Helmerich and Payne (NYSE:HP) looks to benefit from the increase in land drilling activity in the United States as operators continue to shift capital to onshore plays that require highly intensive horizontal development. We'll take a deeper look into this company and its near-term prospects.
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Helmerich and Payne has a total fleet of 292 rigs, with 242 rigs, or 83%, in the United States land segment. The company also has nine offshore rigs and another 24 land rigs working outside the U.S. in its international segment. Helmerich and Payne is adding capacity and has 17 rigs under construction.
The U.S. fleet is diversified by geography and is spread widely across various basins. The two largest areas for the company are the Eagle Ford Shale, where it has 50 rigs working, and the Bakken, where 26 rigs are operating.
Helmerich and Payne's fleet is also diversified by commodity, and the company estimates that the fleet is spread equally across oil, dry gas and liquid plays in the United States.
Nabors Industries Ltd. (NYSE:NBR) has a large land rig fleet in the United States, with 550 drilling rigs and 727 workover rigs. Unit Corporation (NYSE:UNT) is a diversified energy company with an exploration and production, pipeline, and drilling segment. The company's fleet consists of 122 rigs as of April 2011. Chesapeake Energy (NYSE:CHK) also owns an existing fleet of land rigs and recently added to this fleet through the purchase of Bronco Drilling.
Helmerich and Payne has 251 rigs currently working or under contract. That's 86% of its fleet. This includes the 17 rigs under construction which all have contracts. In the U.S. land segment, rig utilization is at 87%, a large increase over the 51% utilization that the company reported at the bottom of the last cycle in the third quarter of 2009.
Most of Helmerich and Payne's rigs are FlexRigs. The company believes FlexRigs are more efficient that older designs in the market and better suited for the increasingly complex drilling required for unconventional and shale plays in the United States. This advantage allows Helmerich and Payne to command a higher leasing rate for these rigs.
The latest data from Baker Hughes (NYSE:BHI) reports that the total United States land rig count reached 1,822 rigs in the week ending June 10, 2011. This was a 316 rig increase compared to a year earlier and approximately flat with the week before.
This increase was led by a shift within the industry to more oil directed horizontal drilling over the last two years. There were 969 rigs looking for oil, up by more than 400 rigs compared to last year. The horizontal rig count also saw a healthy 246 rig year over year increase, and ended the week at 1,065.
Helmerich and Payne will continue to gain from an upswing in the United States drilling cycle and the shift to more complex and intensive drilling of new unconventional plays. (So you've finally decided to start investing. But what should you put in your portfolio? Find out here. Check out How To Pick A Stock.)
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