UPDATE: Goldman Sachs Upgrades Helmerich & Payne (HP) to Buy

(Updated - April 27, 2015 10:12 AM EDT)

Goldman Sachs upgraded Helmerich & Payne (NYSE: HP) from Neutral to Buy with a price target of $85.00 (from $51.00). Analyst Waqar Syed noted its high exposure to increased demand for high-spec US land rigs in 2016.

"HP has the largest inventory of idle >1,500HP AC rigs in the market and thus, should see the largest market share gains of any service company as drilling activity rebounds. We expect 1,500HP or larger rigs to see the sharpest increase in utilization, with rig utilization increasing from 62% currently to the mid-80% range by 4Q16. HP will be the biggest beneficiary of pick-up in 1,500HP AC rig demand as it controls nearly 50% of such available rigs. Furthermore, owing to the high concentration of idle supply (71%) in the hands of three major players, we believe that when the market recovers, pricing could increase more quickly than it would otherwise," said Syed.

"We project HP to generate substantial free cash flow in 2016 (8% of EV), which it can use for dividend increases or share buybacks. The company also has a pristine balance sheet, with 2016E net debt/ capital of -1%, vs. a land drilling peer average of 20%," added the analyst.

For an analyst ratings summary and ratings history on Helmerich & Payne click here. For more ratings news on Helmerich & Payne click here.

Shares of Helmerich & Payne closed at $74.42 yesterday.

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