Good day, everyone, and welcome to the Helmerich & Payne Second Fiscal Quarter Earnings Conference Call. Currently, all phone lines are in a listen-only mode. Later, there will be an opportunity to ask questions during the question-and-answer session. Please be advised, today's program may be recorded. It is now my pleasure to turn the program over to Mr. David Hardie, Manager of Investor Relations. You may begin, sir. David Hardie - Helmerich & Payne, Inc.: Thank you, Aaron, and welcome, everyone, to Helmerich & Payne's conference call and webcast corresponding to the second quarter of fiscal 2017. With us today are John Lindsay, President and CEO, and Juan Pablo Tardio, Vice President and CFO. John and Juan Pablo will be sharing some comments with us, after which we'll open up the call for questions. As usual and as defined by the U.S. Private Securities Litigation Reform Act of 1995, all forward-looking statements made during this call are based on current expectations and assumptions that are subject to risks and uncertainties as discussed in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. The company's actual results may differ materially from those indicated or implied by such forward-looking statements. We will also be making reference to certain non-GAAP financial measures such as segment operating income and operating statistics. You may find the GAAP reconciliation comments and calculations in today's press release. I'll now turn the call over to John Lindsay. John W. Lindsay - Helmerich & Payne, Inc.: Thank you, Dave, and good morning, everyone. Welcome to our second quarter call. As you saw in our press release, we experienced additional activity and spot pricing improvements in the U.S. Land market during the second fiscal quarter and H&P continues to lead the industry in AC drive, rig…

Certainly And we can take our first question from Colin Davies with Sanford C. Bernstein. Your line is now open. Colin Davies - Sanford C. Bernstein & Co. LLC: Well, thank you very much and good morning. John W. Lindsay - Helmerich & Payne, Inc.: Good morning. Colin Davies - Sanford C. Bernstein & Co. LLC: Talk a little bit about your earlier comments at the beginning where you perhaps alluded to maybe the pace of growth of active rigs may be slowing a little bit. Are you actually seeing that in the current quarter? Or is that something you're anticipating as you go forward? And then I got one more follow-up. John W. Lindsay - Helmerich & Payne, Inc.: Colin, I would say that we're seeing less enquiries on rigs. We're still receiving enquiries, but not to the same level – not to the same pace that we were previously. Of course, you have to kind of put that in perspective. This has been – at least for us, it's been an increase in activity that we've never seen before. So it's not really surprising that we're seeing it pull back a little bit. That was our expectation. Quite frankly, my expectation would've been it would've pulled back a little sooner than what it has. So, again, we're still getting requests, we still see the fleet growing through the rest of the quarter. As you probably heard us say before, it's very challenging to see much past a month or two. We're going to be effectively growing based on what our customers are seeing in the future. Obviously, oil prices, the softness that we've experienced over the last month or so has not helped matters any. But, again, I think in general, if you see the rig count, where…

And we will take our next question from Timna Tanners with Bank of America Merrill Lynch. Your line is now open.

Yeah. Hey, good morning, gentlemen. John W. Lindsay - Helmerich & Payne, Inc.: Good morning, Timna. Juan Pablo Tardio - Helmerich & Payne, Inc.: Good morning, Timna.

I want to ask one – to start with one broader question on the industry, because on the one hand in John's comments, he was saying that because some of your competitors may be forced to build rigs uneconomically. And then he also said that they may not be able to expand because of less attractive economics, so just wanted to get a little more color on your expectations in terms of the discipline in the industry on adding rigs in tandem with the growing demand. Thanks. John W. Lindsay - Helmerich & Payne, Inc.: Yeah, Timna, well, I think there's not been a large scale discussion regarding new rigs, but there have been some new rigs that have been announced and, obviously, some new rigs that are continuing to be built. Based on what we're seeing, I think there's probably 10 or so if you were to add them all up. And obviously, there were some kits that were involved that had been previously acquired. So maybe that's part of what's driving it. I think in general though, when you look at the overall fleet of rigs that are working today and the number of those rigs that, again, to use the super-spec capability, and then those that have the ability to be upgraded to super-spec, best we can tell, there is a fairly limited amount of rigs there. So I think in order to see a significant growth going forward, that may be what many of our peers are faced with, is building new rigs as opposed to having a fleet that can scale up like what we've been able to do and meet that demand. Again, that's kind of our assumption at this point.

So you're in better position relative to peers. But do you think that peers are going to make the right economic decision and decide to be more measured in their growth or do you have any concerns about the pace of new rigs relative to this slower demand environment, albeit from high levels? John W. Lindsay - Helmerich & Payne, Inc.: Yeah, it's pretty hard for us to say. Again, all we've heard is that there's about 10 rigs and most of those rigs, I think, the kit or at least half of the kit or so had already been acquired back in either 2013 or 2014. So it's really hard for us to say. All we can really do is we're trying to create context of where we are in the market cycle. As I said in my remarks, in previous cycles, we would've more than likely been out of FlexRigs. And we're in a great position today in that we have that idle capacity that can be upgraded. Obviously, we have some rigs that are – 50 rigs that are running right now that can be upgraded to higher capacity if need be. And I think that's really one of the questions that is unanswered. Nobody knows for sure, but how many of the higher spec classification rigs are going to be required? The sense is, we continue to have requests from customers to upgrade existing rigs or as they're bringing a new rig out, they're wanting to see those rigs upgraded. So our sense is that it's going to continue to grow. I think there's one other point to make here and that's related to the number of legacy rigs, conventional rigs that are still working, that are drilling some of the more – or at least are drilling horizontal wells. I can't really speak to the complexity. So even in a flattening rig count environment, even if the rig count were to flatten at 900 or 950 or whatever the number may be, you're probably still going to see high grades taking place. I think that would make sense because some of those lower performing rigs are probably going to be displaced.

That makes sense. And before I hand it off, if you wouldn't mind, I know you gave some detail on overall pricing, but could you give us some fresh thoughts on where you're seeing the highest or super-spec rigs getting priced at? The latest that you're seeing, or what you're seeing into the second half of the calendar year? John W. Lindsay - Helmerich & Payne, Inc.: I think it's been – the highest end on spot pricing is around 19.5 to low-20s, depending on how the rig is set up in terms of the upgrades that we talked about. So that's kind of the range that we've seen as far as today. Does that answer your question? I want to make certain I...

Yeah, we've heard from other folks about into the next several quarters, perhaps seeing even higher rates on deliveries that are scheduled that far out. So I was just wondering if you have anything there. John W. Lindsay - Helmerich & Payne, Inc.: We don't have anything that I can think of scheduled out that far in the next few quarters. We have ongoing conversations with customers related to rigs and that timing. We don't have any new builds. We do have some discussions related to customers that have several rigs of ours running right now, saying, hey, we need to pick up a rig in August or we may need to pick up a couple or two rigs in the fall. This is the type of rig configuration that we're looking for. They're doing that to make certain that we're kind of reserving a spot in our schedule. But, again, I wouldn't even put that in the category of a commitment. It's just kind of a discussion. Obviously, you know this; it's just a function of what prices are going to do. And if oil prices remain in the $50 to $55 range, then I would imagine we're getting pretty close to where the rig count's going to kind of flatten out for a period of time. If it goes to $55 to $60, then I think we continue to possibly see some increases in activity.

Okay. Thanks so much.

And we can take our next question from Matthew Johnston with Nomura Securities International. Your line is now open.

Hey, good morning, guys. John W. Lindsay - Helmerich & Payne, Inc.: Good morning, Matt.

So, Juan Pablo, when you gave the breakdown for the rigs under term contract, I think you mentioned that you had about 30 of them that were priced during the downturn with average duration of less than a year. Just curious if you guys are getting any inquiries from your customers for term contracts of a longer duration? Anyone coming to you and asking to lock the rig up for two years or even longer at this point? Juan Pablo Tardio - Helmerich & Payne, Inc.: Sure, Matt. I believe we are seeing some requests. But most of our rigs are going to work in the spot market as you've probably noticed in the numbers. But perhaps John may have a little more color on that. John W. Lindsay - Helmerich & Payne, Inc.: Yeah, Matt. There have been a few rigs, Flex3s that have been termed up recently, anywhere from one to two-year type term contracts and low $20,000 type of contracts. So that's positive to see. Of course, the rigs are outfitted with skid systems, 7,500 psi. They're super-spec capable rigs. So that's an encouraging sign to see. And again, we're seeing pricing improvement on the spot market side as well.

Got it. Okay. And then, I guess, just connected to that real quick, is it fair to say that all of the term contracts that you are booking at this point you're booking them at a higher price than that spot rate in the high teens? John W. Lindsay - Helmerich & Payne, Inc.: Yes. That is our intention is to – if we're going to lock up a term contract today, it's going to be at a higher level than spot pricing.

Got it. Great. That's it for me, guys. Thanks. John W. Lindsay - Helmerich & Payne, Inc.: All right, Matt. Thanks.

And we will take our next question from Kurt Hallead with RBC Capital Markets. Your line is now open.

Hey, good morning. John W. Lindsay - Helmerich & Payne, Inc.: Good morning, Kurt. Juan Pablo Tardio - Helmerich & Payne, Inc.: Good morning, Kurt.

Hey, guys. I just wanted to gauge from you, I was kind of little bit on and off here this morning, a lot going on as you're probably aware with a lot of other conference calls and so on. So I apologize if I ask something you guys already answered. The dynamics on pricing, right, as rigs are filtering into the market, kind of getting the sense that there's super-spec rigs are able to get very good pricing and very good margins and let's just say price points in and around the $20,000 a day or maybe better than that. And then if it's not a super-spec rig, the price points are still not really moving very much. So I was wondering if you can talk a little bit about a bifurcation. And if there is a bifurcation and kind of how you see pricing evolving? John W. Lindsay - Helmerich & Payne, Inc.: Yeah, Kurt. This is John. Well, there's no doubt that the super-spec outfitted rigs are commanding higher price. So I think there is a level of bifurcation. We have seen an improvement in our spot pricing on FlexRigs that don't have the upgrades. But, clearly, those rates are not as high as a spot rate for a super-spec rig or, as we just mentioned a moment ago to Matt, related to term contracts, they're not – in most cases, they're not at that level. So I think it's logical that you would have that. I had mentioned earlier on the call, I don't know if you were on then, I think there are still – David, aren't we still seeing around 200 conventional rigs that are drilling horizontal directional wells? David Hardie - Helmerich & Payne, Inc.: That sounds correct. John W. Lindsay - Helmerich & Payne, Inc.: I think that's still generally correct, Kurt. And I'm sure the pricing on those are at a lower level than – depending on how they're outfitted, than the AC drive rigs. Again, those rigs, I think, are going to come under increasing pressure. I don't even know where all of them are working, but I think just in general, you're going to see more pressure on that legacy fleet.

That's great. I appreciate that color. Thank you. John W. Lindsay - Helmerich & Payne, Inc.: Thanks, Kurt.

And we can take our next question from Michael Lamotte with Guggenheim Securities. Your line is now open.

Hey, good morning. This is actually Jim Schumm for Michael. John W. Lindsay - Helmerich & Payne, Inc.: Hi, Jim.

Hi, how are you? I was wondering if you could update us on your new walking system. Just curious how the market is going – the marketing, rather, any issues? And if you'd be willing to share with us what the cost might be of the structure work? John W. Lindsay - Helmerich & Payne, Inc.: Yeah, Jim, the walking rig, the first Flex3 with a walking system, we have a commitment. We've had a couple of commitments over the last month or so and following through for one reason or another. But we do think that we've got a contract for the rig. Again, we're excited about it. We think that it does offer us an opportunity to capture some additional market share in that space where a walking rig – a competitor's rig that we can compete head-to-head with. So we're encouraged by that. We have another four or five that we have planned. Most likely, those rigs are going to go to the Northeast. That's kind of what we're seeing in terms of demand for the walking applications. And so, again, we think it's an opportunity for us. We had mentioned on the last call that we're – in addition to this new walking rig we also added additional 20 Flex3 skid systems. We've got 11 of those 20 that are committed. And so we're pleased that we're continuing to see demand for customers for Flex3 skid systems as well.

And then, just any rough guidance you could share about the cost per rig for the walking systems? John W. Lindsay - Helmerich & Payne, Inc.: Jim, at this stage, with the prototype in the stage that it is right now, we're trying to get from the kind of prototype stage to getting it to a more manufacturing cadence perspective. We did say and we've been pretty clear that this is more expensive than a Flex3 with a skid system upgrade because of the substructure design and new fabrication on the substructure. Obviously, when you're doing the level of upgrade that we're doing, we're also doing 7,500 psi, we're also doing other upgrades, and just generally putting the rig into a condition where it's, you could almost classify it as almost like new. So that drives some additional cost and every rig is going to be little bit different. So we will talk more about the cost in the future. But at this stage of the game, with it being the first rig, it really doesn't make sense to talk about the cost of it right now. And I will say this, from our perspective, it's very attractive when you look at the potential, again, to capture market share with "like new type rig" that can enter into the market and be highly competitive related to – particularly related to returns on invested capital.

Okay, great. And then, you guys just talked about this in terms of the term contract. And I think it was more about the operator appetite for longer-term contracts. I'm curious to hear your views on what your appetite would be for longer-term contracts. Clearly, the numbers you threw out seem to be pretty focused on the spot market. That obviously makes a lot of sense where we are in the cycle. But is there a day rate or a timeframe where you might start adding more term as we go through the year or is this more of a 2018 event or just how you're thinking about that? John W. Lindsay - Helmerich & Payne, Inc.: Well, Jim, it's really – there are a lot of variables in that and having to do with the location, having to do with the amount of investments you're putting in a rig, the customer, there's lots of variables there to enter into a one or two-year term contract on a Flex3 or a Flex5 with $1 million or $2 million investment in an upgrade kit makes a lot of sense. And so, from our perspective, sure, we'd be interested in doing that. So we have the appetite for it to a certain level. But, again, you have to have the other side of the equation. You have to have the demand pull from the customer. So I think, for those that we've entered into, I think it's a great value for both us and our customer.

Thank you very much. Appreciate the time. John W. Lindsay - Helmerich & Payne, Inc.: All right, Jim. Thank you.

We'll next go to Brad Handler with Jefferies & Company. Your line is now open.

Thanks, guys. Good morning. John W. Lindsay - Helmerich & Payne, Inc.: Good morning

I guess I'll follow along the same path, but maybe approach it slightly differently. Are you – it's just I'm not clear. From an upgrade perspective, are you doing that only with some form of contract, some sort of payback in hand, or are you approaching the market a bit more speculatively than that, again, purely on this upgrade to super-spec front? John W. Lindsay - Helmerich & Payne, Inc.: Well, Brad, you've probably heard us say before, six months ago or four months ago, if you didn't have the upgrade, the rig wasn't going to work.

Yeah. John W. Lindsay - Helmerich & Payne, Inc.: And today, obviously – maybe it hasn't been so obvious. We've put rigs to work without having the upgrade kit installed, because, when you're putting 30 out – approximately 30 out a quarter, if you have demand for 35, you can't get to it. So, you put it on later. In some cases, we're getting term, and in other cases, we're doing it in a spot market fashion. We don't have any concerns that that rig is not going to continue to work. So we think it's a great investment. We're definitely getting a return on our investment. Obviously, we don't have it locked into a year, or two years in some cases. But, again, based upon the performance we have, the track record we have, the rigs are going to work in an environment like we're seeing or even in a softer market. But we're still about 50% hedged on term contracts and, of course, some of those are previous contracts we entered into. So, to answer your question, we're doing both. We think it's the right thing to do longer term, and we're pleased – as we made the point in our prepared remarks, we're pleased that we can do that with our existing fleet, with $1 million and $2 million investments as opposed to having to go out and build a new rig.

Right. No, I understand and I appreciate that color. I may have missed this, but just what is your expected CapEx for 2017? Sort of without labeling it... (42:37) John W. Lindsay - Helmerich & Payne, Inc.: We're at $350 million.

Okay. So that's unchanged. So, you're sort of following – it sounds like you're sort of following the game plan including these upgrade moves. John W. Lindsay - Helmerich & Payne, Inc.: Correct, correct. Yeah, I think we prepared ourselves during the course of the year. We made certain that we were not resource constrained. We've got the CapEx; we've got the long lead items on order. It's really no different from our perspective than building new rigs. We're just building new kits and installing them in kind of a lean fashion. So that helps a lot.

Sure, sure. Okay. Moving to a separate question, I guess you took some charges for rig abandonment, and it sounds like there's some more coming, so $40 million total. Can you tell us what rigs that applies to? Just give a little color around that, please. Juan Pablo Tardio - Helmerich & Payne, Inc.: Brad, this is Juan Pablo. We'd be glad to. It mostly relates to our U.S. Land segment. As you can imagine, it relates to the rigs that we are performing upgrades on. As we go through the upgrades, there are pieces of equipment that previously pertained to the rig that no longer have any use. And as that equipment is being replaced, then we decommission that equipment, and that's what creates the abandonment charge which is included in depreciation.

Oh, I got it. Okay. Glad I asked. I understand that. Okay. And then maybe just a last one – not exactly sure what I'm after here, but there's increasing talk around drilling automation packages and the like. A couple of different offerings coming from a couple of different parties, some homegrown I suppose, and then others are third-party offerings. I guess I'm curious for – if I presume that your fleet is equipped to handle those apps, if you will, I guess I'm curious for the appetite you have for that and any color you might be able to offer. And then, if I may, sort of wrapped within the same question, there is – wired pipe seems like it's actually hitting the market today. And I guess I'd be curious for if you have had some experience dealing with wired pipe and again, what you see as the future with that? John W. Lindsay - Helmerich & Payne, Inc.: Sure, Brad. Yeah, the – and I'm assuming the automation – I think you said this, it's down-hole. It's automation, trying to limit the human intervention from a driller and from a directional driller. So, yes, we've been involved really for several years in working towards that type of an effort. And so we've seen the other folks that have talked through it. Number one question that you had is, are our rigs capable? Yes, the rigs are capable. We do have in-house capability on some of the things that we're working on. It's been a bit of iterative process over time, which isn't completely surprising. It's, in some respects, a little similar to, if you think about autonomous vehicles and the different steps that need to be taken along the way to get to more of a full…

That's helpful just to touch on that. Okay, great. Thank you. I'll turn it back. John W. Lindsay - Helmerich & Payne, Inc.: All right, Brad. Thank you.

Juan Pablo Tardio - Helmerich & Payne, Inc.: Aaron, this is Juan Pablo, given that there are no other questions, John would like to make a few concluding comments. John W. Lindsay - Helmerich & Payne, Inc.: Yeah, Aaron, thank you, and thanks, everyone. We appreciate you joining us on the call this morning. Realize there's a lot of activity going on this morning, so we appreciate having your time. Just want to leave you with one thought. We remain confident about the future for H&P because of our competitive advantages that remain in our people, in our performance, our technology, reliability and our uniform FlexRig fleet. We think that positions us very well for the future, and we look forward to talking with you. Thank you again and have a great day.

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