Helmerich & Payne Stock Slides Despite Saudi Rig Reactivation News
The drilling contractor's shares fell nearly 3% as investors weigh a key international expansion against a recent earnings miss and cautious sector outlook.
Helmerich & Payne Inc. (NYSE: HP) saw its shares decline in Tuesday trading, even as the company announced it had commenced the reactivation of seven high-performance drilling rigs in Saudi Arabia, a critical step in its international growth strategy.
Shares of the Tulsa-based drilling contractor fell 2.96% to $26.55 in morning trading. The negative market reaction highlights investor apprehension following the company’s recent fiscal fourth-quarter earnings, where it missed analyst expectations on adjusted earnings per share, causing the stock to drop more than 8% last week.
The operational update from Saudi Arabia signals progress in a key growth market for Helmerich & Payne. The company confirmed that drilling operations are beginning for the seven rigs under previously announced contracts. This move is part of a broader strategy to significantly expand its footprint in the Middle East, with a target of operating 24 rigs in the country by the middle of 2026.
“These reactivations demonstrate the strong, long-term partnership we've built with our customers and their continued confidence in H&P's performance and reliability,” said CEO John Lindsay in a statement. “They also mark a positive step forward as we strengthen our international operations.”
This international push is crucial for H&P as the North American onshore market shows signs of maturity and capital discipline among exploration and production companies. While demand for technologically advanced, “super-spec” rigs remains robust, the overall U.S. rig count has remained relatively stable, hovering around 549 units last week, according to data from Baker Hughes. This environment makes international expansion a primary avenue for growth.
The company’s Saudi fleet will ultimately consist of a mix of its proprietary FlexRigs® and rigs acquired through its strategic transaction with KCA Deutag, positioning it to meet diverse client needs in the region.
Despite the strategic importance of the Saudi expansion, investors appear more focused on the company's recent financial performance and a cautious outlook. With a market capitalization of approximately $2.75 billion, H&P's stock is trading near the consensus analyst price target of $26.60. The current price represents a significant discount from its 52-week high of $35.64, reflecting the broader challenges facing the oil and gas services sector.
Analysts maintain a largely neutral stance on the stock, with a majority of ratings at 'Hold'. The market is weighing the long-term potential of H&P's international execution against short-term profitability headwinds and the cyclical nature of the energy industry.
The successful deployment and operation of these seven rigs will be a key indicator for investors watching to see if Helmerich & Payne's international strategy can deliver the revenue growth needed to offset a more tepid domestic market and improve investor sentiment.