Helmerich & Payne, Inc. · NYSE:HP
Helmerich & Payne — Investor Presentation (March 2017)
50 slides from Helmerich & Payne's investor presentation, Mar 28, 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 December 31, 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: Nasdaq IR Insight (FactSet). Yields calculated as of market close on March 24, 2017.
Slide 5: Current Dividend Yields
Dividend Yield (%) 5% 4% 3% 0% Current Dividend Yields HP NBR PTEN PDs Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on March 24, 2017. UNT
Slide 6: 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 March 2017 (~820 Active Rigs in U.S. Land)
Slide 7: 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 3/28/17. Given notifications as of 3/28/17, the Company expects to generate approximately $6 million in the second fiscal q
Slide 8: Revising U.S. Land Q2FY17 Outlook
Revising U.S. Land Q2FY17 Outlook We are increasing activity guidance, as we now expect revenue days to increase by 34-35% as compared to the first fiscal quarter. Being able to respond more quickly with our fleet enabled us to pick up new customers. These market share gains are generally sustainabl
Slide 9: U.S. Land Drilling Market Conditions
U.S. Land Drilling Market Conditions Even with the recent pullback in oil prices, the outlook continues to be favorable. The level of demand for contract drilling services has been increasing; the BHI U.S. Land rig count is up by 25% year-to-date and up by 108% since the trough last May. Customer we
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
(~540 Rigs as of March 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 than
Slide 12: Capturing Opportunities in U.S. Land Market
Capturing Opportunities in U.S. Land Market H&P’s total U.S. land market share (at ~18%) has risen since the peak (~15%) H&P’s market share has also grown in the AC drive rig segment (~28%), which continues to rapidly expand Our estimate for fiscal 2017 capital expenditures increased in January in r
Slide 13: H&P Uniquely Positioned – Family of Solutions
H&P Uniquely Positioned – Family of SolutionsTM 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 14: Incremental CapEx Upgrade Opportunities
Incremental CapEx Upgrade Opportunities 7,500 psi mud circulating systems Investing in multi-well pad drilling capability Full utilization of FlexRig3 skid systems led to building additional systems to meet demand FlexRig3 walking systems Third mud pump 25,000+ ft setback capability Increased mud vo
Slide 15: H&P U.S. Land Fleet – Family of Solutions
* Roughly 60% 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 a
Slide 16: 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 ~150 FlexRigs remaining that can receive upgrades, we have very attractive leverage
Slide 17: 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 with a 750,000 lbs. mast hookload are derived from Rig Data and corporate filings. ** Estimated number of all other available AC Drive rigs not including those owned by HP, PT
Slide 18: 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 1,900 rig years of AC drive operational experience Our expertise within an integrated business model (designing, building and upgrading the fleet) provides th
Slide 19: Benefits of an Integrated Model
Benefits of an Integrated Model CONTINUOUS IMPROVEMENT DESIGN (and redesign) FABRICATE (and upgrade) OPERATE (and improve)
Slide 20: 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 “Walking” option for the FlexRig3 is designed to meet the unique case for which a skid design may not be as well suited
Slide 21: 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 22: "Walking" Option in FlexRig Family of Solutions
We have designed a new walking system for a FlexRig3 as we believe this could lead to incremental share gains with some customers that have unique locations. The advantages of the FlexRig3 walking system will allow H&P to provide a new design into the market for a much lower investment than having t
Slide 23: 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 24: 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 25: Leading U.S. Unconventional Driller
Leading U.S. Unconventional Driller (168 H&P Contracted Land Rigs as of 3/28/17)
Slide 26: Increasing Focus on More Difficult Drilling
Increasing Focus on More Difficult Drilling
Slide 27: 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 28: The Replacement Cycle: Customer Adoption
The Replacement Cycle: Customer Adoption Next ~115 E&P Operators (~475 Active Rigs by Power Type) Top 10 E&P Operators (~195 Active Rigs by Power Type) Remaining E&P Operators (~150 Active Rigs by Power Type) Top 10 E&P Operators Next ~115 E&P Operators Remaining E&P Operators They represent the 10
Slide 29: 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 March 2017 (~820 Active Rigs in U.S. Land By Power Type) Note: The above estimates corresponding to rig activity a
Slide 30: 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 31: Center of Excellence – Tulsa, OK
Center of Excellence – Tulsa, OK Support Structure Data Analysis Best Practices 24/7 Technical and Performance Solutions:
Slide 32: 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 33: 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 34: H&P's Long Term Strategy
H&P’s Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
Slide 35: H&P's Long Term Strategy
| H&P’s Long Term Strategy > Innovation > Technology > Safety, operational excellence and reliability > Customer satisfaction > Financial strength
Slide 36: 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 37: 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 38: Estimated H&P Activity as of March 28, 2017
Estimated H&P Activity as of March 28, 2017 Rigs Working/ Contracted 168 168 0 6 8 182 Rigs Available 350 348 2 8 38 396 % Contracted 48% 48% 0% 75% 21% 46% U.S. Land AC Drive FlexRigs SCR Fleet Offshore International Land Total In collaborating with a long-term customer, one of the Company’s nine o
Slide 39: H&P Global Fleet Under Term Contract
Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average, Including Announced New Builds - as of 3/28/17) H&P Global Fleet Under Term Contract Segment Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY17 FY17 FY17 FY18 FY18 FY18 FY18 U.S. Land 87.2 84.5 71.4 62.2 46.6 36.7 30.3 International Land 7.0 6.0
Slide 40: H&P's International Land Operations
Contracted Idle Total Long-term Contracts Argentina 5 14 19 5 Bahrain 1 2 3 Colombia 2 6 8 Ecuador 6 6 U.A.E. 2 2 Total 8 30 38 5 H&P’s International Land Operations Rigs on term contract that have greater than or equal to 180 days remaining. 5 of 25 FlexRigs, included in the international fleet of
Slide 41: 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 42: 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 43: 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 44: 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 ~125 FlexRigs that have been or can be upgraded to what some industry followers refer to as “super-spec” rigs. ** Estimated number of idle 1,500 hp
Slide 45: Drilling Activity in the U.S.
Drilling Activity in the U.S.
Slide 46: Ten-Year Relative Shareholder Return
Ten-Year Relative Shareholder Return Source: Nasdaq IR Insight (FactSet) as of March 24, 2017.
Slide 47: Land Drilling Market Valuations
Land Drilling Market Valuations Source: Nasdaq IR Insight (FactSet) as of March 24, 2017.
Slide 48: Oil vs. Natural Gas Directed Rig Count
Oil vs. Natural Gas Directed Rig Count
Slide 49: 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 50: Oil and Natural Gas Prices
Oil and Natural Gas Prices san —Henry Hub Spot —West Texas intermediate Spot || $140 U.S. Dollars per Barrel $4 U.S. Dollars per Million British Therm: s2 4 Natural Gas Prices sot ! $0 Brastregh PP ah Bt ad i oF gt oF yo LL EPE ELE PLE EEE EEE GR Daily Prices Source: Energy Information Administratio
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