Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (December 2016)
44 slides from Helmerich & Payne's investor presentation, Dec 7, 2016
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 September 30, 2016) 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: Thomson Reuters. Yields calculated as of market close on December 2, 2016.
Slide 5: H&P’s Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and announced new build commitments.
Slide 6: H&P U.S. Land Fleet – Family of Solutions
FlexRig Type Rig Power Type H&P U.S. Land Fleet – Family of Solutions Pad* AC Drive FlexRigs Drawworks Horsepower ** Approximately 120 FlexRig3s and 6 FlexRig4s of the 148 “Other FlexRigs” can be upgraded to Pad* FlexRigs. * Optimal for multiple-well pad drilling applications. **
Slide 7: U.S. Land Market Share Leader
U.S. Land Market Share Leader 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. As of December 2016 (~635 Active Rigs in U.S. Land)
Slide 8: 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 12/7/16. Given notifications as of 12/7/16, the Company expects to generate approximately $9 million in the first fiscal qu
Slide 9: 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 10: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions The U.S. Land market is improving. Since the trough of activity in May, rigs have been reactivated across most basins, and the Permian is leading the recovery. Well designs are more challenging and complex with extended laterals requiring more hydraulic horsepowe
Slide 11: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 12: 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 13: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~90 E&P Operators (~325 Active Rigs by Power Type) Top 10 E&P Operators (~140 Active Rigs by Power Type) Remaining E&P Operators (~170 Active Rigs by Power Type) Top 10 E&P Operators Next ~90 E&P Operators Remaining E&P Operators They represent the 10 mo
Slide 14: 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 December 2016 (~635 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activit
Slide 15: H&P’s Lead in U.S. Land 1,500 hp AC Drive Rigs
H&P’s Lead in U.S. Land 1,500 hp AC Drive Rigs * The above estimates corresponding to U.S. lower 48 1,500 hp 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.
Slide 16: Active AC Drive U.S. Rig Market Share
(~405 Rigs as of December 2016) 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 t
Slide 17: H&P’s U.S. Land Activity and Pricing Comments
H&P’s U.S. Land Activity and Pricing Comments H&P’s U.S. Land segment has approximately 117 contracted rigs generating revenue, including 115 rigs generating revenue days as of December 7, 2016 (~3% of the 115 rigs remain idle and on standby dayrates). Average FlexRig spot pricing remains down by mo
Slide 18: H&P Uniquely Positioned – Family of Solutions
H&P Uniquely Positioned – “Family of Solutions” 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 19: H&P’s Experience and Expertise
H&P’s Experience and Expertise Have the people, systems and the operational support structures to drive top performance and reliability Over 1,800 rig years of AC drive operational experience Expertise in designing, building and now upgrading the fleet provides great optionality for the customer
Slide 20: Rig Specifications in High Demand
Rig Specifications in High Demand* AC drive 1,500 hp drawworks 750K lbs. hookload Multi-well pad drilling capability 7,500 psi mud circulating systems H&P’s U.S. Land Fleet Upgrade Potential H&P Rigs with Specifications in High Demand* * These combined high demand rig specifications meet the general
Slide 21: 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 ~170 FlexRigs that have been or can be upgraded to what some industry followers refer to as “super-spec” rigs. Idle 1,500 hp AC Drive Land Rigs (as
Slide 22: 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 23: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (118 H&P Contracted Land Rigs as of 12/7/16*) * Includes 1 announced new FlexRigs with customer commitments scheduled for delivery in calendar 2016.
Slide 24: H&P U.S. Land Fleet (Contracted Rigs)
Drawworks Horsepower FlexRig Type Rig Power Type H&P U.S. Land Fleet (Contracted Rigs as of 12/7/16) ** Pad* AC Drive FlexRigs * Optimal for multiple-well pad drilling applications. ** Most of the “Other FlexRigs” can be upgraded to Pad* FlexRigs.
Slide 25: 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. H&P’s Margin Premium (1) (2)
Slide 26: 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 27: 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 28: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 29: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 30: H&P’s Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 31: First Fiscal Quarter H&P Outlook
First Fiscal Quarter H&P Outlook (As of November 17, 2016) Drilling Operations Outlook for 1Q of Fiscal 2017 Compared to 4Q of Fiscal 2016 U.S. Land Segment Revenue days expected to increase by roughly 20% Average rig revenue per day expected to be roughly $23,500 (excluding the impact from early te
Slide 32: Estimated H&P Activity as of December 7, 2016
Estimated H&P Activity as of December 7, 2016 Rigs Working/ Contracted 117 117 0 7 14 138 Rigs Available 349 347 2 9 38 396 1 397 % Contracted 34% 34% 0% 78% 37% 35% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Total Fleet (3) (1) (2) 57% are FlexRigs
Slide 33: 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.
Slide 34: 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 35: H&P U.S. Land Fleet (Idle Rigs)
H&P U.S. Land Fleet (Idle Rigs as of 12/7/16) Pad* AC Drive FlexRigs Drawworks Horsepower ** * Optimal for multiple-well pad drilling applications. ** Most of the “Other FlexRigs” can be upgraded to Pad* FlexRigs. FlexRig Type Rig Power Type
Slide 36: H&P’s International Land Operations
Contracted Idle Total Long-term Contracts Argentina 11 8 19 10 Bahrain 1 2 3 Colombia 2 6 8 1 Ecuador 6 6 U.A.E. 2 2 Total 14 24 38 11 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. Some of the 10 contracted rigs in Argentina are on s
Slide 37: 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 12/7/16) H&P Global Fleet Under Term Contract Segment Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY17 FY17 FY17 FY17 FY18 FY18 FY18 U.S. Land 70.3 76.6 71.3 60.5 53.6 41.9 34.5 International Land 12.7 12
Slide 38: 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 39: 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 40: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of December 2, 2016.
Slide 41: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of December 2, 2016.
Slide 42: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 43: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Thomson Reuters. Oil Prices Natural Gas Prices
Slide 44: Oil and Natural Gas Prices (Daily)
U.S. Dollars per Million British Thermal Units Henry Hub Spot ‘West Texas Intermedi a Oil Prices x Natural Gas Prices $0 * gs st se Ss ot at eget wget to oe oe Daily Prices Source: Energy Information Administration and Thomson Reuters. U.S, Dollars per Barrel
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