Introduction
Helmerich & Payne, Inc. (H&P) is a major contract drilling company engaged in the exploration and production of oil and gas. Headquartered in Tulsa, Oklahoma, H&P operates in the domestic and international markets, specializing in drilling wells for companies on a contract basis. With a fleet of technologically advanced drilling rigs, H&P is particularly renowned for its expertise in US land operations for unconventional shale developments. This article provides an overview of Helmerich & Payne, its history, operations, financial performance, and outlook.
History
The beginnings of H&P can be traced back to 1920 when it was founded as Helmerich & Payne, Inc. by Walter and Bill Helmerich with a $30,000 investment. The company began operations with rotary drilling rigs in Tulsa, catering to the growing needs of Oklahoma’s oil industry post World War I.
Over the next few decades, H&P expanded steadily by undertaking contract drilling in various onshore oil and gas fields across the Southern and Midwestern US. It became a public company in 1953, which allowed further growth via acquisitions of other land drillers.
In the 1980s, H&P diversified internationally, bringing advanced fully hydraulic rigs to Abu Dhabi and Algeria. In the 1990s, it established operations in Venezuela, Argentina and India as well. H&P also began specializing in directional and horizontal drilling.
The advent of shale activity in the 2000s provided major growth opportunities for H&P in North America land drilling. Its investments into flexible pad-optimal rigs positioned it strongly in major shale plays like Permian, Eagle Ford, Bakken and Marcellus. Today H&P derives 85% of revenues from the US land market.
Operations
Overview H&P operates in North America Solutions and Offshore Gulf of Mexico segments.
- North America Solutions: H&P owns around 270 land rigs in the US making it the 2nd largest land driller in North America. The rigs are contracted to exploration companies on a per day rate basis. This segment contributes 95% of the company’s rig operating income.
- Offshore Gulf of Mexico: H&P provides offshore platform and jackup rigs for clients in the Gulf of Mexico. This segment has been downsizing with only 4 active rigs out of H&P’s total offshore fleet of 8 rigs.
Key services offered by H&P include well drilling & completion, well maintenance & workover, fluid management, and directional drilling. The company invests heavily in rig technology, automation and drilling performance software.
Financial Performance
H&P generates over $2 billion in annual revenues. The company experienced strong growth between 2010 to 2014 driven by US shale activity. Revenues declined after the oil downturn before recovering since 2018.
In the last 5 years, H&P has transformed its business to focus almost entirely on its US land franchise. Margins and returns have improved considerably with new commercial models, pricing strategies and cost management.
In 2021, H&P generated $1.8 billion in operating revenues and achieved record net income of $131 million, reflecting the success of its strategic decisions. With a flexible balance sheet and strong cash flows, H&P is well positioned to maintain leadership in the US land market.
Future Outlook
H&P sees drilling activity increasing considerably in its key US shale basins as E&P companies ramp up investments to address under-supply. The demand for super-spec rigs and integrated solutions provides H&P opportunities to deploy its high-performing FlexRig® fleet.
The company is also expanding into adjacent services like tubular running, pressure control, drillout, and casing running to drive incremental revenues. Investments in process automation, machine learning analytics and digital technology will enable H&P to deliver efficiency gains.
International expansion is not a priority currently but could provide diversification over the long term. Overall, H&P looks well placed to capitalize on the improving industry environment given its strong position in the US land drilling market.
Conclusion
With its technologically advanced fleet, specialized services and strong shale expertise, Helmerich & Payne is poised to benefit from rising North American drilling activity. Its transformation in recent years provides a solid foundation. While there are risks around market volatility, H&P seems ready to leverage the recovery in oil prices and E&P spending to drive sustainable growth.