Sometimes a little risk goes a long way.
Leadership at Helmerich & Payne Inc. took a calculated risk amid a downturn in the oil industry that had left the company with a fraction of its employees and forced the idling of more than 200 rigs. The risk involved the decision to retool operations toward upgrading rigs, rather than focusing on new production, to better serve the market.
“Our customers were drilling longer laterals and more wells per pad,” H&P CEO John Lindsay said. “We saw that trend so in the summer of 2016 … we made a bet toward believing the market was going to improve, and we were going to get in line early and get the equipment sets needed for these upgrades.
“We took our manufacturing capacity … and directed it toward the upgrade program. That was a key element in our ability to respond.”
The switch worked, and the company was poised to upgrade and restart more than 100 rigs.
“Fortunately as oil prices began to improve … we were able to respond very, very quickly,” Lindsay said. “We put 128 rigs back to work in our fiscal (year) 2017. We upgraded 91 of those rigs to Super Spec capacity.”
Lindsay estimates the company increased its market share about six points overall, from 15 to 21 percent, and of the Super Spec capacity rigs he says the company is over 40 percent.
This growth reflected positively in the company’s financial reports, leading to its climb to No. 3 on the Oklahoma Inc. list. H&P showed a nearly 44 percent revenue growth, the sixth-highest rate in the state, with about $2.3 billion in total revenue.
H&P ranked third in percent change in earnings per share from 2017 to 2018, improving 349 percent and ending the time range at $4.16 in earnings per share.
This growth and continued demand for upgraded rigs means H&P will keep working to upgrade rigs rather than building new, Lindsay said.
“Pricing today doesn’t support new-build economics,” he said. “We are in a position where we have more Super-Spec upgradeable inventory than any of our peers, so that puts us in a great position.”
H&P also continues to invest in its technology capabilities, acquiring two services to improve directional drilling and survey correction. This technology is put to use in the company’s fourth generation “Center of Excellence” facility.
“We do our best to support every rig in our fleet from this central hub,” H&P Continuous Improvement Manager Steven Estvold said. “We support on the maintenance side, the data and technology infrastructure side and then drilling performance side.
Estvold helps oversee the Center of Excellence, where support is offered all day, every day. Increasing levels of technology allow for greater service.
“You can provide more as you bring in more data and program things a certain way,” Estvold said. “The capabilities will continue to grow. We started with just maintenance effectively, we didn’t handle drilling operations. You didn’t have the same set of data.”
Looking ahead, Lindsay said he hopes to see continued growth. In the downturn, the company was forced to reduce its workforce from about 12,000 down to 5,000, but it has since regrown to nearly 10,000, Lindsay said.
“We’ve been around a long time, and being in the oil and gas industry, we’ve seen a lot of cycles. We’ve obviously come out of a really challenging downturn,” Lindsay said. “At the end of the day, all that technology aside, we’re a people-oriented company. We have to have people in order to deliver that value to our customers.”
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