Fri, Jul. 17, 11:32 AM
- Offshore drillers are significantly underperforming the broader market following cautious commentary from Schlumberger (SLB -0.1%) despite its Q2 earnings beat, a contract termination and an analyst downgrade.
- On its earnings call this morning, SLB said it expects little improvement in pricing levels in the near future and declines in activity for offshore drillers, while land rigs provide a more attractive opportunity and better margins.
- For its Q3, SLB foresees a further 5%-6% decline in Q/Q revenue as well as lower EPS, and says the $0.77 consensus is a realistic number.
- Yesterday, ConocoPhillips (COP -1.8%) said it plans to cut future deepwater exploration spending, particularly in its operated Gulf of Mexico program; in light of the decision, COP is terminating a contract for an Ensco (ESV -4.9%) deepwater drill ship.
- Also, UBS today downgraded National Oilwell Varco (NOV -1.5%) to Sell from Neutral.
- SDRL -6.4%, RIG -4.7%, RDC -6%, DO -3.3%, ATW -4.2%, HP -1.2%, PTEN -1.2%, PACD -5.7%.
Mon, May 11, 11:49 AM
- It's time to "take profits and... a summer vacation" in onshore oil services stocks such as National Oilwell Varco (NOV -2.8%), Weatherford International (WFT -2.7%), Patterson-UTI Energy (PTEN -3.7%) and RPC (RES -4%), Citigroup's Scott Gruber says.
- The onshore service stocks are discounting at least 400 horizontal rigs returning to service, yet quick-to-market tight oil means supply concerns likely will manifest as soon as the rig count begins to rally, the firm says.
- Citi downgrades NOV to Sell from Neutral given risk of backlog cancellations, continued EPS compression and valuation, and believes a recovery multiple is not warranted for the stock until backlog growth resumes; the firm also cuts RPC to Sell, reiterates its Sell rating on Helmerich & Payne (HP -2%), and lowers WFT and PTEN to Neutral from Buy.
Thu, May 7, 11:59 AM
- UBS says it's time to buy the big three names in land drilling - Helmerich & Payne (HP -2.6%), Nabors Industries (NBR -4.2%) and Patterson-UTI Energy (PTEN -2.6%) - as they take market share from the weaker companies while lower oil prices wash out the weaker hands.
- The firm also notes the group is not taking the public relations beating that some of the fracking giants are from the likes of David Einhorn.
- The three companies are taking it on the chin today, but they recently reported better than expected Q1 results on improved rig revenues, even as revenues typically fell due to reduced rig activity.
Mon, Apr. 27, 10:58 AM
- Helmerich & Payne (HP +3.2%) is upgraded to Buy from Neutral with an $85 price target, raised from $51, at Goldman Sachs, which notes HP's high exposure to increased demand for high-spec U.S. land rigs in 2016.
- The firm foresees 1,500HP or larger rigs to see the sharpest increase in utilization, increasing from 62% currently to the mid-80% range by late 2016, and that HP will be the biggest beneficiary of the demand pick-up since it controls nearly 50% of such available rigs.
- Goldman also likes HP's pristine balance sheet, with estimates 2016 net debt/capital of less than 1% vs. a 20% average for land drilling peers, and projects HP to generate substantial free cash flow in 2016 which can be used for dividend increases or share buybacks.
Thu, Apr. 16, 10:58 AM
- Ensco (ESV -4.8%) reveals in its April fleet status report that it agreed to lower dayrates on seven of its jackups working for Saudi Aramco in the Middle East, with reductions ranging 10%-20% and an average decline of 15% across the seven rigs.
- Cowen analysts believe further rate negotiations are ongoing and could affect other operators with units contracted to Saudi Aramco, noting that Rowan (RDC -4.2%) may be the most exposed since it has nine rigs currently working with Aramco; RDC secured three-year contract extensions in Sept. 2014 on four of the jackups, which could see reductions, as well as four units currently under negotiation extensions.
- Other contractors with units working for Aramco are Noble Corp. (NE -4.9%) with four units, Hercules Offshore (HERO -3.9%) with two (after the termination of the Hercules 261), and Seadrill (SDRL -3.9%) with three.
- Other offshore drilling contractors also are lower: RIG -3%, ATW -2.3%, DO -4.1%, HP -2.7%, ORIG -2.5%, PACD -4.2%.
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, 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."
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."
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.
Oct. 23, 2014, 3:46 PM
- Diamond Offshore's (DO +5.5%) better than expected Q3 results is providing a lift across the offshore drilling sector today: RIG +3.8%, ESV +4.1%, RDC +2.6%, SDRL +1.9%, PKD +3.6%, HP +3.1%, ATW -0.5%.
- It was a trifecta of good news for DO: Its operating profit of $0.97/share easily topped Wall Street consensus for $0.79, it announced a special dividend of $0.75/share, and a positive fleet status update included two new rigs that had found work with Hess and Petrobras extending contracts on three rigs for three years.
- However, Cowen’s J.B. Lowe is cautious, noting that while that the $400K dayrates with Hess give DO a solid backlog though a soft time in the market, "they represent a new low in leading-edge newbuild ultra-deepwater floaters in this part of the cycle.”
Oct. 15, 2014, 3:59 PM
- Oil services companies are rising after Citigroup issued positive comments on a number of stocks in the sector.
- Baker Hughes earns a Buy rating, seen as having a strong chance of meeting EPS estimates before tomorrow's open given recent contract wins in Norway and Brazil, and the stock's valuation is "compelling."
- Among small- and mid-caps, Citi starts Patterson-UTI (PTEN +5.7%) and RPC (RES +2.3%) with Buy ratings, seeing each as likely to outperform if, as the firm forecasts, crude prices rebound and E&P companies' capital expenditures are higher than expected.
- Citi tags Schlumberger (SLB +0.5%), Halliburton (HAL +2.1%), Weatherford (WFT +1%), Superior Energy (SPN +2%) and Helmerich & Payne (HP +5.1%) with Neutral ratings.
Oct. 9, 2014, 3:43 PM
- Offshore drillers have company now that falling oil prices are hitting the shares of land drillers such as Helmerich & Payne (HP -3.7%), Patterson-UTI (PTEN -6.8%), Nabors Industries (NBR -4.7%) and Seventy Seven Energy (SSE -5%) - with good reason, Susquehanna analysts say.
- The firm views land drillers at considerable risk to estimate revisions, given high current dayrates and significant newbuild construction activity, which could be problematic if lower crude prices persist or a weaker outlook on U.S. E&P spending comes out of earnings season.
- Nevertheless, the firm finds valuations much better in land drilling for now, and it prefers PTEN and NBR at a respective 3.7x and 4.5x 2015 EBITDA.
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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