Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — RBC Capital Markets Global Energy & Power Conference 2010
43 slides from Helmerich & Payne's conference presentation, Jun 7, 2010
Slide 1: Helmerich & Payne, Inc. RBC Capital Markets Global Energy & Power Conference
Investor Relations Contact: Mike Drickamer – (918) 588-5190 – mike.drickamer@hpinc.com Helmerich & Payne, Inc. RBC Capital Markets Global Energy & Power Conference June 8, 2010
Slide 2: Forward-looking information disclaimer
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: 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 4: H&P's Global Rig Fleet by segment
H&P’s Global Rig Fleet 264 Total Rigs (Includes New Build Commitments) Offshore * Includes two 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 5: The Market Today
A disparity between crude oil and relatively weak natural gas prices exists. This disparity has led E&P operators to increase drilling activity in oil and “liquids-rich” markets. Drilling activity is becoming increasingly complex, with the number of rigs drilling horizontal wells at an all-time high
Slide 6: How is H&P Positioned?
Our fleet profile is the newest and most advanced Significant portfolio of term contracts Strong financial position – 13.6% debt-to-total capital ratio (as of March 31st, 2010) About 95% of H&P’s rigs active in the U.S. land spot market are FlexRigs FlexRigs continue to deliver outstanding field per
Slide 7: 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 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Number of Rigs Under Long-Term Contracts (Estimated Quarterly Average) Term Contract Status
Slide 8: 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. 116 128 150 154 160 166 0 25 50 75 100 125 150 175 Avg. Q4FY09
Slide 9: H&P's U.S. Land Fleet Status
H&P’s U.S. Land Fleet Status * Includes five FlexRigs with signed contracts. All of the remaining nine uncontracted FlexRigs are FlexRig4’s, which target shallower depth wells. 110 52 14 111 55 48 0 20 40 60 80 100 120 Under Term Spot Market Active Spot Market Stacked* Number of H&P Rigs Highly Mobi
Slide 10: U.S. land spot market and activity outlook
Spot market pricing continues to improve, especially for larger FlexRigs in unconventional plays. We expect a five to ten percent sequential increase in average activity (or revenue days) from the second to the third fiscal quarter of 2010. Average rig margin per day (excluding the impact of early t
Slide 11: H&P's Capex Estimate for Fiscal 2010
Given the continued improvement in U.S. land activity and market conditions for highly-capable rigs, the company has increased its fiscal 2010 capital expenditures estimate by $20 million to $350 million. The $20 million increase is mostly attributable to higher capital maintenance requirements (as
Slide 12: H&P's Contracted U.S. Land Fleet
H&P’s Contracted U.S. Land Fleet (as of 6/8/10) Note: The above numbers corresponding to H&P’s contracted U.S. land fleet include delayed new builds which generate revenue but do not generate revenue days, five idle FlexRigs with signed contracts, and two previously announced pending new build FlexR
Slide 13: The Impact of a Severe Downturn on Activity
*Represents average active rigs for PTEN, NBR and UNT. The Impact of a Severe Downturn on Activity As of 6/8/10 - 60% - 40% - 20% 0% 20% 40% 60% 80% 100% 120% Q1CY05 Q2CY05 Q3CY05 Q4CY05 Q1CY06 Q2CY06 Q3CY06 Q4CY06 Q1CY07 Q2CY07 Q3CY07 Q4CY07 Q1CY08 Q2CY08 Q3CY08 Q4CY08 Q1CY09 Q2CY09 Q3CY09 Q4CY09 Q
Slide 14: Technology and Quality Service Make a Difference
Technology and Quality Service Make a Difference Utilization Premium Rig Margin 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 t
Slide 15: 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. - $100 $0 $100 $200 $300 $400 PTEN* UNT NBR** HP Operating Income (Millions) U.S. Land Drilling Operating
Slide 16: H&P's International Land Operations Rig Fleet Status
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 2 2 Venezuela 11 11 Other 1 1 1 Total 21 1 17 39 13 H&P’s International Land Operations Rig Fleet Status (as of June 8, 2010) 1) Includes one rig under a long-term contract still in t
Slide 17: H&P's International Land Operations
H&P’s International Land Operations We expect quarterly activity (or revenue days) for the segment to sequentially increase by about five percent from the second to the third fiscal quarter of 2010. The new build FlexRig under a long-term contract still in the U.S. is now expected to deploy to Bahra
Slide 18: H&P's Offshore Operations
Seven of the Company’s nine offshore platform rigs remain active, including two under long-term contracts. One of the two idle rigs still has a prospect for work beginning in the fourth fiscal quarter of 2010. Although the exact future implications of the deepwater moratorium are currently unclear,
Slide 19: Peer Group Estimated Return on Equity
Peer Group Estimated Return on Equity 0% 2% 4% 6% 8% 10% PTEN NBR PDS H&P ROE Analyst Estimates Fiscal Year 2010 Return on Equity (Source: First Call Consensus, June 2, 2010)
Slide 20: 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 21: 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 22: H&P's U.S. Land Fleet: Estimated Activity by Rig Type
H&P’s U.S. Land Fleet (as of 6/8/10)* * Includes operator requested new build delivery delays, which generate revenue but not revenue days. Estimated U.S. Land Activity by Rig Type The above estimates corresponding to the total available U.S. land fleet are derived from multiple sources including Ri
Slide 23: 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 Q1 2010 HP Peer A Peer B Peer C
Slide 24: 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 25: End of Presentation
End of Presentation HELMERICH & PAYNE, ING.
Slide 26: Additional References
Additional References:
Slide 27: 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 31
Slide 28: 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 29: A Value Proposition Example – H&P vs. Competitors
Estimated Estimated Peer H&P FlexRig Conventional Fit-for-purpose Average Average Average Mid 2010 (Spot Market) (Spot Market) (Spot Market) 1. Drilling days 26 15 12 Completion days 2 2 2 Moving days 5 5 3 Total rig revenue days per well 33 22 17 2. Drilling contractor dayrate $15,500 $17,500 $22,5
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: FlexRig4 – Performance Sample
FlexRig4 – Performance Sample 42% Improvement 22% Improvement 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 0 2 4 6 8 10 12 14 16 18 Depth (ft) Time (days) Customer's Target Curve Jan to June 2010 Average - 9 Wells FlexRig4's Fastest EagleFord Well FlexRi
Slide 34: Unconventional Natural Gas Production Growing
Alaska Shale Gas Offshore Other Onshore (Includes Tight Sands) Projections History TCF Source: Energy Information Administration Annual Energy Outlook 2010 with projections to 2035 (May 2010). Unconventional Natural Gas Production Growing Coalbed Methane 0 2 4 6 8 10 12 14 16 1990 1995 2000 2008 201
Slide 35: 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 36: Increasing Focus on More Difficult Drilling (Gas)
Increasing Focus on More Difficult Drilling 80% 31% 37% 43% 51% 68% 28% 53% 69% 0 400 800 1200 1600 2004 2005 2006 2007 2008 2009 May-10 Trough (2009) Peak (2008) Number of Active Rigs (Smith Bits S.T.A.T.S.) Annual Average During Each Prior Year Active Rigs in U.S. Land Drilling for Natural Gas Hor
Slide 37: Oil Related Drilling Also Increasingly Complex
Oil Related Drilling Also Increasingly Complex 51% 39% 31% 33% 40% 41% 36% 42% 41% 0 75 150 225 300 375 450 2004 2005 2006 2007 2008 2009 May-10 Trough (2009) Peak (2008) Number of Active Rigs (Smith Bits S.T.A.T.S.) Annual Average During Each Prior Year Active Rigs in U.S. Land Drilling for Oil Hor
Slide 38: Crude Oil & Natural Gas Prices
Crude Oil & Natural Gas Prices Source: Energy Information Administration, Short-term Energy Outlook as of 5/11/2010. 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 39: Improving Rig Counts
Improving Rig Counts U.S. Land International Land 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 Apr-2000 Oct-2000 Apr-2001 Oct-2001 Apr-2002 Oct-2002 Apr-2003 Oct-2003 Apr-2004 Oct-2004 Apr-2005 Oct-2005 Apr-2006 Oct-2006 Apr-2007 Oct-2007 Apr-2008 Oct-2008
Slide 40: 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 UNT PTEN Change in Rig Count Estimated Change Since Peak in Active U.S. Land Rigs (Smith Bits Weekly Rig Count - October 17, 2008 to May 28, 2010)
Slide 41: 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. - 5/28/10)
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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