-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ArlYhkEylF3YOx0OClAag43ddRm+cHJ79HtNcne3fpgARvMnKKuq4CwBZqy61uGG MGjJdX5/SL9fR+u5P20L7A== 0000950134-94-001530.txt : 19941223 0000950134-94-001530.hdr.sgml : 19941223 ACCESSION NUMBER: 0000950134-94-001530 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941222 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HELMERICH & PAYNE INC CENTRAL INDEX KEY: 0000046765 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 730679879 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04221 FILM NUMBER: 94565709 BUSINESS ADDRESS: STREET 1: UTICA AT 21ST ST CITY: TULSA STATE: OK ZIP: 74114 BUSINESS PHONE: 9187425531 MAIL ADDRESS: STREET 2: UTICA AT 21ST ST CITY: TULSA STATE: OK ZIP: 74114 10-K 1 FORM 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to ________________ Commission file number 1-4221 HELMERICH & PAYNE, INC. (Exact name of registrant as specified in its charter) Delaware 73-0679879 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Utica at Twenty-first Street, Tulsa, Oklahoma 74114 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (918) 742-5531 Securities registered pursuant to Section 12(b) of the Act: Name of Exchange Title of Each Class on Which Registered ------------------- ------------------- Common Stock ($0.10 par value) New York Stock Exchange Common Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] (Continued) 2 At December 16, 1994, the aggregate market value of the voting stock held by non-affiliates was $583,364,215. Number of shares of common stock outstanding at December 16, 1994: 24,718,660. DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report to Security Holders for the fiscal year ended September 30, 1994 -- Parts I, II, and IV. (2) Proxy Statement for Annual Meeting of Security Holders to be held March 1, 1995 -- Part III. 3 HELMERICH & PAYNE, INC. AND SUBSIDIARIES Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended September 30, 1994 PART I Item 1. BUSINESS Helmerich & Payne, Inc., incorporated under the laws of the State of Delaware on February 3, 1940, and successor to a business originally organized in 1920, is engaged primarily in the exploration, production, and sale of crude oil and natural gas and in contract drilling of oil and gas wells for others. These activities account for the major portion of its operating revenues. The Registrant is also engaged in the manufacture and distribution of odorants for use in the gas transmission and distribution industry, and in the ownership, development, and operation of commercial real estate. The Registrant is organized into four separate autonomous operating divisions being contract drilling; oil and gas exploration, production and natural gas marketing; chemicals; and real estate. While there is a limited amount of intercompany activity, each division operates essentially independently of the others. Operating decentralization is balanced by a centralized finance division, which handles all accounting, data processing, budgeting, insurance, cash management, and related activities. 4 Most of the Registrant's current exploration effort is concentrated in Louisiana, Oklahoma, Texas, Wyoming, and the Hugoton Field of western Kansas. The Registrant also explores from time to time in the Rocky Mountain area, New Mexico, Alabama, Florida, and Mississippi. The Registrant's gas production is sold to and resold by a marketing subsidiary. This subsidiary also purchases gas from unaffiliated third parties for resale. The Registrant's contract drilling is primarily conducted domestically in Alabama, Oklahoma, Texas, Mississippi, and Louisiana, and offshore from platforms in the Gulf of Mexico and offshore California. The Registrant has also operated during fiscal 1994 in five international locations: Venezuela, Ecuador, Colombia, Trinidad, and Yemen. The Registrant's odorants are manufactured in its plant in Baytown, Texas, and the Registrant's real estate investments are located in Tulsa, Oklahoma, where the Registrant has its executive offices. CONTRACT DRILLING The Registrant believes that it is one of the major land and offshore platform drilling contractors in the western hemisphere. Operating in North and South America and the Middle East, the Registrant specializes in deep drilling in major gas producing basins of the United States and in drilling for oil and gas in remote areas of the world. For its international operations, the Registrant also constructs and operates rigs which are transportable by helicopter. In the United States, the Registrant draws its customers primarily from the major oil companies and the larger independents, which are the companies generally engaged in deep drilling. The Registrant also drills for its own oil and gas I - 2 5 division. In South America and the Middle East, the Registrant's current customers include, respectively, the Venezuelan state petroleum company and major international oil companies. BP EXPLORATION INC. (including its affiliates) is the Registrant's largest single customer. Revenues from drilling services performed for BP EXPLORATION INC. in fiscal 1994 totaled approximately 14% of the Registrant's consolidated revenues. The Registrant provides drilling equipment, personnel, and camps for others on a contract basis for exploration and development of onshore areas and for development from fixed platforms in offshore areas. Each of the drilling rigs consists of engines, drawworks, a mast, pumps to circulate the drilling fluid, blowout preventers, a drillstring, and related equipment. The intended well depth and the drilling site conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling job. A helicopter rig is one that can be disassembled into component part loads of 4,000 to 7,000 pounds and transported to remote locations by helicopter, cargo plane, or other means. The Registrant's workover rigs are equipped with engines, drawworks, a mast, pumps, and blowout preventers (on a smaller scale than the drilling rigs). A workover rig is used to complete a new well after the hole has been drilled by a drilling rig, and to remedy various downhole problems that occur in older producing wells. The Registrant's contracts for drilling are obtained through competitive bidding or as a result of negotiations with customers, and sometimes cover multi-well and multi-year projects. Most of the contracts are performed on a "daywork" basis, under which the Registrant I - 3 6 charges a fixed rate per day, with the price determined by the location, depth, and complexity of the well to be drilled, operating conditions, the duration of the contract, and the competitive forces of the market. Current market conditions involve an oversupply of drilling rigs for the work available. As a consequence, the Registrant is and will be performing and bidding for contracts on a combination "footage" and "daywork" basis, under which the Registrant charges a fixed rate per foot of hole drilled to a stated depth, usually no deeper than 15,000 feet, and a fixed rate per day for the remainder of the hole. Contracts performed on a "footage" basis involve a greater element of risk to the contractor than do contracts performed on a "daywork" basis. Market conditions have also led the Registrant to accept "turnkey" contracts under which the Registrant charges a fixed sum to deliver a hole to a stated depth and agrees to furnish services such as testing, coring, and casing the hole which are not normally done on a "footage" basis. "Turnkey" contracts entail varying degrees of risk greater than the usual "footage" contract. The Registrant believes that under current market conditions "daywork" basis contract rates are too low to adequately compensate contractors and that "footage" and "turnkey" basis contract rates do not adequately compensate contractors for the added risks. However, the Registrant intends to remain in the drilling contracting business in anticipation of a return to more favorable market conditions. Contracts for use of the Registrant's drilling equipment are "well-to-well" or for a fixed term. "Well-to-well" contracts are cancelable at the option of either party upon the completion of drilling at any one site, and fixed-term contracts customarily provide for I - 4 7 termination at the election of the customer, with an "early termination payment" to be paid to the contractor if a contract is terminated prior to the expiration of the fixed term. While current fixed term contracts are for one to three year periods, some fixed term and well-to-well contracts are expected to be continued for longer periods than the original terms, although the contracting parties have no legal obligation to do so. Contracts generally contain renewal or extension provisions exercisable at the option of the customer at prices mutually agreeable to the Registrant and the customer, and in most instances provide for additional payments for mobilization and demobilization. Contracts for work in foreign countries generally provide for payment in United States dollars, except for amounts required to meet local expenses; however, increasingly there is a trend toward state petroleum companies insisting on total payment in local currencies. Domestic Drilling The Registrant believes it is a major land and offshore platform drilling contractor in the domestic market. At the end of September, 1994, the Registrant had 47 rigs available for operations in the United States and had management contracts for two operator owned rigs in offshore California. The Registrant is competitively strongest in deep drilling rigs. Twenty-six of its existing rigs are capable of drilling to depths in excess of 20,000 feet. On June 30, 1994, the Registrant in a single transaction purchased 12 land drilling rigs and related equipment, together with a 14 acre I - 5 8 equipment yard facility located in the state of Texas. The total purchase price was approximately $15.5 million consisting of cash, a promissory note, and certain contingent payment obligations. Since seven of such rigs are considered medium depth rigs (optimum working depth of 12,000 to 15,000 feet), Registrant believes that this acquisition should allow it to expand its business into the shallow to medium depth drilling markets. International Drilling The Registrant's international drilling operations began in 1958 with the acquisition of the Sinclair Oil Company's drilling rigs in Venezuela. Helmerich & Payne de Venezuela, C.A., a wholly owned subsidiary of the Registrant, is a leading drilling contractor in Venezuela. Beginning in 1972, with the introduction of its first helicopter rig, the Registrant expanded into other Latin American countries. Venezuelan operations continue to be a significant part of Registrant's operations. The Registrant presently owns and operates 15 drilling rigs in Venezuela and has labor contracts to operate two government-owned drilling rigs in Venezuela. The Registrant has a utilization rate of 90% for these rigs. During the fiscal year ended September 30, 1994, the Venezuelan operations contributed 17% of the revenue generated by the Registrant's international and domestic contract drilling activities. The Registrant worked for all three Venezuelan producing companies during the fiscal year ended September 30, 1994. Collectively, revenues from the three producing companies amounted to I - 6 9 approximately 9% of the Registrant's consolidated revenues. The Registrant believes its relations with such producing companies are good. During the mid-1970s, the Venezuelan government nationalized the exploration and production business. At the present time it appears the Venezuelan government will not nationalize the contract drilling business. The Registrant in fiscal 1994 experienced unusual currency losses in Venezuela totaling approximately $2.7 million. These losses were primarily attributable to significant increases in the devaluation of the Venezuelan currency and governmental restrictions in the conversion of Venezuelan currency to United States dollars. See "Regulations and Hazards" pages I-9 through I-11. The Registrant's operations in Colombia continue to increase. The Registrant presently owns and operates eight drilling rigs in Colombia. The Registrant's utilization rate for such rigs was 88% as of the end of fiscal 1994. Four of such rigs are working in the last year of a three-year term contract with a major international exploration and production company. During fiscal 1994 the revenue generated by these four rigs contributed approximately 17% of the revenue generated by the Registrant's international and domestic drilling activities. In addition to its operations in Venezuela and Colombia, the Registrant in fiscal 1994 owned and operated four rigs in Ecuador, one rig in Trinidad, and one rig in Yemen. In Ecuador and Yemen, the contracts are with large international oil companies. In August of 1994, a newly formed venture owned 50% by Registrant and 50% by its affiliate, Atwood Oceanics, Inc., was awarded a term I - 7 10 contract in Australia for the design, construction and operation of a new generation platform rig. The rig will incorporate some of the latest technology in instrumentation and remote control mechanization of drilling equipment. It is presently anticipated that rig construction will be completed in late 1995 with initial mobilization and related operations to commence in early 1996. During the first and second quarters of fiscal 1995, three rigs each will be moved to Venezuela and Colombia from the United States and will be operated under term contracts. In the first quarter of fiscal 1995, the rig in Yemen will be moved to and stacked in Houston, Texas. Competition The contract drilling business is highly competitive. Competition in contract drilling involves such factors as price, rig availability, efficiency, condition of equipment, reputation, and customer relations. Competition is primarily on a regional basis and may vary significantly by region at any particular time. Drilling rigs can be readily moved from one region to another in response to changes in levels of activity, and an oversupply of rigs in any region may result. The Registrant made a commitment to deep drilling in the early 1970's. During the past several years there has been what appears to the Registrant to be an oversupply of unregulated natural gas. As a result, the demand for deep drilling for gas has decreased. The expectation in the industry is that the long term trend in domestic exploration will be toward more and deeper wells. I - 8 11 Regulations and Hazards The drilling operations of the Registrant are subject to the many hazards inherent in the business, including blowouts and well fires, which could cause personal injury, suspend drilling operations, seriously damage or destroy the equipment involved, and cause substantial damage to producing formations and the surrounding areas. The Registrant believes that it is adequately insured, with coverage for comprehensive general liability, public liability, property damage (including insurance against loss by fire and storm, blowout, and cratering risks), and employer's liability. No insurance is carried against loss of earnings. The Registrant's present coverage has been contracted through fiscal 1995. However, in view of conditions generally in the liability insurance industry, no assurance can be given that Registrant's present coverage will not be cancelled during fiscal 1995 nor that insurance coverage will continue to be available at rates considered reasonable. International operations are subject to certain political, economic, and other uncertainties not encountered in domestic operations, including risks of expropriation of equipment as well as expropriation of a particular oil company operator's property and drilling rights, taxation policies, foreign exchange restrictions, currency rate fluctuations, and general hazards associated with foreign sovereignty over certain areas in which operations are conducted. There can be no assurance that there will not be changes in local laws, regulations, and administrative requirements or the interpretation thereof, any of which changes could have a material adverse effect on the profitability of the Registrant's I - 9 12 operations or on the ability of the Registrant to continue operations in certain areas. Because of the impact of local laws, in certain areas the Registrant's operations may, in the future, be conducted through entities in which local citizens own interests and through entities (including joint ventures) in which the Registrant holds only a minority interest, or pursuant to arrangements under which the Registrant conducts operations under contract to local entities. While the Registrant believes that neither operating through such entities or pursuant to such arrangements nor the restructuring of existing operations along such lines would have a material adverse effect on the Registrant's operations or revenues, there can be no assurance that the Registrant will in all cases be able to structure or restructure its operations to conform to local law (or the administration thereof) on terms acceptable to the Registrant. The Registrant further attempts to minimize the potential impact of such risks by operating in more than one geographical area and by attempting to obtain indemnification from operators against expropriation, nationalization, and deprivation. Many aspects of the operations of the Registrant are subject to government regulation, including those relating to drilling practices and methods and the level of taxation. In addition, various countries (including the United States) have environmental regulations which affect drilling operations. Drilling contractors may be liable for damages resulting from pollution. Under United States regulations, drilling contractors must establish financial responsibility to cover potential liability for pollution of offshore waters. Generally, the Registrant is indemnified under drilling contracts from environmental damages, I - 10 13 except in certain cases of surface pollution, but the enforceability of indemnification provisions in foreign countries may be questionable. The Registrant believes that it is in substantial compliance with all legislation and regulations affecting its operations in the drilling of oil and gas wells and in controlling the discharge of wastes. To date, compliance has not materially affected the capital expenditures, earnings, or competitive position of the Registrant, although these measures may add to the costs of operating drilling equipment in some instances. Further legislation or regulation may reasonably be anticipated, and the effect thereof on operations cannot be predicted. OIL AND GAS DIVISION The Registrant engages in the origination of prospects; the identification, acquisition, exploration, and development of prospective and proved oil and gas properties; the production and sale of crude oil, condensate, and natural gas; and the marketing of natural gas. The Registrant considers itself a medium-sized independent producer. All of the Registrant's oil and gas operations are conducted in the United States. Most of the Registrant's current exploration and drilling effort is concentrated in Louisiana, Oklahoma, Texas, Wyoming and the Hugoton Field of western Kansas. The Registrant also explores from time to time in the Rocky Mountain area, New Mexico, Alabama, Florida and Mississippi. The Registrant has commenced a 3-D seismic program in which 3-D seismic surveys will be obtained in Kansas, Texas, Wyoming, Louisiana and Oklahoma. The Registrant believes that these surveys will be of I - 11 14 significant assistance in identifying potentially productive oil and gas formations. During the past fiscal year, the Registrant has reduced its expenditures for exploration of fractured Austin Chalk reservoirs in south central Louisiana. The Registrant in fiscal years 1993 and 1994, has participated in the horizontal drilling and completion of four Austin Chalk wells. Upon evaluation of the results of such wells, the Registrant has elected to allow certain oil and gas leases covering approximately 14,763 acres to expire during fiscal 1994. The Registrant's present efforts are concentrated in the western portion of the original exploration area where it holds acreage offsetting an Austin Chalk well which has recently been completed by Oxy USA. Although this well has been initially productive of oil and gas, it is premature to determine its commercial potential. The Registrant will monitor production from this well to assist in the determination of the amount of its participation, if any, in the additional drilling in the area and the extent of its continued payment of annual rentals. The Registrant's exploration and development program has covered a range of prospects, from shallow "bread and butter" programs to deep, expensive, high risk/high return wells. During fiscal 1994 the Registrant participated in 38 development and/or wildcat wells, which resulted in new discoveries of 8.4 bcf of gas and 208,361 barrels of oil and condensate. The Registrant participated in six additional development wells, which resulted in the development of 1.3 bcf of gas and 104,900 barrels of oil and condensate which was previously classified as proved undeveloped reserves. A total of $25,306,000 was spent in the I - 12 15 Registrant's exploration and development program during fiscal 1994. This figure is exclusive of expenditures for acreage. The Registrant's total company-wide acquisition cost for acreage in fiscal 1994 was $4,893,094. The Registrant spent $23,115,110 for the acquisition of proved oil and gas reserves during fiscal 1994. As of September 30, 1994, remaining reserves from such acquisitions totaled 19.5 bcf of natural gas and 157,484 barrels of crude oil and condensate. Approximately 66% of such reserves are located in western Oklahoma with the remainder being located in western Texas and southern Louisiana. Many of these acquired properties have additional development potential. Market for Oil and Gas The Registrant does not refine any of its production. The availability of a ready market for such production depends upon a number of factors, including the availability of other domestic production, crude oil imports, the proximity and capacity of oil and gas pipelines, and general fluctuations in supply and demand. The Registrant does not anticipate any unusual difficulty in contracting to sell its production of crude oil and natural gas to purchasers and end-users at prevailing market prices and under arrangements that are usual and customary in the industry. However, the market for natural gas has been in a state of oversupply for several years, and the Registrant and its wholly owned subsidiary, Helmerich & Payne Energy Services, Inc., have successfully developed markets with end-users, local distribution companies, and natural gas brokers for gas produced from successful wildcat wells or development wells. The Registrant is of the opinion that the I - 13 16 supply/demand for natural gas is moving towards a state of equilibrium. Winter demand and its effect on gas storage has a significant effect on natural gas pricing. The stability of short-term prices for natural gas will largely depend upon the demand during the heating season and the reduction of storage throughout the United States. Other causes affecting supply/demand imbalances may be federal regulation of the market; large quantities of developed gas reserves in Canada and Mexico available for export by pipelines to the United States; fuel switching between fuel oil and natural gas; development of coalbed methane; and large quantities of liquefied natural gas in the Middle East, Africa, and the Far East available for export to the United States. Historically, the Registrant has had no long-term sales contracts for its crude oil and condensate production. The Registrant continues its recent practice of contracting for the sale of its Kansas and Oklahoma and portions of its west Texas crude oil for terms of six to twelve months in an attempt to assure itself of higher than posted prices for such crude oil production. The Registrant, pursuant to various settlement agreements, has previously terminated almost all its long-term gas sales contracts with interstate pipelines. These actions previously resulted in an increase in gas sales. Competition The Registrant competes with numerous other companies and individuals in the acquisition of oil and gas properties and the marketing of oil and gas. The Registrant continues to believe that it should prepare for increased exploration activity without committing to a definite drilling timetable involving large expenditures. The I - 14 17 Registrant also believes that the intense competition for the acquisition of gas producing properties will continue. Through its acquisition experience, the Registrant believes it can still remain competitive and intends to continue purchasing quality long-life oil and gas reserves. The Registrant's competitors include major oil companies, other independent oil companies, and individuals, many of whom have financial resources, staffs, and facilities substantially greater than those of the Registrant. Many major oil companies have committed much of their resources to offshore and international acquisitions and exploration. Although the effect of these competitive factors on the Registrant cannot be predicted with certainty, it would appear that the withdrawal of major oil companies from domestic exploration and production will provide increased domestic opportunities for the Registrant. The Registrant has increased its exploration and development budget for the fiscal year ending September 30, 1995. The Registrant intends to continue to pursue the purchase of proven producing properties and to avail itself of the opportunities for drilling and development. Title to Oil and Gas Properties The Registrant undertakes title examination and performs curative work at the time properties are acquired. The Registrant believes that title to its oil and gas properties is generally good and defensible in accordance with standards acceptable in the industry. Oil and gas properties in general are subject to customary royalty interests contracted for in connection with the acquisitions of title, liens incident to operating agreements, liens for current taxes, and other burdens and minor encumbrances, easements, and restrictions. The I - 15 18 Registrant believes that the existence of such burdens will not materially detract from the general value of its leasehold interests. Governmental Regulation in the Oil and Gas Industry The Registrant's domestic operations are affected from time to time in varying degrees by political developments and federal and state laws and regulations. In particular, oil and gas production operations and economics are affected by price control, tax, and other laws relating to the petroleum industry; by changes in such laws; and by constantly changing administrative regulations. Most states in which the Registrant conducts or may conduct oil and gas activities regulate the production and sale of oil and natural gas, including regulation of the size of drilling and spacing units or proration units, the density of wells which may be drilled, and the unitization or pooling of oil and gas properties. In addition, state conservation laws establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas, and impose certain requirements regarding the ratability of production. The effect of these regulations is to limit the amounts of oil and natural gas the Registrant can produce from its wells, and to limit the number of wells or locations at which the Registrant can drill. In addition, legislation affecting the natural gas and oil industry is under constant review. Inasmuch as such laws and regulations are frequently expanded, amended, or reinterpreted, the Registrant is unable to predict the future cost or impact of complying with such regulations. The Registrant believes that its oil and gas operations currently are not materially affected by such laws. I - 16 19 The domestic production and sale of oil and gas are also subject to regulation by United States federal authorities including the Federal Energy Regulatory Commission ("FERC"). Regulatory Controls The Registrant is subject to regulation by the FERC with respect to various aspects of its domestic natural gas operations under the Natural Gas Act ("NGA") and the Natural Gas Policy Act of 1978. The Natural Gas Wellhead Decontrol Act of 1989 amended both the price and non-price decontrol provisions of the Natural Gas Policy Act of 1978 for the purpose of providing complete decontrol of first sales of natural gas by January 1, 1993. The Registrant believes that substantially all of its gas is decontrolled. On April 8, 1992; August 3, 1992; and November 27, 1992, the FERC issued Order 636, Order 636-A, and Order 636-B (collectively, "Order 636"), respectively, which requires interstate pipelines to provide transportation unbundled from their sales of gas. Also, such pipelines must provide open-access transportation on a basis that is equal for all gas supplies. Order 636 has been implemented through individual interstate pipeline restructuring proceedings. Although Order 636 should provide the Registrant with additional market access and more fairly applied transportation service rates, it will also subject the Registrant to more restrictive pipeline imbalance tolerances and greater penalties for violation of those tolerances. Appeals of Order 636 are currently pending, and the Registrant cannot predict the ultimate outcome of court review. Order 636 may be reversed in whole or in part on review. Individual restructuring orders may also be reversed in whole or in part, I - 17 20 whether or not Order 636 is upheld. Assuming Order 636 is upheld in its entirety, it initially appears that the Registrant will benefit from the provisions of such Order. The FERC has recently announced its intention to reexamine certain of its transportation-related policies, including the appropriate manner for setting rates for new interstate pipeline construction and the manner in which interstate pipelines release transportation capacity under Order 636. While any resulting FERC action would affect the Registrant only indirectly, these inquiries are intended to further enhance competition in natural gas markets. Under the NGA, natural gas gathering facilities are exempt from FERC jurisdiction. The Registrant believes that its gathering systems meet the traditional tests that the FERC has used to establish a pipeline's status as a gatherer. Commencing in May 1994, the FERC has issued a series of orders in individual cases that delineate its gathering policy. Among other matters, the FERC slightly narrowed its statutory tests for establishing gathering status and reaffirmed that it does not have jurisdiction over natural gas gathering facilities and services and that such facilities and services are properly regulated by state authorities. As a result, natural gas gathering may receive greater regulatory scrutiny by state agencies. In addition, the FERC has approved several transfers by interstate pipelines of gathering facilities to unregulated gathering companies, including affiliates. This could allow such companies to compete more effectively with independent gatherers. The FERC's orders delineating its new gathering policy are subject to possible court appeals. It is not possible at this time to predict the I - 18 21 the ultimate effect of the new policy, although it could affect access to and rates of interstate gathering service. However, the Registrant does not presently believe the status of its facilities are affected by the FERC's slight modification to its statutory criteria. The Registrant's natural gas gathering operations may become subject to additional safety and operational regulations relating to the design, installation, testing, construction, operation, replacement, and management of facilities. Pipeline safety issues have recently become the subject of increasing focus in various political and administrative arenas at both the state and federal levels. For example, federal legislation addressing pipeline safety issues was considered in the most recent Congressional session, which, if enacted, would have included a federal "one call" notification system and certain new construction specifications. Similar or additional legislation is likely to be proposed in the next federal legislative session. The Registrant believes that the adoption of additional pipeline safety legislation will not materially affect Registrant in light of its relatively minor gathering operations. On February 2, 1994, the Kansas Corporation Commission ("KCC") issued an order which modified allowables applicable to wells within the Hugoton Gas Field so that those proration units upon which infill wells had been drilled would be assigned a larger allowable than those units without infill wells. Such order was affirmed on appeal by the Kansas District Court on September 15, 1994. As a consequence of this decision, the Registrant believes that it will be necessary in the near future to drill an additional 75 to 90 wells with the total costs to Registrant I - 19 22 ranging from $7.5 to $9 million. The KCC's order has been appealed by several major producing companies. The order has not been stayed pending this appeal. Additional proposals and proceedings that might affect the oil and gas industry are pending before the Congress, the FERC, and the courts. The Registrant cannot predict when or whether any such proposals may become effective. In the past, the natural gas industry has been very heavily regulated. There is no assurance that the current regulatory approach pursued by the FERC will continue indefinitely. Notwithstanding the foregoing, it is anticipated that compliance with existing federal, state and local laws, rules and regulations will not have a material adverse effect upon the capital expenditures, earnings or competitive position of the Registrant. Federal Income Taxation The Registrant's oil and gas operations, and the petroleum industry in general, are affected by certain federal income tax laws, in particular the Tax Reform Act of 1986, which was amended by the Energy Policy Act of 1992 and the Revenue Reconciliation Act of 1993. The Registrant has considered the effects of such federal income tax laws on its operations and has concluded that there will be no material impact on its liquidity, capital expenditures, or international operations. Environmental Laws The Registrant's activities are subject to existing federal and state laws and regulations governing environmental quality and pollution control. Such laws and regulations may substantially increase the costs of exploring, developing, or producing oil and gas and may prevent or I - 20 23 delay the commencement or continuation of a given operation. In the opinion of the Registrant's management, its operations substantially comply with applicable environmental legislation and regulations. The existence of such legislation and regulations have had no material effect on the Registrant's operations, and the cost of compliance therewith has not been material to date. The Registrant believes that compliance with existing federal, state, and local laws, rules, and regulations regulating the discharge of materials into the environment or otherwise relating to the protection of the environment will not have any material effect upon the capital expenditures, earnings, or competitive position of the Registrant. Natural Gas Marketing Helmerich & Payne Energy Services, Inc., ("HPESI") continues into its sixth year of business with emphasis on the purchase and marketing of the Registrant's natural gas production. In addition, HPESI purchases third-party gas for resale and provides compression and gathering services for a fee. During fiscal year 1994, HPESI's sales of third-party gas constituted approximately 16% of the Registrant's consolidated revenues. HPESI sells natural gas to markets in the Midwest and Rocky Mountains. Gas sales contracts are for varied periods ranging from six months to seven years. However, recent contracts have tended toward shorter terms. For fiscal 1995, HPESI's term gas sales contracts provide for the sale of approximately 12 bcf of gas. HPESI presently intends to fulfill such term sales contracts with a portion of the gas reserves purchased from the Registrant as well as from its purchases of third- I - 21 24 party gas. See pages I-13 through I-22 regarding the market, competition, and regulation of natural gas. CHEMICAL OPERATIONS The Registrant owns a chemical plant at Baytown, Texas, where it manufactures mercaptans and sulfides which are blended for use as warning agents in natural and liquefied petroleum gases. The Registrant believes that it is the largest single supplier of gas odorants in North America. Its odorants are also sold in Korea, Latin America, Australia, and Japan. These products are marketed by the Registrant using the trade names of "Natural Gas Odorizing" and "Captan." In addition, the Registrant makes bulk sales of mercaptans for use as sulfiding agents. The Registrant is one of only two companies which sell odorants for liquefied petroleum gases and is one of only three companies which sell odorants for natural gas within the United States. The Registrant believes that its market share approximates 50% of all domestic odorant sales. Competition for liquefied petroleum odorant sales is primarily based upon service considerations, while natural gas odorant manufacturers compete for sales based on price and service considerations. The manufacturing facility is adjacent to a major refinery and chemical plant complex of Exxon Corporation, from which the Registrant obtains most of its principal raw materials. The Registrant's chemical plant and related operations are subject to numerous local, state, and federal environmental laws and regulations. The Registrant believes it is currently in substantial compliance with all such laws and that I - 22 25 compliance with the same will not have any material effect upon the capital expenditures, earnings or competitive position of Registrant. REAL ESTATE OPERATIONS The Registrant's real estate operations are conducted exclusively within the area of Tulsa, Oklahoma. Its major holding is Utica Square Shopping Center, consisting of fifteen separate buildings, with parking and other common facilities covering an area of approximately 30 acres. Fourteen of these buildings provide approximately 405,709 square feet of net leasable retail sales and storage space (99.8% of which is currently leased) and approximately 18,590 square feet of net leasable general office space (99.1% of which is currently leased). Approximately 24% of the general office space is occupied by the Registrant's real estate operations. The fifteenth building is an eight-story medical office building which provides approximately 76,379 square feet of net leasable medical office space (82% of which is currently leased). The Registrant has a two-level parking garage located in the southwest corner of Utica Square that can accommodate approximately 250 cars. At the end of the 1994 fiscal year the Registrant owned 19 of a total of 73 units in The Yorktown, a 16-story luxury residential condominium with approximately 150,940 square feet of living area located on a six-acre tract adjacent to Utica Square Shopping Center. Thirteen of Registrant's units are currently leased. The Registrant owns an eight-story office building located diagonally across the street from Utica Square Shopping Center, containing approximately 87,000 square feet of net leasable general office and retail space. This building houses the Registrant's principal I - 23 26 executive offices. Approximately 11% of this building is leased to third parties. The Registrant is also engaged in the business of leasing multi-tenant warehouse space. Three warehouses known as Space Center, each containing approximately 165,000 square feet of net leasable space, are situated in the southeast part of Tulsa at the intersection of two major limited-access highways. Present occupancy is 84%. The Registrant also owns approximately 1-1/2 acres of undeveloped land lying adjacent to such warehouses. The Registrant also owns a 270 acre tract known as Southpark located in the high-growth area of southeast Tulsa and consisting of approximately 257 acres of undeveloped real estate and approximately 13 acres of multi-tenant warehouse area. The warehouse area is known as Space Center East and consists of two warehouses, one containing approximately 90,000 square feet and the other containing approximately 112,500 square feet. Occupancy is 74%. Preliminary planning has been accomplished to determine the best development uses for the remaining land. A high quality office park, with peripheral commercial, office/warehouse, and hotel sites, has been contemplated. Registrant in January of 1994, sold a one acre tract within Southpark located at the intersection of two major arterial streets. The Registrant also owns a five-building complex called Tandem Business Park. The project is located adjacent to and east of the Space Center East facility and contains approximately six acres, with approximately 88,084 square feet of office/warehouse space and a 49% occupancy rate. The Registrant also owns a twelve-building complex, I - 24 27 consisting of approximately 204,600 square feet of office/warehouse space, called Tulsa Business Park. The project is located south of the Space Center facility, separated by a city street, and contains approximately 12 acres. Occupancy is 84%. The Registrant also owns two service center properties located adjacent to arterial streets in south central Tulsa. The first, called Maxim Center, consists of one office/warehouse building containing approximately 40,800 square feet and located on approximately 2.5 acres. During fiscal 1994 occupancy decreased from 68% to 50% primarily due to the loss of one existing tenant. The second, called Maxim Place, consists of one office/warehouse building containing approximately 33,750 square feet and located on approximately 2.25 acres. Occupancy is 63%. FINANCIAL Information relating to Revenue and Income by Business Segments may be found on page 11 of the Registrant's Annual Report to Shareholders for fiscal 1994, which is incorporated herein by reference. EMPLOYEES The Registrant had 1,606 employees within the United States (15 of which were part-time employees) and 1,181 employees employed in international operations as of September 30, 1994. Item 2. PROPERTIES CONTRACT DRILLING The following table sets forth certain information concerning the I - 25 28 Registrant's existing domestic drilling rigs:
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location ----------- -------------- --------------- -------- 140 Shallow Depth 10,000 Texas 110 Medium Depth 12,000 Texas 141 Medium Depth 14,000 Texas 142 Medium Depth 14,000 Texas 143 Medium Depth 14,000 Texas 144 Medium Depth 14,000 Texas 145 Medium Depth 14,000 Texas 146 Medium Depth 14,000 Texas 147 Medium Depth 16,000 Texas 84 Medium Depth 16,000 Louisiana 93 Medium Depth 16,000 Alabama 95 Medium Depth 16,000 Texas 96 Medium Depth 16,000 Oklahoma 77 Medium Depth 16,000 Alabama 111 Medium Depth 16,000 Louisiana 118 Medium Depth 16,000 Texas 119 Medium Depth 16,000 Texas 120 Medium Depth 16,000 Texas 78 Deep 20,000 Texas 79 Deep 20,000 Illinois 80 Deep 20,000 Oklahoma 89 Deep 20,000 Louisiana 92 Deep 20,000 Oklahoma 94 Deep 20,000 Louisiana 98 Deep 20,000 Oklahoma 122 Deep 26,000 Oklahoma 137 Deep 26,000 Texas 97 Deep 26,000 Texas 99 Deep 26,000 Texas 123 Deep 26,000 Oklahoma 149 Deep 26,000 Texas 72 Very Deep 30,000 Louisiana 73 Very Deep 30,000 Louisiana 127 Very Deep 30,000 Oklahoma 130 Super Deep 30,000+ Texas 131 Super Deep 30,000+ Wyoming 101 Medium Depth 16,000 * Gulf of Mexico 104 Medium Depth 16,000 * Offshore California 108 Medium Depth 16,000 * Gulf of Mexico 91 Deep 20,000 * Gulf of Mexico 105 Deep 20,000 * Gulf of Mexico 109 Deep 20,000 * Gulf of Mexico 100 Deep 26,000 * Gulf of Mexico 106 Deep 26,000 * Gulf of Mexico
I - 26 29
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location ----------- -------------- --------------- -------- 107 Deep 26,000 * Gulf of Mexico 102 Deep 20,000 * Offshore California 103 Deep 20,000 * Offshore California
* Offshore platform rig The following table sets forth information with respect to the utilization of the Registrant's domestic drilling rigs for the periods indicated:
Years ended September 30, --------------------------------- 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Number of rigs owned at end of period 49 46 39 42 47 Average rig utilization rate during period (1) 50% 47% 42% 53% 69%
(1) A rig is considered to be utilized when it is operated or being moved, assembled, or dismantled under contract. The following table sets forth certain information concerning the Registrant's international drilling rigs:
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location ----------- -------------- --------------- -------- 3 Workover/drilling 6,000 Venezuela 14 Workover/drilling 6,000 Venezuela 19 Workover/drilling 6,000 Venezuela 20 Workover/drilling 6,000 Venezuela 21 Workover/drilling 6,000 Venezuela 132 Medium Depth 16,000 Ecuador 23 Deep (helicopter rig) 18,000 Ecuador 10 Deep (helicopter rig) 18,000 Colombia 22 Deep (helicopter rig) 18,000 Yemen 12 Deep (helicopter rig) 18,000 Ecuador 45 Deep 26,000 Venezuela 82 Deep 26,000 Venezuela 83 Deep 26,000 Venezuela 138 Deep 26,000 Ecuador 148 Deep 26,000 Venezuela 117 Deep 26,000 Trinidad 121 Deep 26,000 Colombia 125 Very Deep 30,000 Colombia
I - 27 30
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location ----------- -------------- --------------- -------- 115 Very Deep 30,000 Venezuela 116 Very Deep 30,000 Venezuela 113 Very Deep 30,000 Venezuela 128 Very Deep 30,000 Venezuela 129 Very Deep 30,000 Venezuela 133 Very Deep 30,000 Colombia 134 Very Deep 30,000 Colombia 135 Very Deep 30,000 Colombia 136 Very Deep 30,000 Colombia 150 Very Deep 30,000 Venezuela 139 Super Deep 30,000+ Colombia
The following table sets forth information with respect to the utilization of the Registrant's international drilling rigs for the periods indicated:
Years ended September 30, ------------------------------------ 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Number of rigs owned at end of period 20 25 30 29 29 Average rig utilization rate during period (1) 45% 69% 69% 68% 88%
(1) A rig is considered to be utilized when it is operated or being moved, assembled, or dismantled under contract. OIL AND GAS DIVISION All of the Registrant's oil and gas operations and holdings are domestic. Crude Oil Sales The Registrant's net sales of crude oil and condensate for the three fiscal years 1992 through 1994 are shown below:
Average Sales Average Lifting Year Net Barrels Price per barrel Cost per Barrel ---- ----------- ---------------- --------------- 1992 854,124 $19.16 $8.98 1993 875,713 $17.58 $8.63 1994 887,455 $14.83 $7.74
I - 28 31 Natural Gas Sales The Registrant's net sales of natural and casinghead gas for the three fiscal years 1992 through 1994 are as follows:
Average Sales Average Lifting Year Net Mcf Price per Mcf Cost per Mcf ---- ------- ------------- --------------- 1992 27,622,018 $1.39 $0.3115 1993 28,478,530 $1.84 $0.3460 1994 26,627,776 $1.72 $0.3760
Following is a summary of the net wells drilled by the Registrant for the fiscal years ended September 30, 1992, 1993, and 1994:
Exploratory Wells Development Wells --------------------- ----------------------- 1992 1993 1994 1992 1993 1994 ---- ----- ----- ----- ----- ------ Productive 2.605 2.866 1.021 10.869 8.760 12.334 Dry 3.363 1.393 1.436 0.969 2.858 0.233
On September 30, 1994, the Registrant was in the process of drilling or completing six gross or 1.704 net wells. Acreage Holdings The Registrant's holdings of acreage under oil and gas leases, as of September 30, 1994, were as follows:
Developed Acreage Undeveloped Acreage ------------------------- -------------------------- Gross Net Gross Net ----------- --------- ---------- ---------- Alabama 480.00 112.21 146.00 18.12 Arkansas 4,636.73 2,295.02 -0- -0- Colorado -0- -0- 7,676.35 4,259.24 Kansas 123,263.46 85,726.92 6,340.61 4,629.13 Louisiana 8,087.88 1,471.11 329,906.02 145,746.79 Mississippi 168.17 55.17 839.00 439.59 Montana 2,117.19 387.30 4,668.95 1,530.15 Nebraska 480.00 168.00 -0- -0- Nevada -0- -0- 40,265.87 31,587.71 New Mexico 960.00 54.86 161.88 38.85 North Dakota -0- -0- 8,050.30 1,176.93 Oklahoma 141,638.45 43,391.37 43,013.35 17,667.40 Texas 90,298.39 41,721.09 12,638.65 6,234.27 Wyoming -0- -0- 3,800.00 860.10 ---------- ---------- ---------- ---------- Total 372,130.27 175,383.65 457,506.98 214,188.28
I - 29 32 Acreage is held under leases which expire in the absence of production at the end of a prescribed primary term, and is, therefore, subject to fluctuation from year to year as new leases are acquired, old leases expire, and other leases are allowed to terminate by failure to pay annual delay rentals. Productive Wells The Registrant's total gross and net productive wells as of September 30, 1994, were as follows:
Oil Wells Gas Wells ------------ ------------ Gross Net Gross Net ----- --- ----- --- 3,419 273 853 341
Additional information required by this item with respect to the Registrant's oil and gas operations may be found on pages I-11 through I-22 of Item 1. BUSINESS, and pages 28 through 30 of the Registrant's Annual Report to Shareholders for fiscal 1994, "Notes to Consolidated Financial Statements" and "Note 11 Supplementary Financial Information for Oil and Gas Producing Activities." Estimates of oil and gas reserves, future net revenues, and present value of future net revenues were audited by Southmayd & Associates, Inc., independent consultants, 6450 South Lewis Avenue, Suite 220, Tulsa, Oklahoma, 74136. Total oil and gas reserve estimates do not differ by more than 5% from the total reserve estimates filed with any other federal authority or agency. CHEMICAL OPERATIONS The Registrant owns at Baytown, Texas, a chemical plant which manufactures mercaptans and sulfides for use primarily as warning odorants in natural and liquefied petroleum gases. The plant occupies I - 30 33 approximately ten acres of a 30-acre tract which the Registrant owns. It is estimated that the plant has an annual optimum design production capacity of 20,000,000 pounds of odorants and other mercaptans; however, current operating permits limit production to 10,000,000 to 12,000,000 pounds per year. REAL ESTATE OPERATIONS See Item 1. BUSINESS, pages I-22 through I-25. STOCK At the end of fiscal 1994: The Registrant owned 907,164 shares of the common stock of Sun Company, Inc., and 675,000 shares of the common stock of Oryx Energy Co., Inc. The Registrant owned 1,600,000 shares of the common stock of Atwood Oceanics, Inc., a Houston, Texas based company engaged in offshore contract drilling. The Registrant's ownership of Atwood is approximately 24%. The Registrant owned 740,000 shares of the common stock of Schlumberger, Ltd. The Registrant owned 300,000 shares of the common stock of Phillips Petroleum Company, Inc. The Registrant owned 225,000 shares of the common stock of ONEOK. The Registrant owned 500,000 shares of the common stock of Liberty Bancorp, Inc., formerly Banks of Mid-America, Inc. Liberty Bancorp, Inc., is a bank holding company which owns Liberty Bank and Trust Company of Tulsa, N.A., and Liberty Bank and Trust Company of Oklahoma City, N.A. The Registrant's ownership of Liberty Bancorp, Inc., is approximately 5%. I - 31 34 The Registrant also owned lesser amounts of shares of several other publicly traded corporations. Item 3. LEGAL PROCEEDINGS On or about January 18, 1994, the District Court dismissed without prejudice the lawsuit styled Theresa Arceneaux, et al. v. Natural Gas Odorizing, Inc., Case Number 93-568602, District Court Harris County, Texas, 165th Judicial District. The Court on October 27, 1994, entered an agreed judgment ordering plaintiff's lead counsel, Mr. Thomas J. Pearson, to pay Natural Gas Odorizing, Inc., $60,000 as sanctions for attorney's fees and ordered Mr. Pearson to cooperate in providing certain information to the Grievance Committee of the State Bar of Texas. Natural Gas Odorizing, Inc., has recently filed its grievance against Mr. Pearson with the State Bar of Texas. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names and ages of the Registrant's executive officers, together with all positions and offices held with the Registrant by such executive officers. Officers are elected to serve until the meeting of the Board of Directors following the next Annual Meeting of Stockholders and until their successors have been elected and have qualified or until their earlier resignation or removal. W. H. Helmerich, III, 71 Director since 1949; Chairman of the Board Chairman of the Board since December 1, 1960; Chief Executive Officer from December 1, 1960, to December 6, 1989; and President from December 1, 1960, to December 11, 1987
I - 32 35 Hans Helmerich, 36 Director since March 4, 1987; appointed President and C.E.O. Chief Executive Officer on December 6, 1989; President and Chief Operating Officer from December 11, 1987; Executive Vice President from March 13, 1987; Vice President from June 15, 1985; son of W. H. Helmerich, III, Chairman Allen S. Braumiller, 60 Appointed Vice President, Exploration, in 1977 Vice President George S. Dotson, 53 Director since March 7, 1990; appointed Vice President Vice President, Drilling, in 1977 and appointed President and Chief Operating Officer of Helmerich & Payne International Drilling Co. on February 14, 1977 Douglas E. Fears, 45 Appointed Vice President, Finance, on March Vice President 11, 1988, prior to which he was Internal Auditor from June 30, 1986 Steven R. Mackey, 43 Appointed Secretary on March 7, 1990; Vice Vice President and President on March 11, 1988; and General Secretary Counsel on January 1, 1988, prior to which he was Associate General Counsel from January 1, 1986 James L. Payne, 55 Appointed Vice President, Real Estate, on Vice President September 4, 1991; prior to that date he was Vice President and General Manager of Helmerich & Payne Properties, Inc., from May 9, 1985 Steven R. Shaw, 43 Appointed Vice President, Production, on Vice President July 8, 1985; prior to that date he was Regional Operations Manager of Santa Fe Minerals, Inc., from 1984 to July 8, 1985 Gordon K. Helm, 41 Chief Accounting Officer of the Registrant; Controller appointed Controller effective December 10, 1993; Manager of Internal Audit from September 13, 1991; Regional Controller for Memorex Telex Corporation from 1989; and Manager of Planning for Memorex Telex Corporation from 1988
I - 33 36 PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The principal market on which the Registrant's common stock is traded is the New York Stock Exchange. The high and low sale prices per share for the common stock for each quarterly period during the past two fiscal years as reported in the NYSE - Composite Transaction quotations follow:
1993 1994 ---- ---- Quarter High Low High Low ------- ---- --- ---- --- First 26 3/4 22 1/4 34 1/2 26 1/2 Second 29 3/4 22 3/8 30 26 Third 37 1/8 29 1/4 27 1/8 25 1/8 Fourth 36 1/8 31 1/2 28 1/8 25 5/8
The Registrant paid quarterly cash dividends during the past two years as shown in the following table:
Paid per Share Total Payment -------------- ------------- Fiscal Fiscal ------ ------ Quarter 1993 1994 1993 1994 ------- ---- ---- ---- ---- First $0.120 $0.120 $2,949,291 $2,956,498 Second 0.120 0.120 2,949,291 2,960,098 Third 0.120 0.120 2,953,006 2,960,314 Fourth 0.120 0.125 2,956,378 3,087,902
The Registrant paid a cash dividend of $0.125 per share on December 1, 1994, to shareholders of record on November 15, 1994. Payment of future dividends will depend on earnings and other factors. As of December 16, 1994, there were 1,814 record holders of the Registrant's common stock as listed by the transfer agent's records. II - 1 37 Item 6. SELECTED FINANCIAL DATA Five-year Summary of Selected Financial Data
1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- Sales, operating, and other revenues $238,544 $213,946 $239,700 $315,097 $329,001 Income from con- tinuing operations 47,562 21,241 10,849 24,550 20,971 Income from con- tinuing operations per common share 1.97 0.88 0.45 1.01 0.86 Total assets 582,927 575,168 585,504 610,935 624,827 Long-term debt 5,648 5,693 8,339 3,600 -0- Cash dividends declared per common share 0.44 0.46 0.47 0.48 0.49
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information required by this item may be found on pages 12 through 16, Management's Discussion & Analysis of Results of Operations and Financial Condition, in the Registrant's Annual Report to Shareholders for fiscal 1994, which is incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information required by this item may be found on pages 17 through 30 in the Registrant's Annual Report to Shareholders for fiscal 1994, which is incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The required information regarding the change in Registrant's certifying accountant was previously reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 1994. II - 2 38 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required under this item with respect to Directors is incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held March 1, 1995, to be filed with the Commission not later than 120 days after September 30, 1994. See pages I-32 and I-33 for information covering the Registrant's Executive Officers. Item 11. EXECUTIVE COMPENSATION This information is incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held March 1, 1995, to be filed with the Commission not later than 120 days after September 30, 1994. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held March 1, 1995, to be filed with the Commission not later than 120 days after September 30, 1994. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS This information is incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held March 1, 1995, to be filed with the Commission not later than 120 days after September 30, 1994. III - 1 39 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Document List 1. The financial statements called for by Item 8 are incorporated herein by reference from the Registrant's Annual Report to Shareholders for fiscal 1994. 2. The following financial statement schedules are filed as a part of this Form: (i) Report of Independent Public Accountants on Financial Statements and Financial Statement Schedules for the fiscal years ended September 30, 1993 and September 30, 1992. (ii) Schedule I - Pages IV-5 and IV-6. (iii) Schedule V - Pages IV-7 through IV-9. (iv) Schedule VI - Pages IV-10 through IV-12. (v) Schedule X - Page IV-13. 3. Exhibits required by item 601 of Regulation S-K: Exhibit Number: 3.1 Restated Certificate of Incorporation and Amendment to Restated Certificate of Incorporation of the Registrant are incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1987. 3.2 By-Laws of the Registrant are incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990. 4.1 Rights Agreement dated as of January 21, 1986, between the Registrant and The First National Bank of Boston is incorporated herein by reference to the Registrant's Form 8-A dated January 30, 1986. 4.2 Amendment to Rights Agreement dated as of December 5, 1990, between the Registrant and The Liberty National Bank and Trust Company of Oklahoma City is incorporated herein by reference to the Registrant's Form 8, Amendment No. 1 to Form 8-A, dated December 11, 1990. IV-1 40 *10.1 Incentive Stock Option Plan is incorporated herein by reference to Exhibit 4.2 to the Registrant's Registration Statement No. 33-16771 on Form S-8. *10.2 Consulting Services Agreement between W. H. Helmerich, III, and the Registrant effective January 1, 1990, as amended, is incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990. *10.3 Restricted Stock Plan for Senior Executives of Helmerich & Payne, Inc., is incorporated herein by reference to Exhibit "A" to the Registrant's Proxy Statement dated January 26, 1990. *10.4 Form of Restricted Stock Award Agreement for the Restricted Stock Plan for Senior Executives of Helmerich & Payne, Inc., together with all amendments thereto, is incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990. *10.5 Supplemental Retirement Income Plan for Salaried Employees of Helmerich & Payne, Inc., is incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990. *10.6 Helmerich & Payne, Inc. 1990 Stock Option Plan is incorporated herein by reference to Exhibit "A" to Registrant's Proxy Statement dated January 25, 1991. *10.7 Supplemental Savings Plan for Salaried Employees of Helmerich and Payne, Inc., is incorporated herein by reference from Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1993. 13. The Registrant's Annual Report to Shareholders for fiscal 1994. 22. Subsidiaries of the Registrant. 23.1 Consent of Independent Public Accountants. 23.2 Consent of Independent Auditors. 27. Financial Data Schedule. --------------------- * Compensatory Plan or Arrangement. IV-2 41 (b) Report on Form 8-K: No reports on Form 8-K were filed during the fourth quarter of the fiscal year ended September 30, 1994. IV-3 42 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1993 AND SEPTEMBER 30, 1992 To the Shareholders and Board of Directors of Helmerich & Payne, Inc.: We have audited the accompanying consolidated balance sheet of Helmerich & Payne, Inc. (a Delaware corporation) and subsidiaries as of September 30, 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the two years in the period ended September 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in Item 14(a) are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. The information in these schedules as of September 30, 1993, and for each of the two years in the period ended September 30, 1993, have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Helmerich & Payne, Inc. and subsidiaries as of September 30, 1993, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 1993, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tulsa, Oklahoma November 16, 1993 IV-4 43 HELMERICH & PAYNE, INC. SCHEDULE I - MARKETABLE SECURITIES AS OF SEPTEMBER 30, 1994
Column A Column B Column C Column D Value Based on Current Market Amount at Which Quotations at Carried in Balance Name of Issuer and Title of Issue Number of Shares Balance Sheet (1) Sheet Date --------------------------------- ----------------- ----------------- -------------- (000's) (000's) SCHLUMBERGER, LTD. 740,000 $ 23,511 $ 40,238 Common stock ATWOOD OCEANICS, INC. 1,600,000 20,743 22,800 Common stock SUN COMPANY, INC. 907,164 10,637 26,081 Common stock PHILLIPS PETROLEUM COMPANY 300,000 7,470 10,275 Common stock LIBERTY BANCORP. (2) 500,000 7,270 16,750 Common stock ORYX ENERGY COMPANY 675,000 6,433 9,366 Common stock ONEOK 225,000 2,751 3,796 Common stock OTHER Common stock, debentures and other 8,599 15,706 -------- -------- Total consolidated $ 87,414 $145,012 ======== ========
NOTE: (1) Investments are carried in the balance sheet at cost, except the investment in Atwood which is carried on the equity method. Equity income for 1994 from Atwood was $1,458,000. No dividends were received from Atwood. (2) Formerly Banks of Mid America. IV-5 44 HELMERICH & PAYNE, INC. SCHEDULE I - MARKETABLE SECURITIES AS OF SEPTEMBER 30, 1993
Column A Column B Column C Column D Value Based on Current Market Amount at Which Quotations at Carried in Balance Name of Issuer and Title of Issue Number of Shares Balance Sheet (1) Sheet Date ---------------------------------- ---------------- ----------------- -------------- (000's) (000's) SCHLUMBERGER, LTD. 740,000 $ 23,511 $ 49,303 Common stock ATWOOD OCEANICS, INC. 1,600,000 19,285 17,200 Common stock SUN COMPANY, INC. 907,164 10,637 25,854 Common stock PHILLIPS PETROLEUM COMPANY 300,000 7,470 10,125 Common stock LIBERTY BANCORP. (2) 500,000 7,270 17,000 Common stock ORYX ENERGY COMPANY 700,000 6,683 17,150 Common stock ONEOK 225,000 2,751 5,006 Common stock OTHER Common stock, debentures and other 7,338 10,737 -------- -------- Total consolidated $ 84,945 $152,375 ======== ========
NOTE: (1) Investments are carried in the balance sheet at cost, except the investment in Atwood which is carried on the equity method. Equity loss for 1993 from Atwood was $435,000. No dividends were received from Atwood. (2) Formerly Banks of Mid America. IV-6 45 HELMERICH & PAYNE, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1994 (In Thousands)
Column A Column B Column C Column D Column E Column F Other Changes Balance at Debit (Credit) Beginning of Additions Retirements or -------------- Balance at End CLASSIFICATION Period at Cost Sales Transfers of Period -------------- ----------- --------- -------------- ------------ ------------- CONTRACT DRILLING EQUIPMENT $418,004 $ 53,752 $ 27,213 $ (111) $444,432 PRODUCING OIL AND GAS PROPERTIES 340,176 40,916 3,872 151 377,371 UNDEVELOPED LEASES AND ROYALTIES 10,010 4,893 3,023 (151) 11,729 REAL ESTATE PROPERTIES 47,502 902 577 - 47,827 CHEMICAL PLANT AND EQUIPMENT 11,844 573 - - 12,417 OTHER 45,786 4,847 1,418 111 49,326 --------- ---------- ---------- --------- --------- $873,322 $ 105,883 $ 36,103 $ - $943,102 ======== ========== ========= ========= ========
IV-7 46 HELMERICH & PAYNE, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1993 (In Thousands)
Column A Column B Column C Column D Column E Column F Other Changes Balance at Debit (Credit) Beginning of Retirements or -------------- Balance at End CLASSIFICATION Period Additions at Cost Sales Transfers of Period -------------- ----------- ----------------- ------------- -------------- -------------- CONTRACT DRILLING EQUIPMENT $404,155 $ 24,100 $ 10,451 $ 200 $418,004 PRODUCING OIL AND GAS PROPERTIES 329,264 23,142 12,462 232 340,176 UNDEVELOPED LEASES AND ROYALTIES 12,973 2,410 5,141 (232) 10,010 REAL ESTATE PROPERTIES 47,286 437 221 - 47,502 CHEMICAL PLANT AND EQUIPMENT 11,304 540 - - 11,844 OTHER 43,811 3,580 1,405 (200) 45,786 --------- --------- --------- -------- ---------- $848,793 $ 54,209 $ 29,680 $ - $873,322 ======== ======== ======== ========== ========
IV-8 47 HELMERICH & PAYNE, INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1992 (In Thousands)
Column A Column B Column C Column D Column E Column F Other Changes Balance at Debit (Credit) Beginning of Additions Retirements ------------- Balance at CLASSIFICATION Period at Cost or Sales Transfers End of Period -------------- ----------- --------- ----------- ------------- ------------- CONTRACT DRILLING EQUIPMENT $370,494 $43,049 $ 9,378 $ (10) $404,155 PRODUCING OIL AND GAS PROPERTIES 312,439 21,617 5,044 252 329,264 UNDEVELOPED LEASES AND ROYALTIES 5,552 9,140 1,467 (252) 12,973 REAL ESTATE PROPERTIES 46,670 690 74 - 47,286 CHEMICAL PLANT AND EQUIPMENT 11,202 104 2 - 11,304 OTHER 37,059 7,898 1,156 10 43,811 -------- ------- ------- -------- -------- $783,416 $82,498 $17,121 $ - $848,793 ======== ======= ======= ======== ========
IV-9 48 HELMERICH & PAYNE, INC. SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1994 (In Thousands)
Column A Column B Column C Column D Column E Column F Other Changes Balance at Additions Charged Debit (Credit) Beginning of to Costs & Expenses Retirements or -------------- Balance at End CLASSIFICATION Period (Note 1) Sales Transfers of Period - ---------------------------------- ------------ ------------------- -------------- -------------- ----------------- CONTRACT DRILLING EQUIPMENT $ 258,690 $ 24,183 $ 23,440 $ (10) $ 259,423 PRODUCING OIL AND GAS PROPERTIES 199,408 19,517 173 - 218,752 UNDEVELOPED LEASES AND ROYALTIES 4,500 2,650 - - 7,150 REAL ESTATE PROPERTIES 20,496 1,600 334 - 21,762 CHEMICAL PLANT AND EQUIPMENT 6,726 596 - - 7,322 OTHER 24,704 4,269 941 10 28,042 --------- -------- -------- ----------- --------- $ 514,524 $ 52,815 $ 24,888 $ - $ 542,451 ========= ======== ======== =========== =========
NOTE: (1) See Note 1 to the consolidated financial statements for the Company's policies regarding provisions for depreciation, depletion and amortization. IV-10 49 HELMERICH & PAYNE, INC. SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1993 (In Thousands)
Column A Column B Column C Column D Column E Column F Additions Charged Other Changes Balance at to Costs & Debit (Credit) Beginning of Expenses Retirements or -------------- Balance at End CLASSIFICATION Period (Note 1) Sales Transfers of Period -------------- ------- --------- --------- ------------ ---------- CONTRACT DRILLING EQUIPMENT $242,987 $ 24,788 $ 9,095 $ 10 $258,690 PRODUCING OIL AND GAS PROPERTIES 189,327 18,272 7,060 (1,131) 199,408 UNDEVELOPED LEASES AND ROYALTIES 4,004 496 - - 4,500 REAL ESTATE PROPERTIES 19,061 1,655 220 - 20,496 CHEMICAL PLANT AND EQUIPMENT 6,170 556 - - 6,726 OTHER 22,648 3,510 1,444 (10) 24,704 --------- --------- ---------- ---------- ---------- $484,197 $ 49,277 $ 17,819 $ (1,131) $514,524 ======== ======== ======== ======== ========
NOTE: (1) See Note 1 to the consolidated financial statements for the Company's policies regarding provisions for depreciation, depletion and amortization. IV-11 50 HELMERICH & PAYNE, INC. SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEAR ENDED SEPTEMBER 30, 1992 (In Thousands)
Column A Column B Column C Column D Column E Column F Additions Charged Other Changes Balance at to Costs & Debit (Credit) Balance Beginning Expenses Retirements -------------- at End of CLASSIFICATION of Period (Note 1) or Sales Transfers Period --------------- ----------- --------- ----------- -------------- --------- CONTRACT DRILLING EQUIPMENT $227,276 $23,526 $ 7,914 $ 99 $242,987 PRODUCING OIL AND GAS PROPERTIES 172,245 18,794 2,843 1,131 189,327 UNDEVELOPED LEASES AND ROYALTIES 4,203 (199) - - 4,004 REAL ESTATE PROPERTIES 17,475 1,660 74 - 19,061 CHEMICAL PLANT AND EQUIPMENT 5,653 503 - 14 6,170 OTHER 20,042 3,255 658 9 22,648 -------- ------- ------- ------ -------- $446,894 $47,539 $11,489 $1,253 $484,197 ======== ======= ======= ====== ========
NOTE: (1) See Note 1 to the consolidated financial statements for the Company's policies regarding provisions for depreciation, depletion and amortization. IV-12 51 HELMERICH & PAYNE, INC. SCHEDULE X - SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
COLUMN A COLUMN B -------- -------- Charged to Costs and Expenses ---------------- 1994 1993 1992 ------ ------ ------ (Amounts in thousands) Maintenance and repairs $31,200 $23,145 $19,112 ======= ======= ======= Taxes other than payroll and income taxes - Production $ 3,661 $ 4,658 $ 3,567 Ad valorem 3,616 2,907 3,110 Other 3,006 2,765 2,098 ------- ------- ------- $10,283 $10,330 $ 8,775 ======= ======= =======
IV-13 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized: HELMERICH & PAYNE, INC. By Hans Helmerich ------------------------- Hans Helmerich, President (Chief Executive Officer) Date: December 16, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: By William L. Armstrong By Glenn A. Cox -------------------------------- -------------------------------- William L. Armstrong, Director Glenn A. Cox, Director Date: December 16, 1994 Date: December 16, 1994 By George S. Dotson By C. W. Flint, Jr. -------------------------------- -------------------------------- George S. Dotson, Director C. W. Flint, Jr., Director Date: December 16, 1994 Date: December 16, 1994 By Hans Helmerich By W. H. Helmerich, III -------------------------------- -------------------------------- Hans Helmerich, Director and CEO W. H. Helmerich, III, Director Date: December 16, 1994 Date: December 16, 1994 By George A. Schaefer By H. W. Todd -------------------------------- -------------------------------- George A. Schaefer, Director H. W. Todd, Director Date: December 16, 1994 Date: December 16, 1994 By John D. Zeglis By Douglas E. Fears -------------------------------- -------------------------------- John D. Zeglis, Director Douglas E. Fears Date: December 16, 1994 (Principal Financial Officer) Date: December 16, 1994 By Gordon K. Helm -------------------------------- Gordon K. Helm, Controller (Principal Accounting Officer) Date: December 16, 1994
IV-14 53 HELMERICH & PAYNE, INC. Index to Exhibits Not Incorporated by Reference
Exhibit No. Page - ----------- ---- 13. Annual Report to Shareholders for fiscal 1994 54 22. Subsidiaries of the Registrant 90 23.1 Consent of Independent Public Accountants 91 23.2 Consent of Independent Auditors (Ernst & Young LLP) 92 27. Financial Data Schedule 93
EX-13 2 ANNUAL REPORT FOR FISCAL 1994 1 EXHIBIT 13 HELMERICH & PAYNE, INC. ANNUAL REPORT FOR 1994 HIGHLIGHTS
Years Ended September 30, 1994 1993 ------------------------- --------------- -------------- Revenues $ 329,001,000 $ 315,097,000 Net Income $ 24,971,000 $ 24,550,000 Earnings Per Share $ 1.02 $ 1.01 Dividends Paid Per Share $ .485 $ .48 Capital Expenditures $ 105,883,000 $ 54,209,000 Total Assets $ 624,827,000 $ 610,935,000
HELMERICH & PAYNE, INC. IS A DIVERSIFIED, ENERGY-ORIENTED COMPANY ENGAGED IN CONTRACT DRILLING, OIL AND GAS EXPLORATION AND PRODUCTION, CHEMICALS MANUFACTURING, AND REAL ESTATE DEVELOPMENT AND MANAGEMENT. THE COMPANY ALSO HOLDS SUBSTANTIAL EQUITY INVESTMENTS IN SEVERAL OTHER PUBLICLY OWNED CORPORATIONS. 2 PRESIDENT'S LETTER To the Co-owners of Helmerich & Payne, Inc. As never before in my lifetime, the American people sent shock waves through the halls of Congress. Now the new Republican-controlled House and Senate have a chance not only to reduce spending and allow workers to keep more of their earnings, but to address a more imposing challenge. By a margin of nearly two-to-one, voters said the problems facing this country were not primarily economic in nature, but were rooted in a dramatic social and moral decline. In part, Washington, D.C. was held accountable for the role it has played in contributing to this decline. George Will observed that the voters simply said "Something is amiss when a government that does not adequately deliver the mail delivers condoms to children." Years of irresponsibility have recklessly damaged the reputation of Congress, leaving only nineteen percent of the people confident that their elected representatives will do the right thing. The first order of business for this Congress will be to earn back the trust of ordinary Americans. Whether the relationship is between representative government and the voters, between a business enterprise and its customers, or within our own families, the importance of trustworthiness and a good name is paramount to success. While a renewed commitment to these old-fashioned values would well serve the 104th Congress, it is also timely for us to reflect upon these values since 1995 marks the 75th anniversary of Helmerich & Payne, Inc. My grandfather landed in the oil business by accident. After spending World War I as a young officer and instructor pilot, he left the service to manage an aerial circus until his small fleet of bi-planes were all but lost in a West Texas thunderstorm. What little survived, he traded for three cable-tool rigs in South Bend, Texas, where he and his partner would drill a discovery well in 1920. 2 3 Growing up, I loved hearing stories of the rough and tumble oil patch where the Company's history paralleled the early success of the industry in Oklahoma's Osage, Tonkawa, and Oklahoma City fields; down into East Texas; and over to the first efforts of New Mexico's Four Corners. Deals were done over a handshake and a man's personal integrity was inseparable from the business enterprise itself. Even as the Company grew and prospered, keeping your word, working hard, doing the right thing, and caring about your people and the customer never went out of fashion. I have heard Dad say a thousand times that a good name is built over a lifetime, but lost in an instant. Today on drilling rigs all over the world, in operating and marketing hundreds of oil and gas wells in the United States, and in supporting chemical and real estate operations, there is a deep appreciation and sense of responsibility that is shared by all of us who carry a trusted name and a hard-earned reputation into our daily operations. Our pledge is to approach the next seventy-five years with these time-tested values etched clearly in our minds, remaining forever indebted to the thousands of loyal Helmerich & Payne, Inc. co-workers that have gone before us and kept the faith. Sincerely, Hans Helmerich December 15, 1994 President 3 4 DRILLING HELMERICH & PAYNE INTERNATIONAL DRILLING CO. SUMMARY At the close of 1994, Helmerich & Payne International Drilling Co. owned 65 land rigs and 11 offshore platform rigs which had an average utilization of 77 percent, compared with 69 percent the previous year. Higher domestic activity is credited for revenue and pre-tax income gains of 23 and 33 percent, respectively, in 1994. Pre-tax cash flow rose by 14 percent to $48.4 million, compared with $42.4 million in 1993. DOMESTIC OPERATIONS Domestic land rig utilization averaged 66 percent for the year, compared with 48 percent in 1993. An average of 19 domestic land rigs were fully utilized during 1994, compared with 15 land rigs in 1993. In the third quarter, the Company acquired substantially all of the equipment and property of Energy Service Co.'s domestic land drilling operation based in Alice, Texas. The purchase included 12 land rigs which helped increase the Company's domestic land fleet to 36 rigs by year-end. Offshore operations consist of eight platform rigs in the Gulf of Mexico, and three platform rigs plus two management contracts for Exxon-owned platform rigs offshore California. Utilization averaged 79 percent this year for the Company's 11 platform rigs, compared with 70 percent for nine rigs in 1993. A full year of activity for two additional rigs in the Gulf of Mexico and the Exxon management contracts contributed significantly to the improved financial performance in 1994. INTERNATIONAL OPERATIONS At year-end, the Company owned 29 land rigs in the countries of Venezuela (15), Colombia (8), Ecuador (4), Trinidad (1), and Yemen (1). Utilization averaged 88 percent in 1994, 4 5 compared with 68 percent in 1993. Although revenue increased nine percent to $98.1 million, pre-tax earnings declined by four percent due to higher operating costs in Colombia and foreign exchange losses suffered in Venezuela. In 1994, the Company moved one rig to Colombia which joined the work on BP Exploration's Cusiana/Cupiagua development, one rig was added in Ecuador for Maxus, and two rigs were sent to Venezuela for Corpoven. For 1995, the Company received letters of intent for three-year contracts on three additional land rigs from BP Exploration in Colombia and one-year term contracts for three land rigs from Corpoven in Venezuela. The Company will utilize three existing domestic rigs as well as other equipment purchases for these projects. The Company recently began work on a joint venture with Atwood Oceanics, Inc., a 24 percent owned affiliate, to build a new generation offshore platform rig incorporating the latest technology in instrumentation and remote control mechanization of drilling equipment. The Company will manage the design, construction, testing, and mobilization phases of the project. Rig operations are scheduled to begin in 1996, and will be managed by Atwood Oceanics, Inc., which has operated in Australia for a number of years. The Company is well positioned to perform in a depressed and competitive environment. Whether the work is of a conventional nature or entails complex design and logistics, the Company will continue to focus on delivering value to our customers. 5 6 EXPLORATION & PRODUCTION HELMERICH & PAYNE, INC. SUMMARY Helmerich & Payne, Inc. engages in the exploration, production, and acquisition of oil and natural gas reserves primarily in the states of Oklahoma, Kansas, Texas, and Louisiana. At the close of 1994, the Company had proved oil and natural gas reserves of 6.7 million barrels and 290.7 billion cubic feet (Bcf), respectively. This compares with reserves of 6.9 million barrels of oil and 289.4 Bcf of natural gas in 1993. PRODUCTION OVERVIEW In response to lower prices, the Company reduced its natural gas production to an average annual rate of 72,953 thousand cubic feet (Mcf) per day, from 78,023 Mcf per day in 1993. The average price received for natural gas fell to $1.72 per Mcf compared with $1.84 the prior year. Oil production increased slightly this year to 2,431 barrels per day from 2,399 barrels per day in 1993. However, the average price received for oil declined by over 15 percent to $14.83 per barrel in 1994. Lower commodity prices and natural gas production, coupled with higher exploration expenses, contributed to a significant decline in revenue and pre-tax income this year. ACQUISITIONS The Company invested $23.1 million in 1994 to purchase producing properties which had estimated reserves of 19.9 Bcf of natural gas and 159,580 barrels of oil. Tight sands tax credits, high BTU content natural gas, and several development opportunities are also associated with these properties. DRILLING AND EXPLORATION Of the 44 (15 net) wells which the Company participated in during the year, 37 (12.6 net) were classified as development and 6 7 seven (2.4 net) wells were classified as exploratory risks. Ten (4.7 net) wells were completed as oil wells, 29 (8.7 net) wells were completed as natural gas wells, and five (1.7 net) wells were dry holes. Exploration budget reductions by major oil companies in the lower 48 states have opened a number of attractive exploration opportunities in regions where technological advances like 3-D seismic have not been fully utilized. This is particularly true for some coastal regions in Louisiana where the Company has five new prospects. The Company added a total of six wildcat prospects in 1994 and participated in seven separate 3-D seismic programs. The actual drilling on many of these prospects will not begin until 1995. A dual-leg horizontal well was completed during the year in the Company's Austin Chalk prospect in central Louisiana and it is apparent that the well is marginal. The Company is limiting its efforts to the western portion of this prospect where Occidental Petroleum Corporation has drilled a well which has produced significant hydrocarbons in the early stages. The Company intends to participate in an offset well in 1995 if the economic viability of Occidental's discovery well becomes more certain. The strategy going forward remains focused on domestic onshore acquisition, development, and exploration opportunities, particularly in areas where the Company can employ new drilling and seismic technologies. 7 8 REAL ESTATE HELMERICH & PAYNE PROPERTIES, INC. SUMMARY Helmerich & Payne Properties, Inc. is engaged in the leasing, acquisition, and development of commercial real estate exclusively in the metropolitan area of Tulsa, Oklahoma. At the close of 1994, the Company's property holdings consisted of approximately 1,652,311 leasable square feet which had an occupancy of 85 percent. FINANCIAL HIGHLIGHTS
Years Ended September 30, 1994 1993 1992 ------------------------- ------- ------- ------- (in thousands) Gross Revenues . . . . . . . . . . . . . . . . . . . $ 7,803 $ 7,630 $ 7,550 Pre-Tax Income . . . . . . . . . . . . . . . . . . . 4,460 4,149 4,263 Depreciation Expense . . . . . . . . . . . . . . . . 1,624 1,679 1,685 Capital Expenditures . . . . . . . . . . . . . . . . 916 458 697 Year-End Book Value . . . . . . . . . . . . . . . . . 26,065 27,006 28,224 Average Occupancy . . . . . . . . . . . . . . . . . . 83% 86% 87%
UTICA SQUARE SHOPPING CENTER Consisting of 15 separate buildings including an eight-story medical complex, Utica Square Shopping Center covers 30 landscaped acres located approximately five minutes from downtown Tulsa. Nearly 70 distinguished shops and restaurants make up Utica Square's tenant roster, including Ann Taylor, The Gap, Laura Ashley, Miss Jackson's, The Olive Garden, Saks Fifth Avenue, and Williams-Sonoma. A unique outdoor design allows Utica Square to host a number of seasonal events each year, some of which have become traditions in the Tulsa area. These attributes help make Utica Square a distinctive shopping environment and the cornerstone of the Company's real estate portfolio. 8 9 INDUSTRIAL PROPERTIES The Company's industrial properties and undeveloped land holdings are located in the southeastern part of Tulsa close to major transportation arteries and key growth areas. Two of the properties are classified as bulk warehouse developments and the remaining four are combination office/warehouse properties. Sluggish economic growth and an oversupply of industrial space continues to hamper the occupancy and the rate structure in this market segment. Occupancy for these properties slipped to an average of 76 percent in 1994 from 80 percent the prior year. The quality and location of the properties and land holdings place the Company in a unique position to benefit from growth in the Tulsa economy. SUMMARY OF PROPERTY OWNED
Property Name Description Square Feet ------------- ----------- ----------- Utica Square Shopping Center Upscale Retail 405,709 Utica Square Offices and Medical Center Professional Offices 94,969 Plaza Office Building Corporate Offices 86,899 Space Center Industrial Warehouses 495,000 Space Center East Industrial Warehouses 202,500 Tandem Business Park Office/Warehouse Complex 88,084 Tulsa Business Park Office/Warehouse Complex 204,600 Maxim Center Office/Warehouse Complex 40,800 Maxim Place Office/Warehouse Complex 33,750 Southpark Undeveloped 257 Acres -- --------- Total Square Feet 1,652,311 =========
9 10 CHEMICALS NATURAL GAS ODORIZING, INC. SUMMARY Natural Gas Odorizing, Inc. (NGO), a wholly-owned subsidiary of Helmerich & Payne, Inc., is a leading producer and marketer of mercaptan-based products used primarily as warning odorants in natural and liquified petroleum gas (LPG). The Company also produces similarly composed products used as feedstocks and sulfiding agents in other segments of the chemical industry. The Company's Baytown, Texas, facility obtains its primary raw materials, hydrogen sulfide and olefins, from a neighboring refinery. Raw materials are reacted and fractionated, and then blended with other ingredients to yield the final products. NGO's primary customers are LPG distributors and natural gas utility companies. Depending on the customer's needs, products are delivered in Company-operated tank trucks or shipped in non-returnable containers or reusable cylinders. Approximately eight percent of the Company's sales were made outside of North America in 1994, compared with 11 percent in 1993. Price increases on LPG odorants helped the Company achieve record financial results for the second consecutive year in 1994. Although revenue and pre-tax income increased over 1993 levels by 31 and 64 percent, respectively, LPG odorant prices are expected to stabilize in the coming year. FINANCIAL HIGHLIGHTS
Years Ended September 30, 1994 1993 1992 ------------------------- -------- -------- -------- (in thousands) Gross Revenues . . . . . . . . . . . . . . . . . . . . . $ 18,849 $ 14,374 $ 13,461 Pre-Tax Income . . . . . . . . . . . . . . . . . . . . . 5,994 3,665 2,831 Depreciation Expense . . . . . . . . . . . . . . . . . . 654 594 560 Capital Expenditures . . . . . . . . . . . . . . . . . . 619 630 158 Pounds of Product Sold . . . . . . . . . . . . . . . . . 8,071 7,930 8,452
10 11 REVENUES AND INCOME BY BUSINESS SEGMENTS HELMERICH & PAYNE, INC.
Years Ended September 30, 1994 1993 1992 ------------------------ --------- -------- --------- (in thousands) SALES AND OTHER REVENUES: Contract Drilling - Domestic . . . . . . . . . . . . . . . $ 86,521 $ 60,328 $ 41,171 Contract Drilling - International . . . . . . . . . . . . 98,111 89,618 72,250 --------- -------- -------- Total Contract Drilling Division . . . . . . . . . . . 184,632 149,946 113,421 --------- -------- -------- Exploration and Production . . . . . . . . . . . . . . . . 58,884 69,795 54,525 Natural Gas Marketing . . . . . . . . . . . . . . . . . . 51,889 63,858 40,535 --------- -------- -------- Total Oil and Gas Division . . . . . . . . . . . . . . 110,773 133,653 95,060 --------- -------- -------- Chemical Division . . . . . . . . . . . . . . . . . . . . 18,849 14,374 13,461 Real Estate Division . . . . . . . . . . . . . . . . . . . 7,803 7,630 7,550 Investments and Other Income . . . . . . . . . . . . . . . 6,944 9,494 10,208 --------- -------- -------- Total Revenues . . . . . . . . . . . . . . . . . . . . . . . . $329,001 $315,097 $239,700 --------- -------- -------- --------- -------- -------- OPERATING PROFIT: Contract Drilling - Domestic . . . . . . . . . . . . . . . $ 5,874 $ 122 $ (5,358) Contract Drilling - International . . . . . . . . . . . . 14,645 15,281 10,929 --------- -------- -------- Total Contract Drilling Division . . . . . . . . . . . 20,519 15,403 5,571 --------- -------- -------- Exploration and Production . . . . . . . . . . . . . . . . 3,245 19,495 9,764 Natural Gas Marketing . . . . . . . . . . . . . . . . . . 1,525 667 1,864 --------- -------- -------- Total Oil and Gas Division . . . . . . . . . . . . . . 4,770 20,162 11,628 --------- -------- -------- Chemical Division . . . . . . . . . . . . . . . . . . . . 5,994 3,665 2,831 Real Estate Division . . . . . . . . . . . . . . . . . . . 4,460 4,149 4,263 --------- -------- -------- Total Operating Profit . . . . . . . . . . . . . . . . 35,743 43,379 24,293 --------- -------- -------- OTHER: Miscellaneous operating . . . . . . . . . . . . . . . . . (1,292) (687) (711) Income from investments . . . . . . . . . . . . . . . . . 6,303 9,050 9,202 General corporate expense . . . . . . . . . . . . . . . . (8,908) (6,820) (6,801) Interest expense . . . . . . . . . . . . . . . . . . . . . (385) (925) (632) Corporate depreciation . . . . . . . . . . . . . . . . . . (1,162) (766) (725) --------- -------- -------- Total Other . . . . . . . . . . . . . . . . . . . . . . (5,444) (148) 333 --------- -------- -------- INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE, AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: . . . . . . . . . . . . . $ 30,299 $ 43,231 $ 24,626 --------- -------- -------- --------- -------- --------
Note: This schedule is an integral part of Note 10 (page 27) of the financial statements that follow. 11 12 MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION HELMERICH & PAYNE, INC. RESULTS OF OPERATIONS Helmerich & Payne, Inc.'s net income for 1994 was $24,971,000 ($1.02 per share), compared with net income of $24,550,000 ($1.01 per share) in 1993, and $10,849,000 ($0.45 per share) in 1992. Net income in 1994 included a $4 million ($0.16 per share) one-time reduction in the Company's deferred income taxes from the cumulative effect of adopting Statement of Financial Accounting Standards No. 109. Included in the Company's net income, but not related to its operations, was net income from the sale of investment securities which was nominal in 1994, but totaled $1,780,000 ($0.07 per share) in 1993, and $1,193,000 ($0.05 per share) in 1992. Also included was the Company's portion of income or losses of its equity affiliate, Atwood Oceanics, Inc., ("Atwood") which were $0.04 per share of income in 1994, and per share losses of $0.02 in 1993, and $0.19 in 1992. Company revenues increased to $329,001,000 in 1994, from $315,097,000 in 1993, and $239,700,000 in 1992. The 31 percent increase in total revenues from 1992 to 1993 resulted from increased revenues in every operating segment of the Company. The greatest revenue increases during 1993 were from domestic drilling (47 percent), international drilling (24 percent), exploration and production (28 percent) and natural gas marketing (58 percent). Total revenue increased by 4 percent from 1993 to 1994, primarily as a result of increases in domestic drilling (43 percent), international drilling (9 percent), and chemical (31 percent) segments. Revenues from exploration and production (16 percent decrease) and natural gas marketing (19 percent decrease) fell appreciably in 1994 as oil and natural gas prices and natural gas production volume declined. Income from investments declined to $6,303,000 in 1994, from $9,050,000 in 1993, and $9,202,000 in 1992. From 1993 to 1994, dividend and interest income was stable, but income from the sale of investment securities dropped from $2,914,000 to $124,000 during that time. Interest and dividend income in 1994 was helped by higher market interest rates, even though cash 12 13 balances during the year were lower than the previous two years. From 1992 to 1993, dividend and interest income declined by $1,143,000 while income from investment securities rose by $991,000. Costs and expenses in 1994 were $298,702,000, 93 percent of total operating revenues, compared with 89 percent in 1993 and 93 percent in 1992. Operating costs as a percentage of operating revenues rose slightly to 66 percent in 1994, compared with 64 percent in 1993 and 63 percent in 1992. The increase from 1992 to 1993 was mainly due to Natural Gas Marketing revenues rising by $23,323,000, while cost percentages for that division remained very high. Other divisions' operating cost percentages remained stable or improved. The operating cost percentages rose slightly in 1994 because of greater activity in the lower margin domestic land drilling business and an increase in operating expenses in the international contract drilling business. General and administrative expenses increased to $8,908,000 in 1994, from $6,820,000 in 1993. There was little change from 1992 to 1993. The increase in 1994 was due primarily to increased costs of employee healthcare benefits and, to a lesser degree, a net increase in pension expense. Income tax expense, as a percentage of pre-tax income, fell to 34 percent in 1994, from 42 percent in 1993, and 37 percent in 1992. The increase from 1992 to 1993 was the result of an increase in the corporate tax rate from 34 percent to 35 percent, a higher percentage of international income which is taxed at higher rates, and a decline in the deduction related to dividends received from domestic corporations. The effective tax rate for 1994 was substantially lower because of the usage of foreign tax credit carryforwards, tight sands tax credits, and a reduction in Venezuelan taxes as a result of monetary correction tax laws enacted there. CONTRACT DRILLING DIVISION revenues increased by 23 percent from 1993 to 1994, and by 32 percent from 1992 to 1993. Domestic drilling pre-tax income increased to $5,874,000 in 1994, from a $5,358,000 pre-tax loss in 1992. During that period of time the U.S. offshore platform rig business has shown substantial improvement. The Company's performance in its domestic land rig operations has also improved. It is anticipated that domestic operations will continue to improve as rig demand remains firm in both the offshore platform and the land rig markets. 13 14 International revenues climbed to $98,111,000 in 1994, from $89,618,000 in 1993, and $72,250,000 in 1992. Pre-tax income for the international contract drilling sector declined slightly to $14,645,000 in 1994, after increasing to $15,281,000 in 1993, from $10,929,000 in 1992. This year's decline was due to increased operating expenses in the Company's Colombian operations, and a significant foreign currency loss recorded in Venezuela. The Company anticipates its pre-tax income from international operations will improve for the coming year based on higher activity levels in both Colombia and Venezuela. After the close of the year, the Company announced it was awarded letters of intent for three additional deep land rigs to work in Colombia on three-year term contracts and an additional three rigs for one-year term contracts in Venezuela. With these additions, rig counts in Colombia and Venezuela will increase to 11 and 18, respectively. OIL AND GAS DIVISION revenue and operating income declined significantly in 1994, after increasing substantially from 1992 to 1993. Exploration and production revenues increased 28 percent to $69,795,000 in 1993, from $54,525,000 in 1992, and pre-tax income increased to $19,495,000 from $9,764,000. The variation mirrored natural gas prices and production volumes for the respective years. From 1992 to 1993, natural gas prices increased from $1.39 per Mcf to $1.84 per Mcf, while production increased from 75.5 million cubic feet per day (MMcf/d) to 78.0 MMcf/d. From 1993 to 1994, natural gas prices fell to $1.72 per Mcf and production volumes declined to approximately 73.0 MMcf/d. Crude oil production increased 4 percent from 1992 to 1994, while the average price per barrel fell from $19.16 in 1992, to $17.58 in 1993, and to $14.83 in 1994. Consequently, exploration and production revenues decreased to $58,884,000 for 1994. Pre-tax income for 1994, which fell to $3,245,000, was also affected by higher geophysical expenses and an increase in leasehold abandonments, resulting primarily from a reduction in the carrying value of the Company's leasehold position in its Austin Chalk prospect in south central Louisiana. It is anticipated that higher geophysical charges will continue for the coming year. Additionally, the Company intends to drill a higher percentage of exploratory wells during 1995 and could incur higher dry hole charges. 14 15 Natural gas marketing revenues, which are primarily derived from selling natural gas produced by other companies (third party), declined to $51,889,000 in 1994, from $63,858,000 in 1993. Revenues were $40,535,000 in 1992. Pre-tax income was $1,525,000 in 1994, $667,000 for 1993, and $1,864,000 for 1992. During 1993, the natural gas marketing industry consolidated, causing dramatic downward pressure on income derived from third party natural gas sales. Industry conditions improved slightly in 1994. The Company's approach has been to use the existing capacity of its personnel and facilities to derive additional profit from matching its customers with third party producers when the marketing situation is not conducive for the sale of the Company's own natural gas. It is expected that competition will continue to limit fees and premiums for third party natural gas sales. Therefore, the Company does not anticipate significant growth in income from third party sales in the coming year. CHEMICAL DIVISION revenues increased by 31 percent from 1993 to 1994, and by 7 percent from 1992 to 1993. Pre-tax income increased by 64 percent from 1993 to 1994, and by 29 percent from 1992 to 1993. Product price increases and improved margins account for the significant rise in revenues and income over the two years. It is anticipated that revenues and income will continue to improve during the coming year, but not as rapidly as this past year. REAL ESTATE DIVISION revenues and income for 1994 were up slightly due to the sale of a small parcel of land which resulted in a $450,000 gain. Revenues and income from operations were flat for the years 1993 and 1992. Occupancy and rental rates have been stable to soft over the past two years with no major changes expected for 1995. FINANCIAL CONDITION The Company has maintained a very strong balance sheet for many years. Current ratios for the last three years have exceeded 2.5, while long-term debt as a percentage of total capitalization has remained below 2 percent. During the first quarter of 1994, the Company paid off all of its remaining long-term debt. The only long-term liabilities that remain on the balance sheet are associated with workers compensation and general liability accruals, deferred income taxes, and other miscellaneous long-term payables and deferred items. 15 16 Net cash provided by operating activities was $79,909,000 in 1994, $74,619,000 in 1993, and $63,331,000 in 1992. Capital expenditures were $102,883,000 in 1994, $54,209,000 in 1993, and $82,498,000 in 1992. It is anticipated that capital expenditures in 1995 will exceed those of 1994. The Company has funded capital expenditures in excess of its cash flow internally over the past several years. However, the Company anticipates that it will either sell a portion of its investment portfolio or incur debt in order to fund planned capital expenditures for 1995. Capital expenditures budgeted for 1995 include expanded exploration activities, rig purchases and construction for Colombian and Venezuelan operations, as well as the Company's investment in a joint venture with its equity affiliate, Atwood. The joint venture will construct a new generation offshore platform rig for work offshore Australia. The Company manages a large portfolio of marketable securities which had a book value of $87,414,000 at September 30, 1994, and a total market value at that time of $145,012,000, including its investment in Atwood. During 1994, the Company paid a dividend of $.485 per share which represented its 23rd consecutive year of dividend increases. Stock Portfolio Held by the Company
Number of September 30, 1994 Shares Book Value Market Value ------------------ --------- ---------- ------------ (in thousands,except share amounts) Schlumberger, Ltd. . . . . . . . . . . . . . . . 740,000 $ 23,511 $ 40,238 Atwood Oceanics, Inc. . . . . . . . . . . . . . . 1,600,000 20,743 22,800 Sun Company, Inc. . . . . . . . . . . . . . . . . 907,164 10,637 26,081 Phillips Petroleum Company . . . . . . . . . . . 300,000 7,470 10,275 Liberty Bancorp. . . . . . . . . . . . . . . . . 500,000 7,270 16,750 Oryx Energy Company . . . . . . . . . . . . . . . 675,000 6,433 9,366 Oneok . . . . . . . . . . . . . . . . . . . . . . 225,000 2,751 3,796 Other . . . . . . . . . . . . . . . . . . . . . . 8,599 15,706 -------- -------- Total . . . . . . . . . . . . . . . . . . . . . $ 87,414 $145,012 ======== ========
16 17 CONSOLIDATED STATEMENTS OF INCOME HELMERICH & PAYNE, INC.
Years Ended September 30, 1994 1993 1992 ------------------------- ------- ------ -------- (in thousands, except per share amounts) REVENUES: Sales and other operating revenues . . . . . $322,698 $306,047 $230,498 Income from investments . . . . . . . . . . . 6,303 9,050 9,202 -------- -------- -------- 329,001 315,097 239,700 -------- -------- -------- COSTS AND EXPENSES: Operating costs . . . . . . . . . . . . . . . 213,427 194,856 145,778 Depreciation, depletion and amortization . . 50,068 48,609 47,738 Dry holes and abandonments . . . . . . . . . 10,369 6,893 3,214 Taxes, other than income taxes . . . . . . . 15,545 13,763 10,911 General and administrative . . . . . . . . . 8,908 6,820 6,801 Interest . . . . . . . . . . . . . . . . . . 385 925 632 -------- -------- -------- 298,702 271,866 215,074 -------- -------- -------- INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . 30,299 43,231 24,626 INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . 10,232 18,279 9,192 EQUITY IN INCOME (LOSS) OF AFFILIATE, net of income taxes . . . . . . . . . . . . . 904 (402) (4,585) -------- -------- -------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . 20,971 24,550 10,849 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . 4,000 -- -- -------- -------- -------- NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 24,971 $ 24,550 $ 10,849 ======== ======== ======== PER COMMON SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . $ .86 $ 1.01 $ .45 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . .16 -- -- -------- -------- -------- NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 1.02 $ 1.01 $ .45 ======== ======= ======= AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . 24,416 24,307 24,210
The accompanying notes are an integral part of these statements. 17 18 CONSOLIDATED BALANCE SHEETS HELMERICH & PAYNE, INC.
ASSETS September 30, 1994 1993 ------------- --------- --------- (in thousands) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . $ 29,447 $ 61,656 Short-term investments . . . . . . . . . . . . . . 8,997 9,109 Accounts receivable, less reserve of $1,480 and $608 59,897 56,305 Inventories . . . . . . . . . . . . . . . . . . . . 20,995 17,646 Prepaid expenses and other . . . . . . . . . . . . 3,603 5,783 --------- --------- Total current assets . . . . . . . . . . . . . . 122,939 150,499 --------- --------- INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 87,414 84,945 --------- --------- PROPERTY, PLANT AND EQUIPMENT, at cost: Contract drilling equipment . . . . . . . . . . . . 444,432 418,004 Oil and gas properties . . . . . . . . . . . . . . 389,100 350,186 Real estate properties . . . . . . . . . . . . . . 47,827 47,502 Other . . . . . . . . . . . . . . . . . . . . . . . 61,743 57,630 --------- --------- 943,102 873,322 Less--Accumulated depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . 542,451 514,524 --------- --------- Net property, plant and equipment . . . . . . . . 400,651 358,798 --------- --------- OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . 13,823 16,693 --------- --------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $ 624,827 $ 610,935 ========= =========
The accompanying notes are an integral part of these statements. 18 19 LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 1994 1993 ------------- -------- -------- (in thousands) CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 22,645 $ 23,836 Accrued liabilities . . . . . . . . . . . . . . . . . . . . 24,056 16,899 Current maturities of long-term debt . . . . . . . . . . . . -- 5,679 -------- -------- Total current liabilities . . . . . . . . . . . . . . . 46,701 46,414 -------- -------- NONCURRENT LIABILITIES: Long-term debt, less current maturities . . . . . . . . . . -- 3,600 Deferred income taxes . . . . . . . . . . . . . . . . . . . 44,462 44,723 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,330 7,271 -------- -------- Total noncurrent liabilities . . . . . . . . . . . . . . . 53,792 55,594 -------- -------- SHAREHOLDERS' EQUITY: Common stock, $.10 par value, 80,000,000 shares authorized, 26,764,476 shares issued. . . . . . . . . . . . . . . . . . 2,677 2,677 Preferred stock, no par value, 1,000,000 shares authorized, no shares issued . . . . . . . . . . . . . . . . . . . . . -- -- Additional paid-in capital . . . . . . . . . . . . . . . . . 48,196 47,412 Retained earnings . . . . . . . . . . . . . . . . . . . . . 496,280 482,405 -------- -------- 547,153 532,494 Less treasury stock, 2,054,364 shares in 1994 and 2,126,994 shares in 1993, at cost . . . . . . . . . . . . . . . . . . 22,819 23,567 -------- -------- Total shareholders' equity . . . . . . . . . . . . . . . 524,334 508,927 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . $624,827 $610,935 ======== ========
The accompanying notes are an integral part of these statements. 19 20 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY HELMERICH & PAYNE, INC.
Common Stock Additional Treasury Stock ------------ Paid-In Retained -------------- Shares Amount Capital Earnings Shares Amount ------ ------ ------- -------- ----- -------- (in thousands) ------ ------ ------- -------- ----- -------- Balance, September 30, 1991 . . . . . . . . 26,764 $2,677 $45,894 $467,621 2,277 $(25,059) Cash dividends ($.47 per share) . . . . . -- -- -- (11,533) -- -- Exercise of stock options . . . . . . . . -- -- 527 -- (64) 675 Stock issued under Restricted Stock Award Plan . . . . . . . . . . . . . . . . . . -- -- 343 (619) (25) 275 Amortization of deferred compensation . . . . . . . . . . . . . . -- -- -- 1,636 -- -- Net income . . . . . . . . . . . . . . . . -- -- -- 10,849 -- -- ------ ------ ------- -------- ----- -------- Balance, September 30, 1992 . . . . . . . . 26,764 2,677 46,764 467,954 2,188 (24,109) Cash dividends ($.48 per share) . . . . . -- -- -- (11,815) -- -- Exercise of stock options . . . . . . . . -- -- 888 -- (61) 542 Lapse of restrictions on Restricted Stock Awards . . . . . . . . . . . . . . . . . -- -- (240) -- -- -- Amortization of deferred compensation . . -- -- -- 1,716 -- -- Net income . . . . . . . . . . . . . . . . -- -- -- 24,550 -- -- ------ ------ ------- -------- ----- -------- Balance, September 30, 1993 . . . . . . . . 26,764 2,677 47,412 482,405 2,127 23,567) Cash dividends ($.49 per share) . . . . . -- -- -- (12,097) -- -- Exercise of stock options . . . . . . . . -- -- 549 -- (43) 415 Lapse of restrictions on Restricted Stock Awards . . . . . . . . . . . . . . . . . -- -- (246) -- -- -- Stock issued under Restricted Stock Award Plan . . . . . . . . . . . . . . . . . . -- -- 481 (814) (30) 333 Amortization of deferred compensation . . -- -- -- 1,815 -- -- Net income . . . . . . . . . . . . . . . -- -- -- 24,971 -- -- ------ ------ ------- -------- ----- -------- Balance, September 30, 1994 . . . . . . . . 26,764 $2,677 $48,196 $496,280 2,054 $(22,819) ====== ====== ======= ======== ===== ========
The accompanying notes are an integral part of these statements. 20 21 CONSOLIDATED STATEMENTS OF CASH FLOWS HELMERICH & PAYNE, INC.
Years Ended September 30, 1994 1993 1992 ------------------------- ---- ---- ---- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,971 $ 24,550 $ 10,849 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation, depletion and amortization . . . . . . . . 50,068 48,609 47,738 Dry holes and abandonments . . . . . . . . . . . . . . . 10,369 6,893 3,214 Cumulative effect of change in accounting principle . . . (4,000) -- -- Equity in (income) loss of affiliate before income taxes (1,458) 435 4,956 Amortization of deferred compensation . . . . . . . . . . 1,815 1,716 1,636 Gain on sale of securities . . . . . . . . . . . . . . . (124) (2,914) (1,923) (Gain) loss on sale of fixed assets, other . . . . . . . (2,465) (557) 774 Change in assets and liabilities- Increase in accounts receivable . . . . . . . . . . . . (3,592) (13,486) (5,287) Increase in inventories . . . . . . . . . . . . . . . . (3,349) (35) (914) (Increase) decrease in prepaid expenses and other . . . 5,050 (492) (4,092) Increase (decrease) in accounts payable . . . . . . . . (1,191) 7,523 2,350 Increase (decrease) in accrued liabilities . . . . . . 1,617 (1,619) 411 Increase (decrease) in deferred income taxes . . . . . 3,739 5,600 (2,900) Increase (decrease) in other noncurrent liabilities . . (1,541) (1,604) 6,519 -------- -------- -------- Total adjustments . . . . . . . . . . . . . . . . . . . 54,938 50,069 52,482 -------- -------- -------- Net cash provided by operating activities . . . . . 79,909 74,619 63,331 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, including dry hole costs . . . . . . . . (102,883) (54,209) (82,498) Proceeds from sale of property, plant and equipment . . . . . 5,971 4,801 2,701 Purchase of investments . . . . . . . . . . . . . . . . . . . (1,500) (2,400) (761) Proceeds from sale of investments . . . . . . . . . . . . . . 373 7,904 6,283 Purchase of short-term investments . . . . . . . . . . . . . . (12) (3,036) (5,204) Proceeds from sale of short-term investments . . . . . . . . . 124 7,055 20,603 -------- -------- -------- Net cash used in investing activities . . . . . . . . . . (97,927) (39,885) (58,876) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt . . . . . . . . . . . -- 2,070 3,460 Payments made on long-term debt . . . . . . . . . . . . . . . (3,139) (2,180) (1,657) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (11,965) (11,808) (11,400) Proceeds from exercise of stock options . . . . . . . . . . . 913 1,254 1,201 -------- -------- -------- Net cash used in financing activities . . . . . . . . . . (14,191) (10,664) (8,396) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . (32,209) 24,070 (3,941) CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . 61,656 37,586 41,527 -------- -------- -------- CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . $ 29,447 $ 61,656 $ 37,586 ======== ======== ========
The accompanying notes are an integral part of these statements. 21 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HELMERICH & PAYNE, INC. September 30, 1994, 1993, and 1992 NOTE 1 SUMMARY OF ACCOUNTING POLICIES CONSOLIDATION - The consolidated financial statements include the accounts of Helmerich & Payne, Inc. (the Company), and all of its wholly-owned subsidiaries. Fiscal years of the Company's foreign consolidated operations are August 31 to facilitate reporting of consolidated accounts. TRANSLATION OF FOREIGN CURRENCIES - The Company has determined that the functional currency for its foreign subsidiaries is the U.S. dollar. Foreign currency transaction losses for the years 1994, 1993 and 1992 were $2,764,000, $493,000 and $392,000, respectively. PROPERTY, PLANT AND EQUIPMENT - The Company follows the successful efforts method of accounting for oil and gas properties. Under this method, the Company capitalizes all costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells which find proved reserves and to drill and equip development wells. Geological and geophysical costs, delay rentals and costs to drill exploratory wells which do not find proved reserves are expensed. Capitalized costs of producing oil and gas properties are depreciated and depleted by the unit-of-production method based on proved developed oil and gas reserves determined by the Company and reviewed by independent engineers. The Company reserves for impairment of its oil and gas properties whenever the net capitalized costs of total oil and gas properties exceed the estimated undiscounted future net revenues from proved reserves. Additionally, the estimated undiscounted future revenues of high-cost proved properties, based on prices at the time of the estimate, are evaluated prior to start-up of commercial production and any significant impairment is recognized currently. Undeveloped leases are amortized based on management's estimate of recoverability. Costs of surrendered leases are charged to the amortization reserve. Substantially all other property, plant and equipment is depreciated using the straight-line method based on the following estimated useful lives:
YEARS ----- Contract drilling equipment . . . . . . . . . . . . . . 4-10 Chemical plant and equipment . . . . . . . . . . . . . 10-25 Real estate buildings and equipment . . . . . . . . . . 10-50 Other . . . . . . . . . . . . . . . . . . . . . . . . . 3-33
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of cash in banks and investments readily convertible into cash which mature within three months from the date of purchase. INVENTORIES - Inventories, primarily materials and supplies, are valued at the lower of cost (moving average or actual) or market. DRILLING REVENUE - Substantially all drilling contracts are daywork contracts and drilling revenues and expenses are recognized as work progresses. GAS IMBALANCES - The Company recognizes revenues from gas wells on the sales method, and a liability is recorded for permanent imbalances. INVESTMENTS - Investments in companies owned less than 20 percent are carried at cost with income recognized as dividends are received. Investments in companies owned from 20 to 50 percent are accounted for using the equity method with the Company recognizing its proportionate share of the income or loss of each investee. The Company owned 24.3 percent of Atwood Oceanics, Inc. (Atwood) at September 30, 1994 and 1993. The quoted market value of the Company's investment was $22,800,000 and $17,200,000 at September 30, 1994 and 1993, respectively. Retained earnings at September 30, 1994, include approximately $8,563,000 of undistributed earnings of Atwood. Atwood is the only 20 to 50 percent owned affiliate at September 30, 1994 and 1993. 22 23 Summarized financial information of the affiliated company accounted for on the equity method is as follows:
1994 1993 1992 ---- ---- ---- (in thousands) Gross revenues . . . . . . . . . . . . . . . . . $ 68,045 $ 54,219 $ 47,525 Costs and expenses . . . . . . . . . . . . . . . (62,045) (56,010) (68,593) -------- -------- -------- Net income ( loss) . . . . . . . . . . . . . . . $ 6,000 $ (1,791) $(21,068) ======== ======== ======== Helmerich & Payne, Inc.'s equity in net income (loss) of affiliates, net of income taxes . . . $ 904 $ (402) $ (4,585) ======== ======== ======== Current assets . . . . . . . . . . . . . . . . . $ 37,965 $ 27,903 $ 29,876 Noncurrent assets . . . . . . . . . . . . . . . . 115,065 122,356 135,566 Current liabilities . . . . . . . . . . . . . . . 13,752 11,900 12,087 Noncurrent liabilities . . . . . . . . . . . . . 53,000 58,609 71,269 Shareholders' equity . . . . . . . . . . . . . . 86,278 79,750 82,086 ======== ======== ======== Helmerich & Payne, Inc.'s investment . . . . . . $ 20,743 $ 19,285 $ 19,720 ======== ======== ========
INCOME TAXES - Effective October 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement No. 109, deferred income taxes are computed using the liability method and are provided on all temporary differences between the financial basis and the tax basis of assets and liabilities. For the years ended September 30, 1993 and 1992, deferred income taxes are computed using the deferred method and are provided on timing differences between financial and taxable income. OTHER POST EMPLOYMENT BENEFITS - The Company provides medical benefits to employees who retired before November 1, 1992. The Company does not provide any other benefits to these retirees and will not provide any post retirement benefits to any person retiring after that date. The liability for the benefits provided is not material. The Company has accrued a liability for estimated workers compensation claims incurred. The liability for other benefits to former or inactive employees after employment but before retirement is not material. EARNINGS PER SHARE - Earnings per share are based on the weighted average number of shares of common stock outstanding during the year. Common stock equivalents are insignificant, and therefore, have not been considered in the earnings per share computation. RECLASSIFICATIONS - Certain reclassifications have been made in the 1993 and 1992 financial statements to conform to the 1994 presentation. NOTE 2 LONG-TERM DEBT Notes payable and long term debt consist of the following:
At September 30, 1994 1993 ---------------- ---- ---- (in thousands) Mortgage notes payable (at interest rates ranging from 9.25% to 10%) $ -- $ 3,139 Other long-term debt (at interest rates ranging from 6% to 7%) . . -- 6,140 ---- ------- -- 9,279 Less - Current maturities of long-term debt . . . . . . . . . . . . -- 5,679 ---- ------- $ -- $ 3,600 ==== =======
The Company has available a $20,000,000 bank line of credit under an agreement that expires March 15, 1995. 23 24 NOTE 3 FEDERAL INCOME TAXES Effective October 1, 1993, the Company changed its method of accounting for income taxes from the deferred method to the liability method required by FASB Statement No. 109, "Accounting for Income Taxes." The cumulative effect of adopting Statement No. 109 as of October 1, 1993 was to increase net income by $4,000,000. As permitted under the new rules, prior years financial statements have not been restated. The components of the provision for income taxes are as follows:
Years Ended September 30, 1994 1993 1992 ------------------------ ------- ------- ------ (in thousands) CURRENT: Federal . . . . . . . . . . . . . . . . . . . $ 3,645 $ 6,190 $ 4,690 Foreign . . . . . . . . . . . . . . . . . . . 2,763 5,106 6,985 State . . . . . . . . . . . . . . . . . . . . 777 911 551 ------- ------- ------- 7,185 12,207 12,226 ------- ------- ------- DEFERRED: Federal . . . . . . . . . . . . . . . . . . . (292) 3,174 (1,157) Foreign . . . . . . . . . . . . . . . . . . . 3,430 2,616 (1,834) State . . . . . . . . . . . . . . . . . . . . (91) 282 (43) ------- ------- ------- 3,047 6,072 (3,034) ------- ------- ------- TOTAL PROVISION: . . . . . . . . . . . . . . . . . . . $10,232 $18,279 $9,192 ------- ------- ------- ------- ------- -------
The amounts of domestic and foreign income are as follows:
Years Ended September 30, 1994 1993 1992 ------------------------- ------- ------- ------- INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE, AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: Domestic . . . . . . . . . . . . . . . . . . . . $17,513 $29,051 $12,993 Foreign . . . . . . . . . . . . . . . . . . . . . 12,786 14,180 11,633 ------- ------- ------- $30,299 $43,231 $24,626 ------- ------- ------- ------- ------- -------
Effective income tax rates as compared to the U.S. Federal income tax rate are as follows:
Years Ended September 30, 1994 1993 1992 ------------------------- ---- ---- ---- U.S. Federal income tax rate . . . . . . . . . . . . . 35% 35% 34% Dividends received deduction . . . . . . . . . . . . . (2) (1) (4) Excess statutory depletion . . . . . . . . . . . . . . (1) (1) -- Effect of higher foreign tax rates . . . . . . . . . . 3 7 5 Other, net . . . . . . . . . . . . . . . . . . . . . . (1) 2 2 ---- ---- ---- Effective income tax rate . . . . . . . . . . . . . . . 34% 42% 37% ---- ---- ---- ---- ---- ----
The components of the Company's net deferred tax liabilities are as follows:
September 30, 1994 ------------------ DEFERRED TAX LIABILITIES: Property, plant and equipment . . . . . . . . . . . . . $ 42,406 Pension provision . . . . . . . . . . . . . . . . . . . 4,632 Other . . . . . . . . . . . . . . . . . . . . . . . . . 3,998 -------- Total deferred tax liabilities . . . . . . . . . . 51,036 -------- DEFERRED TAX ASSETS: Financial accruals . . . . . . . . . . . . . . . . . . 4,419 Other . . . . . . . . . . . . . . . . . . . . . . . . . 2,155 -------- Total deferred tax assets . . . . . . . . . . . . . 6,574 -------- Valuation allowance . . . . . . . . . . . . . . . . . . -- -------- Net deferred tax assets . . . . . . . . . . . . . . 6,574 -------- NET DEFERRED TAX LIABILITIES . . . . . . . . . . . . . $ 44,462 -------- --------
24 25 The deferred income tax provision (benefit) for 1993 and 1992 results from timing differences in the recognition of revenue and expense for income tax and financial reporting purposes. The sources of these differences and the related income tax effect of each, are as follows:
Years Ended September 30, 1993 1992 ------------------------ -------- -------- (in thousands) Effect of intangible development costs expensed for income tax purposes over (under) costs amortized for financial reporting purposes . . . . . . . . . $1,302 $(1,085) Financial under income tax depreciation . . . . . . 2,134 857 Pension income . . . . . . . . . . . . . . . . . . . 128 246 Geophysical expense . . . . . . . . . . . . . . . . (51) (532) Insurance expense . . . . . . . . . . . . . . . . . (36) 376 Amortization of deferred compensation . . . . . . . (652) (605) Restricted stock options vesting . . . . . . . . . . 609 -- Deferred mobilization revenues . . . . . . . . . . . 566 (1,745) Sales of long-term investments . . . . . . . . . . . 484 (76) Excess depletion . . . . . . . . . . . . . . . . . . 589 519 Oil and gas revenue recognition timing differences . 262 184 Other . . . . . . . . . . . . . . . . . . . . . . . 737 (1,173) ------ ------- $6,072 $(3,034) ====== =======
NOTE 4 STOCK OPTIONS, AWARD PLAN AND RIGHTS The Company has reserved 1,461,645 shares of its treasury stock to satisfy the exercise of stock options issued under the 1982 and 1990 Stock Option Plans. Options awarded under these plans are granted at prices equal to at least market price on the date of grant. Options granted under the 1982 plan have a term of nine years while options granted under the 1990 plan have a term of seven years. Options granted under both plans become exercisable in increments as outlined in the plans. Activity for the incentive stock option plans, was as follows:
Years Ended September 30, 1994 1993 1992 ------------------------ ------- ------- ------ (in thousands) Outstanding at October 1, . . . . . . . . . . . . . 780,079 860,713 783,189 Granted . . . . . . . . . . . . . . . . . . . . . . 110,250 -- 142,842 Exercised . . . . . . . . . . . . . . . . . . . . . (46,510) (67,112) (65,318) Cancelled . . . . . . . . . . . . . . . . . . . . . (7,940) (13,522) -- ------- ------- ------- Outstanding at September 30, . . . . . . . . . . . . 835,879 780,079 860,713 ======= ======= ======= Exercisable at September 30, . . . . . . . . . . . . 70,889 19,782 40,776 ======= ======= ======= Weighted average exercise price of options outstanding . . . . . . . . . . . . . . . . . . . . $25.65 $25.20 $24.93 ====== ====== ====== Weighted average exercise price of options exercised . . . . . . . . . . . . . . . . . . . . . $21.77 $21.53 $17.64 ====== ====== ======
As of September 30, 1994, the Company has issued 360,000 shares of treasury stock under a Restricted Stock Award Plan (the "Plan") including 30,000 shares during 1994. The Company recognized deferred compensation totalling $12,832,000, which was the fair market value of the stock at the time of issuance, as a reduction of retained earnings. Treasury stock was reduced by the book value of the shares issued, $4,058,000. The difference was recognized as an increase in paid-in capital. The deferred compensation is being amortized over a seven-year period as compensation expense. In both 1994 and 1993, restrictions lapsed with respect to 61,000 shares, and the shares were released to Plan participants. On September 30, 1994, the Company had 24,710,112 outstanding common stock purchase rights ("Rights"). Each Right entitles the holder thereof, until January 8, 1996, to buy one share of common stock at an exercise price of $60.00. The exercise price and the number of shares of common stock issuable upon the exercise of the Rights are subject to adjustment in certain cases to prevent dilution. The Rights are evidenced by the common stock certificates and are not exercisable or transferable apart from the common stock, until 15 days after a person acquires 15 percent or more of the common stock. In the event the Company is acquired in a merger or other business combination transaction (including one in which the Company is the surviving corporation), it is provided that each Right will entitle its holder to purchase, at the then current exercise price of the Right, that number of shares of common stock of the surviving company, which at the time of such transaction, would have a market value of two times the exercise price of the Right. The Rights do not have any voting rights and are redeemable, at the option of the Company, at a price of $.05 per Right prior to any person or entity acquiring beneficial ownership of at least 15 percent of the common stock. The Rights expire on January 8, 1996. As long as the Rights are not separately transferable, the Company will issue one Right with each new share of common stock issued. NOTE 5 INVESTMENTS Short-term investments consist mainly of treasury notes carried at cost, which approximates fair value, and are pledged as collateral for a renewable letter of credit. The aggregate quoted market value of the marketable equity securities, excluding Atwood, was approximately $122,212,000 and $135,175,000 at September 30, 1994 and 1993, respectively. Aggregate cost, which is also carrying value, was $66,671,000 and $65,660,000 at September 30, 1994 and 1993, respectively. At September 30, 1994, gross unrealized gains and unrealized losses applicable to the marketable equity securities were approximately $55,653,000 and $112,000, respectively. In 1994, 1993 and 1992, the Company realized gains from the sale of marketable equity securities of approximately $124,000, $2,914,000 and $1,920,000, respectively. Effective October 1, 1994, the Company will be required to adopt FASB Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." If the Company had adopted the new accounting standard effective September 30, 1994, investments would have increased $55,541,000, deferred tax liabilities would have increased $21,106,000 and shareholders' equity would have increased $34,435,000. 25 26 NOTE 6 RETIREMENT PLANS DEFINED BENEFIT PLANS: The Company has noncontributory pension plans covering substantially all of its employees, including certain employees in foreign countries. The Company makes annual contributions to the plans equal to the maximum amount allowable for tax reporting purposes. Future service benefits are determined using a 1.5 percent career average formula. The net periodic pension credit included the following components:
Years Ended September 30, 1994 1993 1992 ------------------------ -------- ------- ------ (in thousands) Service cost-benefits earned during the year . . . . . . . . . . . $ 1,557 $ 1,304 $ 1,172 Interest cost on projected benefit obligations . . . . . . . . . . 1,191 1,105 896 Return on plan assets . . . . . . . . . . . . . . . . . . . . . . . (2,639) (522) (3,517) Net amortization and deferral . . . . . . . . . . . . . . . . . . . (302) (2,477) 726 ------ ------ ------- Net pension credit . . . . . . . . . . . . . . . . . . . . . . $ (193) $ (590) $ (723) ------ ------ ------- ------ ------ -------
The discount rate used in determining the actuarial value of the projected benefit obligation for 1994, 1993 and 1992 was 7.5%, 7.0% and 7.5%, respectively. The average expected rate of return on plan assets was 8.5% for 1994, 1993 and 1992. The assumed rate of increase in compensation was 5.0% for 1994 and 5.5% for 1993 and 1992. The following table sets forth the plans' funded status and amounts recognized in the balance sheet:
Years Ended September 30, 1994 1993 ------------------------ ------- -------- (in thousands) Actuarial present value of benefit obligations: Vested benefit obligation . . . . . . . . . . . . . . . . . . . $ 13,323 $ 13,493 -------- -------- -------- -------- Accumulated benefit obligation . . . . . . . . . . . . . . . . . $ 15,758 $ 15,649 -------- -------- -------- -------- Projected benefit obligation . . . . . . . . . . . . . . . . . . $ 17,755 $ 17,392 -------- -------- -------- -------- Plan assets at fair value, primarily listed stocks, U.S. Government securities and guaranteed insurance contracts . . . . . . . . . $ 33,317 $ 31,427 -------- -------- -------- -------- Projected benefit obligation less than plan assets . . . . . . . . $ 15,562 $ 14,035 Unrecognized net gain, including unrecognized net assets existing at October 1, 1987 . . . . . . . . . . . . . (5,589) (4,493) Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 2,216 2,455 -------- -------- Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . $ 12,189 $ 11,997 -------- -------- -------- --------
DEFINED CONTRIBUTION PLAN: Substantially all employees on the United States payroll of the Company may elect to participate in the Company sponsored Thrift/401(K) Plan by contributing a portion of their earnings. The Company contributes amounts equal to 100 percent of the first five percent of the participant's compensation subject to certain limitations. Expensed Company contributions were $1,588,000, $1,304,000 and $1,216,000 in 1994, 1993 and 1992, respectively. NOTE 7 ACCRUED LIABILITIES Accrued liabilities consist of the following:
Years Ended September 30, 1994 1993 ------------------------ --------- --------- (in thousands) Accrued royalties payable . . . . . . . . . . . . . . . . . . . . . . $ 6,293 $ 8,179 Accrued taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 4,669 3,004 Accrued workers compensation claims . . . . . . . . . . . . . . . . . 2,364 1,100 Accrued equipment cost . . . . . . . . . . . . . . . . . . . . . . . . 3,000 -- Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 7,730 4,616 -------- -------- $ 24,056 $ 16,899 -------- -------- -------- --------
26 27 NOTE 8 SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended September 30, 1994 1993 1992 ------------------------- ---- ---- ---- (in thousands) Cash payments: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . $ 371 $ 370 $ 566 Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . 9,516 15,924 12,504 Noncash investing activity: Accrued equipment cost . . . . . . . . . . . . . . . . . . . . $3,000 $ -- $ --
NOTE 9 CONCENTRATIONS OF CREDIT RISK Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit financial institutions and limits the amount of credit exposure to any one financial institution. The Company's trade receivables are primarily with a variety of companies in the oil and gas industry. Management requires collateral for certain receivables of customers in its natural gas marketing operations. NOTE 10 SEGMENT INFORMATION The Company operates principally in the contract drilling and oil and gas industries. The contract drilling operations consist of contracting Company-owned drilling equipment primarily to major oil and gas exploration companies. Oil and gas activities consist of ownership of mineral interests in productive oil and gas leases and undeveloped leases located primarily in Oklahoma, Texas, Kansas and Louisiana. Intersegment sales, which are accounted for in the same manner as sales to unaffiliated customers, are not material. Operating profit is total revenue less operating expenses. In computing operating profit, the following items have not been considered: equity in earnings of Atwood Oceanics, Inc.; income from investments; general corporate expenses; interest expense; and domestic and foreign income taxes. Identifiable assets by segment are those assets that are used in the Company's operations in each segment. Corporate assets are principally cash and cash equivalents, short-term investments and investments in marketable securities. Revenues from one company doing business with the contract drilling segment accounted for approximately 14 percent and 11.8 percent of the total consolidated revenues during the years ended September 30, 1994 and 1993, respectively. Collectively, revenues from three companies controlled by the Venezuelan government accounted for approximately 12.5 percent of total consolidated revenues for the year ended September 30, 1992. Summarized revenues and operating profit by industry segment for the years ended September 30, 1994, 1993 and 1992 are located on page 11. Additional financial information by industry segment is as follows:
Years Ended September 30, 1994 1993 1992 ------------------------- ---- ---- ---- (in thousands) Identifiable assets: Contract drilling - Domestic . . . . . . . . . . . . $132,804 $112,435 $109,150 Contract drilling - International . . . . . . . . . . 131,767 113,844 109,920 Exploration and Production . . . . . . . . . . . . . 175,003 162,618 163,123 Natural Gas Marketing . . . . . . . . . . . . . . . . 8,846 13,289 15,235 Chemical division . . . . . . . . . . . . . . . . . . 9,532 9,753 8,488 Real Estate division . . . . . . . . . . . . . . . . 26,958 27,845 29,017 Corporate and other . . . . . . . . . . . . . . . . . 139,917 171,151 150,571 -------- -------- -------- $624,827 $610,935 $585,504 ======== ======== ======== Depreciation, depletion and amortization: Contract drilling - Domestic . . . . . . . . . . . . $ 11,085 $ 10,126 $ 10,076 Contract drilling - International . . . . . . . . . . 15,722 16,929 15,399 Exploration and Production . . . . . . . . . . . . . 19,523 18,294 19,044 Natural Gas Marketing . . . . . . . . . . . . . . . . 290 279 268 Chemical division . . . . . . . . . . . . . . . . . . 654 594 560 Real Estate division . . . . . . . . . . . . . . . . 1,624 1,679 1,685 Corporate and other . . . . . . . . . . . . . . . . . 1,265 864 817 Intersegment elimination . . . . . . . . . . . . . . (95) (156) (111) -------- -------- -------- $ 50,068 $ 48,609 $ 47,738 ======== ======== ======== Capital expenditures: Contract drilling - Domestic . . . . . . . . . . . . $ 31,692 $ 16,261 $ 14,956 Contract drilling - International . . . . . . . . . . 25,723 10,375 34,971 Exploration and Production . . . . . . . . . . . . . 45,809 25,551 30,757 Natural Gas Marketing . . . . . . . . . . . . . . . . 76 205 58 Chemical division . . . . . . . . . . . . . . . . . . 619 630 158 Real Estate division . . . . . . . . . . . . . . . . 916 458 697 Corporate and other . . . . . . . . . . . . . . . . . 1,048 729 901 -------- -------- -------- $105,883 $ 54,209 $ 82,498 ======== ======== ========
27 28 NOTE 11 SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS PRODUCING ACTIVITIES All of the Company's oil and gas producing activities are located in the United States. Results of Operations from Oil and Gas Producing Activities -
Years Ended September 30, 1994 1993 1992 ------------------------- ------ ------ ------ (in thousands) Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $58,884 $69,795 $ 54,525 ------- ------- -------- Production costs . . . . . . . . . . . . . . . . . . . . . . . 18,854 19,378 18,492 Exploration expense and valuation provisions . . . . . . . . . 17,262 12,628 7,225 Depreciation, depletion and amortization . . . . . . . . . . . 19,523 18,294 19,044 Income tax expense . . . . . . . . . . . . . . . . . . . . . . 890 6,481 3,173 ------- ------- -------- Total cost and expenses . . . . . . . . . . . . . . . . . . . 56,529 56,781 47,934 ------- ------- -------- Results of operations (excluding corporate overhead and interest costs) . . . . . . . . . . . . . . . . . . . . . $ 2,355 $13,014 $ 6,591 ======= ======= ========
Capitalized Costs -
At September 30, 1994 1993 ---------------- -------- ------- (in thousands) Properties being amortized: Proved properties . . . . . . . . . . . . . . . . . . . . . . . . $377,371 $340,176 Unproved properties . . . . . . . . . . . . . . . . . . . . . . . 11,729 10,010 -------- ------- Total costs being amortized . . . . . . . . . . . . . . . . . . 389,100 350,186 Less-Accumulated depreciation, depletion and amortization . . . . . 225,902 203,908 -------- -------- Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $163,198 $146,278 ======== ========
Costs Incurred Relating to Oil and Gas Producing Activities -
Years Ended September 30, 1994 1993 1992 ------------------------- -------- -------- -------- (in thousands) Property acquisition: Proved . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,115 $ 3,100 $11,441 Unproved . . . . . . . . . . . . . . . . . . . . . . . . 4,893 2,409 9,140 Exploration . . . . . . . . . . . . . . . . . . . . . . . 12,418 11,769 10,138 Development . . . . . . . . . . . . . . . . . . . . . . . 12,888 13,964 4,656 ------- ------- ------- Total . . . . . . . . . . . . . . . . . . . . . . . . $53,314 $31,242 $35,375 ======= ======= =======
28 29 Estimated Quantities of Proved Oil and Gas Reserves (Unaudited) - Proved reserves are estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are those which are expected to be recovered through existing wells with existing equipment and operating methods. The following is an analysis of proved oil and gas reserves as estimated by the Company and reviewed by independent engineers.
OIL (Bbls.) GAS (Mmcf) ----------- ---------- Proved reserves at September 30, 1991 . . . . . . . . . . . . . . 7,074,405 296,229 Revisions of previous estimates . . . . . . . . . . . . . . . . . 560,703 (211) Extensions, discoveries and other additions . . . . . . . . . . . 697,006 4,565 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . (854,124) (27,622) Purchases of reserves-in-place . . . . . . . . . . . . . . . . . 40,389 21,643 Sales of reserves-in-place . . . . . . . . . . . . . . . . . . . (10,793) (8) --------- ------- Proved reserves at September 30, 1992 . . . . . . . . . . . . . . 7,507,586 294,596 Revisions of previous estimates . . . . . . . . . . . . . . . . . (15,550) 9,568 Extensions, discoveries and other additions . . . . . . . . . . . 168,051 10,083 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . (875,713) (28,479) Purchases of reserves-in-place . . . . . . . . . . . . . . . . . 140,411 4,196 Sales of reserves-in-place . . . . . . . . . . . . . . . . . . . (41,586) (519) --------- ------- Proved reserves at September 30, 1993 . . . . . . . . . . . . . . 6,883,199 289,445 Revisions of previous estimates . . . . . . . . . . . . . . . . . 302,200 (819) Extensions, discoveries and other additions . . . . . . . . . . . 261,114 8,818 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . (887,455) (26,628) Purchases of reserves-in-place . . . . . . . . . . . . . . . . . 159,580 19,900 Sales of reserves-in-place . . . . . . . . . . . . . . . . . . . (8,427) (64) --------- ------- Proved reserves at September 30, 1994 . . . . . . . . . . . . . . 6,710,211 290,652 ========= ======= Proved developed reserves at September 30, 1992 . . . . . . . . . . . . . . . . . . . . . . . 6,477,661 277,169 ========= ======= September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . 6,882,783 282,033 ========= ======= September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . 6,649,672 267,688 ========= =======
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves (Unaudited) - The "Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves" (Standardized Measure) is a disclosure requirement under Financial Accounting Standards Board Statement No. 69. The Standardized Measure does not purport to present the fair market value of a company's proved oil and gas reserves. This would require consideration of expected future economic and operating conditions, which are not taken into account in calculating the Standardized Measure. Under the Standardized Measure, future cash inflows were estimated by applying year-end prices to the estimated future production of year-end proved reserves. Future cash inflows were reduced by estimated future production and development costs based on year-end costs to determine pre-tax cash inflows. Future income taxes were computed by applying the statutory tax rate to the excess of pre-tax cash inflows over the Company's tax basis in the associated proved oil and gas properties. Tax credits and permanent differences were also considered in the future income tax calculation. Future net cash inflows after income taxes were discounted using a ten percent annual discount rate to arrive at the Standardized Measure.
At September 30, 1994 1993 ---------------- --------- --------- (in thousands) Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . $ 478,426 $ 651,369 Future costs - Future production and development costs . . . . . . . . . . . . (191,464) (207,633) Future income tax expense . . . . . . . . . . . . . . . . . . . (71,320) (119,070) --------- --------- Future net cash flows . . . . . . . . . . . . . . . . . . . . . . 215,642 324,666 10% annual discount for estimated timing of cash flows . . . . . (91,019) (145,909) --------- --------- Standardized Measure of discounted future net cash flows . . . . $ 124,623 $ 178,757 ========= =========
29 30 Changes in Standardized Measure relating to Proved Oil and Gas Reserves (Unaudited) -
Years Ended September 30, 1994 1993 1992 ------------------------- -------- -------- --------- (in thousands) Standardized Measure - Beginning of year . . . . . . . . . . $178,757 $173,644 $124,776 Increases (decreases) - Sales, net of production costs . . . . . . . . . . . . . . . (40,030) (50,417) (36,033) Net change in sales prices, net of production costs . . . . (80,347) 16,292 61,468 Discoveries and extensions, net of related future development and production costs . . . . . . . . . . . . . 9,653 12,439 12,688 Changes in estimated future development costs . . . . . . . (14,571) (7,624) (2,252) Development costs incurred . . . . . . . . . . . . . . . . . 12,888 13,964 4,656 Revisions of previous quantity estimates . . . . . . . . . . 483 6,820 2,125 Accretion of discount . . . . . . . . . . . . . . . . . . . 23,678 22,619 15,936 Net change in income taxes . . . . . . . . . . . . . . . . . 20,942 (12,656) (17,964) Purchases of reserves-in-place . . . . . . . . . . . . . . . 11,219 3,820 15,734 Sales of reserves-in-place . . . . . . . . . . . . . . . . . (62) (652) (57) Timing and other . . . . . . . . . . . . . . . . . . . . . . 2,013 508 (7,433) Standardized Measure - End of year . . . . . . . . . . . . . $124,623 $178,757 $173,644
NOTE 12 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended ------------------------------------------------------- Dec. 31, March 31, June 30, Sept. 30, 1993 1994 1994 1994 -------- --------- --------- -------- (in thousands, except per share amounts) Revenues . . . . . . . . . . . . . . . . . . . . . . . $82,186 $87,883 $78,698 $80,234 Gross profit . . . . . . . . . . . . . . . . . . . . . 14,149 12,701 8,688 4,054 Income before cumulative effect of change in accouting principle . . . . . . . . . . . . . . . 7,253 6,155 4,660 2,903 Net income . . . . . . . . . . . . . . . . . . . . . 11,253 6,155 4,660 2,903 Earnings per common share before cumulative effect of change in accounting principle . . . . . . .30 .25 .19 .12 Earnings per share . . . . . . . . . . . . . . . . . . .46 .25 .19 .12
Quarter Ended ------------------------------------------------------- Dec. 31, March 31, June 30, Sept. 30, 1992 1993 1993 1993 -------- ---------- -------- -------- (in thousands, except per share amounts) Revenues . . . . . . . . . . . . . . . . . . . . . . . $82,998 $83,351 $73,607 $75,141 Gross profit . . . . . . . . . . . . . . . . . . . . . 14,843 14,681 10,525 10,927 Net income . . . . . . . . . . . . . . . . . . . . . . 7,219 7,268 4,931 5,132 Earnings per share . . . . . . . . . . . . . . . . . . .30 .30 .20 .21
Gross profit represents total revenues less operating costs, depreciation, depletion and amortization, dry holes and abandonments, and taxes, other than income taxes. 30 31 Report of Independent Auditors HELMERICH & PAYNE, INC. The Board of Directors and Shareholders Helmerich & Payne, Inc. We have audited the accompanying consolidated balance sheet of Helmerich & Payne, Inc. as of September 30, 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The consolidated balance sheet as of September 30, 1993 and the consolidated statements of income, shareholder's equity, and cash flows for each of the two years in the period ended September 30, 1993, were audited by other auditors whose report dated November 16, 1993, expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1994 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Helmerich & Payne, Inc. at September 30, 1994, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Note 3 to the financial statements, effective October 1, 1993 the Company adopted Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes." ERNST & YOUNG LLP Tulsa, Oklahoma November 22, 1994
Stock Price Information Closing Market Price Per Share ----------------------------------------- 1994 1993 ------------------ -------------------- QUARTERS HIGH LOW HIGH LOW ------- -------- -------- -------- First . . . . . . . . . . . . . . . . $ 34 1/2 $ 26 1/2 $ 26 3/4 $22 1/4 Second . . . . . . . . . . . . . . . 30 26 22 3/8 Third . . . . . . . . . . . . . . . . 27 1/8 25 1/8 37 1/8 29 1/4 Fourth . . . . . . . . . . . . . . . 28 1/8 25 5/8 36 1/8 31 1/2
Dividend Information
Paid Per Share Total Payment ----------------- ------------------------- 1994 1993 1994 1993 ------- -------- ---------- ---------- QUARTERS First . . . . . . . . . . . . . . . . $.120 $.120 $2,956,498 $2,949,291 Second . . . . . . . . . . . . . . . . .120 .120 2,960,098 2,949,291 Third . . . . . . . . . . . . . . . . .120 .120 2,960,314 2,953,006 Fourth . . . . . . . . . . . . . . . . .125 .120 3,087,902 2,956,378
STOCKHOLDERS' MEETING The annual meeting of stockholders will be held on March 1, 1995. A formal notice of the meeting, together with a proxy statement and form of proxy, will be mailed to shareholders about January 26, 1995. STOCK EXCHANGE LISTING Helmerich & Payne, Inc. Common Stock is traded on the New York Stock Exchange with the ticker symbol "HP." The newspaper abbreviation most commonly used for financial reporting is "HelmP." Options on the Company's stock are also traded on the New York Stock Exchange. STOCK TRANSFER AGENT AND REGISTRAR Our Transfer Agent is responsible for our shareholder records, issuance of stock certificates, and distribution of our dividends and the IRSForm 1099. Your requests, as shareholders, concerning these matters are most efficiently answered by corresponding directly with The Liberty Bank of Oklahoma City at the following address: The Liberty National Bank and Trust Company of Oklahoma City Stock Transfer Department P.O. Box 25848 Oklahoma City, Oklahoma 73125-0848 Telephone: (405) 231-6325 FORM 10-K The Company's Annual Report on Form 10-K, which has been submitted to the Securities and Exchange Commission, is available free of charge upon written request. DIRECT INQUIRIES TO: President Helmerich & Payne, Inc. Utica at Twenty-First Tulsa, Oklahoma 74114 Telephone: (918) 742-5531 31 32 ELEVEN-YEAR FINANCIAL REVIEW HELMERICH & PAYNE, INC.
Years Ended September 30, 1994 1993 1992 1991 1990 1989 ------------------------- ---- ---- ---- ---- ---- ---- REVENUES AND INCOME* Contract Drilling Revenues . . . . . . . . . . 182,781 149,661 112,833 105,364 90,974 78,315 Crude Oil Sales . . . . . . . . . . . . . . . . 13,161 15,392 16,369 17,374 16,058 14,821 Natural Gas Sales . . . . . . . . . . . . . . . 45,261 52,446 38,370 35,628 37,697 33,013 Gas Marketing Revenues** . . . . . . . . . . . 51,874 63,786 40,410 10,055 10,566 -- Chemical Sales . . . . . . . . . . . . . . . . 18,746 14,286 13,411 12,674 12,067 10,754 Real Estate Revenues . . . . . . . . . . . . . 7,396 7,620 7,541 7,542 7,636 7,778 Dividend Income . . . . . . . . . . . . . . . . 3,621 3,535 4,050 5,285 7,402 9,127 Other Revenues . . . . . . . . . . . . . . . . 6,161 8,371 6,716 20,024 56,144 17,361 Total Revenues . . . . . . . . . . . . . . . . 329,001 315,097 239,700 213,946 238,544 171,169 Net Cash Provided by Operating Activities++ . . 79,909 74,619 63,331 52,110 55,422 67,099 Net Income+ . . . . . . . . . . . . . . . . . . 24,971 24,550 10,849 21,241 47,562 22,700 ------- ------- ------- ------- ------- ------- PER SHARE DATA Net Income+ . . . . . . . . . . . . . . . . . . 1.02 1.01 .45 .88 1.97 .94 Cash Dividends . . . . . . . . . . . . . . . . .485 .48 .465 .46 .44 .42 Shares Outstanding*** . . . . . . . . . . . . . 24,710 24,637 24,576 24,488 24,485 24,173 ------- ------- ------- ------- ------- ------- FINANCIAL POSITION Net Working Capital* . . . . . . . . . . . . . 76,238 104,085 82,800 108,212 146,741 114,357 Ratio of Current Assets to Current Liabilities 2.63 3.24 3.31 4.19 3.72 3.12 Investments* . . . . . . . . . . . . . . . . . 87,414 84,945 87,780 96,471 99,574 130,443 Total Assets* . . . . . . . . . . . . . . . . . 624,827 610,935 585,504 575,168 582,927 591,229 Long-Term Debt* . . . . . . . . . . . . . . . . -- 3,600 8,339 5,693 5,648 49,087 Shareholders' Equity* . . . . . . . . . . . . . 524,334 508,927 493,286 491,133 479,485 443,396 ------- ------- ------- ------- ------- ------- CAPITAL EXPENDITURES* Contract Drilling Equipment . . . . . . . . . . 53,752 24,101 43,049 56,297 18,303 17,901 Wells and Equipment . . . . . . . . . . . . . . 40,916 23,142 21,617 34,741 16,489 30,673 Chemical Plant and Equipment . . . . . . . . . 572 540 104 2,478 1,089 745 Real Estate . . . . . . . . . . . . . . . . . . 902 436 690 2,104 1,467 878 Other Assets (includes undeveloped leases) . . 9,741 5,990 17,038 6,909 5,512 6,787 Total Capital Outlays . . . . . . . . . . . . . 105,883 54,209 82,498 102,529 42,860 56,984 ------- ------- ------- ------- ------- ------- PROPERTY, PLANT AND EQUIPMENT AT COST* Contract Drilling Equipment . . . . . . . . . . 444,432 418,004 404,155 370,494 324,293 323,313 Producing Properties . . . . . . . . . . . . . 377,371 340,176 329,264 312,438 287,248 279,768 Undeveloped Leases . . . . . . . . . . . . . . 11,729 10,010 12,973 5,552 5,507 5,441 Chemical Plant and Equipment . . . . . . . . . 12,417 11,845 11,305 11,202 8,723 7,635 Real Estate . . . . . . . . . . . . . . . . . . 47,827 47,502 47,286 46,671 44,928 48,016 Other . . . . . . . . . . . . . . . . . . . . . 49,326 45,785 43,810 37,059 32,682 30,237 Total Property, Plant and Equipment . . . . . . 943,102 873,322 848,793 783,416 703,381 694,410 ------- ------- ------- ------- ------- -------
Years Ended September 30, 1988 1987 1986 1985 1984 ------------------------- ---- ---- ---- ---- ---- REVENUES AND INCOME* Contract Drilling Revenues . . . . . . . . . . 75,985 64,718 68,220 90,647 91,970 Crude Oil Sales . . . . . . . . . . . . . . . . 14,001 15,223 20,020 32,447 31,367 Natural Gas Sales . . . . . . . . . . . . . . . 26,154 17,251 21,308 28,335 32,780 Gas Marketing Revenues** . . . . . . . . . . . -- -- -- -- -- Chemical Sales . . . . . . . . . . . . . . . . 11,265 9,603 8,471 8,778 8,473 Real Estate Revenues . . . . . . . . . . . . . 7,878 7,561 6,839 5,658 5,282 Dividend Income . . . . . . . . . . . . . . . . 10,069 9,757 11,033 10,878 11,008 Other Revenues . . . . . . . . . . . . . . . . 15,213 34,766 29,244 18,054 10,727 Total Revenues . . . . . . . . . . . . . . . . 160,565 158,879 165,135 194,797 191,607 Net Cash Provided by Operating Activities++ . . 57,967 38,337 54,756 72,552 66,927 Net Income+ . . . . . . . . . . . . . . . . . . 20,150 22,016 7,025 18,498 21,439 ------- ------- ------- ------- ------- PER SHARE DATA Net Income+ . . . . . . . . . . . . . . . . . . .83 .91 .28 .74 .85 Cash Dividends . . . . . . . . . . . . . . . . .40 .38 .36 .35 .34 Shares Outstanding*** . . . . . . . . . . . . . 24,166 24,187 24,187 25,146 25,146 ------- ------- ------- ------- ------- FINANCIAL POSITION Net Working Capital* . . . . . . . . . . . . . 135,275 135,139 108,331 118,340 84,880 Ratio of Current Assets to Current Liabilities 6.10 6.68 5.61 4.58 3.27 Investments* . . . . . . . . . . . . . . . . . 133,726 140,431 158,311 163,045 182,174 Total Assets* . . . . . . . . . . . . . . . . . 576,473 571,348 563,236 616,034 610,011 Long-Term Debt* . . . . . . . . . . . . . . . . 70,715 74,732 79,340 85,532 87,114 Shareholders' Equity* . . . . . . . . . . . . . 430,804 420,833 408,185 427,860 418,163 ------- ------- ------- ------- ------- CAPITAL EXPENDITURES* Contract Drilling Equipment . . . . . . . . . . 19,110 13,993 23,673 27,777 8,682 Wells and Equipment . . . . . . . . . . . . . . 25,936 27,402 11,767 9,527 41,657 Chemical Plant and Equipment . . . . . . . . . 688 307 232 175 108 Real Estate . . . . . . . . . . . . . . . . . . 3,095 6,128 1,409 9,782 1,190 Other Assets (includes undeveloped leases) . . 2,623 2,041 2,075 5,397 4,969 Total Capital Outlays . . . . . . . . . . . . . 51,452 49,871 39,156 52,658 56,606 ------- ------- ------- ------- ------- PROPERTY, PLANT AND EQUIPMENT AT COST* Contract Drilling Equipment . . . . . . . . . . 313,289 309,865 307,199 287,641 264,801 Producing Properties . . . . . . . . . . . . . 251,445 228,214 215,488 218,102 212,475 Undeveloped Leases . . . . . . . . . . . . . . 3,305 4,197 7,294 10,403 15,477 Chemical Plant and Equipment . . . . . . . . . 6,889 6,201 5,894 5,662 5,507 Real Estate . . . . . . . . . . . . . . . . . . 47,165 44,070 38,131 36,538 26,930 Other . . . . . . . . . . . . . . . . . . . . . 28,279 28,675 28,846 28,345 28,378 Total Property, Plant and Equipment . . . . . . 650,372 621,222 602,852 586,691 553,568 ------- ------- ------- ------- -------
* Thousand of dollars ** Gas Marketing activities began in 1990 *** 000's omitted ++ Funds generated by operations for 1984-1985 + Includes cumulative effect of change in accounting for income taxes of $4,000,000 ($.16 per share) for 1994 32 33 ELEVEN-YEAR OPERATING REVIEW HELMERICH & PAYNE, INC.
Years Ended September 30, 1994 1993 1992 1991 1990 1989 ------------------------- ---- ---- ---- ---- ---- ---- CONTRACT DRILLING Drilling Rigs, United States . . . . . . . . . 47 42 39 46 49 49 Drilling Rigs, International . . . . . . . . . 29 29 30 25 20 20 Contract Wells Drilled, United States . . . . . 162 128 100 106 119 108 Total Footage Drilled, United States* . . . . . 1,842 1,504 1,085 1,301 1,316 1,350 Average Depth per Well, United States . . . . . 11,367 11,746 10,853 12,274 11,059 12,500 Percentage Rig Utilization, United States . . . 69 53 42 47 50 44 Percentage Rig Utilization, International . . . 88 68 69 45 46 30 ------ ------ ------ ------ ------ ------ PETROLEUM EXPLORATION AND DEVELOPMENT Gross Wells Completed . . . . . . . . . . . . . 44 42 54 45 36 45 Net Wells Completed . . . . . . . . . . . . . . 15 15.9 17.8 20.2 15.3 15.2 Net Dry Holes . . . . . . . . . . . . . . . . . 1.7 4.3 4.3 4.3 3.4 2.8 ------ ------ ------ ------ ------ ------ PETROLEUM PRODUCTION Net Crude Oil and Natural Gas Liquids Produced (barrels daily) . . . . . . . . . . 2,431 2,399 2,334 2,152 2,265 2,486 Net Oil Wells Owned -- Primary Recovery . . . . 202 202 220 227 223 201 Net Oil Wells Owned -- Secondary Recovery . . . 71 71 74 55 46 214 Secondary Oil Recovery Projects . . . . . . . . 14 14 14 12 12 17 Net Natural Gas Produced (thousands of cubic feet daily) . . . . . . . 72,953 78,023 75,470 66,617 65,147 57,490 Net Gas Wells Owned . . . . . . . . . . . . . . 341 307 289 278 194 205 ------ ------ ------ ------ ------ ------ NATURAL GAS ODORANTS AND OTHER CHEMICALS Chemicals Sold (pounds)* . . . . . . . . . . . 8,071 7,930 8,452 8,155 8,255 7,702 ------ ------ ------ ------ ------ ------ REAL ESTATE MANAGEMENT Gross Leasable Area (square feet)* . . . . . . 1,652 1,656 1,656 1,664 1,664 1,669 Percentage Occupancy . . . . . . . . . . . . . 83 86 87 86 85 90 ------ ------ ------ ------ ------ ------ TOTAL NUMBER OF EMPLOYEES Helmerich & Payne, Inc. and Subsidiaries+ . . . 2,787 2,389 1,928 1,758 1,864 1,100 ------ ------ ------ ------ ------ ------
Years Ended September 30, 1988 1987 1986 1985 1984 ------------------------- ---- ---- ---- ---- ---- CONTRACT DRILLING Drilling Rigs, United States . . . . . . . . . 48 50 48 47 44 Drilling Rigs, International . . . . . . . . . 18 19 19 19 19 Contract Wells Drilled, United States . . . . . 115 110 110 111 132 Total Footage Drilled, United States* . . . . . 1,284 1,182 1,384 1,477 1,529 Average Depth per Well, United States . . . . . 11,165 10,745 12,582 13,306 11,583 Percentage Rig Utilization, United States . . . 45 39 44 65 60 Percentage Rig Utilization, International . . . 16 30 47 41 ------ ------ ------ ------ ------ PETROLEUM EXPLORATION AND DEVELOPMENT Gross Wells Completed . . . . . . . . . . . . . 45 18 27 42 41 Net Wells Completed . . . . . . . . . . . . . . 14.6 5.2 10.3 19.5 17.1 Net Dry Holes . . . . . . . . . . . . . . . . . 1.6 .5 3.6 9.7 8.0 ------ ------ ------ ------ ------ PETROLEUM PRODUCTION Net Crude Oil and Natural Gas Liquids Produced (barrels daily) . . . . . . . . . . 2,463 2,578 3,077 3,388 3,033 Net Oil Wells Owned -- Primary Recovery . . . . 202 199 234 234 233 Net Oil Wells Owned -- Secondary Recovery . . . 222 237 235 259 126 Secondary Oil Recovery Projects . . . . . . . . 21 20 18 19 18 Net Natural Gas Produced (thousands of cubic feet daily) . . . . . . . 45,480 31,752 32,392 35,288 37,316 Net Gas Wells Owned . . . . . . . . . . . . . . 197 180 180 174 173 ------ ------ ------ ------ ------ NATURAL GAS ODORANTS AND OTHER CHEMICALS Chemicals Sold (pounds)* . . . . . . . . . . . 8,507 8,165 7,554 9,123 9,288 ------ ------ ------ ------ ------ REAL ESTATE MANAGEMENT Gross Leasable Area (square feet)* . . . . . . 1,670 1,595 1,433 1,333 1,238 Percentage Occupancy . . . . . . . . . . . . . 90 94 95 93 91 ------ ------ ------ ------ ------ TOTAL NUMBER OF EMPLOYEES Helmerich & Payne, Inc. and Subsidiaries+ . . . 1,156 1,026 844 1,126 1,242 ------ ------ ------ ------ ------
* 000's omitted. + 1984-1989 include U.S. employees only 33 34
DIRECTORS OFFICERS - --------- -------- W. H. HELMERICH, III W. H. HELMERICH, III Chairman of the Board, Chairman of the Board Tulsa, Oklahoma HANS HELMERICH HANS HELMERICH President and Chief Executive Officer, President and Chief Executive Officer Tulsa, Oklahoma WILLIAM L. ARMSTRONG ALLEN S. BRAUMILLER Chairman, Ambassador Media Corporation, Vice President, Denver, Colorado Exploration GLENN A. COX* GEORGE S. DOTSON President and Chief Operating Officer, Retired, Vice President, Phillips Petroleum Co., President of Helmerich & Payne Bartlesville, Oklahoma International Drilling Co. GEORGE S. DOTSON DOUGLAS E. FEARS Vice President, Vice President, President of Helmerich & Payne Finance International Drilling Co., Tulsa, Oklahoma STEVEN R. MACKEY Vice President, Secretary, C. W. FLINT, JR.* and General Counsel Chairman, Flint Industries, Inc., JAMES L. PAYNE Tulsa, Oklahoma Vice President, Real Estate GEORGE A. SCHAEFER Chairman and Chief Executive Officer, Retired, STEVEN R. SHAW Caterpillar Inc., Vice President, Peoria, Illinois Production HARRY W. TODD Chairman, CEO, and President, Retired, Rohr Industries, Inc., Chula Vista, California JOHN D. ZEGLIS Senior Vice President and General Counsel, American Telephone & Telegraph Co., Basking Ridge, New Jersey
*Member, Audit Committee 34 EX-22 3 SUBSIDIARIES OF REGISTRANT 1 Exhibit 22 SUBSIDIARIES OF THE REGISTRANT Helmerich & Payne, Inc. Subsidiaries of Helmerich & Payne, Inc. Helmerich & Payne Properties, Inc. (Incorporated in Oklahoma) Utica Square Shopping Center, Inc. (Incorporated in Oklahoma) The Hardware Store of Utica Square, Inc. (Incorporated in Oklahoma) The Tearoom in Utica Square, Inc. (Incorporated in Oklahoma), doing business as The Garden Restaurant The Space Center, Inc. (Incorporated in Oklahoma) H&P DISC, Inc. (Incorporated in Oklahoma) Helmerich & Payne Coal Co. (Incorporated in Oklahoma) Natural Gas Odorizing, Inc. (Incorporated in Oklahoma) Helmerich & Payne Energy Services, Inc. (Incorporated in Oklahoma) Helmerich & Payne International Drilling Co. (Incorporated in Delaware) Subsidiaries of Helmerich & Payne International Drilling Co. Helmerich & Payne (Africa) Drilling Co. (Incorporated in Cayman Islands, British West Indies) Helmerich & Payne (Colombia) Drilling Co. (Incorporated in Oklahoma) Helmerich & Payne (Gabon) Drilling Co. (Incorporated in Cayman Islands, British West Indies) Helmerich & Payne (Guatemala) Drilling Co. (Incorporated in Oklahoma) Helmerich & Payne (Peru) Drilling Co. (Incorporated in Oklahoma) Helmerich & Payne (Australia) Drilling Co. (Incorporated in Oklahoma) Helmerich & Payne del Ecuador, Inc. (Incorporated in Oklahoma) Helmerich & Payne de Venezuela, C.A. (Incorporated in Venezuela) Helmerich & Payne, C.A. (Incorporated in Venezuela) Helmerich & Payne Rasco, Inc. (Incorporated in Oklahoma) H&P Finco (Incorporated in Cayman Islands, British West Indies) H&P Invest Ltd. (Incorporated in Cayman Islands), British West Indies, doing business as H&P (Yemen) Drilling Co. Subsidiary of H&P Invest Ltd. Turrum Pty. Ltd. (Incorporated in Papua, New Guinea) EX-23.1 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated November 16, 1993, included in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 33-16771 and 33-55239 on Forms S-8. ARTHUR ANDERSEN LLP Tulsa, Oklahoma December 21, 1994 EX-23.2 5 CONSENT OF INDEPENDENT AUDITORS 1 Exhibit 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Helmerich & Payne, Inc. of our report dated November 22, 1994, included in the 1994 Annual Report to Shareholders of Helmerich & Payne, Inc. Our audit also included the 1994 financial statement schedules of Helmerich & Payne, Inc. listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Forms S-8 Nos. 33-16771 and 33-55239) pertaining respectively to the Helmerich & Payne, Inc. Incentive Stock Option Plan and 1990 Stock Option Plan of our report dated November 22, 1994, with respect to the consolidated financial statements for 1994 incorporated herein by reference, and our report included in the preceding paragraph with respect to the 1994 financial statement schedules included in this Annual Report (Form 10-K) of Helmerich & Payne, Inc. ERNST & YOUNG LLP Tulsa, Oklahoma December 21, 1994 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 YEAR SEP-30-1994 OCT-01-1993 SEP-30-1994 29,447 87,414 61,377 1,480 20,995 122,939 943,102 542,451 624,827 46,701 0 2,677 0 0 521,657 624,827 322,698 329,001 288,581 288,581 8,908 828 385 30,299 10,232 20,971 0 0 4,000 24,971 1.02 1.02
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