Helmerich Payne (HP) Assigned 'BBB+' Rating by S&P

Standard & Poor's Ratings Services today assigned its 'BBB+' corporate credit rating to Tulsa, Okla.-based contract drilling company Helmerich & Payne Inc. (NYSE: HP) (H&P). The outlook is stable.

At the same time, we assigned a 'BBB+' senior unsecured rating to the proposed senior unsecured notes, to be issued by Helmerich & Payne International Drilling and guaranteed by H&P.

"The ratings on H&P reflect our assessment of its business risk profile as 'satisfactory', its financial risk profile as 'modest', with 'adequate' liquidity," said Standard & Poor's credit analyst Paul Harvey.

Ratings also reflect H&P's limited geographic diversity relative to higher-rated peers and our view that H&P's focus on the U.S. onshore drilling market could lead to higher cyclicality, but that H&P will be able to quickly adjust operating costs to meet rig utilization.

The stable outlook reflects our expectation that H&P will continue to maintain conservative financial policies to maintain its strong financial measures during what could be a prolonged weak market. We expect that FFO/debt will not fall below 60% and debt/EBITDA will not exceed 1.5x.

We could raise ratings if H&P can increase its scale of operations closer to 'A' rated peers and materially exceed the 'BBB-' category peers, likely through favorable market conditions that support fleet and revenue growth. We could also raise ratings if H&P can maintain less profitability volatility than its contract drilling and oilfield services peer group through a market trough.

We could lower ratings if H&P adopts a more aggressive financial policy such that FFO/debt is expected to fall below 60% and/or debt/EBITDA exceeds 1.5x for a sustained period. This would likely occur if H&P continues to aggressively build rigs on a speculative basis through weak market conditions that limit utilization and day rates. Alternatively, this could occur if H&P adopts shareholder friendly initiatives such as large debt-financed share repurchases.

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