Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (October 2017)
60 slides from Helmerich & Payne's investor presentation, Oct 4, 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 June 30, 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 September 29, 2017.
Slide 5: Current Dividend Yields
(%) 3 z 5 3 > 6 5% 4% 3% Current Dividend Yields HP NBR PTEN PDs UNT Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on September 29, 2017.
Slide 6: U.S. Land Market Share Leader
U.S. Land Market Share Leader As of September 2017 (~975 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. Valu
Slide 7: 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 10/4/17. Given notifications as of 10/4/17, the Company expects to generate approximately $5 million in the fourth fiscal quarter of 2017 and approximately $15
Slide 8: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions Perennial uncertainty surrounding oil prices remains a threat to growth and drilling demand. Additional demand for super-spec rigs remains in spite of lower oil prices. In the current environment there is still the potential to improve dayrates and capture share
Slide 9: AC Drive Gains Share with Relatively Flat Rig Count
Source: The above estimates corresponding to AC Drive market share are derived from Rig Data. AC Drive Gains Share with Relatively Flat Rig Count (Historical Example: January 2013 – January 2014)
Slide 10: 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 11: Active AC Drive U.S. Rig Market Share
(~650 Rigs as of September 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
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: Incremental CapEx Upgrade Opportunities
Incremental CapEx Upgrade Opportunities 7,500 psi mud circulating systems Investing in multi-well pad drilling capability Full utilization of FlexRig3 skid systems led to building additional systems to meet demand FlexRig3 walking systems Third mud pump 25,000+ ft setback capability Increased mud vo
Slide 14: H&P U.S. Land Fleet – Family of Solutions
* Roughly 70% 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 15: 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 117 FlexRigs remaining that can receive upgrades (38 of which are already contracte
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 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 19: H&P U.S. Land Fleet – Family of Solutions
H&P U.S. Land Fleet – Family of SolutionsTM 1,500 hp AC Drive FlexRigs*, including 189 Upgraded or Upgradeable to Rig Specifications in High Demand** 197 Contracted H&P U.S. Land Rigs ** AC drive FlexRigs with 1,500 hp drawworks and 750,000# hookload ratings (189) that do not already have 7,500 psi
Slide 20: U.S. Land Market Share Gains Since 2014 Peak
U.S. Land Market Share Gains Since 2014 Peak 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 for PTEN include active rigs rece
Slide 21: 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 22: Benefits of an Integrated Model
Benefits of an Integrated Model CONTINUOUS IMPROVEMENT DESIGN (and redesign) FABRICATE (and upgrade) OPERATE (and improve)
Slide 23: 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 FlexRig5 skid system is a bi-directional design, with the typical pad having 2-4 wells, and in some cases range from 6-
Slide 24: H&P's 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 25: Walking Option in FlexRig Family of Solutions
The FlexRig3 walking system will allow H&P to provide a new design into the market for a much lower investment than having to build a new rig. We believe this could lead to incremental market share gains with some customers. The upgrade cost for a FlexRig3 with a walking system, including a 7,500 ps
Slide 26: U.S. Land Market Share Gains Since 2016 Trough
U.S. Land Market Share Gains Since 2016 Trough (As Every Contractor’s Best Rigs Competed for Work) 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
Slide 27: 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 28: 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 29: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (197 H&P Contracted Land Rigs as of 10/4/17)
Slide 30: Unconventional Drilling in the Permian
Unconventional Drilling in the 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 or equal to 600 horsepower. (As of September 2017) H&P’s Active Rigs in the Permian Basin Total Active Rig
Slide 31: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 32: 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 33: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~125 E&P Operators (~565 Active Rigs by Power Type) Top 10 E&P Operators (~220 Active Rigs by Power Type) Remaining E&P Operators (~190 Active Rigs by Power Type) Top 10 E&P Operators Next ~125 E&P Operators Remaining E&P Operators They represent the 10
Slide 34: 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 September 2017 (~975 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activi
Slide 35: U.S. Land Horizontal and Directional Activity
U.S. Land Horizontal and Directional Activity (~885 Rigs as of September 2017) 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
Slide 36: 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 37: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 38: 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 Solutions for Controls & Automation Market Share Leader in US Land Rig Deployment MOTIVE Provides- Leading Directional Decision Automatio
Slide 39: MOTIVE Drilling Technologies, Inc.
MOTIVE Drilling Technologies, Inc. MOTIVE’s proprietary Bit Guidance System is a unique directional drilling technology. Industry leader in the use of cognitive computing to guide the directional drilling process Algorithm-driven system More than 200 horizontal wells to date and over 3 million feet
Slide 40: MOTIVE Case Study
MOTIVE Case Study Directional Drilling Industry Problem: inability to consistently follow a prescribed well path and to hit and stay within the targets identified collectively by the operator’s geologists, geophysicists, and reservoir engineers. Directional Drilling Industry Solution: MOTIVE. It emp
Slide 41: 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 42: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 43: H&P's Long Term Strategy
| H&P’s Long Term Strategy > Innovation > Technology > Safety, operational excellence and reliability > Customer satisfaction > Financial strength
Slide 44: Estimated H&P Activity as of October 4, 2017
Slightly under 230 rigs are optimal for multiple-well pad drilling (99% of which are equipped with skidding systems and the remainder (or three rigs) with walking systems). The remaining SCR rigs in the U.S. Land segment have a 3,000 hp drawworks rating. Estimated H&P Activity as of October 4, 2017
Slide 45: 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 10/4/17) H&P Global Fleet Under Term Contract Segment Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY17 FY18 FY18 FY18 FY18 FY19 FY19 U.S. Land 98.7 96.2 80.0 66.8 56.3 48.3 25.4 International Land 10.0 10
Slide 46: U.S. Land Average Rig Expense per Day
U.S. Land Average Rig Expense per Day * Excludes extraordinary items mentioned in a particular quarter’s press release (e.g. lawsuit settlement charges). ** Estimated average rig expense per day for operating rigs only excludes estimated expenses associated with transitory and idle rig costs (e.g. r
Slide 47: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 13 6 19 10 Bahrain 1 2 3 Colombia 2 6 8 Ecuador 6 6 U.A.E. 2 2 Total 16 22 38 10 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. 10 of 25 FlexRigs, included in the international fleet
Slide 48: 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 49: 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 50: 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 51: 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 52: 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 AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number of all other available AC Driv
Slide 53: H&P's Lead in U.S. Land AC Drive Rigs with 1,500hp Drawworks
H&P’s Lead in U.S. Land AC Drive Rigs with 1,500hp Drawworks Rating * The above estimates corresponding to U.S. lower 48 AC Drive fleets are derived from Rig Data and corporate filings. ** Values for PTEN include AC drive rigs recently acquired from Seventy Seven Energy (SVNT). *** Estimated number
Slide 54: 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 ~85 FlexRigs that have been or can be upgraded to what some industry followers refer to as “super-spec” rigs. ** Values for PTEN include AC drive ri
Slide 55: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 56: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Nasdaq IR Insight (FactSet) as of September 29, 2017.
Slide 57: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Nasdaq IR Insight (FactSet) as of September 29, 2017.
Slide 58: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 59: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Nasdaq IR Insight (FactSet). Oil Prices Natural Gas Prices
Slide 60: Natural Gas Prices
U.S. Dollars per Million British Thermal Units Natural Gas Prices —Henry Hub Spot —wWest Texas Intermediate Spot $0 os Daily Prices oS gO ONS NN KE Nb DD nh ah No 1 0 OA Ce EA AE aE A A as Source: Energy Information Administration and Nasdaq IR Insight (FactSet). U.S. Dollars per Barrel
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