Helmerich & Payne Inc.
) hit a 52-week high of $118.95 on Jul 2. In fact, the Tulsa,
Oklahoma-based contract drilling services provider has seen its
stock price climb some 42% over the past six months.
Despite this price appreciation, we remain optimistic about the
firm's near-term prospects, supported by its superior and
diversified drilling fleet, continued strong operating performance
led by an efficient management team, and an investor-friendly
These factors are reflected in Helmerich & Payne's Zacks Rank
#2 (Buy), implying that it is expected to outperform the broader
U.S. equity market over the next one to three months.
Why the Bullishness?
Helmerich & Payne is a major land and offshore drilling
contractor in the western hemisphere, having the youngest and most
efficient drilling fleet. The company specializes in shallow to
deep drilling in oil and gas-producing basins of the U.S. and in
drilling for oil and gas in international locations.
We believe that Helmerich & Payne's technologically-advanced
FlexRigs are the key to its success, helping to increase its count
of active rigs and maintain relatively strong daily-rate margins
even during times of market uncertainty.
The company's proprietary FlexRig design makes the rigs move faster
than conventional rigs, drill quicker and more efficiently, and
allows for a safer operating environment. As such, these are better
suited for the new demands of the exploration business and,
therefore, command higher dayrates and utilization than rigs from
other land drillers.
Helmerich & Payne - which counts
Nabors Industries Ltd.
) as one of its major competitors - recently approved a raise in
its quarterly cash dividend to 68.75 cents per share ($2.75 per
share annualized), representing an increase of 10% over the
previous payout. The significant dividend hike not only highlights
the company's commitment to create value for shareholders but also
underlines Helmerich & Payne's strong cash generation
Helmerich & Payne has always been extremely conservative with
the allocation of capital and the use of leverage on its balance
sheet. This not only insulates the company during uncertain times,
but also led to the generation of $737 million in profit for the
fiscal year 2013, despite volatile prices and credit restrictions.
Another positive in the Helmerich & Payne story is the quality
of its client base, which mostly includes well-capitalized oil
majors or large independents.
Other Stocks to Consider
In addition to Helmerich & Payne, one can look at
North Atlantic Drilling Ltd.
Parker Drilling Co.
) as good buying opportunities. These oil and gas drillers, with a
Zacks Rank #2 (Buy), have seen solid secular growth and harbor the
potential to rise from the current levels.
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