Tulsa World: Price bump aids local drilling rig company

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Price bump aids local drilling rig company
Helmerich & Payne's profit was still down significantly from 2008.

By ROD WALTON World Staff Writer
Published: 11/20/2009 2:19 AM
Last Modified: 11/20/2009 4:47 AM

Fiscal fourth-quarter profit at Helmerich & Payne Inc. topped $51 million as oil and natural gas prices began rebounding this summer, officials of the Tulsa-based drilling rig company announced Thursday.

Annual net income hit $353 million for the fiscal year ending Sept. 30. The profit was down significantly from fiscal 2008's record $461.7 million in earnings but indicated an economic turnaround in the drilling sector.

"Rig counts have responded to the higher commodity pricing," CEO Hans Helmerich said in a conference call with media, noting oil prices above $70 per barrel and natural gas over $4 per million British thermal units.

In addition, Helmerich & Payne will pay off more than $100 million in loans early next year and generate free cash flow for 2010.

The company also is finally getting some back pay from Venezuela after idling all of its 11 rigs in operation there. Helmerich & Payne collected about $32 million from the South American nation's state-run oil company during the fourth quarter but is still owed about $73 million.

"We've seen progress in Venezuela," Chief Financial Officer Doug Fears said.

However, H&P does not expect to quickly put those idled rigs back to work. Venezuela, which allowed the debt to reach more than $100 million at one point, needs to sustain its repayment efforts, officials said.

"We don't want to push the restart button and find ourselves in a similar place six months from now," Helmerich said.

Helmerich & Payne's fourth-quarter net income totaled $51.5 million, down more than half from $126.5 million in profit during fiscal 2008's final three months. Average rig revenue per day dropped to $25,895 from $28,325.

An improving economy and uptick in oil and gas prices may spur increases in drilling opportunities. Helmerich & Payne, however, plans to play 2010 close to the vest and even cut its capital expenditures to $225 million from the $881 million spent in fiscal 2009, executives said.

Helmerich said the company is encouraged by positive developments in the energy industry but skeptical about its short-term arc. He cited concerns about natural gas demand and supply over the next year and noted a industry backlog of up to 1,500 uncompleted or deferred wells domestically.

"We're cautious about this up-cycle," the CEO said.

Mark Brown, a senior research analyst for Pritchard Capital Partners, applauded Helmerich & Payne's wary outlook. He believes the complexity of drilling in shale formations favors the company's high-quality rigs but noted that Helmerich's caution follows more optimistic reports by competing drillers.

"HP is the straight shooter, saying, 'Let's not get ahead of ourselves,' " Brown said.

He is impressed by the company's 55 percent utilization rate in the U.S. land drilling segment, considering economic challenges to exploration and production.

Helmerich & Payne also has added 25 first-time FlexRig users since the last industry bottom several months ago, company officials said.

Rod Walton 581-8457
rod.walton@tulsaworld.com By ROD WALTON World Staff Writer

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Some reader comments for this story were copied from "Helmerich & Payne ends fiscal year with huge profit," which was published on 11/19/2009.

	Report Comment okierose, Tulsa County (11/19/2009 9:24:27 AM) Helmerich & Payne Incs fiscal year ended Sept. 30 with $353.5 million in profits Good, now they can hire back everyone they laid off.
	Report Comment Corvetteguy, Tulsa (11/19/2009 9:30:36 AM) Veyr pleased to hear that Tulsa residents, the Helmerich family are doing well in this recession. They are very good people.......

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