PMC 30 Spotlight - Helmerich & Payne Inc.

This is the first post in our series of the PMC 30 Spotlight, where we provide an in depth look at an individual stock and explain how it fits into our investment thesis. The PMC 30 can be seen on the right of the blog. Inclusion in the PMC 30 does not mean that we would buy the the stocks at their current valuations.

Helmerich & Payne, Inc. (HP) engages in the contract drilling of oil and gas wells in the United States and internationally. The company provides drilling rigs, equipment, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and from fixed platforms, tension-leg platforms, and spars in offshore areas. It conducts domestic land drilling primarily in Oklahoma, California, Texas, Wyoming, Colorado, Louisiana, Mississippi, Pennsylvania, Utah, Arkansas, New Mexico, and North Dakota; and offshore drilling in the Gulf of Mexico, offshore of California, Trinidad, and Equatorial Guinea. As of September 30, 2009, the company had 201 land drilling rigs in the United States; 9 offshore platform rigs; and international land rigs, including 1 in Venezuela, 6 in Colombia, 4 in Ecuador, 9 in Argentina, 1 in Tunisia, and 6 rigs in Mexico. In addition, Helmerich & Payne engages in the ownership, development, and operation of commercial real estate properties, as well as the research and development of rotary steerable technology. Its property portfolio includes a shopping center and multi-tenant industrial warehouse properties, as well as approximately 210 acres of undeveloped real estate land. The company was founded in 1920 and is based in Tulsa, Oklahoma. - source Yahoo Finance

"As we’ve gained market share, we have also maintained premium margins to our peer group, becoming the U.S. land drilling industry’s most profitable contractor during our fiscal year."
- President of the company, Hans Helmerich, from the company's 2009 Annual Report 10K

We at Panoptic Management Consultants, Inc. feel very strongly that energy is a major investing theme. As emerging market nations grow, their demand for energy will become even more insatiable. This was illustrated in the most recent super spike in commodities in 2008. Helmerich & Payne Inc. provides investors exposure to both the crude oil and natural gas exploration industries. Their FlexRig technology allows new areas to be tapped. As illustrated by Exxon Mobil's (XOM) bid for the natural gas company XTO Energy (XTO), and Total's (TOT) recent purchase of 25% of Chesapeake Energy Corp. (CHK) it is obvious that the larger integrated oil companies see value in natural gas shale plays. The United States has a tremendous amount of natural gas in areas that until recently we thought were tapped. The Barnett, Marcellus, and Haynesville shales could provide the nation with enough power to become energy independent. The FlexRig technology gives wildcatters (gas exploration companies) an innovative way to explore these shales. As we do not believe that current alternative energy is an adequate answer to the growing demand for energy, it is our opinion that natural gas will be an inevitable bridge fuel. Helmerich & Payne Inc. does move with the price of oil and gas, and will give investors who can't afford to trade oil and gas futures exposure to this investment theme. The correlation to the prices of oil and gas must be taken into consideration when deciding if and when you will invest in this company.

Full Disclosure:

Our CEO, Asif A. Khan, CPA (or his family members) is long Helmerich & Payne common stock.