Digital Operations And Global Expansion Will Forge Future Success

Key Takeaways

• Expansion in digitalization, automation, and advanced rig technology is reinforcing pricing power, market share, and margin growth.
  
• International growth initiatives and integration efforts in key regions support long-term revenue visibility and strong cash flow generation.
  
• High exposure to U.S. shale, persistent industry overcapacity, and cost pressures threaten Helmerich & Payne's margins, flexibility, and long-term financial stability.

Catalysts

Provides drilling solutions and technologies for oil and gas exploration and production companies.

• Continued digitalization and automation of drilling operations, evidenced by a 20% year-over-year increase in app adoption and performance-based contracts, is driving stronger customer value creation and differentiated pricing, which supports higher revenue and margin expansion going forward.
  
• Global energy demand, particularly from emerging markets and the secular global trend toward greater onshore natural gas development, is supporting H&P's international growth pipeline-especially in the Middle East and South America-providing durable long-term utilization and revenue visibility.
  
• The company's growing international footprint, highlighted by the successful KCA integration and new tender opportunities in Saudi Arabia and Argentina, positions H&P to capture incremental market share and expand EBITDA as geopolitical instability and supply concerns reinforce demand for high-spec rigs.
  
• Strategic cost takeout from the KCAD acquisition and ongoing G&A and R&D reductions ($50–$75 million identified cost synergies), alongside disciplined capital allocation and moderated capital expenditure, points to improved net margins and robust free cash flow generation through 2026.
  
• H&P's continued leadership in super-spec rig technology, with high utilization rates above 80% and increasing customer preference for advanced, high-performance rigs, allows the company to command premium day rates and drive sustainable EPS and shareholder returns as shale development intensity rises.

Helmerich & Payne Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Helmerich & Payne's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.0% today to 7.2% in 3 years time.
• Analysts expect earnings to reach $276.0 million (and earnings per share of $2.73) by about August 2028, up from $-33.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.6x on those 2028 earnings, up from -54.1x today. This future PE is lower than the current PE for the US Energy Services industry at 13.5x.
• Analysts expect the number of shares outstanding to grow by 0.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.22%, as per the Simply Wall St company report.

Helmerich & Payne Future Earnings Per Share Growth

Risks

• Increasing drilling efficiency and longer lateral lengths, combined with overall industry rig count declines (e.g., Permian Basin down 12% YoY), may lead to permanent overcapacity and reduced demand for new rigs, putting downward pressure on H&P's revenues and margins in the long run.
  
• H&P's high exposure and concentration in North America, especially the U.S. shale basins, makes the company vulnerable to regional downturns, commodity price volatility, and intensified competition, risking sustained revenue or market share losses during prolonged weak demand cycles.
  
• Industry consolidation among E&P companies and the prevalence of short-term and high-graded drilling contracts could reduce the client base, increase customer bargaining power, and lead to lower day rates-pressuring both earnings and net margins over time.
  
• The company's substantial capital expenditure requirements and relatively high fixed cost structure, especially for rig maintenance and technology upgrades, could limit flexibility and weigh on net margins and free cash flow during periods of low rig utilization.
  
• Ongoing oil and gas market volatility, uncertain global energy transition policies, and capital markets' shifting sentiment toward the energy sector-as evidenced by recent equity price-driven goodwill impairment-may constrain access to financing or depress valuation, impacting long-term shareholder returns and financial stability.

Valuation

• The analysts have a consensus price target of $21.625 for Helmerich & Payne based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $27.0, and the most bearish reporting a price target of just $17.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $276.0 million, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 10.2%.
  
• Given the current share price of $17.95, the analyst price target of $21.62 is 17.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.