Equity* 12 Months Ended December 31 , 2009
Slide 22: Customer Satisfaction Index
Source: EnergyPoint Research, Inc. * Trailing four quarters average * * Customer Satisfaction Index 10 = “Highly Satisfied”, 1 = “Highly Dissatisfied” * * 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 2006 Q1 2009 Q2 2009 Q3 2009 Q4 2009 HP Peer A Peer B Peer C
Slide 23: Market Trends Favor H&P
Growing focus on technology-based solutions that enable lower total well costs Unconventional plays are the most economically viable and tend to require highly-capable rigs Drilling is becoming more challenging and highly-capable rigs are expected to be in short supply Increasing safety and environm
Slide 24: [LOGO]
[LOGO]
Slide 25: End of Presentation
End of Presentation HELMERICH & PAYNE, ING.
Slide 26: Additional References
Additional References:
Slide 27: 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 28: Another Value Proposition Example – H&P vs. Competitors
Estimated H&P FlexRig Competitor Average Early 2010 (Spot Market) (Spot Market) 1. Drilling days 28 18 Completion days 2 2 Moving days 4 3 Total rig revenue days per well 34 23 2. Drilling contractor dayrate $15,500 $18,500 Operator’s other intangible $15,000 $15,000 cost per day estimate Total dail
Slide 29: Another Value Proposition Example – H&P vs. Competitors
Value added from FlexRig operations Significant H&P dayrate premium Increased wells per rig per year: 5 wells Early production: Incremental wells on production Lowest total well cost Another Value Proposition Example – H&P vs. Competitors
Slide 30: 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 31: FlexRig3 – Performance Sample
* Represents the customer’s fastest reported Bakken Shale well before deploying a H&P FlexRig. FlexRig3 – Performance Sample 48% Improvement 59% Improvement
Slide 32: FlexRig4M – Performance Sample
FlexRig4M – Performance Sample 59% Improvement
Slide 33: Changes in Lower U.S. Land Rig Count
Changes in Lower 48 U.S. Land Rig Count * PDS’s active rig count includes both PDS and GW rigs. - 50% - 40% - 30% - 20% - 10% 0% HP U.S. Land PDS* NBR PTEN UNT Change in Rig Count Estimated Change Since Peak in Active U.S. Land Rigs (Smith Bits Weekly Rig Count - October 17, 2008 to March 12, 2010)
Slide 34: Crude Oil & Natural Gas Prices
Crude Oil & Natural Gas Prices Source: Energy Information Administration, Short-term Energy Outlook as of 3/10/2010. Crude Oil Natural Gas $0 $2 $4 $6 $8 $10 $12 $14 $0 $20 $40 $60 $80 $100 $120 $140 U.S. Dollars per Thousand Cubic Feet U.S. Dollars per Barrel Monthly Average West Texas Intermediate
Slide 35: Improving Rig Counts
Improving Rig Counts U.S. Land International Land * In February 2010, MI Swaco restated its historical rig count, making it more inclusive in certain regions. 0 300 600 900 1,200 1,500 1,800 2,100 2,400 0 300 600 900 1,200 1,500 1,800 2,100 2,400 Feb - 2000 Aug-2000 Feb-2001 Aug-2001 Feb-2002 Aug-20
Slide 36: FlexRigs in Demand for More Difficult Wells
FlexRigs in Demand for More Difficult Wells 0% 20% 40% 60% 80% 100% 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. - 3/5/10)
Slide 37: Unconventional Natural Gas Production Growing
Alaska Onshore Unconventional Offshore Onshore Conventional Projections History TCF Source: Energy Information Administration Annual Energy Outlook 2009 with projections to 2030 (March 2009) Unconventional Natural Gas Production Growing 0 2 4 6 8 10 12 14 1990 1995 2000 2007 2010 2015 2020 2025 2030
Slide 38: FlexRig3 Performance
Highlights of FlexRig3s 1. Field Performance vs. customers’ planned drill curves 3265 complete wells as of March 17, 2010 1960 wells (60%) under or on 1077 wells (33%) over 228 wells had no planned curves 2. 96% of FlexRig3s are currently drilling directional, more technically difficult wells. FlexR
Slide 39: FlexRig4 Performance
FlexRig4 Performance Highlights of FlexRig4s 1. Field Performance vs. customers’ planned drill curves 3966 complete wells as of March 17, 2010 2578 wells (65%) under or on 1110 wells (28%) over 278 wells had no planned curves 2. 86% of FlexRig4s are currently drilling directional, more technically d
Slide 40: 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 41: Delivering Safety – H&P vs. Industry (IADC)
U.S. Land Safety Performance (1994 – Feb 2010) OSHA Recordable Injury Incidence Rates H&P TRIR = 0.95 IADC 2009 = 2.84 INJURIES PER 200,000 MANHOURS MANHOURS WORKED (MM) Delivering Safety – H&P vs. Industry (IADC) MANHOURS = 7.8 MM 0 2 4 6 8 10 12 14 16 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 0
Slide 42: 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 43: End of Document
End of Document HELMERICH & PAYNE, ING.
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