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Helmerich & Payne Inc HP

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Morningstar’s Analysis

Valuation
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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Lowering Helmerich & Payne’s Fair Value Estimate to $27 as U.S. Rig Market Remains Oversupplied

Analyst Note

| Katherine Olexa |

After taking a fresh look at Helmerich & Payne, we maintain our no-moat rating and neutral moat trend. We lower our fair value estimate slightly to $27 from $28 due to prolonged expectations around a tight rig market. Overall utilization remains low (around 40%) owing to conservative capital spending from large, public E&P firms in the near term. We expect low utilization will persist due to oversupply from past overinvestment by rig providers coupled with a broader downward shift in long-run demand. Drillers typically earn pricing power when utilization reaches about 80%. During periods of oversupply--as seen over the last five years--buyer power is much stronger, and drillers’ margins suffer as a result. About 84% of H&P’s business involves drilling, so industry dynamics greatly impact the firm’s performance.

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Company Profile

Business Description

Helmerich & Payne has the largest fleet of U.S. land drilling rigs. The company's FlexRig line is the leading choice to drill horizontal wells for production of U.S. tight oil and gas. H&P is present in nearly every major U.S. shale play and also has a small presence internationally.

Contact
1437 South Boulder Avenue, Suite 1400
Tulsa, OK, 74119
T +1 918 742-5531
Sector Energy
Industry Oil & Gas Drilling
Most Recent Earnings Mar 31, 2021
Fiscal Year End Sep 30, 2021
Stock Type Hard Assets
Employees 4,600

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