Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Goldman Sachs Global Energy Conference 2015
53 slides from Helmerich & Payne's conference presentation, Jan 7, 2015
Slide 1: Helmerich & Payne, Inc. Goldman Sachs Global Energy Conference
Helmerich & Payne, Inc. Goldman Sachs Global Energy Conference January 7-8, 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: General Market and Outlook Comments
General Market and Outlook Comments Low oil prices are increasingly impacting the U.S. land drilling market. Drilling activity and spot dayrate pricing are now expected to significantly decline in the U.S. Nevertheless, as was the case during the last couple cyclical down-turns, H&P is well position
Slide 4: H&P's U.S. Land Activity and Pricing Comments
H&P’s U.S. Land Activity and Pricing Comments 286 FlexRigs remain active in the U.S. Land segment. Since 12/11/14, the idle and available AC drive FlexRig count in the U.S. has increased from 15 to 26. The average FlexRig spot pricing is down by approximately 10% to begin the second fiscal quarter a
Slide 5: 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 6: 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 7: Selected H&P Financial Metrics
Selected H&P Financial Metrics * Total Capitalization is defined as Total Debt plus Shareholders' Equity. Balance Sheet Highlights: As of September 30, 2014 (Dollars in millions) Cash (including Cash Equivalents) $361 Total Debt $80 Shareholders' Equity $4,891 Total Assets $6,722 Other Financial Hig
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 peak total-debt-to-total-capitalization ratio has been ~20% This capitalization ratio has averaged 9% and is currently below 2% At current EBITDA run-rates, this peak capi
Slide 9: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and new build commitments as of January 7, 2015 and exclude nine conventional rigs decommissioned at the end of fiscal 2014. Focus on Organic Growth
Slide 10: Organic U.S. Land Fleet Growth
Organic U.S. Land Fleet Growth * Estimates include existing rigs and announced new build commitments. 371 49 Focus on Organic Growth
Slide 11: 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 December 2014 (~1,800 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. Additiona
Slide 12: U.S. Land Active Rig Count
U.S. Land Active Rig Count BHI Industry Rig Count Through Third Quarter of Calendar 2014 Market Leader
Slide 13: U.S. Land Average Daywork Margins
U.S. Land Average Daywork Margins(1) (1) Does not include the impact of early contract termination revenue. Market Leader Through Third Quarter of Calendar 2014
Slide 14: 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 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 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 16: Innovation & Applied Technology – FlexRig
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 31
Slide 17: 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 18: 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 19: Delivering Safety – H&P vs. Industry
Delivering Safety – H&P vs. Industry (IADC) U.S. Land Safety Performance (2005 – 2013) OSHA Recordable Injury Incidence Rates H&P IADC w/o H&P Injuries per 200,000 Man Hours Best-in-Class Safety
Slide 20: 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 21: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) * Excludes gains from the sale of investment securities and 4QFY14 abandonment (non-cash) charges. H&P's unadjusted ROIC resulted in 14.8%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring charges. Superior ROI
Slide 22: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract Strong Backlog (1) Includes four rigs with early termination notifications. All rigs included above are subject to early termination fees.
Slide 23: H&P Term Contract Overview
H&P new build contracts Average term contract duration of ~3 years Firm “take-or-pay” early termination provisions* protect daily cash margin Attractive economic returns during term (with annual ROIC averages in mid-to-high teens) Close to 90% cash-on-cash payback after cash taxes during original 3
Slide 24: H&P Customer Credit Ratings
H&P Customer Credit Ratings * As of September 30, 2014. Consists of 294 active U.S. Land rigs, 9 active and contracted Offshore rigs, and 22 active International Land rigs. Includes over 70 customers with active H&P rigs. ** The figures above represent H&P’s customer commitments for term contract wo
Slide 25: 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 26: Underlying U.S. Land Market Trends
Underlying U.S. Land Market Trends Unconventional plays continue to shape the landscape. AC drive rigs are in highest demand. Customers continue to focus on drilling efficiency, technology and safety. The replacement cycle is expected to continue.
Slide 27: Unconventional Plays Shaping Landscape
Unconventional Plays Shaping Landscape Well Complexity is increasing: Horizontal and directional wells make up about 80% 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 fo
Slide 28: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 29: 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 or equal to 600
Slide 30: The Replacement Cycle Continues
As of December 2014 (~1,800 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
Slide 31: 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 32: 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 33: New Build FlexRigs
New Build FlexRigs 89 new FlexRig contracts announced since October 1, 2013 55 of the 89 announced new FlexRigs have already been delivered Currently building at a cadence of four FlexRigs per month, with 46 new FlexRigs under contract for fiscal 2015 Flexibility in managing our own production caden
Slide 34: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety and operational excellence Customer satisfaction Financial strength
Slide 35: Additional References
Additional References
Slide 36: H&P Activity as of January 7, 2015
H&P Activity as of January 7, 2015 Rigs Working/ Contracted 287 286 1 9 30 326 Rigs Available 337 312 25 9 40 386 34 420 % Contracted 85% 92% 4% 100% 75% 84% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Total Fleet Reflects announced new build commitme
Slide 37: 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 38: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller * Includes 34 announced new FlexRigs with customer commitments scheduled for delivery in fiscal 2015. (321 H&P Contracted Land Rigs as of 1/7/15*)
Slide 39: 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 or equal to 600 horsepower.
Slide 40: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract Segment Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY15 FY15 FY15 FY16 FY16 FY16 FY16 U.S. Land 174.6 162.4 144.5 129.2 118.0 114.0 111.9 International Land 16.0 18.7 16.3 14.2 14.0 14.0 14.0 Offshore 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Total 192.6 183.1 162.8 145.4 134.0 130.0 127.9 Number o
Slide 41: Distribution of Announced New Builds
Distribution of Announced New Builds Of the 89 new build FlexRigs announced since 10/1/2013, 39 are going to the Permian, 18 to the Oklahoma Woodford, 15 to the Eagle Ford, five to the Tuscaloosa Marine Shale, four each to the Utica and Bakken, two to the Haynesville and one each to the Niobrara and
Slide 42: 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 43: A Value Proposition Example – H&P vs. Competitors
A Value Proposition Example – H&P vs. Competitors Permian Basin – Horizontal Well (Fiscal 2014) Estimated Estimated Peer H&P FlexRig3 Conventional Rig AC Rig Average (Spot Market) 1. Drilling days 15.4 12.1 Other days No Data 3.0 3.0 Moving days 4.0 3.0 Total rig revenue days per well 22.4 18.1 2. D
Slide 44: FlexRigs Delivering Drilling Efficiencies
FlexRigs Delivering Drilling Efficiencies We have over 1,400 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 Improved our footage per day by 14% in 2013
Slide 45: 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 46: Growth / Decline in U.S. Lower Rig Activity
Growth / Decline in U.S. Lower 48 Rig Activity As of 1/7/15 *Represents average active rigs for NBR, PTEN, and UNT. Market Leader
Slide 47: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of January 5, 2015.
Slide 48: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of January 5, 2015.
Slide 49: Return on Equity
Return on Equity Superior ROIC and ROE * Excludes gains from the sale of investment securities and 4QFY14 abandonment (non-cash) charges. H&P's unadjusted ROE resulted in 15.2%. ** The corresponding ROIC values for the selected companies exclude certain extraordinary, non-recurring charges.
Slide 50: Current Dividend Yields
Current Dividend Yields Source: Thomson Reuters. Yields calculated as of market close on January 5, 2015.
Slide 51: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Thomson Reuters Oil Prices Natural Gas Prices
Slide 52: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 53: End of Document
End of Document
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