Thu, Mar. 19, 2:26 PM
- It's a rough day for offshore drilling contractors following Transocean's (RIG -7.1%) announcement last night that it will scrap four rigs and stack four more it previously had idled, taking a $300M-$325M charge.
- Most notably, the Deepwater Expedition, which was working for $650K/day in 2014, will be scrapped; overall, the number of rigs the company plans to scrap is now 16, with possibly more to come.
- RIG was awarded a $300K/day contract for one rig for work off the coast of Nigeria, and idles another rig.
- In cutting its stock price target to $16 from $17, RBC expects just 10%-20% of available rig days will be contracted eventually given current market conditions vs. Wall Street expectations for ~35%.
- Also: ESV -4.3%, NE -5.3%, RDC -0.6%, DO -3.1%, SDRL -2.4%, ATW -5.7%, PACD -4.5%, HP -1.8%.
Fri, Feb. 27, 12:45 PM
- Hercules Offshore (HERO -28.2%) shares are crushed after this morning's downgrade to zero by Deutsche Bank analyst Mike Urban, who had maintained a Buy rating on the oil drilling services company for more than two years.
- Urban says he had remained positive on HERO relative to his negative view on the offshore driller sector because he did not foresee a lot of new competition to enter the shallow Gulf of Mexico area where the company had a commanding market position; that dominant position is no longer enough, he says, because "the collapse in oil prices has eviscerated demand.”
- Other stocks in the sector are rising today: RDC +3.6%, ATW +2.5%, RIG +2.4%, DO +2%, PKD +1.6%, HP +1.3%, ESV +1%.
Thu, Jan. 29, 5:46 PM
- In its earnings conference call today, Helmerich & Payne (NYSE:HP) confirmed it may cut 2,000 jobs as it begins to idle rigs amid lower crude oil prices.
- "The rig count reduction thus far has been more swift than many expected," CEO John Lindsay said during the call.
- HP also said it would now build only two high-tech FlexRigs per month this year, down from the four rigs it had planned.
- HP shares fell as much as 10% to a 52-week low $54 before recovering somewhat to end -3.7%, as a weak forecast for 2015 margins and revenue overshadowed better than expected FQ1 earnings.
Thu, Jan. 29, 9:59 AM
- Helmerich & Payne (HP -6.9%) opens sharply lower after reporting better than expected FQ1 earnings due to compensation from the early termination of contracts, and warning that results for the rest of 2015 would be hurt by lower oil prices.
- In FQ2, HP expects revenue days (activity) in the U.S. land segment to decrease by ~25% Q/Q, with average rig revenue per day falling from $28.6K in FQ1 to $27K-$27.5K; in the offshore segment, HP sees revenue days remaining flat Q/Q, with average rig margin per day of ~$19.5K from $20.7K in FQ1.
- Citigroup downgrades HP shares to Sell from Neutral and cuts its price target to $55 from $71, believing "the defensive shine on the stock is tarnished by a collapse in rig pricing and utilization, as well as rising risk of contract cancellations/resets."
Thu, Jan. 29, 6:17 AM| 2 Comments
Wed, Jan. 28, 5:30 PM
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Wed, Jan. 28, 3:59 PM
- Energy stocks are broadly lower as Nymex crude oil futures fell another $1.68/bbl (-3.6%) to $44.53 after today's inventory report showed the largest weekly supply buildup since 1982, but drilling contractor are whacked with especially large losses.
- Examples: NBR -11.7%, PTEN -8.6%, PES -10.9%, PDS -12.3%, KEG -6.5%; Helmerich & Payne (NYSE:HP), which reportedly has launched a round of steep layoffs, -6.3%.
- Among independent producers: DNR -9.7%, NFX -4.6%, SM -8.6%, SGY -10%, SD -9.7%, EOG -5.3%, PXD -6.8%, QEP -6%, APC -4.2%, XEC -3%.
- ETFs: XLE, ERX, VDE, OIH, XOP, ERY, FCG, DIG, GASL, DUG, IYE, XES, IEO, IEZ, PXE, PXI, FENY, PXJ, RYE, FXN, DDG
Fri, Jan. 9, 12:40 PM
- Nabors Industries (NBR -3.4%) and Helmerich & Payne (HP -1.7%) are both downgraded to Hold form Buy at KeyBanc (I, II) following this week's business update from HP, which reveals how quickly and dramatically U.S. rig activity is reacting to the drop in oil prices.
- The firm expects the impact of a reduced number of working rigs and a drop on spot market dayrates to significantly hurt profitability at the two companies, at least until demand stabilizes; customers are sharply curtailing their drilling programs and releasing rigs as they come off contract.
- KeyBanc forecasts NBR's contracted rigs in the lower 48 states falling from an average of ~200 in Q4 2014 to 170 in Q1 2015, and to average 155 for full-year 2015.
Wed, Jan. 7, 3:23 PM
- Oil driller Helmerich & Payne (HP -6.5%) is the day's biggest S&P 500 loser after saying rates for its high-tech rigs have tumbled 10% Q/Q and warns of more softness ahead because of falling crude oil prices.
- "Drilling activity and spot dayrate pricing are now expected to significantly decline in the U.S.," HP says in a presentation which indicates deteriorating utilization and dayrates among land drillers is spreading farther and faster than expected.
- HP says the idle and available number of its FlexRigs has risen to 26 from 15 since Dec. 11, and sees expects to see another 40-50 FlexRigs become idle in the next 30 days from its current total of 287 but does not foresee further idling beyond that point.
- SunTrust analysts think HP’s rig count will wind up lower by the mid-30s in percentage Q/Q, cutting their 2015 EPS estimates on HP to $2.60, well below the consensus of $5.56, and slashing their price target to $56 from $70.
- Credit Suisse's James Wicklund, who offered little optimism for the oil service sector today, also slashed his estimates on land drillers HP, Nabors Industries (NBR -3.6%), Precision Drilling (PDS -2.1%) and Patterson-UTI (PTEN -3.6%) - "the result is ugly."
Tue, Jan. 6, 11:19 AM
- Craig Hodges, co-portfolio manager of the Hodges Blue Chip 25 Fund, says he is going bargain hunting in the beaten-down energy sector because he sees oil eventually rebounding toward $80-$90/bbl.
- Hodges particularly likes Continental Resources (NYSE:CLR), which has dropped from $60 to the low $30s because it is a big driller in the relatively higher-priced Bakken Shale, but he expects a significant rebound when the energy sector normalizes; Helmerich & Payne (NYSE:HP) has lost 40%-45% of its value in recent weeks, but it is a very longstanding, high-quality maker of flex rigs for drillers.
- The Hodges fund's top holding is U.S. Steel (NYSE:X), whose cost cuts since 2008 have the company structured so that its stock will surge when it enjoys a resurgence in demand; other stocks he likes for the long term include TRN, TCBI, BA.
Tue, Jan. 6, 10:37 AM
- Citigroup analyst Scott Gruber says now could be time for longer-term investors to bulk up on oil services stocks (NYSEARCA:OIH), taking the contrarian view that falling capital spending forecasts and looming bankruptcies by some E&P companies could portend that the industry’s shakeout is closer at hand.
- Meanwhile, Gruber says oil services stocks tend to stop falling as oil reaches "unsustainably low” levels, and investors appear to be through much of their selling since valuations have fallen so low.
- Oil services companies generally have been hit twice as hard as integrated oil majors during the past three months; related tickers include SLB, HAL, NOV, BHI, CAM, ESV, FTI, HP, TS, OII.
Dec. 23, 2014, 6:19 PM
- Although the energy sector led today's stock advance, a raft of companies downgraded by Global Hunter mostly took it on the chin - none more so than Key Energy (NYSE:KEG), which plunged 15% after shares were cut to Reduce from Neutral with a $1.50 price target that was reduced from $2.50.
- Also downgraded to Reduce were HERO -6.1%, NBR -3.2%, DO +1.3%.
- Lowered to Neutral were HAL +0.5%, GEOS -8.9%, HP -2.9%, BAS -2.5%, PKD -2.5%, BHI +0.6%, BBEP -0.2%, MEP +0.1%.
- Downgraded to Accumulate: PES -3.5%, PTEN -1.1%, NGLS +2.9%.
- The firm upgraded five stocks - ATW, NOV, OII, RES and SPN - all of which gained in today's trading.
Dec. 18, 2014, 5:54 PM
- Analysts say big U.S. land drillers that operate new, faster rigs are best placed to weather the downturn brought by weaker crude oil prices and could gain market share from smaller drillers with high debt levels and outdated equipment.
- Companies with considerable debt such as Nabors Industries (NYSE:NBR) and small private firms with less efficient rigs will scramble to keep them in operation; those with new rigs, such as Helmerich & Payne (NYSE:HP) at Patteron-UTI (NASDAQ:PTEN), will have more leeway to negotiate lower rates with producers and keep or even expand their business.
- The top 3-4 players had 65%-70% of the most modern rigs and the oil slump gives them a chance to win market share from small firms that make up about half of the U.S. land drilling sector, RBC Capital analyst Kurt Hallead says.
- HP has a debt-to-EBITDA ratio of less than 1, PTEN's is 2.3x while NBR is 7.4x.
Dec. 16, 2014, 7:21 PM
- "Low oil prices cure low oil prices,” meaning that low oil prices will take supply off line - primarily shale oil production in North America - and eventually prices will recover; if that maxim becomes reality, then it could be time pick up select energy stocks today at cheap prices, some analysts say.
- U.S. Global Investors' Brian Hicks, who believes oil is oversold, favors Devon Energy (NYSE:DVN) for its low-cost Eagle Ford acreage purchased earlier this year, solid cash flow, and significant hedges in place on 2015 production; he also likes oil services companies Noble Corp. (NYSE:NE) and Helmerich & Payne (NYSE:HP).
- Hodges Capital's Michael Breard likes North American oil producers that have the flexibility to shift to natural gas - where prices are more likely to hold up, he says - such as Matador Resources (NYSE:MTDR), Comstock Resources (NYSE:CRK) and Panhandle Oil and Gas (NYSE:PHX).
- Deutsche Bank analysts like companies with the balance sheet strength to survive, but also the budget flexibility, asset quality and performance record to suggest they can return to growth when energy prices go back up, including Anadarko (NYSE:APC), EOG Resources (NYSE:EOG), Cimarex (NYSE:XEC) and Concho Resources (NYSE:CXO).
Nov. 26, 2014, 10:42 AM
- Seadrill (SDRL -19.2%) shares are plunging after the drilling contractor suspended dividend payments due to "significant deterioration" in the broader markets, and North Atlantic Drilling (NADL -13.8%) suspends its dividend because of the delay of its agreement with Rosneft as well as the weaker market.
- The move is slamming the entire sector, and Wells Fargo says that although SDRL is the first driller to cut its dividend, Diamond Offshore (DO -8.3%) and Transocean (RIG -4.7%) will "ultimately have to follow suit."
- Also: SDLP -6.6%, ESV -4.8%, ATW -4.3%, RDC -3.3%, NE -3.2%, PACD -6.5%, ORIG -2.7%, HP -1.1%, RIGP -2.5%.
- ETF: OIH
Nov. 13, 2014, 12:17 PM
- Helmerich & Payne (HP -7.2%) is sharply lower, despite setting records for revenue, operating income and drilling activity in its just concluded FY 2014.
- Q3 operating earnings for HP's U.S. land segment totaled $258M, up 9.6% Y/Y but down 4.6% from FQ3.
- HP expects to spend $1.4B-$1.7B capex in the next year, and says it is "very well prepared for any type of softening in the market."
- HP also says it entered into agreements to build and operate six new patented FlexRigs in U.S. oil and gas plays; the company has contracted 89 newbuild FlexRigs just in the past 14 months.
HP vs. ETF Alternatives
Helmerich & Payne Inc is engaged in contract drilling of oil & gas wells for others in the ownership, development & operation of commercial real estates. Its business comprises of three reportable segments: U.S. Land, Offshore & International Land.
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