HP – No CDS, Base Case iCDS 256bps, Negative Case iCDS 317bps, 2031 2.900% Bond YTW of 3.265%, iYTW of 4.315%, Baa1 Rating from Moody’s, XO (equivalent to Baa3) Rating from Valens, Moderate Refinancing Need

January 18, 2022

  • Credit markets are understating credit risk with a YTW of 3.265% relative to an Intrinsic YTW of 4.315% and Intrinsic CDS of 256bps. Meanwhile, Moody’s is understating HP’s fundamental credit risk with its Baa1 credit rating two notches higher Valens’ XO (Baa3) credit rating.

  • Earnings Call Forensics™ analysis of the firm’s Q4 2021 earnings call highlights that management may lack confidence in their ability to sequentially increase rig count at a higher pace, expand headcount, and achieve offshore operating gross margin targets. Furthermore, they may be concerned about increases in field labor wages, tightening rig supply-related cost increases, and operating expenses increases for North America Solutions. Additionally, they may have concerns about the sustainability of rig demand in Colombia and passthrough pricing increases for their customers.

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