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Category: Stock Market and Helmerich and Payne
Date: 17 November 2019 Stock Price: $40.56 We take a look at the 4th quarter 2019 earnings report of Helmerich & Payne, an owner of drilling rigs focusing on gas and oil drilling.
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About Helmerich & Payne
H&P is the leading U.S. unconventional driller, and our drilling experience spans the globe. Our company currently owns and operates land rigs across North America, South America, the Middle East and Africa, with offshore rigs in the Gulf of Mexico
Overview of Helmerich & Payne's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Revenue: $649.050 million (down from $687.974 million from the same quarter of the previous year)
- Revenue decreased by -5.6% over the last 12 months
- Operating costs: $610.029 million (down from $855.848 million for the same quarter of the previous year)
- Operating costs decreased by -28.7% over the last 12 months
- Net income: $41.176 million (up from -$154.7 million for the same quarter of the previous year)
- Diluted earnings per share: $0.37 (up from -$1.42 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 108.950 million (down from 109.425 million for the same quarter of the previous year)
- Cash and cash equivalents: $347.943 million
- Cash and cash equivalents per share: $3.19
- Cash and cash equivalents makes up 7.8% of Helmerich & Payne's market capital
- Cash and cash equivalents makes up 5.95% of Helmerich & Payne's total assets
- Stockholders equity in Helmerich & Payne: $4.012 billion
- Stockholders equity per Helmerich & Payne share: $36.82
- Helmerich & Payne is trading at 1.11 times its shareholders equity which is outside the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operation (for the 3 quarters): $855.751 million
- Cash generated from operations per share: $7.85
Helmerich & Payne's management commentary on their 4th quarter 2019 earnings report
President and CEO John Lindsay commented, “The Company continued to perform efficiently despite a sizable pull-back in industry activity. The steep decline this past quarter is a result of the over-spend of E&P capital budgets that occurred during the first six months of the calendar year. Reflective of the most recent trends, and customer conversations, we expect to see more stability in rig demand over the next couple of months and heading into calendar 2020, but capital discipline will remain the dominant theme. "In addition to capital spending discipline, customers are becoming more selective in the quality and capability of the rigs they employ, as the decline in legacy rigs drilling horizontal wells is more pronounced compared to the decline felt in the super-spec(3) space. In previous industry down drafts, we've experienced rigs released regardless of performance or capability, so this discernment on rig performance is welcome news. Rig contractors continue to write off legacy rig fleets, resulting from low-performing, less capable rigs in the U.S. market. Despite the softness experienced this year, super-spec utilization is still strong in the most active basins and the Company has remained disciplined in its approach to pricing. We believe services and solutions that deliver lower costs and better well performance deserve compensation that is commensurate to the value they add. Our people and technology are making that happen every day.
"The results from our H&P Technologies (HPT) segment this quarter are not only reflective of the decreased drilling activity, but also the slow and often difficult process of introducing change into the industry. HPT's purpose is to drive development of an autonomous drilling platform that improves safety, drilling consistency and accuracy, completions costs and better well economics for our customers. One example of this is AutoSlide, which is automated sliding while directional drilling, and it is currently commercialized in four U.S. basins. We have now drilled over 100 autonomous horizontal wells comprising 1.7 million feet of vertical, curve and lateral footage. As true with many industrial innovations, the largest barrier to technology adoption is the human workflow changes new technologies can trigger. The adoption resistance we are experiencing today is reminiscent of the initial responses we had over 15 years ago when we rolled out our first AC-drive FlexRigs. Accordingly, we believe customers will continue to adopt and utilize these software solutions because of the value propositions they provide like risk mitigation of parent-child well interference. These incremental investments in well performance and productivity on the front end will pay dividends over the entire life of the well for our customers.
"The traction we experienced in the prior quarter with regard to our international markets continues. The Company signed letters of intent to deploy a third FlexRig in Bahrain, two FlexRigs in Abu Dhabi, a high horsepower AC drive rig in Colombia, and our FlexApps to a customer in Argentina. Each of these successes demonstrate increasing awareness in international markets to the value H&P can deliver from both a rig and digital technology perspective. The elections are over in Argentina, but their impact is still very uncertain. While we did not experience any meaningful operational disruptions this last quarter, we did have a customer delay a commitment to move a second super-spec FlexRig from the U.S. We continue to remain committed and optimistic about the ultimate potential in the Vaca Muerta basin and its importance to Argentina." Vice President and CFO Mark Smith also commented, "The Company executed well during a volatile quarter and finished the fiscal year generating approximately $196 million in cash flow from operations and roughly $142 million in free cash flow. Looking out into fiscal 2020, we expect customers to remain disciplined with their spending behavior and have based our initial capex budget on those expectations.
Accordingly, we anticipate our fiscal 2020 capex to range between $275 and $300 million, which should result in another year of healthy free cash flow generation. "Additionally, during the fourth fiscal quarter we made a decision to rationalize a portion of our equity holdings. Utilizing these proceeds and cash on hand, the Company funded debt redemptions and share repurchases. H&P’s ability to generate relatively strong cash flow and maintain our strong balance sheet positioned us well to address challenges and opportunities while we continued to fund a strong dividend during this past fiscal year.” John Lindsay concluded, “Delivering performance in a challenging environment is not new at H&P. The dedication of our employees combined with our rig fleet and digital technology solutions are unmatched in the industry and give us a solid base to build and innovate upon. With that, we will continue to partner with customers to achieve mutual long-term success."
"The traction we experienced in the prior quarter with regard to our international markets continues. The Company signed letters of intent to deploy a third FlexRig in Bahrain, two FlexRigs in Abu Dhabi, a high horsepower AC drive rig in Colombia, and our FlexApps to a customer in Argentina. Each of these successes demonstrate increasing awareness in international markets to the value H&P can deliver from both a rig and digital technology perspective. The elections are over in Argentina, but their impact is still very uncertain. While we did not experience any meaningful operational disruptions this last quarter, we did have a customer delay a commitment to move a second super-spec FlexRig from the U.S. We continue to remain committed and optimistic about the ultimate potential in the Vaca Muerta basin and its importance to Argentina." Vice President and CFO Mark Smith also commented, "The Company executed well during a volatile quarter and finished the fiscal year generating approximately $196 million in cash flow from operations and roughly $142 million in free cash flow. Looking out into fiscal 2020, we expect customers to remain disciplined with their spending behavior and have based our initial capex budget on those expectations.
Accordingly, we anticipate our fiscal 2020 capex to range between $275 and $300 million, which should result in another year of healthy free cash flow generation. "Additionally, during the fourth fiscal quarter we made a decision to rationalize a portion of our equity holdings. Utilizing these proceeds and cash on hand, the Company funded debt redemptions and share repurchases. H&P’s ability to generate relatively strong cash flow and maintain our strong balance sheet positioned us well to address challenges and opportunities while we continued to fund a strong dividend during this past fiscal year.” John Lindsay concluded, “Delivering performance in a challenging environment is not new at H&P. The dedication of our employees combined with our rig fleet and digital technology solutions are unmatched in the industry and give us a solid base to build and innovate upon. With that, we will continue to partner with customers to achieve mutual long-term success."
Helmerich & Payne (NYSE: HP) stock price history
The image below, obtained from Google, shows the stock price history of Helmerich & Payne (NYSE: HP) for the last 5 years. And its not been a good time for Helmerich & Payne stockholders. 5 years ago the stock was trading around $81.80 and today its trading at $40.56. That's a loss of -50.4% suffered by Helmerich & Payne stockholders. The stock of Helmerich & Payne is currently trading at a lot closer to its 52 week low of $35.74 than it is to its 52 week high of $64.80 which to us is a clear indication that the short term sentiment and momentum of Helmerich & Payne stock is negative.
Recent coverage of Helmerich & Payne (NYSE: HP)
The extract below shows recent coverage of Helmerich & Payne as obtained from TheStreet.com
Helmerich & Payne, Inc. (H&P) (NYSE: HP) announced today its wholly owned subsidiary, Helmerich & Payne Technologies, LLC (H&P Technologies), has acquired DrillScan, a leading provider of proprietary drilling engineering software, well engineering services and training for the oil and gas industry. DrillScan will operate as part of H&P Technologies, H&P's dedicated business entity focused on developing advanced technologies and directional drilling automation solutions to help customers achieve greater reliability involving wellbore quality, accuracy and performance. DrillScan brings a team of highly respected industry experts who will contribute to research, development and innovation efforts to advance H&P's digital technology portfolio. DrillScan will maintain its headquarters in France and its other international locations, including the United States. John Lindsay, H&P president and chief executive officer, said, "The capabilities DrillScan brings are highly complementary to H&P Technologies' drilling optimization and automation solutions. These software solutions, like other offerings in our portfolio, will be available to all E&P operators and directional drillers, regardless of drilling rig contractor." Todd Benson, H&P Technologies president, said, "We are pleased to welcome the talented DrillScan team to the H&P Technologies family and expect our collaboration with them to meaningfully advance our vision for autonomous drilling.
Helmerich & Payne, Inc. (H&P) (NYSE: HP) announced today its wholly owned subsidiary, Helmerich & Payne Technologies, LLC (H&P Technologies), has acquired DrillScan, a leading provider of proprietary drilling engineering software, well engineering services and training for the oil and gas industry. DrillScan will operate as part of H&P Technologies, H&P's dedicated business entity focused on developing advanced technologies and directional drilling automation solutions to help customers achieve greater reliability involving wellbore quality, accuracy and performance. DrillScan brings a team of highly respected industry experts who will contribute to research, development and innovation efforts to advance H&P's digital technology portfolio. DrillScan will maintain its headquarters in France and its other international locations, including the United States. John Lindsay, H&P president and chief executive officer, said, "The capabilities DrillScan brings are highly complementary to H&P Technologies' drilling optimization and automation solutions. These software solutions, like other offerings in our portfolio, will be available to all E&P operators and directional drillers, regardless of drilling rig contractor." Todd Benson, H&P Technologies president, said, "We are pleased to welcome the talented DrillScan team to the H&P Technologies family and expect our collaboration with them to meaningfully advance our vision for autonomous drilling.
Helmerich & Payne (NYSE: HP) latest stock valuation
So based on the 4th quarter 2019 earnings report of Helmerich & Payne (NYSE: HP) what do we value Helmerich & Payne stock at? Based on the earnings reported our valuation model provides a target (full value) price for Helmerich & Payne at $36.82 a stock.
We therefore feel that the stock is overvalued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $36.82 We therefore believe a good entry point into Helmerich & Payne's stock would be around $33.10.30 or below. We expect the stock of Helmerich & Payne to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We therefore feel that the stock is overvalued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $36.82 We therefore believe a good entry point into Helmerich & Payne's stock would be around $33.10.30 or below. We expect the stock of Helmerich & Payne to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Helmerich & Payne
It is expected that Helmerich & Payne will release their 1st quarter 2020 earnings report in mid February 2020