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HP

Helmerich & Payne NYSE:HP Stock Report

Last Price

US$44.28

Market Cap

US$4.7b

7D

9.7%

1Y

60.6%

Updated

13 Aug, 2022

Data

Company Financials +
HP fundamental analysis
Snowflake Score
Valuation2/6
Future Growth4/6
Past Performance0/6
Financial Health3/6
Dividends3/6

HP Stock Overview

Helmerich & Payne, Inc., together with its subsidiaries, provides drilling services and solutions for exploration and production companies.

Helmerich & Payne, Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Helmerich & Payne
Historical stock prices
Current Share PriceUS$44.28
52 Week HighUS$54.59
52 Week LowUS$20.93
Beta1.7
1 Month Change15.58%
3 Month Change-1.88%
1 Year Change60.61%
3 Year Change12.36%
5 Year Change1.33%
Change since IPO413.39%

Recent News & Updates

Jul 10

Helmerich & Payne: Drilling For Free Cash Flow

The first half of this article is a breakdown of the Dallas Fed Energy Survey, which helps us to assess the supply side of the oil market. We then look into Helmerich & Payne, one of America's largest providers of drilling equipment, which is doing the same as its customers: focusing on free cash flow. While I believe that HP stock is undervalued and poised to move higher, I believe that upstream companies (oil producers) provide more upside. Introduction I've been looking forward to this article after covering a number of oil drillers in the past few weeks. In this article, I want to achieve two things. First of all, to discuss the service and equipment side of the North American oil production industry. We'll incorporate the recent Dallas Fed Energy Survey as well as related trends that show what companies are struggling with and what they expect. Second, I'm going to give you a company that goes well with this trend in case investors want to invest in the industry. The Oklahoma-based Helmerich & Payne (HP) company is the owner of one of the most advanced drilling rig portfolios in North America. It provides key supplies to major upstream companies. Its balance sheet is top-tier and utilization rates are high. Moreover, the company has underperformed drilling companies, which could change if supply constraints ease. With that said, let's get to it! The Oil Industry - Opportunities & Challenges In the past two weeks, I wrote two articles highlighting two oil drillers with low breakeven points and an emphasis on free cash flow used to return cash rather aggressively to shareholders - one using high dividends, the other focusing on buybacks. Marathon Oil (MRO) - The New Liberal Order Makes Marathon Oil A Strong Buy Devon Energy (DVN) - Devon Energy: A 10% Yielding Beauty Thanks To Political Efforts As the titles suggest, I went a bit political. This is based on the ongoing trend from fossil fuels to renewables. It's a bit of a forced trend, and politicians aren't afraid to admit it anymore as I cover in these articles. Given that (in the case of the US), 79% of the total energy supply is coming from fossil fuels, we're dealing with a dangerous inflationary trend (caused by supply issues) that is working its way through the economy. It's happening in the US, Europe, Asia, and frankly everywhere. EIA One quote that I used in my Devon Energy article is the one below from Goehring & Rozencwajg who have been on this supply issue for a while: Years of underinvestment in upstream oil and gas projects has produced the present deficit. Trying to reverse this shortfall will take years of upstream capital spending at rates double and triple of what we are spending today. Until we reverse this shortfall in upstream capital spending, we will not fix the underlying problem. Goehring & Rozencwajg Moreover: Oil and gas capital spending fell by over 60% between 2010 and 2020. Investment in the US shales fell by over 70%. Over that entire period, the cumulative reduction in capital spending compared to the trend was more than $1 tr. Over the same period, ESG concerns came to grip the global investor community. We believe much of the capital needed to build renewable projects was diverted away from upstream oil and gas investment. Unfortunately, wind and solar are intermittent sources of power that suffer from very poor energy efficiency. With that said, we now have valuable insights from the Federal Reserve Bank of Dallas as well. The bank publishes a quarterly energy survey, which I have been reading for years. It's a fascinating deep dive into its energy industry, providing us with interesting details. The title of its most recent report, released on June 23, 2022, is: "Oil and Gas Activity Jumps; Costs Escalate, Supply-Chain Delays Worsen" That's the perfect summary of the ongoing energy crisis. Now, let me throw some charts your way, which add to our energy bull case. First of all, I was surprised to see the end-of-year WTI crude oil targets of 134 energy executives. A minority of executives expect oil to finish the year below $100. Most see prices between $100 and $110. However, roughly a quarter of respondents expect the year to finish above $120. Dallas Fed Energy Survey Usually, these responses are far more conservative as executives, in general, don't believe that high prices can or will last. In prior cycles, they were right as aggressive exploration and production growth always caused supply to jump. As soon as demand weakened, oil plummeted. Now, the consensus seems to be that oil prices get support from the severely broken supply. And these executives know the supply side better than any of us. After all, 94% of companies experience supply-side issues as the pie chart below shows. 47% of all respondents rate the impact of supply chain issues on their firm as "significantly negative". Dallas Fed Energy Survey That's pretty bad. What's even worse is that more than 60% expect supply issues to last longer than 12 months. Dallas Fed Energy Survey This makes sense as we're dealing with supply issues that are deep-rooted. According to the Dallas Fed, there are shortages in personnel, steel tubular goods, equipment, chemicals, and even fracking sand. Significant shortages are the worst in steel tubular goods, the very products needed to establish new rigs and wells. Dallas Fed Energy Survey These issues are so significant that it's the single biggest factor contributing to industry uncertainty - it even beats uncertainty caused by government regulation. Dallas Fed Energy Survey I believe that makes total sense as most drillers know what the government is up to. However, executing plans within this framework is still made impossible in some cases by supply issues. These supply issues also threaten existing production to some extent. As a result, roughly 70% of respondents make the case that US crude oil production will not reach the 1 million barrel per day production hike this year, as predicted by analysts. 35% of participants don't expect production to rise by more than 800 thousand barrels per day. With that in mind, let's look at the start of this article, Helmerich & Payne What All Of This Means For Helmerich & Payne Helmerich & Payne is a $4.5 billion market cap company operating in the energy sector. It operates in the oil & gas drilling industry. It doesn't produce a single drop of oil but it delivers high-quality rigs to customers. I've followed the company since I started trading 11 years ago for one major reason: it used to be a great trading vehicle in addition to a company like Exxon Mobil (XOM). Traders - and large funds - used to watch the ratio between HP's share price and XOM's share price. The reason is outperformance. When oil prices rise, energy companies invest in growth. Hence, they buy new equipment. When oil prices fall, equipment investments are neglected. The chart below shows the ratio between HP/XOM and the price of WTI oil. The correlation isn't perfect, but if you look closely, you can see that prior trends in oil were always followed by the equipment/upstream ratio. TradingView (Orange = NYMEX WTI Crude, Orange = HP/XOM ratio) Until 2020, of course. Now the traditional playbook has been thrown out of the window. Oil prices are rising but energy companies are not boosting production as they used to do. After all, global oil capital spending is well below where it needs to be to satisfy the expected 2030 oil demand. Seeking Alpha As a result, HP isn't outperforming anymore. Note that the company's EBITDA history (and outlook) are extremely similar to the global CapEx trend I showed you above. This obviously makes sense and it shows that the company could do $714 million in EBITDA in the business year ending in September of 2023. That's a big improvement compared to the current business year, but not even close to what the company did in the fracking revolution years prior to the 2015 sell-off in oil. TIKR.com Helmerich & Payne isn't sleeping at the wheel. They do know that the industry has changed. This is what the Tulsa-based company commented in April: Given the industry's negative experience in recent years, it should be no surprise to anyone that US producers have remained cautious, rational and discipline with regard to their capital expenditures, even in the face of spiking commodity prices. HP’s strategy is to also maintain CapEx budget discipline and holding that line is something we believe is crucial to creating a healthy and sustainable company over the longer term. If we look at the company's CapEx and free cash flow history, we see that the company is indeed lowering CapEx. In the years ahead, CapEx isn't expected to make it past $290 million. That's way below prior cycles. As a result, the company is in a good spot to boost free cash flow well past $300 million despite lower demand. Please note that free cash flow is operating cash flow minus CapEx. It's cash a company can spend on debt reduction, dividends, and buybacks. TIKR.com It helps a lot that Helmerich & Payne has one of the most advanced portfolios of drilling rigs. It has 271 available rights. All but 7 are onshore drilling rigs. 236 are located in the US. 230 of these (85% of the total) are Super-Spec FlexRig assets. Super-spec rights have an economic life of 30 years. Components like engines have shorter lives and are maintained regularly. These rigs have low total maintenance costs, better reliability, and higher safety standards than "traditional" rigs, making them good alternatives for income-seeking drillers in an environment where the "easiest" drilling opportunities are behind us. The company has the largest fleet of super-spec rigs with a utilization rate of 73% on US land. The total utilization rate of its portfolio is 68% as both international land and offshore utilization rates are low.

Shareholder Returns

HPUS Energy ServicesUS Market
7D9.7%7.4%3.2%
1Y60.6%31.7%-10.2%

Return vs Industry: HP exceeded the US Energy Services industry which returned 31.7% over the past year.

Return vs Market: HP exceeded the US Market which returned -10.1% over the past year.

Price Volatility

Is HP's price volatile compared to industry and market?
HP volatility
HP Average Weekly Movement9.2%
Energy Services Industry Average Movement9.4%
Market Average Movement7.7%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: HP is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 9% a week.

Volatility Over Time: HP's weekly volatility (9%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19205,932John Lindsayhttps://www.hpinc.com

Helmerich & Payne, Inc., together with its subsidiaries, provides drilling services and solutions for exploration and production companies. The company operates through three segments: North America Solutions, Offshore Gulf of Mexico, and International Solutions. The North America Solutions segment drills primarily in Colorado, Louisiana, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming.

Helmerich & Payne, Inc. Fundamentals Summary

How do Helmerich & Payne's earnings and revenue compare to its market cap?
HP fundamental statistics
Market CapUS$4.66b
Earnings (TTM)-US$119.50m
Revenue (TTM)US$1.77b

2.6x

P/S Ratio

-39.0x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
HP income statement (TTM)
RevenueUS$1.77b
Cost of RevenueUS$1.28b
Gross ProfitUS$487.67m
Other ExpensesUS$607.17m
Earnings-US$119.50m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-1.13
Gross Margin27.53%
Net Profit Margin-6.75%
Debt/Equity Ratio19.8%

How did HP perform over the long term?

See historical performance and comparison

Dividends

2.3%

Current Dividend Yield

-89%

Payout Ratio

Does HP pay a reliable dividends?

See HP dividend history and benchmarks
When do you need to buy HP by to receive an upcoming dividend?
Helmerich & Payne dividend dates
Ex Dividend DateAug 16 2022
Dividend Pay DateSep 01 2022
Days until Ex dividend2 days
Days until Dividend pay date18 days

Does HP pay a reliable dividends?

See HP dividend history and benchmarks