HP - Earnings call transcript Q4 2017 | Helmerich & Payne, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to today's Helmerich & Payne's fourth quarter and fiscal year-end earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note that this call may be recorded. It is now my pleasure to turn this conference over to David Hardie, Manager of Investor Relations. ahead. go Please

David Hardie

and and will call Chris, questions. up of to & us, John we Lindsay, Helmerich XXXX. Vice which Pablo Thank and after sharing President webcast welcome, call some corresponding the conference CFO. President John are and us Juan quarter open and to Payne's for Juan With Tardio, Pablo you, and today everyone, CEO; be the will fiscal with fourth comments

the may discussed based U.S. quarterly XXXX, those that by indicated Securities expectations differ usual, Form in Litigation made of as forward-looking Annual company's defined or XX-K implied As uncertainties, to and assumptions by reports Report Act Private all during XX-Q.The Reform as risks and and subject Form are such this on on results statements materially and forward-looking on call are statements. from the actual company's current

to income such making measures certain be financial also operating will and reference We non-GAAP operating statistics. segment as

You will now reconciliation may I Lindsay. call to over press the comments in John today's find and turn release. calculations the GAAP

John W. Lindsay

Dave, capacity. possible were levels and advantage rig fiscal us XXX reaching after of $XXs XXX has super-spec the land years This and the the of of a Recall to history, joining to XXXX We customers. decline combination were fiscal operating price experience. value the mid predicting we of in which XXX price an with rigs count during great grow and by the Solutions, experts the to and you for of year than oil of us and oil substantial most rig rig count summer, Fiscal to uncertainty the rigs again and the and XX rigs, we of people, earnings of The morning rig land, U.S. on by in some leading volatility. land FlexRigs, our XXXX. began Family range-bound due that to Thank headlines you, remained count a balance fourth everyone. to were market which expectations us the rig to towards its reduction year quarter having ramp-up largest skewed customer, trough even the This doubled in H&P witnessed share grow our that without contracted outlook, right dominated enabled rig call. XX%. of which provide good quarter close activity year-end. fourth in U.S. XX edge Thank isn't for pricing rigs X,XXX May the more over XXXX, company's achievement with face provide the with of by able fiscal uncertainty, was upgraded for to to and obtained in U.S. FlexRig XXX cautious proposition allows during Even increase

also in international our have improvement rigs. has seen increased rig to We active count XX markets where

also to opportunities today. pricing super-spec wells complex for longer up and increased in driver cycle in U.S. improve effectively the requirements customer makes growth horizontal financial price be will oil A total the rig bolstered demand day rigs, that rates drill persists fleet should and XX% to into nearly H&P XXXX, rig believe capacity and about rigs limited we continues The industry that improve. the utilized We provide and believe capacity with the several pricing we super-spec market more laterals. forward, fully of that replacement is total. increased continue The going higher past our at that for additional crucial could increases can the by Looking the see fleet is count super-spec for which weeks during XXX is key estimated metrics.

Unlike factored in could supply upgrades. fleet be to we candidates half of be only upgradable that to capacity. and those About what XXX for consideration already very of make the is needs which H&P third estimate FlexRigs of rigs over of has developed super-spec today H&P Another super-spec the to FlexRigs these during are our a is XXX already One working. process upgrade super-spec has peers, a around upgrades rig tight that efficient move. to active, capability are

additional Of will rigs upgrades. course, demand on performing higher decisions drive our for

higher That its economics longer-term H&P is to make is We said, that and experienced will here we whether rigs, and improved contracts that we've will upgrade will the grow they pricing improve the drilling these under most of the investments range-bound market for be count conditions optimistic are E&Ps improve. key day that without support require rates year. past uniquely to or rig commodity positioned that active this take-away that building new as pricing

by to of attractive value driver We performance a lower that critical reliability pricing for Another value customers. an on deliver improved measured see our our is and ability our delivers proposition proposition play The well. long capability but leading provides super-spec the classification complex and for rig technology the in wells, roles equation. and value cost data, crucial also needed more lateral reliability, performance, the

These Excellence deliver conditions, downtime for Center customers, started An rigs. all capabilities effectively use creative the and better we times for high-speed tools real-time both streaming facilitates critical the ways name fleet performance. from approach of in use this customers. recurring advantage to the what important transforming The is Center us XXXX. leveraging some dashboard are business. that maintenance is is similar We IoT condition-based on are and first operations Excellence value Internet proactively Things, moves fourth are its significant and order performance few. provides safety, more to and in really the deliver One several a the best been drilling of critical up a processes are is rig event performance the and to learning, have important reliability support and performance, changing offers gen we generated monitor for and over tools helps prioritized rig less data uniform and of to and acting alarm based dashboard years. our and our Center which we peers of the a And for our is We data in need equipment focused Excellence to example able adding and complex really to developed trip enhance analysis as trends. a data. of metrics rig for that preventative Having We've data that technology vitally and of competitive developed The like the upon generation business. of system our uptime maintenance. that You patterns, to by just on utilizing for capture leverage the

wellbore. about directional has excited of June. integration System X well acquisition feet to drilling customers It's drilling perhaps isn't life System importantly Guidance Technologies Another process is traditional MOTIVE business. drilling accurate enhanced Bit term technology as can leads Bit more interest enhancements software our million of competing in economic The provide directional lead tool. MOTIVE by over with keep is but to going drilling companies. hole smoothly, a isn't costs, It's therefore, these E&Ps that improvements and increased performance H&P in the short impactful, important to seeing are Drilling to and downhole recently consistent are and Guidance the wells. and we as of we mind production a their surpassed using more This in solution, both the to and

maximize speeds sweet increased struggling the the drilling keep drillers through the desired is directional drilling to while currently the active delivering place today, several remainder of to to production. with in required year. spot which five customers, are serving up in on pace pace XX of FlexRigs, to a rigs With of with XX some the scheduled pick are rigs additional accuracy MOTIVE cases and wellbore

more future, we quality. ongoing expect spacing well with longer to As need and control in well placement enhance resulting tighter to of lengths, the the wellbore and look lateral trajectories complex an we to trend

directional about to technology as execution We MOTIVE, and future a providing they with are disruptive represent value the customers. optimistic significant for drilling

And in support to leading-edge value Juan call to have I of them having once turn Pablo. their And thank for outstanding the and now one right to to over service. to developing this opportunity every and to are I'll who customer. again like the our to the So take Juan harnessing the before proposition people would we rigs, Pablo, turning call systems technologies great addition over

Juan Pablo Tardio

good rigs. on followed the by let everyone. you, information with three I me John, followed comments details The July and during the morning, the related the few in will activity led Ford. Land increased our Thank of the earnings details. by again has on on segment, three first segments, U.S. of XX to drilling and our growth highlight On seven of corporate-level last on some each the XXXX, announced Drilling some activity some call our XX, months. our Eagle Permian rigs, by way Since last expand

also We in other basins. up-and-down minor movements experienced

since added customers result We performance XX have the the organization our last is delivering. a that of call new great as

rigs the and contracted most to STACK most Our XX are play, our XXXX the the Permian Ford. rigs SCOOP with XX Eagle operation during three active active today compared basins Permian, and peak. the The remains

coming XX rigs in drawworks XX low In we Ford area, X,XXX-horsepower Eagle respectively. XX STACK We XX and XX SCOOP the contracted a have of FlexRigs and have XX the idle today, and which ratings. have and of contracted, off rigs

the of the growth approximately importantly, and general, and for XXX overall market in the rigs days. were years the activity total beginning U.S. trend a fourth exited priced under to of first In increasing during quarter, quarter, Most contracted markets. in proportion rigs fiscal offset strong to long-term an Land from the increase fiscal similar end As had ago X% experience in spot quarter to decreasing corresponding the of period pricing that results the revenue expect quarterly segment for continued with contracts now XXXX. we we of

$XX,XXX result, upfront than rigs returned over decreased of after by prior and previously slightly to as as generating compared The average remained quarter revenue driven day around a quarters. rig the per than the originally number activity day day that inactivity. the per at higher expense of expense of during rig of $XX,XXX, higher quarters adjusted quarter. The the flat average two the expenses number to the many primarily lower most mostly by level expected rigs was average rig X% per work to a result idle recent a As of reactivated for expected,

a Looking to ahead XXXX, of fiscal sequential revenue quarterly first quarter approximately X% expect increase of days. the in we at X%

per $XX,XXX, offset another. one We rig and as remain to the the flat increasing contract average dynamics continue term revenue of underlying relatively to day roll-offs adjusted newbuild at pricing expect approximately spot

$XX,XXXs. low Thus, spot average teens, continue delivering spot high our in while market leading-edge day to to the our rate experience FlexRig we in improvement value the offering. Although great still customers is pricing pricing through the differentiated is in

inactive to higher primarily of rigs understand to our XX% customers the of move and future. level working go overall reactivation related duration Land half work This The expenses and expected the markets. very amount in to and expense rigs The the costs one idle well rigs total average under less expenses were slightly during term today increase have how to West markets attain be the are roughly is FlexRig FlexRigs to back rigs segment in during and The near five impact in priced upfront remaining California the segment to to Texas around per of average wellbore. roughly than is term remaining the Texas Our related strong clearly to Approximately that directly under are quality average continues for and in $XX,XXX been XXX moving contracts, suited rig some significant day efforts time before Those reduce our a The have all the term already allow to performance idle rig for lower day contracts increase to estimate time. and better a downturn contracts expenses under of year. levels rigs those that and them downturn. contracted expense to in of XXXX five priced have rigs rigs expected in day. to going to are their $XX,XXX. expenses of general related rigs to a to excludes per reliability per related attributable directly U.S. been well forward were

our during As rig rigs a fiscal segment average all under the contracts in day the of is term per first quarter result, roughly margin expected for $XX,XXX. the already

we follows: XX those early already of for X years XXXX, fiscal the for XX in for XXXX, notices fiscal our term XXXX, in a XXXX. during changing our for approximately segment July, have been and three of mid-XXXX, since corresponding corresponding notifications, success contracts we rigs annual million term over number securing day and the approximately average in under in for XXXX, the first No to received in respectively. and rig currently segment four quarter contracts the late the rigs mix each under Given contracts that XX $XX,XXX, of fiscal rigs now of term have margin following revenues. term approximately as fiscal is expected of for and contracts a prior since are quarters fiscal termination new the given backlog during generate call roughly in expect our $XX result of as but $XX,XXX, the are all averages The $XX,XXX, XXXX per total million to that fiscal $X last early fiscal termination

Let of increased adjustments decreased to sequentially income, by by The a with Management revenue expected X about day The X% XX%, we lower which margin average result related to fiscal transition rig the to as operations. our some than reserves operating to contributed of days and fourth now our me contracted Offshore per contracts. contracts approximately was exited quarterly number $X.X self-insurance quarter approximately these to million $XX,XXX. rigs.

look to with fiscal approximately expected are decrease Average days of the is first XXXX, contracted increase revenue quarter As we quarterly by expected per X%, margin to day during rig five approximately $XX,XXX. at to quarter. rigs the

the with Land segment days the The quarter XX% adjustments. in offset was and by rigs, in foreign of the partly exited The exchange margin day margins number X,XXX, of adjusted for International during improvements $XX,XXX, in our the and as these to incurred impact of revenue one-time one million primarily increased rig in Argentina, XX two XX was We a to per XX result the by rigs. on favorable including in activity an average contracted adjusted Moving expenses or favorable of $X.X operations, quarter average in Bahrain. Colombia, quarter.

to We XXXX, the are active look at for approximately were to of fiscal we very expected which quarterly work exiting As revenue primarily by quarter significant with driven back we not see see approximately beyond forward. per the mentioned long-term potentially level some the XX%, XX set by commitments rigs. in have X rolling the the to pleased quarter of expand an any during day first our if is contract XXXX, activity agreement going quarter, expansion to We don't calendar be increase This days per a international day but was Argentina. uptick activity potential be opportunities a to rig re-contracted. to higher do as The is XX for average rig expect rigs off enter $X,XXX. margin margin may going average expected rigs rig

in benefit As quarter. would compensation demobilization the that we case, during from

attractive opportunities Let me add now our Fiscal FlexRigs. level XXXX to existing comment details. provided capabilities to greater even to on corporate continue

number our specifications and Land rigs XX over upgraded U.S. level super-spec in highest we of over to capacity demand, with to year, XXX that rigs During segment. increasing the

acquired we a small increasingly Technologies continue company, look We for a to add Drilling value ways as also to customer. to MOTIVE

we see described, similar types investment John fiscal to of opportunities As during XXXX. hope

business. early CapEx $XXX we Although of invest and improvement opportunities conditions to to in are additional the in for currently the $XXX market year see in estimates the expect attractive to further range million,

CapEx while First, more may and high sustaining in estimate helpful XXXX. the represent of that current fiscal to strength great purposes: additional sheet our including A tubulars for time maintenance balance provide dividend Our pursuing at be close for liquidity flexibility these levels. CapEx references opportunities level modeling current same XX% few

charges. expected upgrades may approximately of as the The last, fluctuate $XXX latter includes million is our volume replaced $XX be equipment of the depreciation abandoned. around the tax effective million fiscal income XXXX. function rig significantly as a in abandonment Second, during XX% estimate is to And rate

turn back now me Let John. call the to

John W. Lindsay

are you its designs approximately the has the XXXX's the technology seriously by significant and dwindle, Thank still Pablo. SCR to that few in drilling drilling future. factor unconventional, a are drilling directional legacy figure performance related ongoing Juan cycle remainder those land. deliver to time rigs replacement today the will of how you, is past are Approximately XXX process of When XXX changed and deficient consider to is rigs ability in rig over there the levels demanded of the rigs more well just That wells. years, still commented mechanical some U.S. but technology reliability complex for legacy continues drilling number the horizontal rigs. in customers who even high and We've be

And, as Chris, questions. an open again, going we call opportunity the that, see now for forward. we So will

Operator

Certainly. ahead. Kurt from Hallead comes question go first Please And with our RBC.

Kurt Hallead

good morning. Hey,

John W. Lindsay

morning, Good Kurt.

Juan Pablo Tardio

Good morning.

Kurt Hallead

So, pretty optimistic especially dynamic. into as of the in a mid-year provided kind mentioned, gentlemen, going contrast outlook you in I the heading think year, year upbeat, you next this to, sharp out expectations of

So noticed what contract with of little bit. place that shown I been yeah, that the had said, the September on incremental rigs to the you've to timeframe a you able in back relative also slowed term kind that have

hit You getting or think you that to chalk do what E&P XXXX, and your guys, read the in would they may getting up companies are, you that their on again, budgeting need mind? what through it maybe going in pause E&Ps Is of a kind process button? ready the to

Juan Pablo Tardio

we we count continue this to XX continue is able the plus under contracts? as we Juan as increase term were roll-offs and to Are term place our Kurt, new to rig old from rigs Pablo. see you that contracts referring to

Kurt Hallead

fiscal for in mid-November, October, XX, example, that be number In we're XXXX. early of at looking to one up XX. average and an there contract maybe term you rigs jumped indicated back as that on now September, Just XX in early

you surge November. between I'm significant a gauge as just slowdown incremental to process bit to that to a trying not October, and in a nitpick, into trying in saw and September I'm So going contracts of

So into if to I that there's to or anything see read just want not.

Juan Pablo Tardio

when This anything strong may don't significantly is expected, fleet, long-term upgrade in months, long-term our a we're customers as our as market on are Juan time to Pablo continue do investing see the And being contracts being combination relatively contracts, same Kurt. of It's what compared for type willing in we And these have We general. again. different the XX-month to enter the FlexRigs. we of willingness to we at And hand contracts. XX these that some to one while say upgrades.

but it's that us significantly. we think So, a win-win situation, nothing it's again, surprises

Kurt Hallead

for share And Okay, to is capability. thanks super-spec sure for even expect the correctly at you opportunities. I want in did increase your I say heard when on be to potentially and that John, that market you have question the if upgraded flat, that color. guys you rig you you count And environment? you the referenced would upgrade you market a rig rigs remained could to assets correctly make still understand went most I that look a flat even to just

John W. Lindsay

been Kurt, we've a that Yeah, for about while. I think talking now

we've oil over to prices. related of continued belief XX%. think or of an not seen got improved going to up last last and a a is to different to several outlook share able a continue quarter, but in And an see and change been that do rig at. slightly $XX count our in looking demonstrate on But I customers with the to they're oil best down, the we've service what rig may well an been if level the in rig active think type to count. improvement expecting expectation that expectation and focused We're add prices significantly have flat, last necessarily flattish, then But we've I or maybe is that, I which churn sort be market over capital it $XX rig a on price improvement the Obviously, And I do some that continue discipline, that our pretty you're over count, pretty has dramatic quarter in to they're have it's high function again, mid-$XX working I of not remain at count rigs oil we've think that able there. I looking environment, that can think get. as as oil you to upgrade to been the they getting guess of in And weeks. the cases the to prices, relatively fleet general, of we've contracts depends count best for in going services a that performance seen heavily think you a rig customers. toward see to where higher super-spec.

your rig you by capacity And and drilling drilling some that you're costs wells rig. so if have times super-spec to having capable, you've improve is got don't and more a challenging opportunity a your higher lower

field. a we that So to we to take the grow long think but of the share to feel I in able it's market some I your continue value can because general, that question, know pretty and provide answer our in folks confident fleet are our

Kurt Hallead

what price And newbuild? the to a be you economically to would do think have market justify

John W. Lindsay

I'm competitor's would I've estimates million not of low a what certain $XX be. range. heard newbuild

$XX,XXX if I reasonable multiple-year a a in I need of or a that's a case, think you're rate day, the going $XX,XXX term want get order to on think I rate a return. you'd reasonable rate to they're again, have day And investment, contract. that return if to of going would to think and get

Kurt Hallead

Got it, thank you so much color. for the

John W. Lindsay

Okay. Thank Kurt. you,

Juan Pablo Tardio

has relatively on me question contracts. as that remained prior your let the to little been surprising. less not relates that granularity so Land fleet a more XX% flat, the of the Kurt, segment U.S. is or add in it consideration has under bit spot contract, is term That market. more our in XX% term metric And, Part

fact, consideration the mentioned, rig, a as becomes as The of of as is to are John and, availability well willing customers more tighter, of that matter term type into contracts. other right as requesting enter

market and surprising I given things what thus two to what is believe those conditions. of we combination saw the is So not leads

John W. Lindsay

can please. we Chris, next question, the take

Operator

Colin next Please Research. And ahead. with Davies Bernstein go question comes our from

Colin Davies

you morning. and good very Thank much

John W. Lindsay

morning. Good

Colin Davies

is the that much you obviously, and Good tone, positive more remarks. was morning. than prepared cautious, quarter a The ago the narrative more in far where alluded to

to talk Is have anticipating it that hold prepared the that those of dividend being you We of in through closing that cautious fair on more the really emphasize of comments current dividend, year? remarks level you last now to at and made the able for did year. to about the you're next to side financial been through the that's say plan terms put call, next one going the

John W. Lindsay

thinking. some Colin, XXX-rig look low challenging. XXX general well. trading coming this in we the and saying that dividend count say can positive. and is John. in even just though more the lot mid-$XXs, to that, think time, customers. I'll continue folks oil we was it let was just remarks I believe market oil additional were $XX, not low would were remember had to But I But people $XX during it yeah, there necessarily relates had or general, outlook for same as to the but look going remember $XXs, we I even I could but a Juan And that look At of we a Pablo think on that oil to as have make looking belief just color. the in obviously we which we week, and in think a with that don't this happened our general we've the the I just didn't you the gone some for closer some future. believe see didn't it were think remain But the what of into you have that was pull the count if few continued seen, He'll have $XXs rig outlook, foreseeable prices Obviously, that our back remained relatively from fund $XXs things I also to prices, the flat, we've back. to at having oil

We that. confidence have a of in lot

is cyclical two some see the side believe in cycle. half and this industry, point And a is other of for belief We still seen the if at downside or But time, the of you well would an years cycle. we're course, an have of not, improvement the a that? would positioned. a up the year, is anything Juan All we on that, if we're And cycle, the you future. hopefully and we've add of I months not even Pablo, in we're to end three more it's again, front years, in course, a there next to that. even last the think the six

Juan Pablo Tardio

covers I it Thank you. John. think that well,

Colin Davies

just That's million. million $XXX guidance the the next and for CapEx year, one follow-up $XXX great, on to

into of You implied in that XX% scale CapEx plan? upgrade upgrade constructed that maintenance the of cost million assuming upgrade to should that's we terms being is be beyond the CapEx. that of $XXX What and million $XXX

Juan Pablo Tardio

of Colin, attributable to is this is upgrades Juan the most general. that Pablo. in To your first think question, XX% I

have are bottlenecks look important the is One and we things to there the market in opportunities and times past. sure for lead conditions, at hand, as with at Make we forward look constrained several not that respond we quickly that are have that the consideration components. we considered. to As capability we certain

making improving to we're part market so that is see to conditions. there respond sure just what prepared you of us And well

also part of that per cost We've type skidding $X million Another through standard question as some upgrade rigs systems upgrade upgrade. us general, in of and as per your capability systems. can rig have walking our $X related a to say be drilling to before, X,XXX-psi and pad add million rig, introduced upgrade you systems FlexRigX we heard

So a of seen we've system past skidding higher in type significantly closer of add what upgrades investment instead of we capability, walking. number type higher the at to skidding is much That to compared and $X walking a million. a also system. a as X,XXX-psi is, But again,

those gives of address of at to we're that on how our of on Does incremental upgrades skidding Especially, upgrade of that on a returns your the super-spec both found you expected course, is have we very So, capacity. or CapEx Colin? costs. question, type sense In that rigs looking investments attractive. scenarios, those

Colin Davies

trying that. extent the and skiddable also, was you perhaps seeing I extent and any as upgraded, to pull so upgrades a as you're market to forward more just plan demand. from building between leaning does. the can it think to on to you're mix the And ready-to-go which expensive upgrades that shift I respond company the you to seeing rigs inventory Yes, the an of get the

John W. Lindsay

Colin, a that's great question. Yeah,

mean, I We the got I to I it. is be in upcoming. We've we've with where think again, there. OPEC ability sure range have that don't we with the going for going outlook, oil But sure fairly continue what remains think face talked know meeting the the to going The upgrade. outlook uncertain price think oil let's the to to for outcome's to we're go. about,

on market's Just we're mean, a of improve. upgrades you not to XX spec over for on XX be as end, to with to said, we last but reasonable. of And intent XX think is doing your averaged question just per do guess upgrade to to Juan our going year, course, example we a to XX quarter. rigs. XX quarter, upgrades we're from Clearly, range anywhere upgraded with I going to not rigs an it's give kind from of anything Pablo – answer possible expectation going not us to that that. the is But, XX I an I directly, the

did you about, capability chain, with be rigs respond. to quarter, prepare we've than we past, cadence And rigs demand. or X able supply up. and it others. when to have an then see we think in to the saw we to talked having ramp with our same scale X we in start And outlook month, new upgrade will, forward, a improving to the quickly And with thing we more much CapEx us we similar a the where would if Very next were a demand, if going we can month. of the that we be the to that I saw able up what X enables builds the would the to sort respond if

Colin Davies

color. very it helpful very back. Thanks I'll turn That's much,

John W. Lindsay

you, Colin. Thank Okay.

Operator

Bianchi Cowen. go ahead. our Marc And question with comes next Please from

Marc Bianchi

Thank you.

to upgrade Following to I Pablo, clarify. up want the Juan questions. just

million? end, for be that $XX basic as as million. like, for then the to of an $X upgrade. $X $XX So $X the million? Is it $X million And we be sort You to high that $X additional sounded it could was said or million thinking as million million, should all-in high

Juan Pablo Tardio

in. all is it Marc,

just some rigs are systems only drilling that So, to pad of cases, or clarify, don't in well any walking have skidding we type adding, to capabilities. multiple

skidding So, and we a add a that to question. Hopefully has that would system never already that. walking rig clarifies the a system take

Marc Bianchi

rigs of of range, do comments the saying, couple we earlier next the in the others – hearing from upgrade that about I Do in were million rigs you prepared cost any average of some comments million XXX layer to you from we've Because to the that to guys most of this go peers on and those? and like marketplace, the quarters in what higher helpful. for think $X be three no, back were some have the upgrade for is Yeah, overall? you we're candidates guess, your is maybe the if or you $X there's million upgrade what market to comments, now context your it $XX upgraded. maybe heard and four sounded million

John W. Lindsay

what base on $X is walking then skid And million of million a only be great We course, FlexRigX. our go to and that's to $X upgrades the Marc, $X Again, really on million know, system. is clear, a system, all-in to are. the question. our X,XXX-psi

that's demand probably to we'll that so, as huge The develop do general, going we think rigs, the XXX to higher. upgrades be think, more But we a that you're But some And that forward. back walking the as seen going you go demand end right. we see get in what trying haven't we're are on upgrades And is to- system. into of of pool. I

You are and see $X some they small in of horsepower that. have peers do to million are investments our of X,XXX horsepower, $XX million AC rigs and upgrading a that number to relatively candidates to order those X,XXX

that is to have we So, capability up quickly. our we the ramp that's what position, about like

on walking But fiscal do We did, were a have upgrades that X systems going do based the year. inventory. I that a XX Of earlier, going of to demand. to We're the last we said speculative basis. we're big that upon as XX not customer

upgrades. we'll more haven't base going what going announced have upgrades again, really I imagine it So we walking we're from on than skid our to cadence would but But would forward, the be, the will demand system customer. we

Marc Bianchi

could reasonable it you? upgrade count's rig if the of kind are for day if execute you work seem that rates CapEx this that Does all flat and flat? Does for still

John W. Lindsay

asking? that the of CapEx is we've terms announced, what that you're In

Marc Bianchi

upgrades. $XX,XXX $XXX guys? flat for stay non-maintenance out of day count rig albeit for low Does if get flat, it guess the range stays these and to works you that in executed rates I the overall million about

John W. Lindsay

the add think contract in to into we that have in case $XX,XXX well some I continuing a doing basis, that the to would term not some upgrades some with market. low on of commitment, interest well

I consider, won't and prepared and be this thing you surprised. part our think of the to again, other was, remarks

us fleet is that about that's before, out You've but still drilling talk heard this there legacy these there wells.

and if wells. know wells Now, I they're directional don't horizontal

Now, trend laterals longer I to the think psi the you is, begin traditional as feet. continues, lengths to lateral seen see X,XXX laterals. X,XXX when get to average we've around don't know X,XXX lateral systems X,XXX if they're when that's begin drilling be I this But What stressed. feet, longer is the to towards still

longer that's as that's think high-grading on I super-spec for talked embedded. rigs we got churn going And speaks asked that's count that earlier. upgrades. It in these are you've maintaining So, to about an that but environment, drill even opportunity rig flat legacy to again, a laterals,

Marc Bianchi

sense. of John. turn a lot I'll back. Sure, Thanks, makes it

John W. Lindsay

Okay, Marc. Thank you.

Operator

FBR. And Thomas ahead. our Please with go B. question next Curran Riley comes from

Thomas Curran

guys. morning, Good

John W. Lindsay

morning. Good

Juan Pablo Tardio

morning. Good

Thomas Curran

where of is your in in builds introductory industry's that place How industry queue? big current number but then, tally if I sorry as construction your remain the new remarks, of range fleet? on side, this existing build the it team what's missed the I'm And new of today? the would your super-spec John, estimated currently or

John W. Lindsay

you relatively new say XX. I'd on build? to new small two not say a do say build. yeah, the I'm handfuls. feedback number. I about going the – was certain have Dave, It's any I was going to

about So we about. hear XX that

on Total, I depending think definition that – around definition I of there's land. other add outlined think as the directional we've according and you wells be there's horizontal it as and to – super-spec, we U.S. is XXX to XXX. purest AC categories, XXX rigs rigs. And, to could if today close in are active think the to some super-spec, the and close running, the in way is high drilling XXX rig data,

upgraded And are are the half upgrade super-spec. XXX have candidates. there's that that rigs are of those We then half about to are know close another – XXX believe, So, today, we of we think to candidates. are we running upgrade AC we know that

if just be kind others, that And of assumption model designs we're The at making and can of about working. not half those XXX, the mistaken, base looking upgraded. the rigs again, those I'm are

the that of half working out is about So of upgradable XXX, fleet actually today.

Thomas Curran

opportunities exactly much announced billion to are you coming That's John. be and was recently them? there? to great, side years, looking the supply see elections, to do reasons. And back hasn't five if next That's some And would I of of the then spend for over attention the so, plan Argentina, or expectations But it out obvious perfect $XX the for. super-spec in your on expect interested you summary the you what sigh seen new arise? YPF's turning got Have relief of and lately passage

John W. Lindsay

pretty quickly, market It's rig and has funny a count U.S. I to international nice in think there this portion can change the just market of how Argentina. pretty our big that is increasing, some opportunities. see been like quickly. can It's international change

I that opportunities additional for do are So us. think there some

Argentina years were sent all ago. FlexRigXs for with we recall, you If XX skid Those FlexXs several YPF the to systems.

to the the have that opportunities. there have ground rigs I job the here is rigs a right great if the on so drilling, our there. And and and done think we'll is capability think demand right so I again, rate we contract the Again, obviously do and have the some

Thomas Curran

the squeeze any, I'll that what in step CapEx in one meaningfully XXXX? might What to more then decide for And to allocation that are MOTIVE up? the And here. lead if you is catalysts,

John W. Lindsay

it if CapEx, minimal. to very has... rigs, even at I'm just it as not it's The look relates you sure, Juan Pablo very,

Juan Pablo Tardio

insignificant. It's

John W. Lindsay

and it's is really for great Again, are requirements news a company, the software us very CapEx low. the very,

things of model. compelling business And the their so that's really that's one about

So I needle-mover. wouldn't expect be it to a

Thomas Curran

for All taking guys. right. my questions, Thanks

John W. Lindsay

right, Thank you. All Thomas.

Juan Pablo Tardio

you. Thank

Operator

our with question comes ahead. Jefferies. Please from And go next Handler Brad

Bradley Philip Handler

Hey, morning thanks. guys. Good

John W. Lindsay

Brad. Good morning,

Bradley Philip Handler

example, that whistles super-speccable? X,XXX-psi first. bells for other and low The is day rig? John, $XX,XXXs and something Maybe some having small a that is rate super-spec questions cited, that for So system versus you the mud

John W. Lindsay

super-spec $XX,XXXs has rig, a low the it is the upgrades. Yes, super-spec so

Bradley Philip Handler

Okay, got it.

on I'd do and let's we'll start? rig, are we still upgrade nice customers and this the you? then had the contracting that's your with like talked can? is you we'll and just experience work so saying a Or to to going, Let's that that. in get you've primary upgrade we'll put now way get to sense Do investment customers super-spec about then it You've get actually to, and of as shifting us please the fly, ability then to

John W. Lindsay

customers out a we or prior wanted heard the that super-spec comments to to you Most wanted if to put the the my – most the for part, so super-spec, customers XX, Brad, earlier of about quarter. rig. taking super-spec back you XX – again, if go related upgrade those

and we the is whatever hey, go happened, said a outran that's once take month cadence, when months, And upgrade so ahead of period. what customers two our it though, capability we'll in time or I'll now the and rig in

the not think I at So, then. today were we're that we again, near cadence

have side capabilities. top I and upgrades, super-spec think think it's of if side, cases. able the question, your longer actually heart then the in of the some on don't the pumping to primarily having are drive horsepower sometimes at the putting you not drive if lateral, side, to those top we're on by risk the you to to complexity wellbore in I not most all upgrades cases, a make going work, higher the prior well, rig But

So it's a think I that trade-off. type of

wells the on is I lateral challenging how depends the how it long might and be. think

Bradley Philip Handler

at about Could XXX pro-rata us OpEx about think costs. XXXX logical But operating hypothetically, the expense That sense, way less reactivation something you other over down there's rig because words, obviously for Juan like about Pablo, per fiscal okay. it working, rig I'm okay. the taking for rigs think $XX,XXX? the I less example. to out is side. your in just for say down time? that makes getting to we being please, there's think Let's side, reasonable some that, stepping exit to get U.S. us allocating, on sort OpEx? onshore, is inactive In of underlying

Juan Pablo Tardio

very idle some think there. rigs mentioned. I that's the that in that have still We assumptions you given scenario, out reasonable, probably,

And so reasonable. level of sounds activity, that the XXX, given

Bradley Philip Handler

Okay.

Juan Pablo Tardio

$XX,XXX over average. rigs mean the the XXX I

Bradley Philip Handler

Right. right. right, Right,

Okay. just And would then are us working to you That's rigs you on that. and are update or helpful. I say had or the don't cheat Could a on just something, felt like for give you MOTIVE charging today, but services mean in there? last maybe the that one, hadn't I I placeholder trial a mode? it's still which status

John W. Lindsay

they to were acquisition. MOTIVE prior as working is the

that there you are And so varying are if they they have models charging of their in different yeah, business levels they the they yes, services. And will. product but provide, terms how charge, for of

are And levels upon so of there different they're charges, depending providing. what

Bradley Philip Handler

Okay.

John W. Lindsay

again, part think the a note important part not of just activity is today, the work of it's to FlexRig. of MOTIVE is the It's offering. thrown not not a on third pier The that I FlexRigs. of on it's rest And in on – So it it's rigs.

Bradley Philip Handler

third-party using open will And remain rigs, to imagine, Right. I you right?

John W. Lindsay

for independent. drillers. from Brand it where and agnostic that they're Their And we're are is it to directional they're kind beginning E&Ps. whether to or said And to on matter the they work. working again, them FlexRig MOTIVE as base keep And doesn't x. of intent our customer We E&Ps

Bradley Philip Handler

right. Right,

you. Thank good. Very Okay.

John W. Lindsay

All right, Brad. Thanks.

Bradley Philip Handler

I'll thanks. back, turn it

John W. Lindsay

for Chris, more we time probably question. have one

Operator

Waqar comes last ahead. Please from Sachs. go our Goldman question And with Certainly. Syed

Waqar Syed

going the see a working is of you you what for Do cash or – capital source as environment assuming forward? XXXX? a capital changes do question regarding My that in use, is you. expect flattish cash rig Thank working

Juan Pablo Tardio

would requirement capital working the expect Waqar, Juan We Pablo. increase. this to is

relatively probably well. working then is your So in have relatively requirements But, flat going be may which flat, assumption, capital given expectation of that relatively stay would that as a use, given a what happens forward. we optimistic terms

Waqar Syed

we long models to how Okay. your management and Offshore All right. contracts, And should revenues expect then, continue? that those

Juan Pablo Tardio

you're referring have Offshore? – to We the

Waqar Syed

right, That's yeah.

Juan Pablo Tardio

Yeah.

most I under those, X We X believe one believe have type still is day rates. that rigs the working. under rates. that standby are X currently of I that operating day of are

and forward. I'd to So, some There speculating going necessarily may movement expected ahead, numbers. some see significantly if are But, mention be I'd some opportunities we there. change nothing

first to sense. fiscal I think, assuming recur, that the what in probably expect makes see may quarter we

Waqar Syed

The quarters? $X.X quarter, have again that could million management you contract following reoccur margin think in that you the the in December

Juan Pablo Tardio

Yes.

$X million expect management quarter, We to forward, million $X cash that going in at contracts flow future. and again hopefully least from recurs the for during the foreseeable

Waqar Syed

new that international Now, $X,XXX, has that in about utilization guidance, normal? is your it load the some Or margin so quarters? future the could costs still better embedded it get in

Juan Pablo Tardio

to I But, approximately. secured would first improvement don't we would activity. as commitments, a be any entering certainly that exit rigs, with see see to in to we there, calendar that Well, fiscal XXXX. exit, increase And have we mentioned, that XX quarter continue hope assuming given expect we

assume everything terms that following stays of or have first contracts. this it assumption Again, additional but to do if as less hope toward guided margin announce the for for that better, we so, fiscal fair And quarter to of is is, more the think quarters. I nothing we we to in the at point,

Waqar Syed

final year. then next just And one quick taxes one for on

taxes? cash see taxes XX% tax do You you mentioned rate. How versus reported

Juan Pablo Tardio

income see slightly. will our probably tax We liability come deferred down

But So, the a not way. significant suffer benefit some. will tax in

Waqar Syed

very you it. much. Appreciate Thank Okay.

Juan Pablo Tardio

Waqar. you, Thank

John W. Lindsay

Waqar. Thanks,

John W. Lindsay

thank our strong fleet to us needs for sheet, We wanted FlexRig and with confident combined the complementary customer capacity, the our and about in again provide flexibility the people, I emphasizing that gives invest our to balance meet for to remain fleet. technologies uniform reliability, participating again spare in and everyone performance, competitive advantages great close H&P reside by call. fleet want future on shareholders. value I to technology, our because to our

you again great for thank day. and a have participating So

Operator

program. for your participation. This Thank does conclude today's you

time. any at disconnect may You

Helmerich & Payne (HP) 16 Nov 172017 Q4 Earnings call transcript