Jefferies Downgrades Helmerich & Payne (HP) to Underperform

Jefferies downgraded Helmerich & Payne (NYSE: HP) from Hold to Underperform and cut its price target to $40.00 on pricing concerns.

Analyst Brad Handler commented, "Our downgrade reflects lower assumed day rates for rigs beginning in 2016 and running through our Normalized period; as discussed above, we believe day rates fall further near term given our assumed environment of lower rig count to end 2015 and then a more sluggish rig count recovery through 2017 on lower commodity prices and we believe it is more prudent to assume lower day rates in our Normalized year given our lower relative rig count forecast. Specifically for HP we model that its average day rate declines into 2017 as contracts roll off and its AC rigs go back to work and reprice at lower rates (our estimated average trough for HP is $23.6K/day, down from $26.6K/day in FY3Q15). Note that our estimate still reflects contribution from other services such as casing while drilling and higher-than-peer-average reimbursables. For our Normalized year, we model that HP has 260 active rigs at an average day rate of $24.0K/day and daily cash opex of $13.5K/day."

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 $51.29 yesterday.

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