Helmerich & Payne (HP)

Land drilling contractor Helmerich & Payne (NYSE:HP) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 50.2% year on year to $1.02 billion. Its non-GAAP loss of $0.15 per share was significantly below analysts’ consensus estimates.

Company Overview

Operating the largest fleet of super-spec rigs in North America with technology that can drill horizontal wells over two miles long, Helmerich & Payne (NYSE:HP) provides drilling rigs and crews to oil and gas companies that need wells drilled to extract hydrocarbons from underground.

Oilfield services companies provide equipment, technology, and services enabling exploration and production activities, including drilling, completion, well intervention, and reservoir evaluation. Their fortunes closely track upstream capital spending cycles. Tailwinds include increased drilling activity during favorable commodity environments, demand for efficiency-enhancing technologies, and growing offshore and unconventional resource development. Headwinds include significant revenue volatility tied to oil and gas price swings and producer spending discipline. Intense competition pressures pricing and margins, while the energy transition may structurally reduce long-term demand. Workforce availability and technological disruption require continuous adaptation.

Helmerich & Payne's main competitors include Nabors Industries (NYSE:NBR), Patterson-UTI Energy (NASDAQ:PTEN), and Precision Drilling (NYSE:PDS), along with numerous regional drilling contractors across North America.

The size of the revenue base is a way to assess topline, and it tells an investor whether an Energy producer has crossed the line between being a more vulnerable commodity taker and a durable operating platform. Scaled businesses tend to produce and generate revenue from many wells, pads, takeaway routes, and geographies, not just a single field or drilling program. Helmerich & Payne’s $4.09 billion of revenue in the last year is mid-sized for the industry.

Cyclical sectors like Energy often flatter weaker operators during favorable price environments, but a longer-term lens separates those from businesses that can consistently perform across market cycles. Luckily, Helmerich & Payne’s sales grew at an incredible 25.4% compounded annual growth rate over the last five years. Its growth beat the average energy upstream and integrated energy company and shows its offerings resonate with customers.

Even a long stretch in Energy can be shaped by a single commodity cycle, so extending the view to ten years adds another perspective and reveals which companies are built to grow regardless of the pricing regime. Helmerich & Payne’s annualized revenue growth of 5.6% over the last ten years is below its five-year trend, but we still think the results suggest decent demand.

While looking at revenue is important, it can also introduce noise around commodity prices and M&A. Analyzing drivers of revenue, on the other hand, highlights what is happening inside the asset base and whether the economic footprint of a company is expanding. Over the last two years, Helmerich & Payne’s total oil volume per day - Upstream averaged 11.3% year-on-year growth while natural gas volume per day - Upstream averaged 1.7% year-on-year growth, which was good.

This quarter, Helmerich & Payne reported magnificent year-on-year revenue growth of 50.2%, and its $1.02 billion of revenue beat Wall Street’s estimates by 3.1%. This quarter, Helmerich & Payne’s year-on-year production growth of 20.6% was excellent, and its 18.6 Mboe (thousand barrels of oil equivalent) of production was in line with Wall Street’s estimates.

In a single quarter or year, gross margins in the sector can swing wildly due to commodity prices, hedging, or changes in labor costs. Over a multi-year period across different points in the cycle, gross margin differences can signal whether a company is a structurally-advantaged producer (“rock” quality, takeaway, operating costs) or not.

Helmerich & Payne, which averaged 35% gross margin over the last five years, exhibits poor unit economics in the sector. It means the company will struggle more at lower commodity prices than peers with better gross margins.

This quarter, Helmerich & Payne’s gross profit margin was 32.9% , marking a 6.5 percentage point decrease from 39.3% in the same quarter last year. Note that energy margins can be volatile due to commodity price changes.

Helmerich & Payne was profitable over the last five years but held back by its large cost base. Its average EBITDA margin of 25.4% was weak for an upstream and integrated energy business.

On the plus side, Helmerich & Payne’s EBITDA margin rose by 14.5 percentage points over the last year, as its sales growth gave it immense operating leverage.

In Q4, Helmerich & Payne generated an EBITDA margin profit margin of 22.7%, down 6.8 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue. This adjusted EBITDA beat Wall Street’s estimates by 5.7%.

Adjusted EBITDA shows how profitable a company’s existing “rock” is before financing and reinvestment, while free cash flow shows how much value remains after paying to replace those wells. Because production declines over time, strong EBITDA can coexist with weak FCF if drilling is expensive or declines are steep. FCF therefore captures both operating efficiency and the cost of sustaining production.

Helmerich & Payne has shown mediocre cash profitability relative to peers over the last five years, giving the company fewer opportunities to return capital to shareholders. Its free cash flow margin averaged 6.9%, below what we’d expect for an upstream and integrated energy business.

The level of free cash flow is important, but its durability across cycles is just as critical. Consistent margins are far more valuable than volatile swings driven by commodity prices.

Helmerich & Payne’s ratio of quarterly free cash flow volatility to WTI crude price volatility over the past five years was 8.9 (lower is better), indicating reasonable insulation from commodity swings.

You may be asking why we wait until the free cash flow line to perform this stability analysis versus commodity prices. Why not compare revenue or EBITDA to WTI in the case of Helmerich & Payne? Because what ultimately matters is not how much revenue or profit you earn when prices are high but how much cash you can generate when prices are low. Free cash flow is the superior metric because it includes everything from hedging prowess to growth and maintenance capex to management behavior during good times and bad.

Helmerich & Payne’s free cash flow clocked in at $114.9 million in Q4, equivalent to a 11.3% margin. This result was good as its margin was 3.6 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Free cash flow shows how much money a producer generated, while ROIC shows how efficiently that money was earned. ROIC measures the operating profit produced for each dollar of capital invested, whether from debt or equity. Cash generation measures quantity while ROIC measures the quality of value creation.

We at StockStory like to look at ROIC over a ten-year period because energy investment cycles can involve up to five years of ramping production and another five years of harvesting. A decade view captures buying, extracting, and monetizing rather than just part of that picture. Helmerich & Payne’s ten-year average ROIC was negative 1.4%, meaning management lost money while trying to expand the business. Its returns were among the worst in the energy upstream and integrated energy sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Helmerich & Payne’s ROIC increased by 3.9 percentage points annually each year over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Helmerich & Payne reported $269 million of cash and $2.03 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $964.8 million of EBITDA over the last 12 months, we view Helmerich & Payne’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $94.89 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Helmerich & Payne beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its EPS missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $34.17 immediately after reporting.

Updated: March 15, 2026 at 1:08 AM EDT

Before investing in or passing on Helmerich & Payne, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

There are some positives when it comes to Helmerich & Payne’s fundamentals. To kick things off, its revenue growth over the last five years was top-tier for the sector. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its expanding EBITDA margin shows the business has become more efficient. On top of that, its scale enables operational efficiencies, capital market access, and investment in advanced technologies.

Helmerich & Payne’s P/E ratio based on the next 12 months is 63x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in. Add this one to your watchlist and come back to it later.

Wall Street analysts have a consensus one-year price target of $36.73 on the company (compared to the current share price of $36.01).