Analysts at SunTrust Robinson Humphrey’s had this comment:
Don’t expect the rig count to stop falling then. By the time all is said and done, we think Helmerich & Payne’s rig count will be down in the mid-30% range [compared with the fourth quarter of 2014].
H&P expects both activity and day rates to decline significantly. The company’s FlexRig spot day rates are already down 10% and the company expects spot pricing to soften further in the next 30 days. Margins were in the range of $15,000 a day in the third quarter, and the break-even level on the rigs is about $13,000 per day according to the analyst’s at SunTrust.
Credit Suisse had this to say about H&P and competitors Nabors Industries Ltd. (NYSE: NBR), Patterson-UTI Energy Inc. (NASDAQ: PTEN) and Precision Drilling Corp. (NYSE: PDS):
We’ve gone through our models for Helmerich & Payne, Nabors, Precision Drilling, and Patterson and, along with a revised rig count forecast, have slashed our daily rig margin assumptions and pushed through 20% price concessions in 2015 in ancillary businesses. The result is ugly.
The drillers will either have their contracts cancelled or they will get squeezed on day rates to the point where they can’t keep the rigs operating with any margin at all. Crude oil producers in some of the sweet spots in the various shale plays can produce at a profit with crude prices as low as $30 a barrel according to at least one researcher. Others need prices closer to $70 or more to make a profit. Those will be the first to suffer, and their drillers along with them.
H&P’s shares traded nearly 7.5% in the mid-afternoon on Wednesday at $58.91 after posting a new 52-week low of $58.40 earlier in the day. The 52-week high is $118.95.
Nabors traded down nearly 5% at $11.07 in a 52-week range of $9.91 to $30.24.
Patterson’s shares traded down about 4.3% at $14.60 in a 52-week range of $14.01 to $38.43.
Precision Drilling traded down about 3.5% at $5.00 after posting a new 52-week low of $4.95. The stock’s 52-week high is $14.65.
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