HP - Earnings call transcript Q3 2018 | Helmerich & Payne, Inc.

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Operator

Good day, everyone, and welcome to today's Helmerich & Payne's Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later you'll have the opportunity to ask questions during the question-and-answer session. Please note this call is being recorded. I'll be standing by, if you should need any assistance. pleasure the my Mr. over now is to conference turn to It Wilson, Relations. of Dave Investor Director ahead. go Please

Dave Wilson

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

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

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

may call You that turn reconciliation now calculations and Lindsay. I'll said, release. comments the yesterday's and press to in With John the over find GAAP

John W. Lindsay

Good by H&P this with Mark to Thank going morning. to the begin first morning, H&P. on of call I'm you for joining the course, is, team. everyone. call Today Smith his welcoming us conference

market with focus this providing we want to several teams increase supercharged have of are highlights a technology. during high industry-leading FlexRigs speaks with and glad good continue our in demand we value us, achieved on strong midst for onboard The see you robust to of company four operational There super-spec are So The I morning, the areas our to the Mark. and continue customers. And discussion everyone. partnerships morning. the additional to nurture again, dayrates the to quarter where our in

we've pricing First success is share market the delivered. and

super-spec average pricing market. benefited the per continue our is pricing position H&P's we $XX,XXX sold-out approaching operations range nearing to per activity leading-edge and mid from superior stock Land and in is U.S. on day. capitalize the spot Our higher $XX,XXX pricing as day

our S. rig in have to super-spec where success in well three approximately overall to also in the count addition market have In we obtaining terms, believe leading better the we improve position as Further, market commercial top share market been both fleet XX% as active share most we we in share the the basins U. able have dayrates in today.

customers. XXX we total upgraded in super-spec first We FlexRigs super-spec the Land leadership the for managers market price we of the forward we Looking the pertains expect second and oil pricing XX the that efforts. close and bringing the over gap today's will with super-spec would provide strong average drives for credit the in market. fiscal I'd year, pricing area marketing thank position to spot demand. next reflect believe environment persists, pricing time our months super-spec want and rig that of to power morning provided metrics U.S. outlook maintain My to the their we group take leading-edge our and account I few proposition to value your the quarters. this nine improve fleet. a to the super-spec this like better maintained efforts Throughout and to each to capacity, give lot of the focus the our FlexRigs you to to sales pricing of

that embrace tight the expect FlexRigs technologies as market As I drive more customers trend economics. we mentioned this earlier, to drilling unconventional the endure for is and

our are length, rig average which XXXX. two-year from The On that it has a we tighter A pad which plan increase the a benefits cost from capacity, performance risk current multi-well few term over enough drilling multi-well more delivers side, the to is X,XXX the of XXs dayrates, continue in feet time, per has operation. remain the well and economics incremental significant upgrade the for move command in mud the the today project. setback will overall markers are pumping that positive rigs increased faster the The length and and performance therefore, rig feet, the spacing. Land well drilling had we averaged primary and, include XX cadence. slightly If contract a the U.S. We is strong in customers lateral efficient on pad attraction factors lateral capacity an drilling the and impact of X,XXX of a super-spec primary capability capability, mid of demand cadence, quarter. maintain just to complexity

during upgrade, Permian we new the the leveraging and are FlexRigXs optimistic With near-term all in and to the strong rigs barrel budgets available for seven to a the a adding $XX are people to reflect walking most the can it's addition have their potential service, today strong demand, rigs spending the into also XXXX Permian industry. the mid-XXs value super-spec investment that that and we bottleneck demand is XXXX capacity year. we upgrade. $XX convert the FlexXs we FlexRig hovered is price. and in that the but count experience to the that yet we on in E&P oil Oil The excellence quarter E&P the year reflecting current and continued to at the we in accordingly. to I momentum identified headlines, fully somewhat, point the H&P Therefore, increase continues believe technology have from third with have clouded outlook but to all in concern rig not FlexRigX want delivering low-XXs for has to causing the prices also similar bullish the our are in CapEx you issue and the transportation prospects per FlexRigX brand My give getting we safety, In super-spec on customer on perspective others. attention process the H&P market is differentiates our

in we customers have rigs, count at and is and to fiscal committing end at in FlexRigs XXX to service XXX rigs few super-spec basin the QX to this quarter. rig FlexRigXs of FlexRigXs. continue QX, from today in addition a second calendar the up Our standard And

With rigs we by roughly in the in could hand the commitments today, year-end. XXX Permian we reach fiscal have

So seeing we we in experienced environment all we're hear we've and of the Permian. other seeing price a of Though surrounding are plays rig pullback oil concerns looming as capacity late, that activity the of also improved in indications well. the strong takeaway

to of XX% in the the growth Permian, part SCOOP/STACK and activity play of these rigs footprint top is strong of our in in the share XX% in another Ford, each So XX% active basins. four for story Eagle XX% currently have market H&P the in We our the Offshore from plus as the that budget additional Bakken. positively International with during $XX We businesses quarter. rigs Higher crude price. also the a other could needed, if dollars were June and have basins, contracted believe impacted oil oil shift Permian prices

additional point advances these our hopefully plays. Argentina on especially its We to segments fiscal pursuing is see our in will technology and in growth are in XXXX, an My continued drilling actively in and resource automation. begin final update subsidiaries opportunities with unconventional

technology proposition and Driven tighter by value our as longer to Technologies see Magnetic Drilling Services, the trends laterals numbers subsidiaries and Variation new of the industry toward – long-term drilling increasing gratified MagVAR. well are provided services impressive MOTIVE and of contractor also in realizing customers We by on create on are driver to and H&P an platform spacing, rigs. automation. important are digital FlexRig utilize technologies activity rates additional evolution at These the growing both both leading-edge, FlexRigs companies opportunities provide our other known and

exceeded by over These and our are drilling FlexRigs delivering executed wells successfully of we slides As the that multiple very experienced drilling vertical, accomplished directional autonomously drillers. Field digital often that drilled it currently has Using underway lateral next those proprietary the most system, combining all a the compelling FlexRig several on accuracy control extended in in to of and Basin with our reach promising by trials the platform our sections. Permian and the automation value-driven the namely well. horizontal trials the sections well, directional results performance with evolution, the of were update majority algorithms including of MOTIVE enabled are automated process human automation. stage accomplished curve were

and directional important the is except still rig be to he's would the five tools MagVAR occasions. its we and rigs of over million quality MOTIVE these of in in three similar rare progress touch in active their the continue the where required and over XXX remain segments X enhancing operation, on wheel market. part with pleased the analogy, MagVAR on position wellbore. to of correction are but wells the this out market this, grow these guided to there with and More As leadership of come drillers feet footage the continuing autonomous over lead MOTIVE car a steering actively an steering are respective horizontal but XXX level not to is to the Using driver trials. survey levels,

our U.S. the creating multi-FlexRig is kind in derricks. have Mark, The multiple-activity a their pursuit solutions easily FlexRig of automation. the In well is Instagram first of family general H&P derricks, the onshore is called by that customers. also another another is of to refer achieved milestone activated having its new customer turning a with to of distinguished addition over Before rig may think will we Facebook. of two programs. to call longtime I and rig our design capable you them This offering in to result as drilling value but mast, June, project example particular it's This people on or first we seen to additional collaborating good in and of H&P the actually that in maybe

a fantastic The a a is the and a the prototype engineering customer Our the quarters. will simultaneously. multiple delivering functions allowing did new working safely, over to about perform listening with and customer combination over and had I'll on the turn FlexRigX multi-FlexRig and vision. efficiently we call Mark group in now of the to the inquiries rig be FlexRigX, few the job customer, several We've Smith. reliability analyzing next and performance And to design

Mark W. Smith

position. I review will of John. our guidance operating our Thanks, for financial third the year remainder provide fiscal quarter's results, fiscal comment and on Today the

million, and third employee Land partially the additions increase completed in previous revenue to Let's primarily U.S. than highlights quarterly segment. to million our to start million to $XX $XXX The due quarter the and of General correspondingly increased million in the for days and recently expenses generated is totaled the quarter. our day The to higher due fees. versus counts primarily professional $XXX third quarterly the $XXX administrative costs Q. revenue the for revenue guidance Operating average increase quarter. nonrecurring versus in million $XXX prior for per revenues with previous in company

Both from tax provision diluted tax continuing in where approximately $X.XX share third $X state incurred during Concluding our to in of million quarter of per quarter. a the operations income second discrete international the consists the $X.XX fiscal QX that quarter. per Our related press results, per a operate. quarters this for of diluted items, release. in adversely $X.XX selected $X.XX versus highlighted loss $X.XX of previous quarter's versus share the and a a impacted loss are share jurisdictions as the items in quarter these we loss H&P were of items, was by Absent loss

in Land turning X% rigs the three and the third quarter the U.S. of with beginning rigs had active segments, Now fiscal contracted exited quarter-to-quarter. We XXX number an to of increase with our approximately segment.

has We continued XX XXXX. through April the again earnings rigs. of the Permian activity the call growth a with seven once a and on end led XX, beginning quarter The from increase expect the fourth to increased similar quarter fiscal of end rig Since increase. last activity the of to way by our experience in

the H&P mentioned, Ford SCOOP/STACK. in the Eagle – three John top leading U.S. has and As the share the basins market Permian,

activity XXX, each are XX in contracted, levels and Our respectively. XX at rigs

the of are Ford, SCOOP/STACK, idle John XX both which favorable upgradable continue The well that have Permian, conditions FlexRigs of super-spec; to idle FlexRigs FlexRigs idle XX upgradable. which Eagle the in as improvements. market are to the X are upgradable XX XX which We in allow as pricing mentioned of in to super-spec;

Permian for earnings one-time the quarter's early the $XX,XXX in part termination average part to higher to The previous the revenue, the average wage costs mentioned other Excluding rig day increase rig expense due and and per in in per our revenue to pass-through call to quarter. $XX,XXX increased day costs. increased

to to count at average quarter XXXX rig of increase the expect dynamics approximately the $XX,XXX. Now U.S. looking super-spec rigs. the for $XX,XXX per of value approximately basins ahead third as per they the an expected expect to due is differentiated representing across by adjusted sequential revenue Land, a to for we numerous XXX increase fourth fiscal revenue customers The we customers. continue days, day, our Compared of to the approximately X% average driven rig increase quarterly to of at market in day number contract FlexRigs deliver quarter

and XXX We of day contracts rig absent rollover will, day to its passed directly is average keep level continues approximately The comprised of to relates to that our market. term to services the decline. active rigs the expected of perspective of these and directly higher for important increases. is normalized We upfront all through is $XX,XXX. term under time. now per of affected Permian recent our is auxiliary rigs day related legacy relating $XX,XXX, segment the a expenses. quarter. that decrease contracts Historically, of amount stated are very as the of however, company that in approximately the continue new-build most as working XX in cost neutral it been XXX post of an in the higher third estimate to customer. cost due expenses that contracted partially downturn $XX,XXX, to wage the Part see Today, to expense day impact normalized $XXX to one-time term the are this $XX,XXX that costs the significant offset rig Land an have remaining and average increase average rig under the rigs expense increase normalized of the rigs expense had as our per to with average XXX expenses the the operating priced to increase, has U.S. margin rigs idle demand. per per in count customers the auxiliary normalized related in is The during mostly and but This current rig quarter day of some inactive costs to related contracts were per part reactivation sequentially excludes to It's idle

earning per have expect quarter, under the fiscal average contract fourth an of an rigs in $XX,XXX margin term We to day. average XXX of

approximately For rigs new the expect already average $XX,XXX. in to contract seven expand XXXX, term under we we have to to margins

$XX,XXX. fiscal XX associated rigs margin term XXXX, under in the For the contract is

third the higher reactivated rig sequentially, platform end Turning to one our Offshore which Operations back was into quarter. The resulting sixth expected to segment, put six we third by of to primarily work. at rig rigs the margin rig the rig startup contracted during quarter, than cost decreased that average per driven day

segment, fourth look eight our the fiscal forward we we As currently active. the quarter for of of six XXXX Offshore rigs offshore to have

versus to is during last to the opportunities While rigs work is to there quarter at imminent normalized are put per margin time. over quarters. fourth nothing increase approximately this expected time, to average The rig $XX,XXX of the a additional level day more few

increased XX% the Land in quarter expected, of rigs by the three due Colombian third International as days the our quarterly revenue reactivating number approximately market. sequentially in segment, to Regarding

the in unconventional to while active the to expect including Argentina Bahrain. We market to X XX% Colombia in overall segment, of our is We drilling is higher. fourth XX the end in market XX share believe in there this Argentina, our about with share quarter rig much X market and XX X rigs in

footprint, continues strong believe Argentina develop. we as to and the scale relative our Given positioned unconventional are to we grow market

this me fiscal corporate Now for look forward remainder items of on let the year.

S. strategy this other in in Permian market investment the U. increasing year has basins. H&P resulted and Our fiscal for CapEx share

and future. the needs into to and enable value Our us upgrades of our and enhance today useful lives existing customer the provide meet capabilities fleet and FlexRig

is the FlexRigs standard million. capital abandonments maintenance XXXX primarily million The Given – in an approximately Note are so approximately upgrade be of level range previous year. our to to $XX plus contracted capacity, to H&P's full FlexRig still is is fiscal at estimate the CapEx are of rigs CapEx that additional CapEx, of we super-spec or that $XXX total tubulars. high the of estimated approximately attributable to $XXX of increased expected and opportunities estimate super-spec at we end depreciation range seeing to adjusted XX% related including to million, our upgrades. million $XXX the guidance expenditure be Depreciation for have

general Our the full be expenses expected and administrative to approximately for year $XXX million. are

MagVAR. We enhanced capabilities MOTIVE of innovation and have acquisitions the significantly our technology and with

expanded original we to quarters, our have field Land as expenses. with the in prior John our in added today built XXX. Tulsa addition, support is note when growing. In count rig operating was budget, to we certain it fiscal goal has our mentioned and rig that reduce U.S. Also XXX rigs And growing capabilities XXXX fleets

mentioned federal we XX, rate XX%. for As income XXXX fiscal September our tax year-end approximately U.S. statutory quarter, last is the

In we foreign income tax provisions. impact and state addition to are the rate taxes U.S. statutory our to expecting incremental

XXXX looking Now $XXX of facility liquidity on financial $XX Including had investments & million hand approximately at Payne million. position. $XXX was and our revolving our million. short-term June at XX, Helmerich availability, cash of approximately credit our

Our quarter-end XX%, at best-in-class our group. debt-to-capital was peer a amongst measurement

no maturity XXXX. until have We debt

H&P asset reinvestment our the and for opportunistic conventional continuing in and to position up-cycle. serves strengthen fleet our Our onshore FlexRig base

asset while to market utilizing Our FlexRig existing share effectively our increase base. goal is

H&P the generated Therefore, to dividend. from very in capital Our level balance to flexibility reinvested shareholders that flow goal term shareholders. continues fleet be simultaneously backlog and operations sheet free to longstanding the strength, and our liquidity through to contract our provide while returning cash return pursue

on facility cash availability. our hand. existing to market pursue utilize revolving to we upgrades to of a have credit remain will expect we available share FlexRig not We goal reactivations us, growth and our through that our portion As consume do

coupled cost with horizon, fiscal in positive our and this Looking the quarter. the fleet free will third yield cash focus disciplined concludes comments our the centralized ahead flows. That investment expanding planning for prepared in

Wendy Now let me for to turn the call questions. over

Operator

our Tommy with from Stephens, Moll question ahead. will Inc. we take And first Please go

is line Your open.

Tommy Moll

Thanks for my taking morning. Good questions.

John W. Lindsay

morning, Good Tommy.

Tommy Moll

I on wanted FlexX to the potential. about comment follow upgrade your up

need to potential and called Am the the efficient walking that's where under seven or more you returns with think parameters a that term range contract the out to about attractive? capital basic and upgrade super-spec right FlexXs million that I investments FlexX two-year be think provide there's upgrades. line I in the mid-XXs the the $X you were with with

John W. Lindsay

Yeah. Tommy, on. FlexX doing that that so it's is, we're conversion a a

FlexX And And that would $X yes, pricing. to expectation ballpark the described So we're it's two-year converting that walking. FlexX how line upgrades is be we've and the these mid-XXs term contracts million. our with in

Tommy Moll

at there And peeked as Or how later? for seven, a found it in remainder you potentially first Great. was look at just to you of you could fleet have just the go think FlexX about go but the follow-up, deep back could upgrades?

John W. Lindsay

Yeah.

time. I think of talked we've over this kind about

spent haven't just lot we've whole upgrades simply haven't time and a of on the the had of had, FlexRigXs. We the this time all of because on we course,

engineering with up some work, seven. group did came these our So,

additional it's come but to We the of kind on timeline be the would that, any There'll say haven't more be. on done work others. hard what to

Tommy Moll

kinds going? integrations portfolio? it update capabilities of in More more to how What then automation. are of advantage there you want your technology, is acquisition enough. with shifting data see which you those MOTIVE FlexRig original seen getting curve the add the with And of you're capability. a years back number of Thanks. the Fair customers? recently, of the us now you MagVAR, Can to and suggests technological might we've And goes other do to terms from anecdotes on

John W. Lindsay

strong important of Sure. cultures, a success. similar has The both I think companies which really integration welcome. to is been It's integration. been Really You're good.

rig at when is at to or made the is, probably success so. think MOTIVE look and you the so speaks were we really I think think or acquisition, if I count what growth, rigs around XX the I we XX

some So there is adoption.

can business, upside, real got be somewhat slow. But know, real it's some opportunities. in As you adoption it's our some got technology

wellbore talk about more quality wellbore us important. and heard more being and placement You

And working to MagVAR. say a So on that, in has today. over a MOTIVE rigs want FlexRigs. the both MagVAR third companies does XXX about role in I H&P that they're as again, terms of plays big of is

H&P piece, about playing said, well. that highlight And important. to so kind a level we're team working of like automation, that's is I that So three to as automation large in the with the excited MOTIVE role and kind that in then getting, of

looking is been I side strategic. The keeping think there there? important for opportunities. we're So open acquisitions side have other out Obviously, Are both of always as opportunities our well. equation the an other eyes data

feeling yeah, about it. So, pretty good we're

Tommy Moll

That's me. all Great. for Thank you.

John W. Lindsay

care. Take

Operator

we'll with our Handler next from take And Please Jefferies. ahead. Brad question go

Bradley Philip Handler

Thanks. guys. Good morning,

John W. Lindsay

Brad. morning, Good

Mark W. Smith

Good morning.

Bradley Philip Handler

please. I guess, let's talk some numbers,

XX the you that and XXX the rigs a contracts XXX contracted rigs little mid-May, can term in with the So, some they versus you talked rates earlier with about compared have on the us as may in tell about color those on year?

John W. Lindsay

Brad. Yes,

Bradley Philip Handler

afraid a cut I was got Okay. minute I for off.

Mark W. Smith

The alluded average rates, term his had of about are mid-XXs. John I a those would as comments, is our And say. prepared to year, approaching really in

Bradley Philip Handler

believe that than even quarter or we're think the I progression calendar the to of first year? seen have we supposed the made mean, something? course contracts say, through, April I they were or through Presumably in higher

John W. Lindsay

We have, Brad.

most year. are between those we're to contracts I and two on into average two year year we're recent the requiring think entering If Mark's one is reference are upgrades, XXX. one that's The years. there

most a those for we're contracts obviously factor. The entering average contracts. term into higher non-new-build the are that's term than So recent

Bradley Philip Handler

Got it.

own perspective rigs four XXX on recent super-spec a horsepower fairly actually super-spec. your think hearing some fair around changed of taking are opportunities from super-spec. course, and competitors the the you rewind I'm of How X,XXX now? Okay, where be to to from to reference it? your that thank the we've rigs growing of the it talking number could to that industry? a I'm you was putting that I were number tabulated we if about much it amount apiece and and starting about just ask to I grow? capital, rigs $XX your of guess, off thought about you. Again, roughly easily your million that is capability. FlexXs. one going example upgrade But then, call have I today upgraded we your And for has industry perspective? And so, heard And upgrade example, guess, to if you I to comments, still one coming Is

John W. Lindsay

that I is that running our that know today number there's Brad, because don't pure definition can we in why another that think the that if XXX the XXX much. that growing reason upgraded. use, are And There's be so you're we we think around using calculation, is super-spec that have upgraded. been or

think We those, around to now, have are XXX of and half maybe close I of I half working. or it's XX% those think

the to the I horsepower. actually be going still the of well, be a reasonable think are rigs about those kind to that is, H&P which outside of at able the what price. X,XXX the So of fleet, And fit then question remains, your of to description upgraded question rest

horsepower to I'm and strategy not some horsepower not that the the think right are I them to deem at classic like another and upgrade we still into some others, that the definition, anywhere may higher the that consistent there's X,XXX XXX And to to captured marketplace. rigs of information capacity. rigs said, the pretty they interesting taking some think to put then In is back economic been certain that I XXX of I those enough kind lower-end have total looking So we in it's upgrading now. XXX XX of think contractors are of just a then probably probably was XXX fleet are that we've saying the in the upgradable rigs thought to think you're I I describing. XXX pure are there out in from – range.

Bradley Philip Handler

you. you. Got Got

Okay.

Mark W. Smith

the the remind Helmerich multi-pad FlexRigX to out. would With we on the depending that good $X Payne FlexRigXs you and essentially essentially that that X and numbers capability XX place prepared vessel. less have XX at threw & to is that place we of conversions cost type here super-spec to the market Brad, we're on relative John be comments, million in I we just the mentioned in take put can his the or us a

Bradley Philip Handler

but understand I out. sure, that for pointing for point, that thanks

guys. I'll Okay. Very Thanks. good, back. turn it

John W. Lindsay

Brad. Thanks,

Operator

from next Colin ahead. And take with our question Davies we'll Please Bernstein. go

Colin Davies

Good you. morning. Thank

John W. Lindsay

morning, Good Colin.

Colin Davies

Good morning.

like with the mean, it's beyond encouraging think little are of some next to increased capacity as the I activity we about next I'd sight where beginning Just a phenomenon end of takeaway line to bit? in the well. little issue, play And But color line talking this and this remarks in confidence give your of more about issue. bit you've very as in got the can fundamentally Permian talk that to a quarter temporary obviously, prepared the to of year start does or you year outlook sight next or sort that of in wither as middle next we or year? of

John W. Lindsay

out committing keep even mentioned that is the with our Permian enough into try calendar have of reason QX are that I is have I – to go which rigs, I we why this XXXX and primarily quarter, XXXX. and in the to upgrades Basin. that in that and clear rigs of first are the mentioned to super-spec think customers of calendar the remarks because QX and far some rest that prepared year, future know to And QX we calendar out rest primary this the the and taking reason quarter contracting that don't Colin, insight I of we

oil not a haven't actually today's of $XX $XX $XX So $XX function any low oil from is been we price Again, to that we price, we've think that activity a to a customers. behavior seen change experiencing.

numbers commitments adjusted budgets haven't upward. XXXX. So be adjusted possibility We their think our capital. what upward their to budgets How that all bottleneck completely customers in are could issue there's speaking been get we're through with the hard are your that around, to arms that customers working rigs have and but kind of out really behaviors of that disciplined They very really Permian and making. a is higher shakes

Colin Davies

see you of just are when that much if growth to within super-spec the how those rig? net around starting how related customers to about very color that think helpful. growth even is and can perhaps displacement the drilling, may. like, to we category much and with Perhaps of one of non-super-spec follow-up, that some rigs it give you as now is, if That's Permian, of that, the a that demand, programs displacing I taking And super-spec you're

John W. Lindsay

probably We a think pick probably mix will is that displacing a a answer. know super-spec are lower-performing the with examples have I right it's intent rig. up there FlexRig a of that the customer do

drilling rig. that keep Sometimes that rig rigs horizontal complexity trends, them the there's think sometimes to in going heard I you rigs – and say SCR may is lateral When around today. directional an and well wells mind, length One those to it's for is are going older have mechanical I harder rig are be rigs, start XXX to legacy compete. rig the trends, before, think that considering continue thing an SCR you still AC us to to

do So the a to going combination. that I think happen. I the it's that's continue – think But cycle cycle think I upgrade remains – to remains

are think both place. additional I rigs taking replacements and

Colin Davies

other relative given displacement dynamic That's there to any is Is very of Permian, some helpful. just the the basins? sense that Permian has higher of different the maturity demand in that

John W. Lindsay

in I there as it. laterals, mature because been some maybe, the Bakken I But say, support think in the don't the as, Eagle or particularly I not of to there. facts basin but the unconventional think years it's the is reasoning think sense it make terms has behind there's have potential play, I Ford that. does longer that

Colin Davies

helpful. it very I'll Thank you. That's back. turn

John W. Lindsay

right, Thank All you. Colin.

Operator

Please our from And RBC. next question we Kurt Hallead go will take with ahead.

Kurt Hallead

good morning. Hey,

John W. Lindsay

Kurt. morning, Good

Mark W. Smith

morning. Good

Kurt Hallead

welcome And Mark. Mark. aboard, Hey

Mark W. Smith

Thank you. be It's here. good to

Kurt Hallead

said in John, you a Obviously, been drilling primarily drillships what rig. you deployed concept interest the definitely launching on dual-derrick peaked about has think dual-derrick land hey, So, I my obviously, offshore.

kind business. foray the drilling of So it's that of the first into land

mid-XXXXs? So – the it the maybe see give what if you expect of you us & rate a first as evolving evolved back concept And FlexRig Payne of time? adoption dual-derrick early way for that Helmerich sense some to context, the concept when kind in in the to same launched possible, do over kind might John, in that get potentially

John W. Lindsay

of something in had I early going try have customer that to a trying think of very we very, a lot it work kind onshore. We interest is for understand and a that internal application what This help really game together of it's make we've and had think to about kind the of happen. it's that to I talked in Kurt, while. kind

a offline might just I that time, think of rig's at be some still there's mid-June, flat the start again, have the some another. some work lot together, capability. economics the I again, the of thinking one they're to a of go rigs that simultaneous kind looking – lot can able learning. there's so also opportunity when you NPT, think some work can been operations still But advantages – for out just of from about multi-functionality, on minimizing as But and of they the of since

of a those structure, and So of ability it's footprint than I then drillship whether it's but is similarities, think think we're the the do We some by whether rigs some limited capacity. have a a work to different I Offshore also also there's probably it platform. not have the independently. together kind the ship, additional of Obviously, or There's model.

So it's features. got some

out an thought Again, with out so get and But and a lot talk we're We obviously to think figure it that's I we Facebook there from it about capability get thought would more about make of what think pretty probably it little it's out talk least a bit. these those Instagram have again, like. we'd to to have. it. quarters going fleet we at trying FlexRigX and hard, do to a look of hit the I – sense these FlexRigX. types type rigs, of of couple a of We the in and a H&P perspective, that projects

Kurt Hallead

concept. Interesting. Interesting

great. That's Okay.

think increase in of drilling So, pretty I you kind little you the bit that if because motherload on could increase guess, or in there's and follow-up after acreage I see that. demand? in that my lines much terms some lot outside E&P of put outside along Permian. question about potential wondered a unlikely the varying wondered to have be would you're been what outside the – just the don't whole And companies bet into to go some okay, that I had discussions Permian, potential Permian if seeing on provide just say, investors it's the any Permian rig to significant a the have perspective context I might I've able with talk can you be of

John W. Lindsay

Yes, Kurt.

are these H&P you have into which We've the news oil we in is have up some rig And to some activity see count couple I $XX are a additional set in see upgraded basins theme that or to that to to got growth $XX as $XX being two to super-spec many Bakken, and And part need $XX are in I can had year of Our a to or we end slightly reset couple went the budgets those think with upgraded that the oil have to that then is outlook, work that of it in Eagle of is rigs. the that going basins idle that's Again, the commitments price in won't positive. budgets because Ford, cases environment great kind story the going SCOOP/STACK price today. and idle a or that rigs production. three think you're in that oil believe rigs play. We underlying that some probably towards here of with of be for to be some the again, is what $XX $XX if part a environment with super-spec XXXX. to

horizontal work. think compete we additional running still that be in eight again, are that mechanical a have or probably an to way finding FlexRigs FlexXs XX rig a XX our rig environment. find drilling that that, we are environment against again, running FlexX of well, upgraded Because, that think oil their have to price or if sort I you super-spec competing a stronger to in about think SCR chances I into that I like and today able aren't

Kurt Hallead

of put with a if And us know, day. normalizing out kind gave may cost it. just Mark, around on additional follow-up revision close one just I went can Got that on the normalized of working number guys operating or to level you that would How level? relates to a think that we as rigs what about context operating what get I $XX,XXX that? through cost into operating it the I and per it to you if should at side. wondered cost take

Mark W. Smith

reactivation The mean, to The that the $XX,XXX get normalized there. $XX,XXX. we're idling or you cost incremental $XX,XXX I costs approximately $X,XXX the cost and from is, essentially

a the will is we $XX,XXX where number So think hold. we

Kurt Hallead

upgrades, kind that additional was the no – that out to be of that assume to trying kind concept. could on what right? – you that's guess, would maxed just that get you'd of figure out So trying market. trying I to I provide was into Is to what I

Mark W. Smith

I'm I following know question, if your part don't Kurt. of last that

Kurt Hallead

That's right. all right. up That's follow all That's I'll offline. fine.

Mark W. Smith

Thank you.

Kurt Hallead

Thank Thanks. you, it. Mark. appreciate I

Mark W. Smith

Appreciate the call.

John W. Lindsay

Kurt. Thanks,

Operator

next John Please ahead. And with go to Simmons we'll Company. go Daniel &

John Daniel

Guys, small sort just it's versus customer easier John, E&P customer the generalization, would players? me. a be color on you you cap large the bit and us can a I color any sub-segments, with hopefully be of a appreciated. just perceive more I what private know ones cap provide ideally to couple of for but demand mean, versus mindset share

John W. Lindsay

I other. differentiating that John, a one the view between clear I versus don't know have

public their clear what very thoughtful discipline companies, the I decisions they're they're to level high think their in a it's larger the capital they've they're sticking and companies, clearly budgets, they're made budgets, being of doing. what and that having their

never and me that is that is the us opportunity had an the smaller work have it about for I for. gives the one to only think things work downturn opportunity over probably say companies an previously good this customers heard we of would you time what

rigs I XXXX. running when have we customers XX customers think So didn't XX in We we have today. had XXX

customer and anything other sense Mark or But a have there really you for don't have anything, I we do expanded really we've Is of? our can think So Dave that. exposure. than base

Mark W. Smith

No, this couple we've putting we some John a of last across quarter commitments I think to, mix types rigs clients. the into and have, still been the alluded various of see had we as of new that quarters, to E&P work next the

would I differences the of discernible between say no type So client.

John Daniel

those half that have clientele some rigs? been Okay. okay. you smaller, seeing year, be sounds basket that that the Nice would release potentially anything looking be of more suggest the of drop the Because well-capitalized It know. that would back less like is you're likely would as there to not customers, to that get speculation in rigs to

John W. Lindsay

churn a in mean, I so. fact is think there's don't the count. the sure the rig of I matter always level of certain

a to end begin if performing quarter the of if then year, have that the into I a back at super-spec the they think the the and going reason in rig customers get is rigs rig wouldn't first you're of release to business particularly XXXX. high

than going Now going of be going a to have whole to out contract go upgrade and have you're going you're in the rig to through you're to to and process. you're go line STACK to have pull and more then likely it to

quarter work or I would that to going a to in two rig turn believe way. up out back to little a that it don't that thinking pick a – it going it's consider they're because find I release to going just challenging around, just they isn't So it

I operators that. know So think the of most

would I they to got they've they've going that got rig, be if to think release it. I'd hang a they're rig, I good think on a surprised quality it.

a later. Now as then dice with up performing back if see well you might you it's not the roll rig high and what come

John Daniel

And guys But that just or Okay. this if you market? for outlook thank an operations that for – in last – and for what's comment is California? probably still the you then maintain me off-the-wall one And do question. so,

John W. Lindsay

a platform in very, or there, perspective. years. offshore. We the many for rigs We – John, but a think there personnel big it land XXXX We environment, many, XXXX had I We very we work challenging XXXX. don't. presence exited from worked – had just worked it's in offshore. We to

California. people in great have We

contractors and Texas operation in still likely of matter in very rigs, into But it's land in you wasn't it West fact, Texas. go They for to two least the friendly West on employees, of California. off. living work two friendly, very our visit week some working – are run two very, a not California that on, and As to us our it's two Great employees and highly when for good schedule business you going at week you're workforce.

what's to on So out I really speak going there. can't

John Daniel

remembered, enough. you, have forgot. probably but should Fair Thank I guys.

John W. Lindsay

No, Thanks, problem. no John.

Operator

go Holt. Pickering & with question take next And our we'll Taylor ahead. Please from Zurcher Tudor,

Taylor Zurcher

guys. in. squeezing me Hey, for Thanks

John W. Lindsay

Sure.

Taylor Zurcher

John, in higher, the obviously like a count Land slight U.S. in rolling period rigs, been contracted it mix to from shift of today, to seems contracted rig term there's but has those moved spot. June XX some your from

that's noise of some think into underlying to play? so flexibility perhaps the year-end indicative in just curious And if customers numbers preserve at just or you some some trying or dynamic

John W. Lindsay

of rigs terms having contract? under term In more

Taylor Zurcher

having of I rigs under XXX XX, like June contract. XXX. today, terms If had looks In you look at less and term rigs

just some just if noise you...? that's curious if or So

John W. Lindsay

function had do into was. rolled bit it's into. of a during noise. rigs just enter that as Yeah, little were I'm off what just off sure it rolling entering we to just didn't That's that rigs of we mostly large quarter the with were the number a many and really as

I it's term to we small XX%. So think went mean, of very, rigs I very or from XX% our XX% change.

Mark W. Smith

just contracts some of the that And were our pre into rolling actually entered those add, were I'll older some of off, downturn.

Taylor Zurcher

International. last for added is several on mean, then rigs the few question you've obviously past me And months. a over I sense. makes That helpful. That's Okay.

guys mean, or it to moving be continue As forward? America we regions how you the in seems rigs America. some rig market be to capacity Argentina, or potentially might idle you we have in move I will And see still from moving if that you're other viewing hotspot like look moving specific to curious, forward forward, a Argentina Latin even forward, that just U.S.? a hotspot from Latin And

John W. Lindsay

well to in an I it continue Well, to for to in rigs put there's is. And work as I think us Colombia Argentina. think as back opportunity

that or We've nice with other our customer opportunity there. on is do and we that. likelihood a strong hopefully least high great can market build Argentina. position We're base be got there to a an would and YPF at hope have a there's think NOCs in share IOCs continue I to our and in we'll

that's upgrade down we're U.S. FlexXs we I which think the both that opportunity see. as going as here the there, in well FlexXs to have can to what move We standard super-spec, to

longer. laterals we're to to to starting super-spec are of Argentina see going a think type required more offering because begin I the trend in

You're lot the the going seen in opportunities here that to a we've U.S. have same of

be that So expectation. our would

I our we comments XXXX. think in talked about had

you're today, get you As going you're first trigger know, six before if – country. month the rig still can the the in out to probably you pulled you

Taylor Zurcher

it. Got Thanks, guys. Appreciate it.

John W. Lindsay

Thank you. Okay.

Operator

JP next go we'll Sean with ahead. to Morgan. Please go Meakim And

Sean C. Meakim

you. Thank

John W. Lindsay

Hi Sean.

Sean C. Meakim

I about upgrades contract. to wanted ask John, super-spec can either off rigs that roll those or

for appetite the of terms terms this trade customers can versus same shorter view point, your you how off talk lower of in term your of table? And do as greater at sides you're price Just Just of incremental signing in characterize looking higher about you versus you're how rates they contracts? both value optionality the that you for term? how

John W. Lindsay

guess, wants overbuild don't make the certain we're to super-spec just of possible, about balanced not to so super-spec approach. I if all calls, – and talked we've customer super-spec, think last the and kind swing where it, actually seeing. on actually we've as in producer last mean, of the in a we're couple I a call I at the position that we Well, that's got what want needs we a want a

levels have demand. We of high

levels The XX% are super-spec high have customers – super-spec also wells We are of to they're requirement XX% usage. type drilling of that the have wells.

So that's a good thing.

great mid-XXs the be. place our model. and we the would at of years think be So, stage this cycle, two that is to pricing think I And a

good We're that's share place But not a in For now. strategy our right position that. be. right I that's a really now, to anything to think past

Sean C. Meakim

customers? And how about

John W. Lindsay

of for? In their desire terms

Sean C. Meakim

similar yes? side, their tradeoff the on Yeah,

John W. Lindsay

Yeah.

customers have we're and for term. running have think I staggered of their they on rigs most working multiple the rigs

obviously a think that. I not pricing. going part for term they're if balance two-year good need a out a well. of is they the so willing rig put attractive a matter it's And of that that fact is, on to sort super-spec pay and as we're their without The contract us capability, and And to rig

What get into contract. really my a to long their is another They've fleet your a is every maybe don't in if of all. is, of longer I'm think two to years. to at a have this want feel term, rig on any about part they wouldn't got gosh, problematic term I don't up I they're lock concerned I think horizon. do thinking not But question that, pretty two-year I lock course, mix got oh

Sean C. Meakim

makes a of That lot sense. Understood.

scale you now, the obviously, to thinking just a just bit. getting the point that to Just, We maybe the attractive some of you particularly really cycle there you've in rest International the fleet little is about target are Argentina Land some here. markets world, your International your U.S. But next in – appetite hands the full cycle up here? think momentum or any but right are for at discussed

John W. Lindsay

desire Well, have – we you the have desire, time, you followed balance sheet the have the us know do have it. the we long to capability, we a we

require firm skill you you sets take-or-pay do you're It's where investing. to term have We return can these of do a capital a money think get type just important right it. contract. are reasonable the also kind I is you And then when markets finding of that investing the projects get those rate it's that that of for some

market long working fact contractor perspective like from the want best still to the opportunities and But it's on has a is a as say, got right are for been XXXX, place well. U.S. area and to internationally place likelihood those matter drilling Sometimes East. hopefully, long that's those in most some that If type high opportunities. I future think now. near in we We've a in a why But can view it. that logical right opportunities internationally. is XXXX there's H&P you the the that there's capital a now. I And problematic continue the of the think is good there think to Argentina exploit been grows. this I That's last again, Middle for the I then think time the your opportunities. years do get probably XX invest on We've

Sean C. Meakim

helpful. No very doubt. That's Thanks, John.

John W. Lindsay

Thanks, Sean.

Operator

remarks. will presenters our this back Q&A. for I'll to And it any today's closing conclude hand

John W. Lindsay

thank Wendy, Okay, you.

quarter participating they us behaviors levels close earnings company, of and day. thank you call. leader of of want high to by Have in for for satisfy do good this attitude value the again, drive to Those I'm everything going to thanking them thanks, third and makes folks of all customers. the a the our for customer consistent providing key service component continued industry. the today. participating to this I in So what for a and thank all on is drive you again of the for pursuit

Operator

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

disconnect. may You

Helmerich & Payne (HP) 26 Jul 182018 Q3 Earnings call transcript