Helmerich & Payne, Inc. Barclays Capital CEO Energy-Power Conference September 8, 2011
H&P Basics 324 Drilling Rigs* 6 Billion Market Cap 7,600 Employees 10% Debt/Cap * Includes 38 new FlexRigs under construction with customer commitments and scheduled for completion during fiscal 2012.
Market Trends Favor H&P Drilling today involves more complex well designs directed at oil and liquid rich plays. Customers continue to focus on efficiency and technology to achieve lower total well costs. Major customers are…
Economics Shift Activity Towards Oil Drilling
H&Ps Growing Exposure to Oil & Liquids Estimated proportion of H&Ps active U.S. Land rigs in markets primarily associated with oil, liquids rich gas, and dry gas.
The New Build Replacement Cycle Continues Industry is undersupplied with high performance AC drive rigs Older rigs are not well suited for more complex drilling High-efficiency AC drive new builds continue to replace old rigs…
Increasing Focus on More Difficult Drilling
Rigs Active (1,850) in the U.S. Land Market (By Power Type) AC Drive Rigs 25% Mechanical Rigs 42% SCR Rigs 33% Note: The above estimates corresponding to rig activity are derived from multiple sources including Rig Data,…
AC Drive U.S. Rig Market Share (450 Rigs) Note: The above estimates corresponding to market share are derived from multiple sources including Rig Data, Smith Bits, and corporate filings.
Active Rig Market Share Ten Years Ago Lower 48 U.S. Land Market Share As of August 24, 2001 Note: The above estimates corresponding to U.S. land rig market share are derived from Smith Bits S.T.A.T.S..
Organically Growing Active Rig Market Share Lower 48 U.S. Land Market Share As of August 26,2001 March 16, 2011 Note: The above estimates corresponding to U.S. land rig market share are derived from Smith Bits S.T.A.T.S..
H&Ps Lead in U.S. High-Efficiency Rig Offering 250 of AC Drive Land Rigs in U.S. 200 Estimated Number 150 100 50 0 HP NBR PTEN PDS AC Drive land rigs (existing as of second quarter announcements of calendar 2011)…
Highest U.S. Activity Level in Company History As of 9/8/11
Organic U.S. Land Fleet Growth 291 49 * Estimates include existing rigs and announced new build commitments.
Most Profitable Driller in U.S. Land Business * PTENs operating income includes drilling operations in Canada. ** NBRs operating income corresponds to its U.S. Lower 48 Land Drilling segment.
Five-Year Relative Shareholder Return Source: Yahoo Finance as of August 26, 2011
Growing Shareholder Value Lead Innovation Expand Drive Well Market Share Costs Down Satisfy Customers
H&Ps FlexRig Advantage The FlexRig Difference: Key Advantages Increased drilling productivity and reliability Variable frequency (AC) drives with increased precision and measurability Computerized electronic driller that more…
Innovation & Applied Technology Computerized Controls Drillers Cabin AC Driven Systems & Integrated Top Drive 31 Satellite Communications Mechanized Tubular BOP Handling Handling Rig Move Capabilities
Technology & Quality Service Make a Difference H&Ps Margin Premium * Does not include the impact of early contract termination revenue. ** Represents weighted-average rig margin per day for PTEN, NBR and UNT through Q2CY11.
Technology & Quality Service Make a Difference H&Ps Utilization Premium * Utilization is herein calculated to be average active rigs divided by estimated available marketable rigs during the period. ** Represents estimated…
Activity as of September 8, 2011 Rigs Rigs Working/ % Available Contracted Contracted U.S. Land 253 221 87% Offshore 9 7 78% International Land 24 18 75% Total 286 246 86% FlexRig Construction 38 38 Total Fleet 324 284
Key Considerations in a Volatile Environment Term contract coverage Additional growth potential through new builds with long-term contracts Quality of active fleet that is exposed to the spot market Customer base
H&P Global Fleet Under Term Contract
H&P vs. Industry U.S. Land Customer Base H&P Industry U.S. Land Activity U.S. Land Activity Estimated Customer Distribution Estimated Customer Distribution (Late August 2011) (Late August 2011) Small & Majors Private Majors…
Unconventional Plays Shaping Landscape Well Complexity is increasing: Technology solutions that provide safe, environmentally sound and efficient operations are required by contractors to be competitive Extended reach laterals…
Leading U.S. Unconventional Driller (259 H&P Contracted Land Rigs as of 9/8/11*) Arkoma Woodford, Piceance Basin, 6 2 Haynesville Shale, 6 Granite Wash, 6 Conventional Gas, 7 Eagle Ford Shale, 75 Barnett Shale, 7 Avalon / Bone…
H&Ps New Build Advantages We have been improving and honing the process for over 10 years, prompting our assertion that we build a better rig for less Safety is our first priority, followed by a relentless focus on strong…
H&P New Builds Total of 58 new builds announced during fiscal 2011 Delivering new FlexRigs at the rate of three per month through September 2011 Two new builds left to deliver in fiscal 2011 and 36 in fiscal 2012 Begin cadence…
Introducing the FlexRig5 Aimed at market segment of extended reach, long lateral shale plays for multi-well pad drilling Preserved the key performance drilling features of our flagship FlexRig3, combined with: Bi-directional…
Performance is Not Only About Better Rigs Its also about: People Support Structure Safety Processes Experience Organizational Network Training Maintenance Culture Supply Chain
End of Presentation
Additional References
H&Ps U.S. Land Operations The major shift across the industry towards oil and liquids rich plays is increasingly employing unconventional drilling techniques to conventional reservoirs. Basins that were historically characterized by…
H&Ps U.S. Land Fleet Activity * Active rigs on term (in blue) generated both revenue and revenue days. ** Includes completed new builds that were waiting on customers and which generated revenue but did not generate revenue days.
H&Ps Offshore Operations Seven of the Companys nine offshore platform rigs remain active, including two under long-term contracts. The number of revenue days during the fourth fiscal quarter of 2011 is expected to be roughly flat…
H&Ps International Land Operations Of the 24 rigs assigned to international operations, 18 are currently active including nine under long-term contracts. Additionally, we have received a contract for a fourth FlexRig in Bahrain with…
H&Ps International Land Operations Rig Fleet Status (as of September 8, 2011) Long-term Active Contracted Idle Total Contracts Argentina 4 5 9 4 Bahrain 3 3 3 Colombia 5 1 6 2 Ecuador 4 4 Tunisia 2 2 Total 18 6 24 9 (1) 1) 9 of…
Oil Related Drilling Increasingly Complex
Increasing Focus on More Difficult Drilling
H&P U.S. Land Fleet by Power Type* * Includes New Build Commitments.
Total Industry Available U.S. Land Fleet (by Power Type) AC Drive Rigs 17% Mechanical Rigs 52% SCR Rigs 31% Note: The above estimates corresponding to the available rig fleet in the U.S. are derived from multiple sources…
Customer Satisfaction Index 10 = Highly Satisfied, 1 = Highly Dissatisfied Source: EnergyPoint Research, Inc.
How Does H&P Define a New Build Land Rig A new build rig consists of all new structures and equipment for the purpose of: Eliminating legacy issues Achieving Safety-by-Design Maximizing drilling efficiency Improvement of ergonomics…
Building a New FlexRig Processing Raw Materials Fabricating New Lean Manufacturing Structures Commissioning / Delivery Test Assembly and Unitizing Packages Outfitting New Electrical Systems
Driller on a Conventional Rig vs. FlexRig
Roughnecks on a Conventional Rig vs. FlexRig
A Value Proposition Example H&P vs. Competitors Estimated Estimated Peer H&P FlexRig3 Conventional Fit-for-purpose Average Average Average 2011 (Spot Market) (Spot Market) (Spot Market) 1. Drilling days 20 11 9 Completion days 3 3…
FlexRig3 Performance Sample FlexRig3 Eagle Ford Shale 0 2,000 Customer's Target 4,000 Jan 2010 to Aug 2011 H&P Average - 18 Wells 6,000 H&P Best Depth (ft) 8,000 10,000 12,000 14,000 50% Improvement 16,000 31%…
FlexRig3 Performance Sample FlexRig3 Bakken Shale 0 Best competitor offset (2007)* 2,000 Target Curve 4,000 Jan 2009 - August 2011 H&P Average - 22 Wells 6,000 H&P Best 8,000 Depth (ft) 10,000 12,000 14,000 16,000…
FlexRig3 Performance Sample FlexRig3 CANA-Woodford Shale 0 2,000 Customer's Target Jan 2010 - Aug 2011 H&P Average - 13 Wells 4,000 H&P Best 6,000 Depth (ft) 8,000 10,000 12,000 14,000 16,000 48% Improvement…
FlexRig4M Performance Sample FlexRig4M West TX 0 Customer's Target 1,000 Jan 2010 to Aug 2011 H&P Average - 36 Wells H&P Best 2,000 3,000 Depth (ft) 4,000 5,000 6,000 7,000 8,000 9,000 31 % Improvement 10,000 58 %…
FlexRig4 Performance Sample FlexRig4S Marcellus Shale 0 1,000 Customer's Target 2,000 Jan 2010 - June 2011 H&P Average - 22 Wells 3,000 4,000 H&P Best 5,000 Depth (ft) 6,000 7,000 8,000 9,000 10,000 11,000 25%…
Delivering Safety H&P vs. Industry (IADC) U.S. Land Safety Performance (1994 2011) OSHA Recordable Injury Incidence Rates INJURIES PER 200,000 MANHOURS MANHOURS WORKED (MM) 16 MANHOURS = 16 14.2 MM 14 14 12 12 10 10 8 8 6 6…
Safety Excellence Also Generates Savings Reduced Workers Comp and General Liability Losses per Man Hour EMR = Experience Modifier Ratio (Industry Average = 1.00)
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