Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (December 2017)
59 slides from Helmerich & Payne's investor presentation, Dec 6, 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 September 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 November 28, 2017.
Slide 5: H&P's Global Rig Fleet
H&P’s Global Rig Fleet *The U.S. Land Super-Spec portion of the 2018E global rig fleet is as of 12/6/2017. The Company plans to upgrade additional rigs to super-spec status throughout 2018.
Slide 6: U.S. Land Market Share Leader
U.S. Land Market Share Leader As of November 2017 (~990 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. Value
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 12/6/17. Given notifications as of 12/6/17, the Company expects to generate approximately $4 million in the first fiscal quarter of 2018 and approximately $10 m
Slide 8: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions Recent oil price improvements could provide opportunities for increased drilling demand and dayrate improvement. There is additional demand for super-spec rigs as the replacement cycle persists and well complexity increases. The ongoing trend toward more complex
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
(~655 Rigs as of November 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 t
Slide 12: CapEx Upgrade Opportunities
CapEx Upgrade Opportunities 7,500 psi mud circulating systems Investing in multi-well pad drilling capability FlexRig3 skid systems FlexRig3 walking systems Third mud pump 25,000+ ft setback capability Increased mud volume capability Other customer specific upgrades
Slide 13: H&P U.S. Land Fleet – Family of Solutions
* 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 and 750,0
Slide 14: 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 104 FlexRigs remaining that can receive upgrades (32 of which are already contracte
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 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 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 U.S. Land Fleet – Family of Solutions
H&P U.S. Land Fleet – Family of SolutionsTM 1,500 hp AC Drive FlexRigs*, including 195 Upgraded or Upgradeable to Rig Specifications in High Demand** 201 Contracted H&P U.S. Land Rigs ** AC drive FlexRigs with 1,500 hp drawworks and 750,000# hookload ratings (195) that do not already have 7,500 psi
Slide 19: 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 20: 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 2,000 rig years of AC drive operational experience Our expertise within an integrated business model (designing, building and upgrading the fleet) provides th
Slide 21: Benefits of an Integrated Model
Benefits of an Integrated Model CONTINUOUS IMPROVEMENT DESIGN (and redesign) FABRICATE (and upgrade) OPERATE (and improve)
Slide 22: 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 23: 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 24: 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 25: 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 26: 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 27: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (201 H&P Contracted Land Rigs as of 12/6/17)
Slide 28: 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 November 2017) H&P’s Active Rigs in the Permian Basin Total Active Rigs
Slide 29: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 30: 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 31: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~130 E&P Operators (~580 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 ~130 E&P Operators Remaining E&P Operators They represent the 10
Slide 32: 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 November 2017 (~990 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activit
Slide 33: U.S. Land Horizontal and Directional Activity
U.S. Land Horizontal and Directional Activity (~890 Rigs as of November 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 g
Slide 34: 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 35: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 36: 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 37: 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 300 horizontal wells to date and over 4 million feet
Slide 38: 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 39: 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 40: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 41: H&P's Long Term Strategy
| H&P’s Long Term Strategy > Innovation > Technology > Safety, operational excellence and reliability > Customer satisfaction > Financial strength
Slide 42: First Fiscal Quarter H&P Outlook
First Fiscal Quarter H&P Outlook (As of November 16, 2017) Drilling Operations Outlook for 1Q of Fiscal 2018 Compared to 4Q of Fiscal 2017 U.S. Land Segment Quarterly revenue days expected to increase by approximately 4% to 5% Average rig revenue per day expected to be roughly $21,700 (excluding any
Slide 43: Estimated H&P Activity as of December 6, 2017
Slightly under 230 rigs are optimal for multiple-well pad drilling (97% of which are equipped with skidding systems and the remainder (or six rigs) with walking systems). The remaining SCR rigs in the U.S. Land segment have a 3,000 hp drawworks rating. We expect one of these 18 rigs to become idle b
Slide 44: Number of Rigs Already Under Long-Term Contracts
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average - as of 12/6/17) H&P Global Fleet Under Term Contract Segment Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY18 FY18 FY18 FY18 FY19 FY19 FY19 U.S. Land 100.2 87.0 72.6 60.3 50.9 27.4 23.5 International Land 11.0 10.8 10.0 10.0 10.0 10.0 10.0 Off
Slide 45: 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 46: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 16 3 19 10 Bahrain 1 2 3 Colombia 1 7 8 Ecuador 6 6 U.A.E. 2 2 Total 18 20 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: H&P's Lead in U.S. Land AC Drive Rigs with 1,500hp Drawworks Rating
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 1,500 hp 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). *** Estimate
Slide 53: 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 ~70 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 54: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 55: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Nasdaq IR Insight (FactSet) as of November 28, 2017. 0% 100% 200% 300% 400% HP NBR PTEN UNT PDS
Slide 56: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Nasdaq IR Insight (FactSet) as of November 28, 2017.
Slide 57: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 58: 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 59: Oil and Natural Gas Prices
—wWest Texas Intermediate Spot | $12 } x Oil Prices U.S. Dollars per Million British Thermal Units $24 Natural Gas Prices aR Fg 9g 9S go So gh PP OO WN AO IO A a ae a a a as Daily Prices Source: Energy Information Administration and Nasdaq IR Insight (FactSet). U.S. Dollars per Barrel
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