Shares of Helmerich & Payne Inc. (HP - Free Report) hit a 52-week high of $118.95 on Jul 2. In fact, the Tulsa, Oklahoma-based contract drilling services provider has seen its stock price climb some 42% over 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 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 - Free Report) as one of its major competitors – recently approved a raise in its quarterly cash dividend to 68.75 cents per share ($2.75 per share annualized), representing an increase of 10% 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.
Helmerich & Payne has always been extremely conservative with the allocation of capital and the use of leverage on its balance sheet. This not only insulates the company during uncertain times, but also led to the generation of $737 million in profit for the fiscal year 2013, despite volatile prices and credit restrictions.
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 North Atlantic Drilling Ltd. and Parker Drilling Co. (PKD - Free 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.