We issued an updated research report on drilling contractor Helmerich & Payne, Inc. (HP - Free Report) on Oct 5. The company’s industry-leading drilling fleet, comprising advanced FlexRigs, and drill operating expertise lend it an edge over its peers. However, volatile oil and gas prices remain overhangs on the stock.
The company carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
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 United States and international locations.
The contract driller is relatively immune to economic turmoil as it has contracts with well-capitalized oil majors and larger independent companies. Additionally, term contracts and shale drilling demand for its rigs have helped Helmerich & Payne maintain a relatively high level of utilization.
Helmerich & Payne’s technologically-advanced FlexRigs are the key to its success. These rigs help drive its count of active rigs and maintain relatively strong daily-rate margin even during periods of market uncertainty.
Despite these factors, the company has lost 23.9% over the past year, underperforming the 19.3% downfall of the industry.
Also, though oil prices have recovered from its historic lows, it is way below the mid-2014 level. Thus, many energy companies have been forced to cut spending (particularly on the costly upstream projects) on the back of lower profit margin. This, in turn, means less work for contract drillers like Helmerich & Payne.
Stocks to Consider
A few better-ranked players in the energy sector are Par Pacific Holdings Inc. (PARR - Free Report) , Transmontaigne Partners LP (TLP - Free Report) and Lonestar Resources US Inc. (LONE - Free Report) . All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Houston, TX, Par Pacific managed to beat the Zacks Consensus Estimate in three of the last four quarters at average earnings surprise of 195.26%.
Headquartered in Denver, CO, Transmontaigne is involved in the transportation and storage of refined petroleum products. The firm recorded an average positive earnings surprise of 6.60% over the last four quarters.
Based in Fort Worth, TX, Lonestar Resources is an upstream energy player. The company’s 2017 earnings are estimated to grow 79.7%.
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