Helmerich & Payne, Inc.

Transcription

1 Helmerich & Payne, Inc. Lehman Brothers CEO Energy/Power Conference September 7, 2006 Investor Relations Contacts: Doug Fears CFO, , Juan Pablo Tardio Manager, Investor Relations, ,

2 The information contained within this presentation is forward looking and involves risks and uncertainties that could significantly impact expected results. A discussion of these risks and uncertainties is contained in the Company s Form 10-K/A filed with the Securities and Exchange Commission on July 28,

3 H&P s Global Rig Fleet U.S. Offshore 11 International 27 U.S. Land 155 Mobile & Conventional 40 FlexRigs 50 New FlexRigs Total Rigs 2 (Includes 66 new build rigs to be delivered in 2006 and 2007, one of which corresponds to International Operations)

4 Trends Drilling Industry Rig demand remains strong as E&P spending continues to expand Industry faces difficult technical challenges Unconventional gas plays require innovative, long-term solutions Mature drilling areas are becoming more technically challenging Increasing focus on efficient, cost-reducing drilling technology Segmentation of rig assets by technical capability and quality Industry is engaged in a massive retooling effort, where new and improved will replace 25+ year old rig fleet (vast majority of current fleet) Organizations that can deliver superior performance with innovative and productive equipment will amply reward their shareholders 3

5 The Elephant in the Room NG Storage Capacity U.S. Natural Gas Storage Trend Data Source: Energy Information Administration ( 4,000 3,500 3,000 2,500 2,000 1, Dec Jan Feb Mar Apr May Jun Jul Aug-06 8-Sep-06 6-Oct-06 3-Nov-06 1-Dec-06 U.S. Natural Gas Storage (BCF) Storage (Prev 5-yr Avg) Storage 2006 EIA Forecast August 2006 (3.24 TCF 3rd Qtr Storage ) 3.5 TCFLimit? 2006

6 Growing E&P Spending U.S. E&P Spending Estimates (Data Source: The Original E&P Spending Survey - Lehman Brothers) U.S. E&P Spending (in Billions) $70.0 $65.0 $60.0 $55.0 $50.0 $45.0 $ A 2006E (Dec 2005 Survey) 2006E (Jun 2006 Survey) 5

7 61,000 59,000 57,000 55,000 53,000 51,000 49,000 47,000 45,000 Impact of Increasing Rig Count on NG Production Total U.S. Natural Gas Production and Rig Count 1,600 Total Daily Dry Gas Production (E.I.A.) Baker Hughes Gas Rig Count 1,400 1,200 1, Million Cubic Feet per Day Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Baker Hughes Gas Rig Count

8 Drilling Becoming More Difficult U.S. Land Industry Trend Unconventional Market Sample Active U.S. Land Rigs Drilling Horizontal or Directional Wells (Data Source: Smith International Inc. May 2002 through May 2006) Active Colorado Land Rigs Drilling Horizontal or Directional Wells (Data Source: Smith International Inc. May 2002 through May 2006) Percentage of Total Active U.S. Land Rigs 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Percentage of Total Active Colorado Rigs 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

9 FlexRigs in Demand for More Difficult Wells Active Land Rigs Drilling Horizontal or Directional Wells (Data Source: Smith International, Inc. - S.T.A.T.S. - 8/14/06) Percentage of Applicable Rig Fleet 70% 60% 50% 40% 30% 20% 10% 0% Land Rigs, Industry Wide FlexRigs 8

10 Modern Rig Fleets? 80% Announced New Build Commitments As Percent of Company's 2005 U.S. Land Fleet 70% 60% 50% 40% 30% 20% 10% 0% PTEN UNT GW NBR HP 9

11 H&P s Differentiated Approach Create value through ongoing improvements and leadership in drilling efficiency and safety Provide and support customers with the most innovative and advanced rigs in the industry for the purpose of driving their total well costs down In turn, customers provide premium dayrates and unique growth opportunities to H&P, generating growth in earnings and shareholder returns This is a sustainable approach that should continue to allow H&P to substantially expand into both new and mature markets 10

12 Growth in H&P s U.S. Land Fleet ,000' (FlexRig4) 8-18,000' (Mobile & FlexRigs 1, 2 & 3) 18-25,000' U.S. Land Rigs FY E* 2007E* * Includes commitments for 65 new builds to enter the U.S. land market. 11

13 Technology and Quality Service Make a Difference Estimated Average Daily Margins $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 U.S. Land Daywork Drilling Margins Quarter Ending June 30, 2006 GW NBR PTEN UNT FlexRigs * * Excludes newly deployed FlexRigs. 12

14 EPS Sensitivity Estimates * U.S. Land $1000 Average Margin Per Rig Day Increase ** Annual EPS Increases.20 Committed New Builds 66 FlexRigs Working a Full Year 1.31 * Using 3Q06 Earnings & Statistics As Baseline ** Will increase proportionately to growing number of active rigs 13

15 Visibility for Increasing Earnings H&P Earnings per Share First Call Consensus Estimates (30 Aug 2006) E 2007E Fiscal Year $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- Earnings per Share 14

16 Peer Group Growth Comparison 60% Earnings per Share Analyst Estimates FY2006-FY2007 EPS Growth (First Calll Consensus, 30 Aug 06) Cash Flow per Share Analyst Estimates FY2006-FY2007 CFPS Growth (First Call Consensus, 30 Aug 06) 60% 40% 40% 20% 20% 0% PTEN GW UNT NBR HP PTEN UNT GW NBR HP 0% 15

17 New Builds H&P s FlexRig Program The FlexRig Difference: Key Advantages Increased drilling productivity and reliability Variable frequency drives with increased precision and measurability Computerized electronic driller that precisely controls weight on bit, rotation and pressure Designed to move quickly from well to well Total well cost savings even at premium dayrates Accelerated well programs A significantly enhanced and safer workplace Minimized impact to the environment 16

18 New Builds H&P s FlexRig Program FlexRig Construction Status Average investment on 66 new builds expected to increase by approximately 16% per rig from original estimates Industry continues to experience labor and equipment shortages, resulting in higher costs and construction delays 24 of 66 new builds scheduled to be completed by Sep 2006 Production schedule targeted at four rigs per month going forward Expect very strong financial returns 17

19 New Builds H&P s FlexRig Program Impact to Operating Margins Forecasted Impact of Deployment of 65 New FlexRigs in U.S. Land Segment Revenue less Direct Training, Deployment and Operating Expenses ($MM) 4QFY06 1QFY07 2QFY07 3QFY07 4QFY07 1QFY08 2QFY08 $90 $80 $70 $60 $50 $40 $30 $20 $10 $- Estimated Operating Margin (in Millions) (Net of Upfront Training and Other Extraordinary Costs) 18

20 New Builds H&P s FlexRig Program The H&P Difference: Experience & People Drilling since 1920 Designing and building FlexRigs since 1997 Over 230 rig-years of FlexRig operations The most modern land rig fleet in the industry An organizational structure designed to support rigs with state-of-the-art technology People committed to quality and safety 19

21 H&P FlexRig4 in Western Colorado

22 New Value Drivers in Line with H&P Strengths New Builds Setting a new standard Safety Doing what s right and leading the way People Attracting, training and retaining key people Drilling Efficiency Delivering unprecedented value 21

23 Leader in New Ideas & Applied Technology Joystick Controls Integrated Top Drive Communications BOP Handling VFD AC Drawworks Mechanized Tubular Handling 22

24 Driller on a Conventional Rig vs. FlexRig 23

25 Roughnecks on a Conventional Rig vs. FlexRig 24

26 H&P s Organizational Support Structure 25

27 Delivering Safety H&P vs. Industry (IADC) U.S. Land Safety Performance (1994 Jul 2006) 12-Month Rolling Average Recordable Incidence Rates Total Recordable Incidence Rate (TRIR) INCIDENTS PER 200,000 MANHOURS MANHOURS WORKED (MM) 5.7 MM H&P MANHOURS IADC 2005 TRIR = 6.64 H&P TRIR = Jul- 06 YEAR ' 0 26

28 Protecting People H&P s Most Important Asset The first half of calendar year 2006 was completed with a best ever safety record in H&P s U.S. land operations (total recordable incident rate of 1.62), an achievement that is 75% better than the industry average. H&P s FlexRig fleet completed the first half of 2006 with a safety record 81% better than the industry average. H&P s international operations surpassed 3 million manhours in early July without a lost time incident. U.S. offshore operations have worked 76 consecutive days and over 400,000 manhours without a safety recordable injury. 27

29 Personnel Development Center 1. Health, Safety and Environmental (HSE) 2. People Skills and Leadership 3. Technical (Equipment Support) 4. Administration (Payroll, Supply Chain) 28

30 Performance Example: H&P FlexRig3 East Texas 0 2,000 Field Avg. August 2002, Prior to H&P H&P 2006 Current Average 4,000 Depth (ft) 6,000 8,000 10,000 53% Improvement 12, Time (days) 29

31 Best Value Example H&P vs. Competitors Estimated Field H&P FlexRig3 Competitor Average Drilling days Completion days 2 2 Moving days 5 3 Total rig revenue days per well Drilling contractor dayrate $19,500 $26,500 Operator s other intangible cost per day estimate $15,000 $15,000 Total daily cost estimate $34,500 $41,500 Total cost per well (daily services) $690,000 $531, Total well savings with H&P per well $158,800 per year $4.5MM 30

32 Best Value Example H&P vs. Competitors Value added from FlexRig3 operations Significant H&P dayrate premium Increased wells per rig per year: 10.3 wells Early production: Incremental wells on production Lowest total well cost 31

33 FlexRig4 Early Performance Sample ROCKY MOUNTAINS Average Spud to Spud, Prior to H&P 2,000 H&P Avg - Same Area (33 wells) Depth (ft) 4,000 6,000 8,000 37% Improvement 10, Time (days) 32

34 End of Presentation 33

35 Additional References: 34

36 Evolution of H&P s Global Fleet Rigs Available International U.S. Offshore U.S. Land FY E* 2007E* * Includes commitments for 66 new builds. 35

37 H&P s U.S. Land Term Contracts U.S. Land Term Contracts (Includes 65 New Builds) % 42% 100% 80% 60% 40% 20% 0% 36 Q4FY06 Q4FY07 Q4FY08 Q4FY09 Q4FY10 New Build Contracts Other Term Contracts Average Rigs Available % on Term Contracts Estimated Average Rigs per Quarter. (Existing Rigs & Contracted New Builds).

38 Delivering Performance FlexRig3 Highlights of Rigs Field Performance vs. customer s planned drill curves 1042 complete wells as of 18 June wells (66%) under 41 wells (4%) on 316 wells (30%) over 2. 65% of FlexRig3s are currently drilling directional, more technically difficult wells. 37