Helmerich & Payne, Inc. Scotia Howard Weil 46th Annual Energy Conference March 27-28, 2018
Presentation Outline Market Conditions H&Ps long term strategy Most capable and uniform land drilling fleet Family of SolutionsTM Market share leader in the U.S. Technology driven wellbore quality and accuracy Very strong…
Drilling Market Conditions Higher oil prices boding well for increasing drilling demand and continuing dayrate improvement Customer level of interest in putting additional rigs to work continues to increase Continue to experience…
CapEx Upgrade Opportunities Continuing to see additional demand for upgrades driving our capex estimates higher for fiscal 2018 Returns on upgrades are attractive Upgrading opportunities include: 7,500 psi mud circulating…
H&Ps Long Term Strategy Innovation Technology Safety, operational excellence and reliability Customer satisfaction Financial strength
H&Ps Global Rig Fleet 450 Offshore 390 395 396 396 400 374 International Land 340 350 U.S. Land 320 Rigs Available 281 300 U.S. Land Super-Spec** 254 257 224 250 193 200 151 127 130 128 150 111 96 100 50 0 2001…
H&Ps Experience and Expertise People, systems and the operational support structures in place to drive high performance and reliability 2,000+ rig years of AC drive operational experience Expertise within an integrated business…
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 FlexRig fleet allows for broad range…
Competitive Benefits of Uniform FlexRig Fleet Uniform fleet creates adaptive environment to reach maximum efficiency for people, equipment and technology Uniform fleet is critical in increasingly complex basins providing consistent…
Most Capable & Uniform Fleet Creates Opportunity (As of March 27, 2018) Greater scale than any competitor; ability to upgrade and deploy a total of 270 FlexRigs in U.S. Land segment to rig specifications in highest demand without…
H&Ps Lead in U.S. Land AC Drive Rigs with 1,500hp Drawworks Rating and 750,000 lbs. Mast Hookload 320 Estimated Number of AC Drive Land Rigs in Idle 280 U.S. with 1,500 hp Drawworks Rating Active and 750k lbs. Mast…
Super-Spec* Rigs Rapidly Gain Market Share 1,000 41% Super-Spec* as a % of Active US Land Rigs (BHI North American Rotary Rig Count) Number of Active U.S. Land Rigs 750 38% 500 35% 250 32% U.S. Land Rig Count…
H&P U.S. Land Fleet Family of SolutionsTM (As of March 27, 2018) 1,500 hp AC Drive FlexRigs*, including 270 Upgraded or Upgradeable to 350 Available H&P U.S. Land Rigs Rig Specifications in High Demand** Other (56) Potential…
Active AC Drive U.S. Rig Market Share (695 Rigs as of March 2018) Other Land Drillers HP 27% 30% PDS 8% NBR PTEN 15% 20% Note: The above estimates corresponding to rig activity are derived from multiple sources including…
U.S. Land Market Share Leader As of March 2018 (1,030 Active Rigs in U.S. Land) 24% 18% Estimated Market Share 12% 6% 0% HP PTEN NBR PDS UNT Note: The above estimates corresponding to market share are derived…
U.S. Land Market Share Gains Since 2014 Peak 6.0% from October 2014 to February 2018 U.S. Land Market Share Gains 4.0% 2.0% 0.0% HP PDS PTEN* NBR -2.0% Note: The above estimates corresponding to market share…
Leading U.S. Unconventional Driller (212 H&P Contracted Land Rigs est. for 3/27/18) Woodbine, 2 Mississippian, 1 Niobrara Shale, 3 Other Gas (Dry and Utica Shale, 5 Liquids Rich), 1 Marcellus Shale, 5 Piceance Basin, 8 Bakken…
Performance Is Not Only About Better Rigs Our competitive advantage is also about: People Uniform Fleet Size & Scale Safety Operational Support Network Experience Processes/Data Training Maintenance Culture Supply Chain
Customer Satisfaction Matters H&P has been rated 1st in total customer satisfaction for TEN YEARS IN A ROW* Value creation for the customer is not only driven by having the right rig. It is also driven by service; the ability of…
Benefits of an Integrated Model DESIGN (and redesign) CONTINUOUS IMPROVEMENT OPERATE FABRICATE (and improve) (and upgrade)
H&P Adding to the Family of Solutions Wellbore Quality and Accuracy Critical to Extracting Value from Shale Assets Recent MOTIVE and MagVAR acquisitions create a powerful platform and compelling value opportunity for E&P companies…
Challenge: Inconsistent Directional Drilling Drilling Performance Varies Widely Increased Tortuosity of Wellbores Poor Drilling Accuracy Missed Targets Downhole Tool Failures Late Target Changes at Landing These inefficiencies…
Directional Complexity/Velocity Trend Extended Reach S-Well Horizontal Turnazontal SPEED AND COMPLEXITY CONTINUOUSLY INCREASING Industry Attempting to Hire Artists, Need to Convert Art Into Science 24
Motive Bit Guidance System Bit Guidance is a completely new approach to directional drilling, enabling repeatable execution of High Quality Wellbores by: Completely Automating ALL of the Following Tasks: Data Analysis Real-Time…
MOTIVE Drilling Technologies, Inc. MOTIVE is the industry leader in the use of cognitive computing to guide the directional drilling process. Motive has commercially drilled more than 5 million feet drilled across all of the major…
Value Driven AutomationTM Real-Time Economic Driven Decisions Millions of potential options are considered by Guidance System to find the optimal convergence back to the well plan. Convergence Planner considers costs and value…
Challenge: Sensor Error Accumulates Objective Reality Accurate Placement/Spacing Critical to Maximize Well Economics 28
Accurate Wellbore Placement Matters - Reservoir: Optimal drainage - Completions: Controlling hydraulic communication - Geology: Better data for geological mapping - Regulatory: Greater confidence wells are within boundaries -…
Magnetic Variation Services MagVAR is a leading provider of MWD geomagnetic referencing and survey quality management Real-time center serving active horizontal rigs drilling in North America Utilized for over 40 E&P companies…
Well Placement is Critical MagVAR services reduce standard surveying uncertainty by 50-60%, increasing horizontal well economics while reducing risk. Precise well placement enables maximum reservoir drainage More accurate positional…
H&P / Motive / MagVAR Strategic Value 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…
24/7 Technical and Performance Solutions Center of Excellence MagVAR Real-Time Center Tulsa, OK Denver, CO Staffed by Technicians & Drillers Staffed by Engineers Motive Command Center Dallas, TX Staffed by Directional Drillers
H&Ps Strong Balance Sheet (As of December 31, 2017) Total-Debt-to-Total-Capitalization Ratio1 1. Total Capitalization is defined as Total Debt plus Shareholders' Equity. Source: Company Filings.
H&P Global Fleet Under Term Contract Term Contract Status - H&P Global Fleet* (As of 3/27/18) 130 120 U.S. Land Already Under Long-Term Contracts 110 International Land (Estimated Annual Average) 100 Offshore 90 Number of…
H&P Winning Strategy FlexRig Fleet and a Digital Platform Most Capable and Uniform Fleet Growing Market Share Meeting Wellbore Quality & Accuracy Challenges Strong Balance Sheet Robust Backlog
Additional References
H&P Activity as of March 27, 2018 Rigs Rigs Working/ % Available Contracted Contracted U.S. Land 350 212 61% AC Drive FlexRigs 348 (1) 212 61% (2) SCR Fleet 2 0 0% Offshore 8 5 63% International Land 38 18 47% Total Fleet 396 235…
H&Ps U.S. Land Fleet Activity 330 300 297 Number of Active H&P U.S. Land Rigs 270 240 233 212 210 179 200 191 183 180 161 153 147 150 158 134 98 102 122 87 120 111 109 117 87 91 87 90 128 104 60 118 84 73 72 67…
H&Ps International Land Operations Rig Fleet Status (as of March 27, 2018) Long-term (1) Contracted Idle Total Contracts (3) Argentina 16 3 19 10 Bahrain 1 2 3 Colombia 1 7 8 Ecuador 6 6 U.A.E. 2 2 (2) Total 18 20 38 10 (1)…
U.S. Activity by Well and Rig Type 1,030 Active U.S. Land Rigs (March 2018) Vertical Wells Being Drilled 8% Horizontal or Vertical Directional Wells Being All Rigs Drilled with SCR or Mechanical Rigs Horiz & Dir 25% SCR & Mech…
Increasing Focus on More Difficult Drilling U.S. Rig Activity by Drilling Type 100% Vertical Drilling 90% Horizontal or Directional Drilling (BHI North American Rotary Rig Count) 80% Percentage of Active U.S. Rigs 70%…
U.S. Land Horizontal and Directional Activity (940 Rigs as of March 2018) Legacy Rigs 27% AC Drive Rigs 73% Note: The above estimates corresponding to rig activity are derived from multiple sources including Rig Data and…
U.S. Land Horizontal and Directional Activity (As of March 2018) 80% Percentage of Active U.S. Land Rigs Drilling Horizontal and Directional Well Paths 70% 60% 50% 40% 30% 20% AC Drive Rigs SCR Rigs 10% Mechanical…
Drilling Activity in the U.S. BHI U.S. Land Rig Count 2,500 (BHI North American Rotary Rig Count) Number of Active U.S. Land Rigs 2,000 1,500 1,000 500 0
Unconventional Drilling in the Permian (As of March 2018) 500 125 H&P H&Ps Active Rigs in the Permian Basin Total Active Rigs in the Permian Basin Horizontal / Directional 400 Vertical 100 300 75 200 50 100…
Oil vs. Natural Gas Directed Rig Count 2,500 Total Active Rigs Rigs Drilling for Oil (BHI North American Rotary Rig Count) Rigs Drilling for Gas 2,000 Number of Active U.S. Rigs 1,500 1,000 500 0
Oil and Natural Gas Prices 16 160 Henry Hub Spot U.S. Dollars per Million British Thermal Units 14 West Texas Intermediate Spot 140 12 120 U.S. Dollars per Barrel 10 100 8 80 Oil Prices 6 60 4 40 2 20…
H&Ps 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…
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…
Center of Excellence Tulsa, OK 24/7 Technical and Performance Solutions: Support Structure Data Analysis Best Practices
FlexRig Family of SolutionsTM - Pad Design FlexRig3 skid system is designed to meet the requirements for standard pad drilling. Typically customers drill 2-4 wells per pad. FlexRig5 skid system is a bi-directional design, with the…
H&P U.S. Land Fleet Family of SolutionsTM (As of March 27, 2018) 1,500 hp AC Drive FlexRigs*, including 205 Upgraded or Upgradeable to 212 Contracted H&P U.S. Land Rigs Rig Specifications in High Demand** Other (7) Potential…
Industrys Super-Spec* and Upgradable Utilization * AC drive FlexRigs with 1,500 hp drawworks and 750,000 hookload ratings that do not already have 7,500 psi mud circulating systems and multiple-well pad drilling systems (herein…
H&Ps Lead in U.S. Land AC Drive Rigs 360 320 of AC Drive Land Rigs in U.S.* 280 240 Estimated Number 200 160 120 80 40 0 HP NBR PTEN** PDS All Others*** AC Drive Rigs (existing as of fourth quarter of…
H&Ps Lead in U.S. Land AC Drive Rigs with 1,500hp Drawworks Rating 360 Estimated Number of AC Drive Land Rigs in U.S. 320 with 1,500 hp Drawworks Rating* 280 240 200 160 120 80 40 0 HP PTEN** NBR PDS All…
H&P Very Well Positioned to Gain Share Idle 1,500 hp AC Drive Land Rigs (as of March 2018) 140 Estimated Number of AC Drive Land Rigs in U.S. with 1,500 hp Drawworks Rating 120 100 80 60 40 20 0 HP* NBR PTEN**…
U.S. Land Market Share Gains Since 2016 Trough (As Every Contractors Best Rigs Competed for Work) 4.0% from May 2016 to February 2018 U.S. Land Market Share Gains 3.0% 2.0% 1.0% 0.0% HP PDS PTEN* NBR Note: The…
AC Drive Gains Share with Relatively Flat Rig Count (Historical Example: January 2013 January 2014) Source: The above estimates corresponding to AC Drive market share are derived from Rig Data.
The Replacement Cycle Continues As of March 2018 (1,030 Active Rigs in U.S. Land By Power Type) Mechanical Rigs 15% SCR Rigs 17% AC Drive Rigs 68% As of October 2008 (Peak) As of October 2014 (Peak) (1,925 Active Rigs in…
The Replacement Cycle: Customer Adoption U.S. Land Market (as of March 2018) Top 10 E&P Operators Next 135 E&P Operators Remaining E&P Operators (240 Active Rigs by Power Type) (605 Active Rigs by Power Type) (185 Active Rigs by Power…
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…
H&P Global Fleet Under Term Contract Number of Rigs Already Under Long-Term Contracts* (Estimated Quarterly Average - as of 3/27/18) Segment Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY18 FY18 FY18 FY19 FY19 FY19 FY19 U.S. Land 118.1 117.8 95.1 83.6…
Technology & Quality Service Make a Difference (1) H&Ps Margin Premium (2) (1) Does not include the impact of early contract termination revenue. (2) Represents weighted-average rig margin per day for PTEN, NBR, PDS, and…
U.S. Land Average Rig Expense per Day * Excludes extraordinary items mentioned in a particular quarters press release (e.g. lawsuit settlement charges). ** Estimated average rig expense per day for operating rigs only excludes…
Ten-Year Relative Shareholder Return 300% HP NBR PTEN UNT PDS 200% 100% 0% Source: Nasdaq IR Insight (FactSet) as of March 19, 2018.
Current Dividend Yields 5% 4% Dividend Yield (%) 3% 2% 1% 0% HP NBR PTEN PDS UNT Source: Nasdaq IR Insight (FactSet). Yields calculated as of market close on March 19, 2018.
Land Drilling Market Valuations 8,000 7,000 6,000 Market Capitalization 5,000 (Millions) 4,000 3,000 2,000 1,000 0 HP PTEN NBR UNT PDS Source: Nasdaq IR Insight (FactSet) as of March 19, 2018.
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