NYSE: HP

HELMERICH AND PAYNE INC Report created Feb 14, 2020 Page 1 OF 5

Founded in 1920 and headquartered in Tulsa, Oklahoma, Helmerich & Payne, Inc. (H&P) is a petroleum Argus Recommendations
contract drilling company focused on oil and gas well drilling. As of the end of 2018, the company's U.S.
Land division had 238 contracted rigs.
Twelve Month Rating SELL HOLD BUY
Analyst's Notes Five Year Rating SELL HOLD BUY
Analysis by Bill Selesky, February 14, 2020
Under Market Over
ARGUS RATING: HOLD Sector Rating Weight Weight Weight

• Reaffirming HOLD following 1Q20 results Argus assigns a 12-month BUY, HOLD, or SELL rating to each
• Helmerich & Payne has been hurt by persistent oil price volatility and reduced capital spending by its stock under coverage.
E&P customers. This has lowered demand for its drill rigs, resulting in falling utilization rates and • BUY-rated stocks are expected to outperform the market (the
benchmark S&P 500 Index) on a risk-adjusted basis over the
declining margins and earnings. next year.
• On February 3 after the close, Helmerich & Payne reported an adjusted fiscal 1Q20 net profit (for the • HOLD-rated stocks are expected to perform in line with the
period ended December 31, 2019) of $12.3 million or $0.13 per share, compared to an adjusted net market.
loss of $12.7 million or $0.10 per share in the prior-year quarter. EPS missed our estimate of $0.15 • SELL-rated stocks are expected to underperform the market
on a risk-adjusted basis.
but topped the consensus of $0.07.
The distribution of ratings across Argus' entire company
• The swing to an operating profit was attributable to lower operating expenses in both the U.S. Land universe is: 66% Buy, 34% Hold, 0% Sell.
and International Land businesses, as well as higher operating revenues in H&P Technologies and
Offshore Operations. However, total operating revenues declined 17% $614.7 million, above the
consensus of $604.6 million. Key Statistics
Key Statistics pricing data reflects previous trading day's closing
• We are lowering our FY20 EPS estimate to $0.47 from $0.75 based on the weak first-quarter 2020 price. Other applicable data are trailing 12-months unless
results relative to our estimate and our expectations for weaker rig demand in the near term. The otherwise specified
current consensus forecast is $0.50. Market Overview
Price $45.40
INVESTMENT THESIS Target Price --
We are reaffirming our HOLD rating on contract drilling company Helmerich & Payne 52 Week Price Range $35.74 to $64.80
Inc. (NYSE: HP) following fiscal first-quarter 2020 results. HP has been hurt by persistent Shares Outstanding 108.88 Million
oil price volatility and reduced capital spending by its E&P customers. This has lowered Dividend $2.84
demand for its drill rigs, resulting in falling utilization rates and declining margins and Sector Overview
weaker profits. We expect these weak industry conditions to continue over at least the next Sector Energy
several quarters. Sector Rating MARKET WEIGHT
On the positive side, the company has a strong balance sheet and an attractive dividend Total % of S&P 500 Market Cap. 3.00%
yield of about 6.5%. Financial Strength
RECENT DEVELOPMENTS Financial Strength Rating MEDIUM-HIGH
Debt/Capital Ratio 10.7%
HP shares have outperformed thus far in 2020, falling 0.1% while the S&P 500 Energy
Return on Equity 2.1%
index has decreased 9.5%. However, they have underperformed over the past year, Net Margin -0.8%
Payout Ratio 6.04
Market Data Pricing reflects previous trading week's closing price. Current Ratio 2.72
200-Day Moving Average 52 Week High: $46.78 52 Week Low: $39.00 Closed at $42.65 on 2/7 Revenue $2.67 Billion
Price After-Tax Income -$22.01 Million
($)
70
Valuation
Current FY P/E 96.60
60 Prior FY P/E 34.14
50 Price/Sales 1.85
Price/Book 1.24
40
Book Value/Share $36.51
Market Capitalization $4.94 Billion
Rating BUY
HOLD
SELL Forecasted Growth
EPS 1 Year EPS Growth Forecast
($) -64.66%
0.13 0.12 0.11 0.12 0.15 5 Year EPS Growth Forecast
-0.02 -0.04 -0.01 0.19 -0.10 0.56 0.51 0.36 0.19 0.20 0.24
10.00%
Quarterly
0.12 1.33 0.47 ( Estimate) 0.77 ( Estimate)
1 Year Dividend Growth Forecast
Annual
0%
Revenue
($ in Mil.) Risk
Beta 1.15
Quarterly 564.0 577.0 649.0 697.0 741.0 721.0 688.0 649.0 615.0 606.5 620.0 625.8 630.0 628.0 643.6 655.6 Institutional Ownership 90.78%
Annual 2487.0 2799.0 2467.3 ( Estimate) 2557.3 ( Estimate)
FY ends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Sept 30 2018 2019 2020 2021

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HELMERICH AND PAYNE INC Report created Feb 14, 2020 Page 2 OF 5

Analyst's Notes...Continued
declining 20.3% while the Energy index has fallen 13.6%.
On February 3 after the close, Helmerich & Payne reported an
adjusted fiscal 1Q20 net profit (for the period ended December 31,
2019) of $12.3 million or $0.13 per share, compared to an
adjusted net loss of $12.7 million or $0.10 per share in the
prior-year quarter. EPS missed our estimate of $0.15 but topped
the consensus of $0.07.
The swing to an operating profit was attributable to lower
operating expenses in both the U.S. Land and International Land
businesses, as well as higher operating revenues in H&P
Technologies and Offshore Operations. However, total operating
revenues declined 17% $614.7 million, above the consensus of
$604.6 million.
Helmerich & Payne's segments are U.S. Land (85% of FY19
sales), Offshore (5%), and International Land (8%), and H&P
Technologies (2%). We discuss fiscal 1Q20 results for these
segments below.
The U.S. Land segment posted an operating profit of $56.7
million in fiscal 1Q20, down from $75.8 million in 1Q19. The
decline reflected lower revenue days and lower rig margins.
Operating revenues fell 18% in 1Q20, while rig utilization
averaged 64%, down from 68% in the year-earlier period. As of
February 3, 2020, the U.S. Land division had 197 contracted rigs
(128 on term contract and 69 on spot contract) generating revenue.
This compares to 194 contracted rigs at the end of September
2019.
The Offshore drilling segment reported 1Q operating income of
$6.33 million, down from $7.17 million in the prior-year period.
The decline was driven by higher operating expenses, including
expenses for unexpected downtime.
The International Land segment reported a first-quarter
operating profit of $3.12 million, compared to a profit of $6.63
million a year earlier. The decline was largely attributable to lower
revenues booked in the quarter, which fell 30% from the prior-year
quarter. Foreign currency exchange was unfavorable for the
quarter.
The H&P Technologies segment reported a first-quarter pro
forma operating loss of $4.55 million, compared to an operating
loss of $6.38 million in the year-earlier quarter. The narrower loss
reflected benefits from a change in the fair value of a contingent
liability.
EARNINGS & GROWTH ANALYSIS
On the 1Q20 conference call to discuss performance results and
the outlook looking ahead, CEO John Lindsay noted that business
conditions remained challenging due to reduced capital spending
by E&P operators and were likely to remain so through at least the
first half of FY20.
We are lowering our FY20 EPS estimate to $0.47 from $0.75
based on the weak first-quarter 2020 results relative to our
estimate and our expectations for weaker rig demand in the near
term. The current consensus forecast is $0.50.

Growth & Valuation Analysis Financial & Risk Analysis

GROWTH ANALYSIS
($ in Millions, except per share data) 2015 2016 2017 2018 2019
FINANCIAL STRENGTH 2017 2018 2019
Revenue 3,162 1,624 1,805 2,487 2,798
Cash ($ in Millions) 521 284 348
COGS 2,312 1,497 1,835 2,236 2,371
Working Capital ($ in Millions) 891 738 705
Gross Profit 850 127 -30 251 427
Current Ratio 3.59 2.96 2.72
SG&A 135 146 148 199 194
LT Debt/Equity Ratio (%) 11.8 11.3 11.9
R&D 16 10 12 18 27
Total Debt/Equity Ratio (%) 11.8 11.3 11.9
Operating Income 699 -30 -190 33 205
Interest Expense 9 20 14 16 16 RATIOS (%)
Pretax Income 662 -73 -185 16 -51 Gross Profit Margin -1.7 10.1 15.3
Income Taxes 241 -20 -57 -477 -19 Operating Margin -10.5 1.3 7.3
Tax Rate (%) 36 — — — — Net Margin -7.2 19.2 -1.3
Net Income 420 -57 -128 483 -34 Return On Assets -2.0 7.6 -0.6
Diluted Shares Outstanding 109 108 109 109 109 Return On Equity -3.0 11.2 -0.9
EPS 3.85 -0.54 -1.20 4.37 -0.34
RISK ANALYSIS
Dividend 2.75 2.76 2.80 2.81 2.84
Cash Cycle (days) 72.3 70.4 68.7
GROWTH RATES (%) Cash Flow/Cap Ex 0.9 1.2 1.9
Revenue -15.0 -48.8 11.3 38.0 12.6 Oper. Income/Int. Exp. (ratio) -8.3 1.7 -1.0
Operating Income -32.4 — — — 513.8 Payout Ratio — 76.1 62.9
Net Income -40.5 — — — —
EPS -40.2 — — — — The data contained on this page of this report has been
Dividend 12.8 0.5 1.3 0.4 1.1 provided by Morningstar, Inc. (© 2020 Morningstar, Inc.
Sustainable Growth Rate 2.5 -3.9 — 4.2 -5.4 All Rights Reserved). This data (1) is proprietary to
VALUATION ANALYSIS Morningstar and/or its content providers; (2) may not be
Price: High $79.90 $85.78 $81.30 $75.02 $64.80 copied or distributed; and (3) is not warranted to be
Price: Low $46.16 $40.02 $42.16 $44.56 $35.74 accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or
Price/Sales: High-Low 2.7 - 1.6 5.7 - 2.7 4.9 - 2.5 3.3 - 2.0 2.5 - 1.4
losses arising from any use of this information. Past
P/E: High-Low 20.8 - 12.0 —-— —-— 17.2 - 10.2 —-—
performance is no guarantee of future results. This data
Price/Cash Flow: High-Low 6.1 - 3.5 12.3 - 5.7 24.7 - 12.8 15.1 - 9.0 8.3 - 4.6 is set forth herein for historical reference only and is not
necessarily used in Argus’ analysis of the stock set forth
on this page of this report or any other stock or other
security. All earnings figures are in GAAP.

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 NYSE: HP

HELMERICH AND PAYNE INC Report created Feb 14, 2020 Page 3 OF 5

Analyst's Notes...Continued
We are also reducing our FY21 EPS estimate to $0.77 from
$1.03 to reflect ongoing challenging conditions within the sector
and our assumptions for a continued weak margin environment for
drill rig providers. The current FY21 consensus forecast is $0.69.
FINANCIAL STRENGTH & DIVIDEND
We rate HP's financial strength as Medium-High, the
second-highest rating on our five-point scale. The company's debt
is rated BBB+/stable by Standard & Poor's and Baa1/stable by
Moody's.
At the end of fiscal 1Q20, HP's total debt/capitalization ratio
was 11.8%, up from 10.2% a year earlier. The total debt/cap ratio
remains well below the peer average and has averaged 10.3% over
the past five years.
Helmerich & Payne had total debt of $531.54 million at the
end of 1Q20, compared to $499.81 million at the end of 1Q19.
The company has access to $750 million in liquidity under its new
revolving credit facility.
HP had cash and cash equivalents of $355 million at the end of
1Q20, compared to $229 million at the end of 1Q19. Cash from
operating activities totaled $112 million in 1Q20, compared to
$210 million a year earlier.
In August 2018, Helmerich & Payne raised its quarterly
dividend by 1.4% to $0.71 per share or $2.84 annually, for a yield
of about 6.4%. Our dividend estimates are $2.84 for both FY20
and FY21.
MANAGEMENT & RISKS
John W. Lindsay became chief executive officer of Helmerich &
Payne in March 2014 succeeding Hans Helmerich. Mr. Lindsay
joined the company in 1987 as a drilling engineer.
The Oil Services, Drilling and Equipment industry is one of the
most volatile and unpredictable industries in the S&P 500. The
main investment risk is the overall health of the global economy,
though the industry also faces significant geopolitical risk.
COMPANY DESCRIPTION
Founded in 1920 and headquartered in Tulsa, Oklahoma,
Helmerich & Payne, Inc. (H&P) is a petroleum contract drilling
company focused on oil and gas well drilling. As of the end of
2018, the company's U.S. Land division had 238 contracted rigs.
VALUATION
HP shares have traded between $35.74 and $64.80 over the
past 52 weeks and are currently 11% below the midpoint of the
range. The shares reached a near-term peak in late April but fell
below $37 in early September and again in early October on
investor concerns about falling E&P capital budgets in 2020. The
shares have recovered modestly over the last several weeks.
P/E multiples are not particularly useful for valuation purposes
given our relatively low EPS estimates for both FY20 and FY21.
The shares are trading at a trailing price/book multiple of 1.2, at
the low end of the historical range of 1.2-2.0; at a price/sales

Peer & Industry Analysis

The graphics in this section are designed to
P/E
allow investors to compare HP versus its Growth
industry peers, the broader sector, and the HP vs.
market as a whole, as defined by the Argus Market
NOV
Universe of Coverage. HP vs.
1,000 Sector
• The scatterplot shows how HP stacks up More Value More Growth
versus its peers on two key
characteristics: long-term growth and Price/Sales
value. In general, companies in the lower HP vs.
left-hand corner are more value-oriented, Market
while those in the upper right-hand corner 500 HP vs.
are more growth-oriented. Sector
More Value More Growth
• The table builds on the scatterplot by
displaying more financial information. Price/Book
• The bar charts on the right take the HP
BKR SLB
HAL HP vs.
analysis two steps further, by broadening 0 RIG Market
the comparison groups into the sector HP vs.
level and the market as a whole. This tool Sector
is designed to help investors understand More Value More Growth

Value
P/E

how HP might fit into or modify a PEG

5 10 15
diversified portfolio.
5-yr Growth Rate(%) HP vs.
Market
5-yr Net 1-yr EPS HP vs.
Market Cap Growth Current Margin Growth Argus Sector
More Value More Growth
Ticker Company ($ in Millions) Rate (%) FY P/E (%) (%) Rating
SLB Schlumberger Ltd. 48,001 8.0 20.6 -30.8 18.5 BUY 5 Year Growth
HAL Halliburton Co. 19,525 8.0 17.8 -5.0 4.0 HOLD HP vs.
BKR Baker Hughes Co 14,429 5.0 16.7 .5 25.0 BUY Market
HP vs.
NOV National Oilwell Varco Inc. 9,008 7.0 1,167.0 -71.9 3,750.0 BUY Sector
HP Helmerich & Payne, Inc. 4,943 10.0 96.6 -.8 63.8 HOLD More Value More Growth
RIG Transocean Ltd 2,851 15.0 -3.7 -47.5 55.2 HOLD Debt/Capital
Peer Average 16,460 8.8 219.2 -25.9 652.7
HP vs.
Market
HP vs.
Sector
More Value More Growth

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HELMERICH AND PAYNE INC

Report created Feb 14, 2020 Page 4 OF 5

Analyst's Notes...Continued
multiple of 1.8, below the low end of the range of 1.9-3.6; and at a
price/cash flow multiple of 6.4, below the midpoint of the range of
5.9-11.4.
Despite these relatively low multiples, we believe that weak
E&P capital spending will lower demand for the company's
FlexRigs in the coming quarters. We also believe that improvement
in E&P spending will require sustainable oil prices near $60 per
barrel. As such, we are maintaining our HOLD rating on HP.
On February 14 at midday, HOLD-rated HP traded at $45.14,
down $0.26.

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METHODOLOGY & DISCLAIMERS Report created Feb 14, 2020 Page 5 OF 5

About Argus
Argus Research, founded by Economist Harold Dorsey in 1934,
has built a top-down, fundamental system that is used by Argus
analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis
identifies industries expected to perform well over the next
one-to-two years.
The Growth Analysis generates proprietary estimates for
companies under coverage.
In the Financial Strength Analysis, analysts study ratios to
understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and
familiarize themselves with the processes of corporate management
teams.
Quantitative trends and qualitative threats are assessed under
the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a
historical ratio matrix, discounted cash flow modeling, and peer
comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on
a risk-adjusted basis over a 12-month period. To make this
determination, Argus Analysts set target prices, use beta as the
measure of risk, and compare expected risk-adjusted stock
returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.

Argus Research Disclaimer

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Morningstar Disclaimer
© 2020 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising
from any use of this information. Past performance is no guarantee of future results.

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