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Helmerich & Payne's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Also beyond some transitional cost increases, we are seeing cost pressures on several fronts. Some higher costs are driven by the steady March of more complex and challenging drilling and faster cycle times. For example, from 2010 to 2010, our average footage per day increased over 10%. Already in 2012, we have seen average footage per day increase another 10%. So on one hand, our performance continues to improve, but at the same time, simply more is being demanded from the rig.

We will manage the challenge in a manner that plays to our strengths. Our success is securing premium margins that's relied on consistently reducing the customer's well cycle time. So first, we will continue to focus on safety, delivering performance efficiencies and repeatability to the customer. We have found over the years that, that often requires additional investment and can incur additional cost. At the same time, that approach is not mutually exclusive to vigorously managing the cost side of our business to inform asset-management, purchasing and innovative cost management.

In balancing both sides, better efficiencies will win the day and will remain our primary focus.

Going forward, we expect the average daily costs to flatten and trend slightly lower as some of the transitional issues run their course. Only 3 of the 80 rigs we have in the spot market are drilling for dry gas, and only another 3 of the dry-gas-directed rigs under term roll off during the third quarter.

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