HP Conference Call

[dan_s]

Helmerich & Payne's quarterly conference calls are always great. They not only give you some insight into what is going on at HP but also the entire upstream oil & gas industry. HP is an industry leader and a lot of analysts were on the call.

HP thinks the onshore rig count bottomed in December and they expect it to go up by 100 rigs by Q3. They expect to get a high percentage of the new contracts and gain market share. I agree.

HP's 1st quarter included a one-time $8.8 million pre-tax gain on sale of stock held for investment. Q2 EPS should be in the $1.30 range. They expect earnings and cash flow per share to dip in Q2, then ramp up into year-end. CFPS should be around $10 this fiscal year. Since HP has an rock solid balance sheet and is generating more than enough cash flow to cover their capital budget, I think a multiple of 8X CFPS is a very reasonable price target.

Since HP crushed the streets EPS estimates you can expect more upgrades on this one.

PS: When I graduated from Tulsa University in 1976 I went into public accounting. The first client I worked on was HP. I can remember preparing personal tax returns for several members of the family, including Hans Helmerich III, a teenager at the time. I recall that his portfolio income was about 4X my salary at the time. I also remember that HP was an extremely well respected company then, as they are today. Each member of the family that I met seemed to be very nice people.