Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (May 2017)
51 slides from Helmerich & Payne's investor presentation, May 23, 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 May 5, 2017.
Slide 5: Current Dividend Yields
a = 2 S 2 2 i} 4% 3% 1% Current Dividend Yields HP NBR PTEN PDs Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on May 5, 2017. UNT
Slide 6: U.S. Land Market Share Leader
U.S. Land Market Share Leader As of April 2017 (~900 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 f
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 5/23/17. Given notifications as of 5/23/17, 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 Encouraging signs indicate that the U.S. land market could continue to build momentum, though the rate of increase in activity may slow to a more modest pace. Rig specification requirements have been increasing during this recovery due to more complex well design
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
(~595 Rigs as of April 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 (~28%), which continues to rapidly expand Our estimate for fiscal 2017 capital expenditures increased in January in r
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 60% 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 146 FlexRigs remaining that can receive upgrades, we have very attractive leverage
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'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 19: Benefits of an Integrated Model
Benefits of an Integrated Model CONTINUOUS IMPROVEMENT DESIGN (and redesign) FABRICATE (and upgrade) OPERATE (and improve)
Slide 20: 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 21: 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 22: 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 23: 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 24: 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 25: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (188 H&P Contracted Land Rigs as of 5/23/17)
Slide 26: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 27: 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 28: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~115 E&P Operators (~510 Active Rigs by Power Type) Top 10 E&P Operators (~205 Active Rigs by Power Type) Remaining E&P Operators (~185 Active Rigs by Power Type) Top 10 E&P Operators Next ~115 E&P Operators Remaining E&P Operators They represent the 10
Slide 29: 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 April 2017 (~900 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activity a
Slide 30: 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 31: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 32: Acquiring MOTIVE Drilling Technologies, Inc.
Acquiring MOTIVE Drilling Technologies, Inc. Entered into $75 million agreement to acquire MOTIVE, plus up to $25 million in potential earnout payments. MOTIVE’s proprietary Bit Guidance System is a unique directional drilling technology. Industry leader in the use of cognitive computing to guide th
Slide 33: Acquiring MOTIVE (Continued)
Acquiring 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 22,
Slide 34: 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 In-house Solutions for Controls Enhancement & Automation Market Share Leader in US Land Rig Deployment Motive Provides- Leading Direction
Slide 35: 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 36: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 37: Third Fiscal Quarter H&P Outlook
Third Fiscal Quarter H&P Outlook (As of April 27, 2017) Drilling Operations Outlook for 3Q of Fiscal 2017 Compared to 2Q of Fiscal 2017 U.S. Land Segment Revenue days expected to increase by roughly 25% Average rig revenue per day expected to be roughly $21,000 (excluding the impact from early termi
Slide 38: Estimated H&P Activity as of May 23, 2017
Estimated H&P Activity as of May 23, 2017 Rigs Working/ Contracted 188 188 0 6 13 207 Rigs Available 350 348 2 8 38 396 % Contracted 54% 54% 0% 75% 34% 52% 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 drawwork
Slide 39: 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 5/23/17) 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 93.2 88.9 76.2 49.0 38.7 32.3 26.8 International Land 11.0 10
Slide 40: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 10 9 19 10 Bahrain 1 2 3 Colombia 2 6 8 Ecuador 6 6 U.A.E. 2 2 Total 13 25 38 10 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. The 13 contracted rigs reflect a customer’s withdrawal
Slide 41: 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 42: 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 43: 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 44: 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 45: 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 active AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number of all other available
Slide 46: 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 active AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number of all other available
Slide 47: 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 ~110 FlexRigs that have been or can be upgraded to what some industry followers refer to as “super-spec” rigs. ** Values for PTEN include active AC
Slide 48: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 49: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Nasdaq IR Insight (FactSet) as of May 5, 2017.
Slide 50: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 51: Oil and Natural Gas Daily Prices
U.S. Dollars per Million British Thermal Units $10 se \ Oil Prices $6 $4 $2 Natural Gas Prices —Henry Hub Spot —wWest Texas Intermediate Spot IPP SP 3S 20 AO A A AN SPAY _AD XP 20 X9 Ah Ah A 96 90 00 96 26 06 1 wet EON RUN RE, Daily Prices Ot OO He GN A Source: Energy Information Administration and