Tags: Helmerich | Payne | rigs | HP

Helmerich & Payne Sees Money in More Rigs

By    |   Monday, 17 Oct 2011 04:31 PM

Oil and gas producers aren't the only ones who benefit from high crude prices. Their suppliers do as well, including Tulsa, Okla. oil rig contractor Helmerich & Payne (HP).

Business is good. The company reported third-quarter operating revenue of $644.1 million, up 33 percent from the same period a year earlier. Third-quarter net income came to $109.8 million compared with a $36.7 million loss from a year earlier.

Helmerich & Payne secured contract commitments for 12 of its FlexRig drilling units, and now says it will build and operate 20 additional more under multi-year term contracts with four exploration and production companies. Terms and customers weren't disclosed.

Prior to the deal, the company's fleet included 249 land rigs in the U.S., 24 international land rigs and nine offshore platform rigs.

The new additions are definitely welcome. "We are pleased with the company's third quarter results and the announcement of 20 additional rig orders, bringing our quarterly total to 32 new builds. Our introduction of the FlexRig5 reflects our ongoing commitment to innovative design and driving enhanced rig capacity and performance," says HP President and CEO Hans Helmerich in an earnings statement.

Ups and downs

Analysts like the company, but aren't screamingly wildly and waving pompoms over it. Twice this year, Barclays Capital has reiterated an equal weighting, while Stifel Nicolaus reiterated a buy recommendation.

RBC Capital Markets reiterated a sector perform recommendation, although Canaccord Genuity downgraded the company's stock in April to hold from buy. More recently, Bernstein downgraded the company to market perform from outperform.

Energy is a hot sector, but it does have its ups and downs, especially amid economic uncertainty.

Ratings agency Moody’s says earnings growth for global integrated oil and gas companies in 2012 should temper a bit as crude oil prices ease and pressure persists on refining margins.

Moody's says the industry looks stable rather than positive, pointing out that when economies cool they need less oil and gas to grow.

"We believe that weakening global macroeconomic conditions will lead to slower growth in oil consumption and an easing in current market tightness over the coming quarters, as Libyan production gradually comes back onto the market," says Francois Lauras, a senior credit officer in Moody's Corporate Finance Group, in an industry outlook. "These factors could result in some softening in oil prices from recently high levels."

Lawsuits against the Venezuelan government, which seized control over company oilrigs last year, bear watching as well, as the Venezuelan government has dismissed the company's claim as frivolous, according to the Reuters newswire.

The company will report fourth quarter earnings on Nov. 17.

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Oil and gas producers aren't the only ones who benefit from high crude prices. Their suppliers do as well, including Tulsa, Okla. oil rig contractor Helmerich Payne (HP). Business is good. The company reported third-quarter operating revenue of $644.1 million, up 33...
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2011-31-17
Monday, 17 Oct 2011 04:31 PM
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