HP stock: Oil drilling | Rig | my research

 Feb. 21, 2021

Here are my notes:

1. balance sheet, a debt-to-equity ratio of just 15%
2. ample liquidity, roughly $1.3 billion
3. It can pivot back to growth as soon as demand picks up again. 
4. It has a large fleet of high-end drilling rigs. Only 80 of its 234 high-end rigs are currently contracted out, leaving a lot of upside potential. 
5. Primary market is the U.S. fracking sector. 

The right tools 

Reuben Gregg Brewer (Helmerich & Payne): Energy services get roughed up when oil falls because their customers pull back on spending. But when prices start heading higher the trend goes the other direction. Which is why Helmerich & Payne should benefit if oil prices take off (even more than they have already). The company has a couple of important things going for it.

First, it has a really strong balance sheet, with a debt-to-equity ratio of just 15%, and ample liquidity, roughly $1.3 billion. In other words, it has the financial strength to muddle through today's hard times and also the cash to take advantage of the next upturn. That means it can pivot back to growth as soon as demand picks up again.   

Which brings up point No. 2: It has a large fleet of high-end drilling rigs. Simply put, the best rigs will get put back to work first. To put a number on that, only 80 of its 234 high-end rigs are currently contracted out, leaving a lot of upside potential. It is worth noting, too, that Helmerich & Payne's primary market is the U.S. fracking sector, which can ramp up production relatively quickly compared to other drilling methods.  

So, Helmerich & Payne has the strength to survive until demand picks up, the rigs that will most likely get put back to work first, and operates in a market that should be able to ramp up quickly. That sounds like a winning combination.