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Helmerich & Payne, Inc.
(HP-NYSE)
SUMMARY
SUMMARY DATA
Risk Level *
Below Avg.,
Type of Stock Large-Blend
Industry Oil&Gas-Drill
Zacks Industry Rank * 105 out of 267
Current Recommendation
OUTPERFORM

Prior Recommendation
Neutral
Date of Last Change
12/12/2013

Current Price (02/27/14)
$96.91
Target Price
$116.00
We are maintaining our Outperform recommendation
on Helmerich & Payne, thanks to an impressive
performance during the Oct-Dec period. Fiscal first
quarter results were buoyed by a robust international
land drilling business. The company is a leading drilling
contractor with activities in the U.S. and overseas.
Supported by a superior and diversified drilling fleet,
together with a healthy financial profile, we expect
Helmerich & Payne to sustain its profitability over the
foreseeable future. We believe its technologically-
advanced FlexRigs will continue to benefit from an
upswing in U.S. land drilling activity and the shift to
complex onshore plays that require highly intensive
solutions.
52-Week High $97.19
52-Week Low $56.25
One-Year Return (%) 50.76
Beta 1.22
Average Daily Volume (sh) 1,350,148

Shares Outstanding (mil) 107
Market Capitalization ($mil) $10,383
Short Interest Ratio (days) 8.22
Institutional Ownership (%) 39
Insider Ownership (%) 4

Annual Cash Dividend $2.50
Dividend Yield (%) 2.58

5-Yr. Historical Growth Rates

Sales (%) 17.1
Earnings Per Share (%) 17.5
Dividend (%) 44.7

P/E using TTM EPS 16.7
P/E using 2014 Estimate 16.4
P/E using 2015 Estimate 15.1

Zacks Rank *: Short Term
1 3 months outlook 1

Strong Buy
* Definition / Disclosure on last page

ZACKS CONSENSUS ESTIMATES

Revenue Estimates
(In millions of $)
Q1 Q2 Q3 Q4 Year
(Dec) (Mar) (Jun) (Sep) (Sep)
2012 733 A 770 A 820 A 829 A 3,152 A
2013 845 A 838 A 840 A 865 A 3,388 A
2014 889 A 879 E 912 E 916 E 3,596 E
2015 3,849 E
Earnings Per Share Estimates
(EPS is operating earnings before non-recurring items, but including employee
stock options expenses)
Q1 Q2 Q3 Q4 Year
(Dec) (Mar) (Jun) (Sep) (Sep)
2012

$1.29 A $1.13 A $1.37 A $1.36 A $5.15 A
2013

$1.40 A $1.36 A $1.44 A $1.44 A $5.64 A
2014

$1.56 A $1.44 E $1.51 E $1.42 E $5.93 E
2015

$6.43 E
Projected EPS Growth - Next 5 Years % N/A

February 28, 2014

Equity Research HP | Page 2

OVERVIEW
Incorporated in 1940, Helmerich & Payne Inc. (HP) is engaged in the contract drilling of oil and gas wells
in the U.S. and internationally. The company supplies drilling rigs, equipment, personnel, and camps on a
contractual basis to explore for and develop oil and gas from onshore areas and from fixed platforms,
tension-leg platforms, and spars in offshore areas. Helmerich & Payne s contract drilling business
consists of three reportable business segments: U.S. land drilling, offshore drilling and international land
drilling.

U.S. Land Drilling: As of Sep 30, 2013, the company s U.S. land drilling business consisted of 302
rigs available for work. Helmerich & Payne conducts its domestic land drilling primarily in Oklahoma,
California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Pennsylvania, Utah, Arkansas, New
Mexico, and North Dakota. During fiscal 2013 (fiscal year ends on Sep 30
th
), U.S. land operations
contributed approximately 82% of the company s operating revenues.

Offshore Drilling: The domestic offshore drilling unit s key assets include 9 platform rigs (8 under
contract). Helmerich & Payne carries out offshore drilling in the Gulf of Mexico, offshore of California,
Trinidad, and Equatorial Guinea. This unit contributed 7% of operating revenues in fiscal 2013.

International Land Drilling: The international land segment is active in Ecuador, Colombia,
Argentina, Bahrain and Tunisia. It has 29 rigs, including 9 in Argentina, 7 in Columbia, and 6 in
Ecuador. In fiscal 2013, international land drilling accounted for 11% of Helmerich & Payne s
operating revenues.
Additionally, Helmerich & Payne is involved in the ownership, development, and operation of commercial
real estate properties, as well as the research and development of rotary steerable technology. The
company s property portfolio includes a shopping center and multi-tenant industrial warehouse
properties, as well as approximately 210 acres of undeveloped real estate land.
Operating Revenue by Segment (FY 2013)
U.S. Land Drilling Offshore Drilling International Land Drilling

Equity Research HP | Page 3

REASONS TO BUY

Helmerich & Payne is a major land and offshore drilling contractor in the western hemisphere,
having the youngest and most efficient drilling fleet. The company specializes in shallow to deep
drilling in oil and gas-producing basins of the U.S. and in drilling for oil and gas in international
locations. Helmerich & Payne remains relatively unscathed from any economic turmoil, as the
company s major work contracts are with well capitalized oil majors and the larger independent oil
companies. Additionally, term contracts and shale drilling demand for its rigs have helped Helmerich
& Payne maintain a relatively high level of utilization.

We believe Helmerich & Payne s technologically-advanced FlexRigs are the key to its success,
helping to increase its count of active rigs and maintain relatively strong daily-rate margins even
during times of market uncertainty. The company s proprietary FlexRig design makes the rigs move
faster than conventional rigs, drill quicker and more efficiently, and allows for a safer operating
environment. As such, these are better suited for the new demands of the exploration business and,
therefore, command higher dayrates and utilization than rigs from other land drillers.

The company s modest capital expenditure requirements and strong balance sheet have been real
assets in this highly uncertain period for the economy. Leverage is low with a debt-to-capitalization
ratio of 1.7% as of Dec 31, 2013. Helmerich & Payne has always been extremely conservative with
the allocation of capital and the use of leverage on its balance sheet. This not only insulates the
company during uncertain times, but also led to the generation of $737 million in profit for the fiscal
year 2013, despite volatile prices and credit restrictions.

Helmerich & Payne recently approved a raise in its quarterly cash dividend to $0625 per share
($2.50 per share annualized), representing an increase of 25% over the previous payout. The latest
dividend hike not only highlights the company s commitment to create value for shareholders but
also underlines Helmerich & Payne s strong cash generation capabilities.

Furthermore, Helmerich & Payne s strong contract drilling backlog, which now stands at around $3.3
billion, not only reflects steady demand from its customers but also offers long-term earnings and
cash flow visibility.
RISKS

Helmerich & Payne s results are exposed to oil and gas prices, which are inherently volatile and
subject to complex market forces. Any significant reduction in energy prices could depress the level
of exploration and production activity, resulting in a corresponding decline in demand for the
company s services.

The pace of new term contract orders have weakened considerably, while newbuild awards have
also been hard to come by due to flat rig demand and stiff price competition. This will continue to
weigh on the company s fortunes in the near-to-medium term.

Helmerich & Payne has operations in several international regions, which accounted for
approximately a tenth of its consolidated operating revenues during fiscal 2013. As such, the
company is exposed to risks associated with doing business abroad. Such risks include embargoes
and/or expropriation of assets, exchange rate risks, terrorism and political/civil sentiment.
Equity Research HP | Page 4

The company s operations are subject to a number of operational risks, including inclement weather,
blowouts and well fires. These hazards could adversely affect Helmerich & Payne s drilling
operations and seriously damage/destroy the equipment involved, thereby reducing the company s
revenues, earnings and cash flows.
RECENT NEWS
First Quarter 2014 Results

On Jan 30, 2014, Helmerich & Payne reported an impressive first quarter of fiscal 2014 (three months
ended Dec 31, 2013), owing to better drilling activities. Quarterly earnings per share from continuing
operations (excluding special items) came in at $1.56, beating the Zacks Consensus Estimate of $1.45.
Compared with the year-ago adjusted profit, the results increased 11.4%. Revenues stood at $889.2
million, up 5.3% from the first quarter of fiscal 2013 and also surpassed our projection of $865.0 million.
Segment Performance
U.S. Land Operations: During the quarter, operating revenues totaled $731.7 million (82.3% of total
revenue), up 5.1% year over year. Average rig revenue per operating day was $28,468, up 1.5%, while
average rig margin per day increased marginally 0.8% to $15,534, on a year-over-year basis. Utilization
levels increased to 84% (from 82% in the first quarter of fiscal 2013). The segment s operating income
improved (by 7.1%) from the year-earlier quarter to $250.9 million.
Offshore Operations: Helmerich & Payne s offshore revenues were up 2.3% year over year to $59.1
million. Daily average rig revenue increased a nominal 0.6% to $62,306, while average rig margin per
day climbed 6.5% to $27,449. This led to a 23.3% rise in the segment s operating income from the prior-
year quarter, to $18.5 million. Quarterly rig utilization was 89%, flat with the year-ago quarter.
International Land Operations: International land operations recorded revenues of $95.3 million, up
from $87.3 million in the prior-year quarter. Average daily rig revenue was $38,433, up 8.2%, while rig
margin per day was $10,342, up from $8,400 recorded in the year-ago quarter. The segment generated
operating profit of $12.8 million compared with $9.1 million in the first quarter of fiscal 2013. Utilization
level was however 82%, down from 85% in the corresponding period, last year.
Capital Expenditure & Balance Sheet
During the first quarter of fiscal 2014, Helmerich & Payne spent $140.6 million on capital programs. As of
Dec 31, 2013, the company had approximately $581.4 million in cash, while long-term debt stood at
$80.0 million (debt-to-capitalization ratio of 1.7%).
Agreement
Helmerich & Payne has reported that it inks deals with four upstream firms. Per the agreements,
Helmerich & Payne will construct and operate nine extra FlexRigs in the U.S.
Outlook
Helmerich & Payne is expected to invest roughly $950.0 million in fiscal 2014, owing to FlexRigs rising
demand. In the U.S. Land Operations business unit, Helmerich & Payne projects rig revenue per day for
the second quarter of fiscal year 2014 to remain almost same with the previous quarter.
Equity Research HP | Page 5

VALUATION
We believe Helmerich & Payne s technologically-advanced FlexRigs are the key to its success, helping to
increase its count of active rigs and maintain relatively strong daily-rate margins even during times of
market uncertainty. Other positives in the Helmerich & Payne story are its relatively conservative financial
policy and the quality of its client base, which mostly includes well-capitalized oil majors or large
independents.
This is reflected in our continued Outperform recommendation.
Helmerich & Payne s current trailing 12-month earnings multiple is 16.7X, compared with the 33.2X
industry average and 18.1X for the S&P 500. Over the last five years, Helmerich & Payne s shares have
traded in a range of 5.0X to 22.3X trailing 12-month earnings.
Our $116 price objective is based on a 2014 P/E multiple of 19.6X.
Key Indicators

P/E
F1
P/E
F2
Est. 5-Yr

EPS Gr%
P/CF
(TTM)
P/E
(TTM)
P/E
5-Yr
High
(TTM)
P/E
5-Yr
Low
(TTM)
Helmerich & Payne Inc. (HP) 16.4 15.1 N/A 9.6 16.7 22.3 5.0

Industry Average 24.2 11.4 17.6 7.0 33.2 65.6 7.2
S&P 500 15.7 14.8 10.7 14.8 18.1 27.7 12.0

Noble Corp. (NE) 8.6 6.6 13.0 4.8 10.8 35.5 4.0
Ensco plc (ESV) 8.0 7.0 18.0 6.0 8.6 19.8 3.0
Diamond Offshore Drilling Inc. (DO) 10.5 8.0 18.0 6.3 9.9 15.0 6.2
Patterson-UTI Energy Inc. (PTEN) 22.1 17.4 -0.9 5.2 20.1 73.0 3.6
TTM is trailing 12 months; F1 is 2014 and F2 is 2015, CF is operating cash flow

P/B
Last
Qtr.
P/B
5-Yr High
P/B
5-Yr Low
ROE
(TTM)
D/E
Last Qtr.
Div Yield
Last Qtr.
EV/EBITDA
(TTM)
Helmerich & Payne
Inc. (HP) 2.1 2.3 1.0 14.1 0.0 2.6 6.2

Industry Average
1.5 1.5 1.5 7.1 0.9 2.2 10.4
S&P 500
4.8 9.8 2.9 25.4

2.1

Equity Research HP | Page 6

Earnings Surprise and Estimate Revision History

Equity Research HP | Page 7

DISCLOSURES & DEFINITIONS
The analysts contributing to this report do not hold any shares of HP. The EPS and revenue forecasts are the Zacks Consensus
estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal
views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly,
related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this
report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to
accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet
the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an
offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a
position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the
securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to
twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve
months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The
current distribution of Zacks Ratings is as follows on the 1064 companies covered: Outperform - 17.9%, Neutral - 74.9%, Underperform

6.7%.
Data is as of midnight on the business day immediately prior to this publication.
Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in
earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model
assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks
Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a
company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of
investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In
determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each
stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5
th
group has the highest
values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the
second, third, and fourth groups of stocks, respectively.
Analyst Nilanjan Choudhury
Nilanjan Choudhury QCA
Lead Analyst Nilanjan Choudhury
Reasons for Update 1Q14 Earnings Update