Helmerich & Payne is Now Outperform - Analyst Blog
December 16 2013 - 11:00AM
Zacks
On Dec 13, 2013, we upgraded Tulsa,
Okla.-based contract drilling services provider, Helmerich
& Payne Inc. (HP) to Outperform from Neutral. Our new
investment thesis is supported by a Zacks Rank #2 (Buy).
Why the Upgrade?
We remain optimistic about the firm’s long-term prospects,
supported by its superior and diversified drilling fleet, continued
strong operating performance led by an efficient management team,
and an investor-friendly financial policy.
Detailed Analysis
Helmerich & Payne is a major land and offshore drilling
contractor in the western hemisphere, having the youngest and most
efficient drilling fleet. The company, which has surpassed earnings
estimates in each of the last 6 quarters, 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.
We believe that 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.
Helmerich & Payne – which counts Nabors Industries
Ltd. (NBR) as one of its major competitors – recently
approved a raise in its quarterly cash dividend to 50 cents per
share ($2.00 per share annualized), representing an increase of
more than 200% over the previous payout. The significant 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 billion, not only reflects
steady demand from its customers but also offers long-term earnings
and cash flow visibility.
Another positive in the Helmerich & Payne story is the quality
of its client base, which mostly includes well-capitalized oil
majors or large independents.
Other Stocks That Warrant a Look
Other players in the oil and gas drilling industry, which look
attractive at current levels, include Pacific Drilling
S.A. (PACD) and Tesco Corp. (TESO). Both
these stocks carry a Zacks Rank #1 (Strong Buy).
HELMERICH&PAYNE (HP): Free Stock Analysis Report
NABORS IND (NBR): Free Stock Analysis Report
PACIFIC DRILLNG (PACD): Free Stock Analysis Report
TESCO CORP (TESO): Free Stock Analysis Report
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