Helmerich & Payne, Inc. (NYSE:HP) Q4 2017 Earnings Conference Call Transcript

Nov 16, 2017 • 11:00 am ET


Helmerich & Payne, Inc. (NYSE:HP) Q4 2017 Earnings Conference Call Transcript


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Good day, everyone, and welcome to today's Helmerich & Payne's Fourth Quarter and Fiscal Year-End Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. (Operator Instructions) Please note that this call may be recorded.

It is now my pleasure to turn the conference over to David Hardie, Manager of IR. Please go ahead.

David Hardie

Thank you, Chris, and welcome everyone, to Helmerich & Payne's conference call and webcast, corresponding to the fourth quarter of fiscal 2017. With us today are John Lindsay, President and CEO; and Juan Pablo Tardio, VP and CFO. John and Juan Pablo, will be sharing some comments with us, after which we will open up the call for questions.

(Forward-Looking Cautionary Statements)

We will also be making reference to certain non-GAAP financial measures, such as segment operating income and operating statistics. You may find the GAAP reconciliation comments and calculations in today's press release.

I will now turn the call over to John Lindsay.

John Lindsay

Thank you, Dave, and good morning everyone. Thank you again for joining us on our fourth fiscal quarter earnings call. Fiscal 2017 witnessed the largest ramp-up of US land rig activity in the Company's history, which more than doubled even in the face of oil price uncertainty and volatility. We began the fiscal year with 95 rigs contracted in US land, and after reaching trough operating levels of 66 rigs in May of 2016, we closed the year with 197 rigs, an increase of 102 FlexRigs, most of which were upgraded to super-spec capacity. This achievement isn't possible without the advantage of having great people, a Family of Solutions, and over 2,000 rig years of FlexRig experience.

This combination, allows us to provide the right rig for the customer, and has enabled us to grow US land market share to 20%. The headlines during our fourth fiscal quarter were dominated by oil price uncertainty, which remained range-bound in the mid-$40s, and skewed expectations toward a substantial rig count reduction for the balance of 2017.

Recall that during the summer, some experts were predicting the rig count to decline by 100 to 300 rigs by year-end. Even with that cautious outlook, H&P was able to grow its rig count and obtained leading edge pricing, due to the value proposition we provide to customers. We have also seen improvement in our international markets, where our rig count has increased to 17 active rigs.

Looking forward, oil price increases during the past several weeks could provide additional opportunities for rig count growth and higher dayrates going into 2018, which should also improve our key financial metrics. A crucial driver for increased pricing is, the limited super-spec capacity we see in the market today. The total super-spec fleet in the US is estimated at 400 rigs, and we believe H&P makes up about 40% of that total. The industry super-spec fleet is nearly fully utilized, and demand continues to be bolstered