Riding high on record profits and continuing efficiencies, the contract drilling sector nevertheless faces uncertainties during the first half of next year that require patience and flexibility, said the CEO of Tulsa-based Helmerich & Payne Inc. (HP).
CEO Hans Helmerich dished out his cautious optimism after his company reported record income from continuing operations for its full fiscal year 2012 ending Sept. 30, and increased profits quarter over quarter for 4Q in the same fiscal year ($573.6 million, or $5.27/share, compared with $434.6 million, or $3.99/share, for fiscal year 2011). The 4Q results were $149.6 million, or $1.39/share, compared with $121.5 million, or $1.11/share, for the same quarter in fiscal 2011.
Noting that energy price volatility was a factor this year, Helmerich said “it is hard to see natural gas prices increasing enough to add much drilling activity in 2013.” He thinks shale and associated gas provide attractive markets, but HP will “exercise patience” in the first half of next year to see what happens to gas prices.
HP has been “aggressively” shifting its fleet of 289 land-based drilling rigs to almost 100% horizontal drilling, and at the same time the revenue production/rig has increased by 50% during the past five years, said Helmerich, adding that since the U.S. rig count peaked in 2008, HP’s count has increased by 25%.
His intention is to “continue to lead the industry in activity and margin levels.” HP and other contract drillers earlier this year continued a strong shift away from dry gas to drilling in the liquids-rich associated gas market (see Daily GPI, April 30).
COO John Lindsay outlined HP’s active rig counts and the prospects for it going lower, but he also said HP has plans to bring on four new rigs next year, two each in January and February. In the first quarter of fiscal 2013 (4Q2012), Lindsay predicted the company’s rig count would be down.
Helmerich said HP “set new standards in 2012,” and this, along with its “organizational competencies,” will be needed in facing “uncertain market conditions” in the near future. The company’s ability to recruit and train the best people possible will be critical to HP’s continued success, he said.
“We picked up 10 new customers during the past 12 months,” said Lindsay, despite the fact that in the last three months the overall U.S. rig count has declined by about 230 rigs. Oil prices are the driver, he and Helmerich emphasized, and natural gas could “provide some lift,” but not anytime soon, so the other factor to consider is when customers will begin to push the “re-start button.”
“We’ve been encouraged by some developments of late, but we have to wait for customers’ drilling plans and hope we see some lift,” Helmerich said.
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