Helmerich & Payne Has Had Almost As Many Long-Term Contracts Cancelled As Remain Active

HOUSTON –

Since the US drilling peak in late-2014, Helmerich & Payne has received early termination notifications for a total of 77 rigs under long-term contracts. Included in this figure are 17 cancellation notices received since November 2015.

The pile of cancellation notices is almost the same size as the long-term H&P rig contracts operators are still honoring. H&P has term contract commitments in place for an average of 87 rigs during the current quarter. Some of these will likely receive early termination notices in the weeks ahead.

115 H&P rigs are currently generating revenue days, including 28 in the spot market. However, some of the 115 active rigs are on standby dayrates. H&P has 347 available land rigs in the US.

H&P rigs sit idle in the Permian Basin

It's important to note that operators are making H&P mostly whole on the contract value for these early terminations. In fact, revenues related to these 77 canceled contracts are now estimated at approximately $429 million, including $166mm to be recognized during fiscal 2016 and $175mm after that. But visibility on future work for these rigs is non-existent at this point.

Weekly North American Rig Count Statistics

The North America rig count fell 37 units last week with declines in both US land and Canada. The US land rig count fell 17 units to 590 rigs running. WTI is hovering around $30/barrel, which skews rig count direction lower and below expectations for 1H16.

We expect Independent E&P companies to cut capex again this year by more than 20%. While the weekly figures will ebb and flow, the recent leg down in oil prices means stability for driller activity remains on the horizon. The 600 rig count level for US land was broken this week, and the 500 level will be tested in the month or two.

In Canada, the rig count fell 19 rigs to 231 for the week.

A regional summary of rig counts by key basins is below. With 182 rigs working, the Permian is still the most active basin, but it was down 17 rigs on the week. The Eagle Ford, with 64 rigs running, is the second most active basin, and it was flat last week. With 44 rigs running, activity in the Bakken was down 1 last week.

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