If you look at the oil and gas industry, independent driller Noble Energy, Inc. (NBL) would be a potential customer for oil and gas services company Helmerich & Payne, Inc. (HP -0.03%). So even though they operate in different parts of the energy business, their outlooks are tied at the hip in many ways. Today, U.S. onshore drilling is the main connection point. Thus, both of these companies deserve a closer loo. Which one may be your best bet? Let's stack these two companies up against each other to see which company is the better buy.

Getting back up to speed, with bumps

Although Noble Energy has operations around the world, 75% of its capital program is being dedicated to U.S. onshore drilling in 2017. Helmerich & Payne, meanwhile, has drill rigs running around the world, too, but roughly 90% of its fleet is dedicated to U.S. land drilling. To give you an idea of what's going on in the region, Helmerich's U.S. utilization rate increased 24% between September and December last year. If you are interested in the ongoing pickup in U.S. drilling, both of these companies are right there.  

Helmerich and Payne employees.

Image source: Helmerich & Payne, Inc.

The problem is that U.S. drilling can ramp up just as quickly as it can slow down. That's been a massive problem for supply and demand in global energy markets, and the world hasn't quite figured out how to adjust yet. In other words, energy markets could be volatile for a while longer. For Noble that means the potential of low commodity prices pressuring the top and bottom line and for Helmerich it could mean demand for drilling rigs goes through wild swings. This is a situation in which safety is important and, in my opinion, Helmerich is built to survive better than Noble.    

Ready for the swings

To be more direct, having a solid foundation is going to be important for energy-related names in the near term. That means taking a look at the balance sheet. Long-term debt makes up a little more than 40% of Noble Energy's capital structure. That number at Helmerich & Payne is around 10%. If the going gets tough, Helmerich will have more breathing room. (Helmerich also has one of the strongest balance sheets compared to its direct peers.)    

Helmerich and Payne's debt is low versus Noble and within its own peer group.

Helmerich & Payne's balance sheet is solid as a rock.  Image source: Helmerich & Payne, Inc.

But let's not stop there, let's also look at the current ratio, a rough estimate of a company's ability to pay its bills in a worst case scenario. Helmerich & Payne's current ratio is a robust 5 (or so). That means Helmerich could pay its near-term bills five times over. Noble Energy's current ratio is 1.3. Noble has a little more cash on its balance sheet, but it's nowhere near as strong financially.  

There are other ways to see the risk, too. That includes Noble Energy's decision to cut its dividend by 40% in 2016. It was probably the right choice for the company since oil prices are still much lower than they were before oil started to plunge in mid-2014. However, it shows how a rough spell can impact Noble's investors directly. The shares yield around 1.2% today. Helmerich & Payne's dividend has gone up every year for 44 years, with a current yield of over 4%. That's a commitment to shareholder returns that has survived more than one industry downturn.  

One of the important differences here is in the business model. Helmerich builds large and expensive drilling rigs that it leases out. That means it has a material amount of depreciation, a non-cash charge that reduces earnings but has no impact on cash flow. However, it generally only builds rigs when it has a customer lined up. So when demand drops off, the company's capital spending falls, protecting the cash flow it needs to run its business and pay the dividend.

NBL Capital Expenditures (Quarterly) Chart

NBL Capital Expenditures (Quarterly) data by YCharts.

Oil players like Noble have large ongoing expenses just to keep their pumps working. And if they stop spending, production levels can start to decline. Spending can only decline just so much, or for just so long, before there's a lasting impact on the business.

Going strong

If you are looking for a way to invest in the U.S. onshore oil and gas industry, Helmerich & Payne is one of your best options. When compared to Noble Energy, Helmerich has a more solid financial foundation to weather the industry's ups and downs. That's important today because U.S. onshore is likely to be a volatile business until world energy markets adjust to this highly flexible supply source. Which is why Helmerich, and its over 4% yield, is my choice of this U.S. focused duo.