Back to top

Analyst Blog

Shares of Helmerich & Payne Inc. (HP - Analyst Report) reached a 52-week high of $84.16 on Dec 27. In fact, the Tulsa, Oklahoma-based contract drilling services provider has seen its stock price climb some 30% during the past six months.

Despite this price appreciation, we remain optimistic about the firm’s near-term prospects, supported by its superior and diversified drilling fleet, continued strong operating performance led by an efficient management team, and an investor-friendly financial policy.

These factors are reflected in Helmerich & Payne’s Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Why the Bullishness?

Helmerich & Payne is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. The company, which has surpassed earnings estimates in each of the last 6 quarters, specializes in shallow to deep drilling in oil and gas-producing basins of the U.S. and in drilling for oil and gas in international locations.

We believe that Helmerich & Payne’s technologically-advanced FlexRigs are the key to its success, helping to increase its count of active rigs and maintain relatively strong daily-rate margins even during times of market uncertainty. The company’s proprietary FlexRig design makes the rigs move faster than conventional rigs, drill quicker and more efficiently, and allows for a safer operating environment. As such, these are better suited for the new demands of the exploration business and, therefore, command higher dayrates and utilization than rigs from other land drillers.

Helmerich & Payne – which counts Nabors Industries Ltd. (NBR - Analyst Report) as one of its major competitors – recently approved a raise in its quarterly cash dividend to 50 cents per share ($2.00 per share annualized), representing an increase of more than 200% over the previous payout. The significant dividend hike not only highlights the company’s commitment to create value for shareholders but also underlines Helmerich & Payne’s strong cash generation capabilities.

Another positive in the Helmerich & Payne story is the quality of its client base, which mostly includes well-capitalized oil majors or large independents.

Other Stocks to Consider

In addition to Helmerich & Payne, one can look at Pacific Drilling S.A. (PACD - Snapshot Report) and Parker Drilling Co. (PKD - Snapshot Report) as good buying opportunities. These oil and gas drillers, with a Zacks Rank #2 (Buy), have seen solid secular growth and harbor the potential to rise from the current levels.

Please login to Zacks.com or register to post a comment.