Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (May 2016)
42 slides from Helmerich & Payne's investor presentation, May 18, 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 U.S. land drilling market share leader Most modern, uniform and capable land drilling fleet Strong term contract backlog with high quality customer base Strategy focused on continued innovation, performance excellence and customer satisfaction About Helmerich & Payne (H&P)
Slide 3: H&P's Global Rig Fleet
H&P’s Global Rig Fleet * Estimates include existing rigs and announced new build commitments.
Slide 4: Organic U.S. Land Fleet Growth
Organic U.S. Land Fleet Growth * Estimates include existing rigs and announced new build commitments. 350 49
Slide 5: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions E&P companies living within reduced drilling budgets, further reducing costs, and increasing efficiencies U.S. land active rig count now below 400, comparable to the all-time record lows reached in 1999 Dramatic reductions in personnel and investments due to indu
Slide 6: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 7: Oil and Natural Gas Prices
Oil and Natural Gas Prices Source: Energy Information Administration and Thomson Reuters. Oil Prices Natural Gas Prices
Slide 8: 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 had approximately 84 contracted rigs generating revenue and approximately 79 rigs generating revenue days as of May 2, 2016 (~18% of the 79 rigs were idle and on standby dayrates). Average FlexRig spot pricing was down by more tha
Slide 9: H&P's U.S. Land Fleet Activity
H&P’s U.S. Land Fleet Activity (1) Active rigs on term includes rigs on standby dayrates. Includes completed new builds pending delivery and not generating revenue days. (2)
Slide 10: H&P vs. Peers Credit Statistics
H&P vs. Peers Credit Statistics (As of March 31, 2016) Very Strong Balance Sheet 1. Total Capitalization is defined as Total Debt plus Shareholders' Equity. Total-Debt-to-Total-Capitalization Ratio1 Source: Company Filings
Slide 11: Current Dividend Yields
Current Dividend Yields Source: Thomson Reuters. Yields calculated as of market close on May 13, 2016.
Slide 12: 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 13: 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 Most Advanced Fleet ** Approximately 131 FlexRig3s and 6 FlexRig4s of the 159 “Other FlexRigs” can be upgraded to Pad* FlexRigs. * Optimal for multiple-well pad drilling applications. **
Slide 14: H&P U.S. Land Fleet (Contracted Rigs as of 5/2/16)
Drawworks Horsepower FlexRig Type Rig Power Type H&P U.S. Land Fleet (Contracted Rigs as of 5/2/16) Most Advanced Fleet ** Pad* AC Drive FlexRigs * Optimal for multiple-well pad drilling applications. ** Most of the “Other FlexRigs” can be upgraded to Pad* FlexRigs.
Slide 15: 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) Most Advanced Fleet
Slide 16: 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 17: H&P's U.S. Land Market Share Gains
As of May 2016 (~380 Active Rigs in U.S. Land) As of October 2014 (Peak) (~1,930 Active Rigs in U.S. Land) As of October 2008 (Peak) (~1,925 Active Rigs in U.S. Land) H&P’s U.S. Land Market Share Gains Market Leader Note: The above estimates corresponding to market share are derived from Rig Data. P
Slide 18: H&P Positioned to Continue to Gain Share
H&P Positioned to Continue to Gain Share ~510 Idle 1,500 hp AC Drive Rigs in U.S. Land (May 2016) Market Leader Note: The above estimates are derived from multiple sources including Rig Data, Smith Bits, and corporate filings. Additionally, the drawworks capacity of each land rig with AC drive power
Slide 19: U.S. Land Active Rig Count
U.S. Land Active Rig Count BHI Industry Rig Count Through First Quarter of Calendar 2016 Market Leader
Slide 20: Delivering Safety – H&P vs. Industry (IADC)
Delivering Safety – H&P vs. Industry (IADC) U.S. Land Safety Performance (2005 – 2015) OSHA Recordable Injury Incidence Rates Injuries per 200,000 Man Hours H&P IADC w/o H&P Best-in-Class Safety
Slide 21: H&P Global Fleet Under Term Contract
H&P Global Fleet Under Term Contract Strong Backlog The above term contract coverage excludes long-term contracts for which the Company received early contract termination notifications as of 5/2/16. Given notifications as of 5/2/16, the Company expects to generate over $80 million in the third fisc
Slide 22: 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 23: Ongoing U.S. Land Market Trends
Ongoing U.S. Land Market Trends Unconventional plays continue to shape the landscape. Customers continue to focus on drilling efficiency, technology and safety. AC drive rigs are best suited for more complex horizontal drilling. Multiple wells being drilled from a single pad. The replacement cycle i
Slide 24: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 25: 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 or equal to
Slide 26: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next 90 E&P Operators (~205 Active Rigs by Power Type) Top 10 E&P Operators (~105 Active Rigs by Power Type) Remaining E&P Operators (~70 Active Rigs by Power Type) Top 10 E&P Operators Next 90 E&P Operators Remaining E&P Operators They represent the 10 most
Slide 27: 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 May 2016 (~380 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activity are
Slide 28: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety and operational excellence Customer satisfaction Financial strength
Slide 29: H&P's Long Term Strategy
|, H&P’s Long Term Strategy > Innovation > Technology > Safety and operational excellence > Customer satisfaction Financial strength
Slide 30: Third Fiscal Quarter H&P Operations Outlook
Third Fiscal Quarter H&P Operations Outlook Drilling Operations Outlook for 3Q of Fiscal 2016 Compared to 2Q of Fiscal 2016 U.S. Land Segment Revenue days expected to decrease by roughly 25% to 28% Average rig revenue per day expected to be roughly $25,000 (excluding the impact from early terminatio
Slide 31: H&P Activity as of May 2, 2016
H&P Activity as of May 2, 2016 Rigs Working/ Contracted 84 84 0 7 14 105 Rigs Available 347 345 2 9 38 394 3 397 % Contracted 24% 24% 0% 78% 37% 27% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total FlexRig Construction Total Fleet 54% are FlexRigs that are optimal for multiple
Slide 32: H&P U.S. Land Fleet (Idle Rigs as of 5/2/16)
FlexRig Type Rig Power Type H&P U.S. Land Fleet (Idle Rigs as of 5/2/16) Pad* AC Drive FlexRigs Drawworks Horsepower Most Advanced Fleet ** * Optimal for multiple-well pad drilling applications. ** Most of the “Other FlexRigs” can be upgraded to Pad* FlexRigs.
Slide 33: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller * Includes 3 announced new FlexRigs with customer commitments scheduled for delivery in fiscal 2016. (87 H&P Contracted Land Rigs as of 5/2/16*)
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, Smith Bits, and corporate filings. Additionally, the drawworks capacity of each land rig included in the above analysis was equal to or greate
Slide 35: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 10 9 19 10 Bahrain 1 2 3 1 Colombia 1 7 8 1 Ecuador 6 6 U.A.E. 2 2 2 Total 14 24 38 14 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
Slide 36: H&P Global Fleet Under Term Contract: Strong Backlog
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average, Including Announced New Builds - as of 5/2/16) H&P Global Fleet Under Term Contract Segment Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY16 FY16 FY17 FY17 FY17 FY17 FY18 U.S. Land 70.9 69.3 68.5 69.5 60.6 52.2 45.7 International Land 14.0 14.
Slide 37: 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 38: 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 39: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Thomson Reuters as of May 13, 2016.
Slide 40: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Thomson Reuters as of May 13, 2016.
Slide 41: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 42: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count _ A C4 8 Bs s 5 igs Drilling for Oil —Rigs Drilling for Gas 2,500 2 e 8 8 8 8 2,000 1,500 Gunog Bry Arejoyj ueoLewy YON Ha) sBly “SN eAnoy Jo sequINN