Helmerich & Payne Sees Improvement In 2010

By Eric Fox | December 20, 2010 AAA

Helmerich & Payne (NYSE:HP), a U.S. oil and gas well driller, saw a steady increase in demand for its land rig fleet during 2010, as the exploration and production industry continued to ratchet up the development of various United States basins during the year. (To learn more, see our Oil And Gas Industry Primer.)

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Land Rig Fleet
Helmerich & Payne had 273 land rigs in its fleet in December, with the majority of these operating in the United States. This land rig fleet has benefited from the industry push to develop shale and other unconventional resource basins in the United States.

Helmerich & Payne reported utilization of 82% in the United States land segment in the fourth fiscal quarter ending September 30, 2010. This was a large improvement from the 76% utilization in the previous quarter, and the 55% utilization reported in the same quarter last year.

Other land rig companies reported similar improvements in utilization in 2010. Patterson-UTI Energy (Nasdaq:PTEN) reported that the company had an average of 182 rigs working in the United States in November 2010. In January 2010, the company reported an average of only 122 rigs working.

Unit Corp (NYSE:UNT) reported that the number of its land rigs used in the third quarter of 2010 increased by 89% from the same quarter of 2009.

Nabors Industries (NYSE:NBR) had 126 rigs under term contracts at the end of the third quarter of 2010, compared to 111 rigs six months earlier.

U.S. Land
Helmerich & Payne's two most active areas in the United States in December were the Eagle Ford Shale and Permian Basin, where the company reported 35 and 24 rigs under contract, respectively. Other oil and liquids plays where Helmerich & Payne was leasing rigs include the Bakken, with 21 rigs, and the Cana Woodford area with 20 rigs.

Although natural gas is currently out of favor for most investors, Helmerich & Payne also had 23 rigs working in the Haynesville Shale. (For background reading, see Natural Gas Industry: An Investment Guide.)

Flex Rig
Helmerich & Payne believes that demand for its AC rig fleet will increase due to the large amount of development of unconventional resource basins in North America. Operators in these types of plays prefer more advanced rigs, and 76% of the company's fleet is of this type, compared to only 16% of the total industry fleet.

New Rigs
Helmerich & Payne also continued to expand its land rig fleet in 2010, and have announced 23 new builds since March 2010. The company has completed 12 of these rigs, and will deliver the balance in 2011. All of the new rigs have contracts in place.

The Bottom Line
Helmerich & Payne experienced higher demand for its land rig fleet in 2010 as the company's customers moved forward with the development of more complex formations in the United States.

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