Helmerich & Payne, Inc.

Rock Hill Advisors

      

Leah RubinRice University, Class of

2018Major: Mathematical

Economic Analysis, Minor: Business

Eli EngelmanTulane University, Class of

2018Major: Finance, Minor:

Sociology

Tate SmithRice University, Class of 2018

Major: Economics, Minor: Business

Nick KumlebenUniversity of Virginia, Class of

2018Major: History, Minor: Commerce, Politics

Parker DonaldsonUniversity of Texas, Class of

2018Major: Economics, Minor:

Mathematics

Will OlsonUniversity of Virginia, Class of

2018Major: Public Policy &

Leadership, Minor: Entrepreneurship

AgendaI. Executive SummaryII. Market UpdateIII. Company OverviewIV. Peer ComparisonV. Possible RisksVI. DCF & ValuationVII. Recommendation

214

Flex 3Industry Standard onshore drilling rig

78

Flex 4Customizeable offshore rig

49

Flex 5Revolutionary multi-well pad with extended reach for unconventional shale resources

3Production Sites & InfrastructureLand owned and production factories in OK, TX, and LA

Shift in Market. The oil market bottoming creates future opportunity for H&P

Supply changes. Middle East & U.S are begnining to represent greater market share leading to unique H&P advantage

Future increase in oil prices. Projected price increase will allow H&P to expand

New contracts. H&P is well-positioned to be awarded new contracts with superior products offered

Strong Backlog. ~$100m guaranteed contracts in FY16, ~$80m during FY17, and ~$50m during FY18

Utilization Rates. HP has over 290 rigs that can be easily utilized as contract numbers expand

Impressive Technology. H&P owns 50% of all 1500hp rigs in the U.S and is the leading U.S. unconventional driller

Strong Balance Sheet: smaller debt-to-capitalization than competitors

H&P is an attractive acquisition

Positive future outlook

OFS market leader

Attractive hard assets with ample liquidity

Executive SummaryMarket Background Market Sentiment

Position Highlights Investment Thesis

Source: Wall Street Research, company website.

Asset Overview

Market Update

Source: FactSet.

Announces all-time high of annual revenue. 89

new rig contracts in previous 12 months.

Posted net loss during Q4 of $21M. With high

expectations, low oil prices, and a volatile market, H&P

entered a decline.

Positivity enters the market as rig counts rise, E&P

expansion continues, and the 2016 onshore drilling

outlook improves.

Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-1620%

30%

40%

50%

60%

70%

80%

90%

100%

110%

(60%)

(56%)

(39%)

(32%)(32%)

Volume Helmerich& Payne PeerGroup WTI HHUB S&P500OFS

Peer group: PTEN, NBR, PDS, UNT

Industry Trends & Overview

Feb-11 Dec-11 Oct-12 Aug-13 Jun-14 Apr-15 Feb-160

500

1000

1500

2000

2500 “We currently assume HP holds its current market

share as the cycle rebounds, as we see other drillers’ high-spec offerings as competitive with HP’s Flex 3s/5s.  To its credit, HP has highlighted that it owns 50% of the available 1,500HP rigs in the US market, and we generally believe it is regarded by customers as ‘best in class.’”

“We believe the US land rig market has clearly bottomed and begun a slow grind higher into 2H-17.  H&P remains the clear market leader with its Tier 1 rig fleet, a position we expect them to hold into the next cycle.”

“The current fleet of capable rigs may be able adequately to support the activity levels needed to maintain or grow production without getting in any significant ‘under-supply’ problem.”

 Morgan Stanley (7/29/2016)

UBS (7/29/2016)

 Credit Suisse (8/1/2016)

Jan-96 Jan-01 Jan-06 Jan-11 Jan-160%

20%

40%

60%

80%

100%

Directional or Horizontal VerticalSource: Baker Hughes, Wall Street Research.

U.S. Rig Count

U.S. Rig Activity by Drill Type

Peer Commentary

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E

96111

127 130 128151

193224

254 257281

320340

374390 397

U.S. Land International Land Offshore

Company Overview

9%

15%

17%

13%

11% 11%

14%

11%10%

7%

5%6%

5%4%

3%

HP PTEN NBR PDS UNT

Source: Company website.

H&P Market Share

Founded in 1920, Helmerich & Payne, Inc. is one of the oldest contract drillers in the United States

H&P went public on the NYSE in 1963 H&P has steadily grown since its

founding to become the largest U.S. land driller by market cap in 2011

Today, Helmerich & Payne has three main business segments:

U.S. Land International Land Offshore

Outside of contract drilling, H&P engages in research and development of rotary steerable technology through their subsidiary TerraVici Drilling Solutions

H&P Rig Count

~1,925 Active Rigs ~1,930 Active Rigs ~380 Active Rigs

October 2008 October 2014 May 2016

Management Team

Source: Bloomberg, LinkedIn, Reuters.

Name Position(s) Age Previous Positions / Other Biographical       

John W. Lindsay President, Chief Executive Officer & Director 55

n Has served as President since 2012, Chief Executive Officer since 2014, and Director since 2012. and also serves as President of subsidiary companies

n Joined H&P in 1987 and has recently served in various positions including Executive Vice President, U.S. and International Operations (2006-2010), Executive Vice President and COO (2010-2012)

  n Received a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa  n On the Board of Directors at H&P and Tulsa Area United Way

Juan Pablo Tardio Chief Financial Officer & Vice President 50 n Has served as CFO and Vice President of H&P since 2010n Joined H&P in 2001 and previously served as Manager of Investor Relations (2005-2008) and

Director of Investor Relations (2008-2010)n Received undergraduate degree as well as an MBA from the University of Houston

Cara M. Hair Chief Compliance Officer, VP & General Counsel 39

n Has served as Vice President and Chief Compliance Officer of the Company since 2015 and currently serves as Deputy General Counsel

n Joined H&P in 2006 as a corporate attorneyn Received undergraduate degree from Oklahoma State University and J.D. from the University of

Oklahoma College of Law

Gordon K. Helm Vice President & Controller 61n Has served as Vice President since 2008 and Controller since 1993n Received his undergraduate degree as well as an MBA degree from Oral Roberts University.

    n Received a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa

Jonathan M. Cinocca Corporate Secretary 44n Has served as Corporate Secretary since 2014 and joined H&P in 2001 as a Senior Attorneyn Received undergraduate degree from University of Oklahoma and J.D. from Oklahoma College of

Law

Robert L. Stauder Senior Vice President and Chief Engineer 53n Has served as Senior Vice President and Chief Engineer, Helmerich & Payne International Drilling

Co., since 2012n Received undergraduate degree from the University of Oklahoma

Jeffrey L. Flaherty Senior Vice President of Operations 52 n Has served as Senior Vice President of Operations, Helmerich & Payne International Drilling Co., since 2014

Board MembersName Position(s) Age Previous Positions / Other Biographical

       

Hans C. Helmerich Chairman 57n Joined H&P in 1989 as CEO and transitioned into current role as Chairman in 2012 n Holds leadership positions at The Northwestern Mutual Life Insurance Company, Director of

Atwood Oceanics, Inc,, and Cimarex Energy Co. n Received undergraduate degree from Dartmouth

Thomas A. Petrie Independent Director 70n Joined H&P in 2012 and serves as current Chairman of Petrie Partners, LLC and former Vice

Chairman of Bank Of America, previously Merrill Lynchn Received undergraduate degree from West Point and Master's degree from Boston University

Donald F. Robillard, Jr.  Independent Director 64n Joined H&P in 2012 and serves as current CFO, Chief Risk Officer and EVP of Hunt Consolidated

Inc. as well as Independent Director of Cheniere Energy, Inc.n Received undergraduate degree from University of Texas in Austin

L. Francis Rooney, III  Independent Director 62n Joined H&P in 2008 and serves as President and CEO of Rooney Holdings, Inc. and Independent

Director at Laredo Petroleum, Inc.n Received undergraduate degree and JD from Georgetown University

Randy A. Foutch  Independent Director 64n Joined H&P in 2007 and serves as Chairman and CEO of Laredo Petroleum, LLC, Independent

Director at Madagascar Oil Limited, and Gryphon Exploration Companyn Foutch has more than 30 years of experience in the oil and gas industry

Paula A. Marshall-Chapman  Independent Director 62n Joined H&P in 2002 and serves as President and CEO of The Bama Companies, Inc. and Director

American Fidelity Assurance Company and American Fidelity Corporationn Received undergraduate degree and PHD from Oklahoma City University

Edward Barry Rust, Jr. Independent Director 64n Joined H&P in 1997 and serves as Presiding Director at Caterpillar Inc., Director at Peoria, Ill,

and Director at State Farm Investment Management Corp.n Received undergraduate degree at Illinois Wesleyan as well as a JD and MBA from Southern

Methodist University

John D. Zeglis Independent Director 68n Joined H&P in 1989 and serves as Director of State Farm Bank, F.S.B., Georgia Pacific

Corporation and State Farm Insurance and previously served as President of AT&T Corporationn Received undergraduate degree from University of Illinois and JD from Harvard

Source: Bloomberg, LinkedIn, Reuters.

Financial Overview

Source: Company filings, FactSet.

HP      

Headquarters     Tulsa

Employees     6,738        

Market Valuation      

Stock Price as of 8/10/16     $63.08

52 Week High     70.28

% off 52 Week High     (10.2%)

Equity Value ($MM)     $6,817

Enterprise Value ($MM)     6,393        

Trading Multiples:      

EV / 2016E EBITDA     16.8x

EV / 2017E EBITDA     18.8x

P / 2016E Cash Flow     11.6x

P / 2017E Cash Flow     17.5x        

Credit Statistics      

Net Debt / Net Capitalization (Market)     (10%)

Net Debt / 2017E EBITDA     1.4x

Capitalization

Cash $956.6

Current Debt $39.2

Long-Term Debt 493.2

Total Debt $532.38

Net Debt (424.2)

Common Equity Value (Book) 4,701.5

Total Book Capitalization $5,233.8

Net Capitalization 4,277.2

Liquidity      

Revolving Credit Facility     $300.0

Debt Outstanding     $532.4

Letters of Credit     $52.3

Cash     $956.6

Available Capacity     $683.9 *values in millions

($3.0)

($2.0)

($1.0)

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

HP PTEN UNT NBR PDS

2012 2013 2014 2015 2016

HP owns 20% of all major horizontal drilling rigs. Closest peer owns 12%

HP has been a market leader in tech advancements since 1920

HP has a larger market cap (6.7B) than PTEN (2.85B), NBR (2.54B), PDS (1.37B), and UNT (632.42M)

HP has a lower Debt: Capitalization ratio (~10%) versus PTEN (~25%), UNT (~41%), NBR (~47%), and PDS (~49%)

Source: Company filings, FactSet.

Peer Comparison

Rolling EBITDA

Stock Performance

EPS Comparison

Market Size Technological Advancements

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-160

20

40

60

80

100

120

140

HP-US NBR PKD PTEN UNT

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-150x 1x 2x 3x 4x 5x 6x 7x 8x 9x

HP Peer GroupPeer group: PTEN, NBR, PDS, UNT

Source: Trading comp. spreadsheet.

0.5x

1.6x

3.1x

3.8x

2.5x

DEBT/EBITDA

HP PTEN NBR PKD UNT

-40.5%-53.3%

34.5%

-43.2%-42.0%

10.0%

-26.5%

-40.0%

35.1%

-45.7%

-31.1%

45.5%

Revenue Growth

HP PTEN NBR PKD UNT

10.00%

25.00%

47.00% 49.00%

41.00%

HP PTEN NBR PKD UNT

Peer Comparison continuedEV/EBITDA

Revenue Growth

DEBT/EBITDA

Total-Debt to Total-Capitalization

2014 – 2015E 2015E – 2016E

2016E – 2017E-14.9%

-55.8%

-2.0%

HP PTEN NBR PKD UNT

16.9x18.4x

9.8x

22.8x

7.4x

18.9x

14.7x

8.9x 8.8x

5.4x

2016E 2017E

Peer Analysis: Transaction Comparables

H&P scales internally

Good Management leads to good

profits

H&P has maintained a

prudent growth strategy

• H&P has had exactly two transactions since 1920: selling natural gas assets in August 1996 to Occidental Petroleum Corp. and acquiring Key Productions Co. Inc. in February 2002

• The management of H&P believes that growth can come within: profits should be generated by providing a superior quality product with superior service

• Morningstar research report (7/13/2016): “Management has avoided costly acquisitions, the most pernicious category of value destruction via poor stewardship [and] refused to issue debt… …as some peers regrettably did.”

• NBR (24 May '15): Nabors Industries Ltd. acquires Nabors Arabia Co. Ltd• PKD (17 Apr '15): Parker Drilling Co. acquires 2M-Tek, Inc.• PTEN (20 Oct '14): Patterson-UTI Energy, Inc. acquires Texas Pressure Pumping Assets• PES (17 Sep '14): Basic Energy Services, Inc. acquires Pioneer Fishing & Rental Services LLC

Recent Peer M&A Highlights

HP NBR PKD PTEN PES

2

38

12

31

13

Total M&A Deals

Source: Company website, FactSet, Wall Street Research.

U.S. Land

California

Colorado

Louisiana

Mississippi

Montana

Nevada

New Mexico

North Dakota

Ohio

Oklahoma

Pennsylvania

Texas

Utah

West Virginia

Wyoming

International Land

Argentina

Bahrain

Colombia

Ecuador

Mozambique

UAE

Offshore

Equatorial Guinea

Gulf of Mexico

Source: AM Charts.

Asset Overview

Company Risks

Oil and gas prices South American operations

Argentina Colombia

Other international operations Middle East Africa

Lawsuit(s) Ongoing lawsuit vs. Venezuela, PDVSA Only one pending – Keel v. HPIDS

Best-in-class safety record

Source: Company filings.

Valuation Analysis

Source: Company filings, FactSet.

Assumptions

Exit Multiple

#### 6.0x 8.0x 10.0x 12.0x 14.0x12% $4,588 $5,866 $7,144 $8,423 $9,701

11% $4,763 $6,100 $7,437 $8,774 $10,111

10% $4,949 $6,348 $7,747 $9,146 $10,545

9% $5,145 $6,609 $8,074 $9,538 $11,002

8% $5,352 $6,886 $8,419 $9,952 $11,485

Disc

ount

Rate

Sensitivities

$2,764

$5,468

$9,011

$3,455

$6,835

$11,264

$4,145

$8,202

$13,517

NTM EBITDA

LTM EBITDA

Base Case

Used transaction comparables to derive appropriate exit multiples Assumptions

Revenue Growth: 5.5%

G&A: 10% of Revenue Capex: 15% of Revenue Tax Rate: 37%

Oil Price OutlookYears TPH % Change WS % Change Avg. % Change

2017 40.1% 26.7% 33.4%2018 0.0% 9.3% 4.6%2019 6.3% 5.9% 6.1%2020 5.6% 5.9% 5.7%

Average Composite 5.5%

DCF Summary

Recommendation: Buy Believe the market undervalues H&P at an enterprise value

of $6.33b and that $7.75b more accurately portrays value

H&P owns nearly half of all available multi-dimensional rigs in the U.S.

Combined with its reputation for its “best in class” quality, H&P will be a popular partner to drillers returning to the industry in the near and far future

H&P rigs are often considered to be technologically superior to its competitors. In an industry where efficiency is vital, partnering with a tech leader will be an enticing opportunity

Future projections of oil market suggest an increase in E&P and thus an increase in contracts awarded to OFS companies

As a result of its high cash holdings, H&P is well positioned to rapidly increase investment and production as the oil market grows