Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Credit Suisse 2014 Energy Summit
45 slides from Helmerich & Payne's conference presentation, Feb 11, 2014
Slide 1: Helmerich & Payne, Inc. Credit Suisse 2014 Energy Summit
Helmerich & Payne, Inc. Credit Suisse 2014 Energy Summit February 11-12, 2014
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: A Quick Primer on Helmerich & Payne
A Quick Primer on Helmerich & Payne U.S. land drilling market share leader Focused on innovation and returns on capital Leader in ongoing industry land rig replacement cycle Most modern and capable land drilling fleet Strong balance sheet
Slide 4: Evolution of H&P's Global Rig Fleet
Evolution of H&P’s Global Rig Fleet International Land 29 Offshore 9 September 2001 U.S. Land 316 96 Rigs 354 Rigs (Before AC Drive Rigs) February 2014
Slide 5: Overall U.S. Land Market Trends
Overall U.S. Land Market Trends Increasing market demand for AC drive rigs Firm and slightly improving spot market pricing Continued customer focus on drilling efficiency, technology and safety Conversations with customers for additional new build orders continue
Slide 6: H&P New Builds
H&P New Builds Delivered 22 new builds in fiscal 2013, all under long-term contracts. Since the beginning of fiscal 2014, we have announced long-term contracts for 35 new FlexRigs with nine customers in the U.S. As of February 10, 2014, 15 of the 35 announced FlexRigs have already been delivered. On
Slide 7: AC Rigs Continue to Gain Market Share
AC Rigs Continue to Gain Market Share Note: The above estimates corresponding to rig activity 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 horsepower.
Slide 8: The Replacement Cycle Continues
As of January 2014 (~1,700 Active Rigs in U.S. Land By Power Type) The Replacement Cycle Continues As of October 2008 (Peak) (~1,900 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, and c
Slide 9: 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. AC Drive Rigs (existing as of third
Slide 10: U.S. Land Average Daywork Margins
U.S. Land Average Daywork Margins(1) (1) Does not include the impact of early contract termination revenue.
Slide 11: 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.
Slide 12: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) (Source: Thomson Reuters) Source: Thomson Reuters as of February 11, 2014.
Slide 13: Return on Invested Capital (Excluding Extraordinary Items)
Return on Invested Capital (ROIC) * Excludes gains from the sale of investment securities and discontinued operations. H&P's unadjusted ROIC resulted in 17.0%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring items. (Excluding Extraordinary Ite
Slide 14: Current Dividend Yields
Current Dividend Yields Source: Thomson Reuters. Yields calculated as of market close on February 7, 2014.
Slide 15: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of February 7, 2014.
Slide 16: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of February 7, 2014
Slide 17: [LOGO]
[LOGO]
Slide 18: Lead Innovation, Expand Market Share, Satisfy Customers, Drive Well Costs Down
Lead Innovation Expand Market Share Satisfy Customers Drive Well Costs Down
Slide 19: The FlexRig Difference: Key Advantages
The FlexRig Difference: Key Advantages Increased drilling productivity and reliability Variable frequency (AC) drives with increased precision and measurability Computerized electronic driller that more precisely controls weight on bit, rotation and pressure Designed to move quickly from well to wel
Slide 20: Innovation & Applied Technology
Innovation & Applied Technology AC Driven Systems & Integrated Top Drive Mechanized Tubular Handling Computerized Controls BOP Handling Driller’s Cabin Satellite Communications Rig Move Capabilities 31
Slide 21: FlexRigs Delivering Drilling Efficiencies
FlexRigs Delivering Drilling Efficiencies We have over 1,300 rig years of AC Drive FlexRig drilling experience. Drilled over 52 million feet in 2012 Drilled in excess of 61 million feet in 2013 Improved our footage per day by 23% in 2012 Footage per day increased approximately 14% in 2013
Slide 22: 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 23: Delivering Safety – H&P vs. Industry (IADC)
Delivering Safety – H&P vs. Industry (IADC) U.S. Land Safety Performance (2005 – 2013) OSHA Recordable Injury Incidence Rates H&P = 0.84 IADC w/o H&P = 1.81 Injuries per 200,000 Man Hours
Slide 24: H&P Continues to Capture Market Share
H&P Continues to Capture Market Share As of October 2008 (Peak) (~1,900 Active Rigs in U.S. Land) As of January 2013 (~1,700 Active Rigs in U.S. Land) Note: The above estimates corresponding to market share are derived from Rig Data. PDS’s market share includes both PDS and Grey Wolf rigs. Additiona
Slide 25: Favorable Market Trends for FlexRigs
Favorable Market Trends for FlexRigs Customer focus on drilling efficiency, technology and safety Increasing well complexity AC drive rigs replacing SCR and mechanical rigs More customers high-grading their fleets
Slide 26: High-Grading Continues
High-Grading Continues Note: The above estimates corresponding to rig activity 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 horsepower. Certain assump
Slide 27: 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.
Slide 28: Unconventional Plays Shaping Landscape
Unconventional Plays Shaping Landscape Well Complexity is increasing: Horizontal and directional wells make up over 75% of wells drilled in the U.S. Extended reach laterals progressively longer Multi-well pad drilling gaining acceptance in more areas This all creates an expanding level of demand for
Slide 29: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 30: Leading U.S. Unconventional Driller
(291 H&P Contracted Land Rigs as of 2/10/14*) Leading U.S. Unconventional Driller * Includes 20 announced new FlexRigs with customer commitments scheduled for delivery in calendar 2014.
Slide 31: Unconventional Drilling Growth in Permian
Unconventional Drilling Growth in 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 600 horsepower.
Slide 32: H&P's Pad Capable Fleet
H&P’s Pad Capable Fleet Approximately 50% of H&P’s U.S. Land active fleet, all of which are AC drive rigs, are equipped with hydraulic skid systems. Our pad capable fleet is fully utilized. Customers continue to contract/add skid systems to existing FlexRigs.
Slide 33: FlexRigs Leading in Pad Drilling Efforts
FlexRigs Leading in Pad Drilling Efforts AC Drive FlexRigs lead in pad drilling efforts in U.S. Land FlexRig3 first pad application in 2004 FlexRig4 was the first bi-directional land drilling design FlexRig5 is the latest generation of bi-directional, long lateral pad drilling rig We have drilled ov
Slide 34: H&P Activity as of February 10, 2014
H&P Activity as of February 10, 2014 Rigs Working/ Contracted 271 271 0 8 23 302 Rigs Available 316 283 33 9 29 354 20 1 375 % Contracted 86% 96% 0% 89% 79% 85% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Other AC Construction Total Fleet (1) (2) Incl
Slide 35: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity (1) (1) Includes completed new builds pending delivery and not generating revenue days.
Slide 36: H&P's New Build Program Continues
H&P’s New Build Program Continues H&P plans to continue a build cadence of two rigs per month through March and then increase to three rigs per month through the rest of the fiscal year. We have the flexibility to modify our production cadence and our capital spares capacity. This approach has allow
Slide 37: In Summary
In Summary: H&P’s long term strategy for growing shareholder value: Innovation Technology Safety, operational excellence and best people Customer satisfaction
Slide 38: Additional References
ry mee Additional References
Slide 39: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and announced new build commitments
Slide 40: Changes in Lower U.S. Land Rig Count
Changes in Lower 48 U.S. Land Rig Count * PDS’ active rig count includes both PDS and Grey Wolf rigs.
Slide 41: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract Segment Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY14 FY14 FY14 FY15 FY15 FY15 FY15 U.S. Land 150.7 144.2 139.6 122.4 106.3 85.6 70.2 International Land 13.8 13.1 13.0 11.3 9.2 7.8 6.3 Offshore 3.0 2.5 1.9 1.0 1.0 1.0 1.0 Total 167.5 159.8 154.5 134.7 116.5 94.4 77.4 Number of Rigs
Slide 42: H&P's International Land Operations Rig Fleet Status
Active Idle Total Long-term Contracts Argentina 8 1 9 4 Bahrain 3 3 3 Colombia 4 3 7 2 Ecuador 5 1 6 1 Tunisia 2 2 U.A.E. 2 2 2 Total 22 7 29 12 H&P’s International Land Operations Rig Fleet Status (as of February 10, 2014) 11 of 16 FlexRigs, included in the international fleet of 29 rigs, are under
Slide 43: 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 44: H&P's Exposure to Oil & Liquids
Estimated proportion of H&P’s active U.S. Land rigs by primary hydrocarbon target as of 2/10/14 H&P’s Exposure to Oil & Liquids Dry Gas (Long-term Contracts) 3% Dry Gas (Spot Market) 5%
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