-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KforbtTqMUHja5cpN/pRsMgTwKnxyKUnrGEvmrIw5DS5UKmnkJFjD7bGP0ptmb0P 5ZzomAeKBlyHJkXVe2mAhg== 0000950134-95-003420.txt : 19951226 0000950134-95-003420.hdr.sgml : 19951226 ACCESSION NUMBER: 0000950134-95-003420 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951222 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: 95603818 BUSINESS ADDRESS: STREET 1: UTICA AT 21ST ST CITY: TULSA STATE: OK ZIP: 74114 BUSINESS PHONE: 9187425531 MAIL ADDRESS: STREET 1: 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, 1995 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, 74114 TULSA, OKLAHOMA (Zip code) (Address of principal executive offices) 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. [ ] At December 15, 1995, the aggregate market value of the voting stock held by non-affiliates was $674,214,412. Number of shares of common stock outstanding at December 15, 1995: 24,764,620. DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report to Shareholders for the fiscal year ended September 30, 1995 -- Parts I, II, and IV. (2) Proxy Statement for Annual Meeting of Security Holders to be held March 6, 1996 -- Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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, 1995 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. Each of the divisions, except exploration and production, conduct their respective business through wholly owned subsidiaries. Operating decentralization is balanced by a centralized finance division, which 3 handles all accounting, data processing, budgeting, insurance, cash management, and related activities. Most of the Registrant's current exploration effort is concentrated in Louisiana, Oklahoma, Texas, 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. Substantially all of 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 1995 in six international locations: Venezuela, Ecuador, Colombia, Trinidad and Tobago, Yemen, and Bolivia. 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 principally in North and South America, 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 I-2 4 in deep drilling. The Registrant also drills for its own oil and gas division. In South America, the Registrant's current customers include the Venezuelan state petroleum companies and major international oil companies. British Petroleum Company, P.L.C., including its affiliates, ("BP") is the Registrant's largest single customer. The Registrant performs drilling services for BP, both domestically and internationally. Each drilling rig operates under a separate contract. The Registrant believes that its relationship with BP is good. Revenues from drilling services performed for BP in fiscal 1995 accounted for approximately 18% of the Registrant's consolidated revenues for the same period. 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 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 producing wells. I-3 5 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 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. I-4 6 "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 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 government owned petroleum companies are requesting that a greater proportion of these payments be made in local currencies. See Regulations and Hazards, page I-8. Domestic Drilling The Registrant believes it is a major land and offshore platform drilling contractor in the domestic market. At the end of September, 1995, the Registrant had 31 of a total of 41 available rigs operating 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-three of its existing rigs are capable of drilling to depths in excess of 20,000 feet. I-5 7 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 one of the leading drilling contractors 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 the Registrant's operations. The Registrant presently owns and operates 18 drilling rigs in Venezuela and has labor contracts to operate two government-owned drilling rigs in Venezuela. The Registrant had a utilization rate of 89% for these rigs during fiscal 1995. The Registrant worked for all three government owned producing companies in Venezuela (Corpoven, Maraven and Lagoven) during the fiscal year ended September 30, 1995. Collectively, revenues from the three producing companies amounted to approximately 13% of the Registrant's consolidated revenues during fiscal 1995. 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's operations in Colombia continue to increase. The Registrant presently owns and operates ten drilling rigs in Colombia. The Registrant's utilization rate for such rigs was 87% during fiscal 1995. During fiscal 1995 the revenue generated by Colombian drilling operations contributed approximately 16.6% of the Registrant's consolidated revenues. I-6 8 In addition to its operations in Venezuela and Colombia, the Registrant in fiscal 1995 owned and operated four rigs in Ecuador, one rig in Trinidad and Tobago, one rig in Bolivia, and one rig in Yemen. During 1995, the rig located in Yemen was moved to Bolivia. In Ecuador, Trinidad and Tobago, and Bolivia, the contracts are with large international oil companies. In August of 1994, a newly formed venture owned 50% by the Registrant and 50% by its affiliate, Atwood Oceanics, Inc., was awarded a term contract in Australia for the design, construction and operation of a new generation platform rig. The rig, which incorporates some of the latest technology in instrumentation and remote control mechanization of drilling equipment, was recently completed. While the platform operator has postponed commencement of mobilization to Australia until March of 1997, the operator will pay the venture a holding rate during the postponement. The Registrant was recently awarded a three-year term contract to provide platform drilling services for a major oil company in the Gulf of Mexico. The Registrant should complete construction in December of 1995 of a new generation rig for installation upon a tension leg platform. The tension leg platform concept allows platform drilling operations to be conducted at significantly greater water depths. Drilling operations are expected to commence in the spring of 1996. The same major oil company entered into a letter of intent for the Registrant's construction of a second rig which is to be installed on a tension leg platform in approximately 3,200 feet of water in the Gulf of Mexico. A three-year term drilling contract for the second rig is currently being finalized with rig construction scheduled to be completed and the contract to commence in December, 1996. I-7 9 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. Although many contracts for drilling services are awarded based solely on price, the Registrant has been successful in establishing long-term relationships with certain customers which have allowed the Registrant to secure drilling work even though the Registrant may not have been the lowest bidder for such work. The Registrant has continued to attempt to differentiate its services based upon its engineering design expertise, operational efficiency, and safety and environmental awareness. 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. 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. I-8 10 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 1996. However, in view of conditions generally in the liability insurance industry, no assurance can be given that the Registrant's present coverage will not be cancelled during fiscal 1996 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 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 I-9 11 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. During fiscal 1995, approximately 33% of the Registrant's consolidated revenues were generated from international contract drilling operations. Over 90% of the international revenues were from Venezuela, Colombia, and Ecuador. Exposure to potential losses from currency devaluation is minimal in the countries of Colombia and Ecuador. In those countries, all receivables and payments are currently in U.S. dollars. Cash balances are kept at a minimum which assists in reducing exposure. In Venezuela, approximately 65% of the Registrant's revenues are in U.S. dollars and the other 35% are in the local currency, the Bolivar. The Registrant is exposed to certain risks of currency devaluation in Venezuela as a result of Bolivar receivable balances and necessary Bolivar cash balances. In 1994, the Venezuelan government established a fixed exchange rate in hopes of stemming economic problems caused by a high rate of inflation. During the first week of December, 1995, the government established a new exchange rate, resulting in further devaluation of the Bolivar. It is estimated that the Registrant will not experience a material loss, if any, from such devaluation. I-10 12 It is uncertain when the government will again adjust the exchange rate, but the Registrant does not expect losses from future adjustments in the exchange rate to be material. The Registrant has been able to offset some of the devaluation exposure through a government approved mechanism which allows the purchase of local currency at favorable market exchange rates. Many aspects of the Registrant's operations 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, 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. I-11 13 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 Oklahoma, Kansas, Texas, and Louisiana. The Registrant also explores from time to time in New Mexico, Alabama, Florida, Michigan, Mississippi, and the Rocky Mountain area. A reorganization of the Registrant's exploration and production division was accomplished in September, 1995. This action resulted in the consolidation or elimination of several management positions, the elimination of several consulting geologists, and the formation of several geographical exploitation teams. These teams are comprised of geological, engineering, and land personnel who will primarily develop in-house oil and gas prospects as well as review a limited number of outside prospects and acquisitions for their respective geographical areas. The Registrant believes that this structure will allow each team to gain greater expertise in its respective geographical area and will encourage the development of successful prospects. Most of the current exploration and production employees were retained in the reorganized division. The Registrant expects that the total number of employees within the division during fiscal 1996 will remain approximately the I-12 14 same. The reorganized division will be managed by the Registrant's Vice President of Production. During the past fiscal year, the Registrant has continued to reduce its expenditures for exploration of fractured Austin Chalk reservoirs in central Louisiana and has elected to allow certain oil and gas leases covering approximately 52,663 net acres to expire. The Registrant's present efforts are concentrated in the western portion of its acreage located primarily in Vernon and Rapides Parishes, Louisiana. During 1994, OXY USA drilled an Austin Chalk well, adjacent to a substantial acreage position of the Registrant. A second well offsetting the original well has been commenced. The Registrant did not participate as a working interest owner in either of these wells, but retained an overriding royalty interest. In addition, the Registrant reached an agreement with another exploration and production company whereby the Registrant will reduce its interest in certain of its acreage in return for payment of all of the Registrant's share of drilling and completion costs in a minimum of two (2) Austin Chalk wells. The first well has been drilled and is presently being tested. The Registrant will monitor production from these wells to assist in the determination of the amount of its participation, if any, in 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 1995, the Registrant participated in 46 development and/or wildcat wells, which resulted in new discoveries of approximately 8.8 bcf of gas and 328,539 barrels of oil and condensate. The Registrant participated in 13 additional development wells, which resulted in I-13 15 the development of approximately 3.0 bcf of gas and 4,404 barrels of oil and condensate which was previously classified as proved undeveloped or proved developed nonproducing reserves. A total of $23,199,430 was spent in the Registrant's exploration and development program during fiscal 1995. This figure is exclusive of expenditures for acreage and acquisitions of proved oil and gas reserves. The Registrant's total company-wide acquisition cost for acreage in fiscal 1995 was $1,564,986. The Registrant spent $1,228,071 for the acquisition of proved oil and gas reserves during fiscal 1995. Reserves from such acquisitions totaled approximately 1.9 bcf of natural gas and 310 barrels of crude oil and condensate. In addition, the Registrant sold 47 properties for $325,126. The reserves associated with these sales were approximately 116,000 mcf of natural gas and 26,251 barrels of crude oil. 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. 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. Although the I-14 16 market for natural gas has been in a state of over-supply for the past several years, the Registrant is of the opinion that the 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 development of large quantities of liquefied natural gas in Trinidad and Tobago and Africa 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. 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 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 I-15 17 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 larger than those of the Registrant. In addition, many of the Registrant's competitors purchase reserves based upon price forecasts and reserve evaluations, which the Registrant believes are substantially higher than the Registrant's price forecasts and reserve evaluations. 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's fiscal 1996 exploration and production budget of approximately $28,000,000 is 29.4% greater than its actual exploration and production expenditures in fiscal 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 I-16 18 incident to operating agreements, liens for current taxes, and other burdens and minor encumbrances, easements, and restrictions. The 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-17 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 has provided the Registrant with additional market access and more fairly applied transportation service rates, it has also subjected 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 whether I-18 20 or not Order 636 is upheld. Assuming that Order 636 is upheld in its entirety, the Registrant believes that it will benefit from the provisions of such Order. The FERC has recently announced its intention to re-examine certain of its transportation-related policies, including the manner in which interstate pipelines release transportation capacity under Order 636 and the use of market-based rates for interstate gas transportation. While any resulting FERC action would affect the Registrant only indirectly, these inquiries are intended to further enhance competition in the natural gas markets. In addition, the FERC issued a policy statement on how interstate natural gas pipelines can recover the cost of new pipeline facilities. While this policy statement in its present form affects the Registrant only indirectly, the new policy should enhance competition in natural gas markets and facilitate construction of gas supply laterals. However, requests for rehearing of this policy statement are currently pending. The Registrant cannot predict what action the FERC will take on these requests. However, the Registrant believes any such action will not have a material impact on the Registrant. 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 I-19 21 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. Several of the FERC's orders delineating its new gathering policy are subject to pending court appeals. It is not possible at this time to predict the ultimate effect of the new policy, although it could affect access to and rates charged for interstate gathering services. However, the Registrant does not presently believe the status of its facilities would be affected by modification to the 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, various federal legislative proposals addressing pipeline safety issues are currently pending, including a federal "one call" notification system and certain new construction specifications. Similar or additional legislation is likely to be proposed in the near future. The Registrant believes that the adoption of additional pipeline safety legislation will not materially affect the 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 I-20 22 assigned a larger allowable than those units without infill wells. Such order was affirmed by a Kansas district court in September of 1994. An appeal of the KCC's order is presently pending. As a consequence of this order, the Registrant has drilled 47 infill wells and believes that it will be necessary in the near future to drill an additional 65 to 70 wells with the total costs to the Registrant ranging from $6.5 to $7 million. Several of these wells will be drilled to a depth of 5,500 feet in search of additional reserve-bearing formations. 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. 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. I-21 23 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 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 has 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 seventh 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 1995, HPESI's sales of third-party gas constituted approximately 10.6% of the Registrant's consolidated revenues. HPESI sells natural gas to markets in the Midwest and Rocky Mountain areas. Term gas sales contracts are for varied periods ranging from four months to seven years. However, recent contracts have tended toward shorter terms. I-22 24 The remainder of the Registrant's gas is sold under spot market contracts having a duration of 30 days or less. For fiscal 1996, HPESI's term gas sales contracts provide for the sale of approximately 13 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-party gas. See pages I-14 through I-23 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 sells odorants for liquefied petroleum gases and is one of only three companies which sells odorants for natural gas within the United States. The Registrant believes that its market share approximates 40% to 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 I-23 25 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 compliance with the same will not have any material effect upon the capital expenditures, earnings or competitive position of the Registrant. During the fourth quarter of fiscal 1995, the Registrant retained an investment banking firm for the purpose of advising the Registrant regarding the potential sale of its chemical operations. The Registrant has authorized such firm to solicit indications of interest in the Registrant's chemical operations from certain prospective purchasers. REAL ESTATE OPERATIONS The Registrant's real estate operations are conducted exclusively within the metropolitan 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 (98% of which is currently leased) and approximately 18,590 square feet of net leasable general office space (99% 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 (78% 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. I-24 26 At the end of the 1995 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. Eleven of the 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 executive offices. Approximately 11% of this building was leased to third parties during fiscal 1995. 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 90%. 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 has reached 100% primarily due to the expansion of several existing tenants. Preliminary planning has been accomplished to determine the best development uses for the I-25 27 remaining land. A high quality office park, with peripheral commercial, office/warehouse, and hotel sites, has been contemplated. 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. Occupancy has increased from 47% during fiscal 1995 to 68% currently due primarily to the addition of one new tenant. The Registrant also owns a twelve-building complex, 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 has increased to 94% due to expansion of existing tenants and additions of new tenants during fiscal 1995. 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 1995 occupancy increased from 50% to 65% primarily due to one tenant's expansion. The second, called Maxim Place, consists of one office/warehouse building containing approximately 33,750 square feet and located on approximately 2.25 acres. During fiscal 1995, occupancy increased from 63% to 81% by the addition of one new tenant and the expansion of one existing tenant. I-26 28 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 1995, which is incorporated herein by reference. EMPLOYEES The Registrant had 1,716 employees within the United States (11 of which were part-time employees) and 1,529 employees in international operations as of September 30, 1995. Item 2. PROPERTIES CONTRACT DRILLING The following table sets forth certain information concerning the Registrant's existing domestic drilling rigs: I-27 29
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location - ----------- -------------- --------------- -------- 110 Medium Depth 12,000 Texas 141 Medium Depth 14,000 Texas 142 Medium Depth 14,000 Texas 143 Medium Depth 14,000 Texas 145 Medium Depth 14,000 Texas 146 Medium Depth 14,000 Texas 156 Medium Depth 14,000 Texas 157 Medium Depth 14,000 Texas 95 Medium Depth 16,000 Texas 96 Medium Depth 16,000 Oklahoma 118 Medium Depth 16,000 Texas 119 Medium Depth 16,000 Texas 120 Medium Depth 16,000 Texas 147 Medium Depth 16,000 Texas 154 Medium Depth 16,000 Texas 78 Deep 20,000 Texas 79 Deep 20,000 Louisiana 80 Deep 20,000 Oklahoma 89 Deep 20,000 Alabama 92 Deep 20,000 Oklahoma 94 Deep 20,000 Texas 98 Deep 20,000 Oklahoma 122 Deep 26,000 Louisiana 97 Deep 26,000 Texas 99 Deep 26,000 Texas 137 Deep 26,000 Texas 149 Deep 26,000 Texas 72 Very Deep 30,000 Louisiana 73 Very Deep 30,000 Louisiana 127 Very Deep 30,000 Oklahoma 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 102 Deep 20,000 * Offshore California 103 Deep 20,000 * Offshore California 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 107 Deep 26,000 * Gulf of Mexico
* Offshore platform rig I-28 30 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, ------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- Number of rigs owned at end of period 46 39 42 47 41 Average rig utilization rate during period (1) 47% 42% 53% 69% 71%
(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 140 Medium Depth 10,000 Venezuela 158 Medium Depth 10,000 Venezuela 159 Medium Depth 12,000 Venezuela 132 Medium Depth 16,000 Ecuador 12 Deep (helicopter rig) 18,000 Ecuador 22 Deep (helicopter rig) 18,000 Bolivia 23 Deep (helicopter rig) 18,000 Ecuador 121 Deep 20,000 Colombia 45 Deep 26,000 Venezuela 82 Deep 26,000 Venezuela 83 Deep 26,000 Venezuela 117 Deep 26,000 Trinidad & Tobago 123 Deep 26,000 Bolivia 138 Deep 26,000 Ecuador 148 Deep 26,000 Venezuela 160 Deep 26,000 Venezuela 115 Very Deep 30,000 Venezuela 116 Very Deep 30,000 Venezuela 125 Very Deep 30,000 Colombia 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
I-29 31
Rig Registrant's Optimum Working Present Designation Classification Depth in Feet Location ----------- -------------- --------------- -------- 135 Very Deep 30,000 Colombia 136 Very Deep 30,000 Colombia 150 Very Deep 30,000 Venezuela 151 Very Deep 30,000 Colombia 152 Super Deep 30,000+ Colombia 153 Super Deep 30,000+ Colombia 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, ------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- Number of rigs owned at end of period 25 30 29 29 35 Average rig utilization rate during period (1) 69% 69% 68% 88% 84%
(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 fiscal years 1993 through 1995 are shown below:
Average Sales Average Lifting Year Net Barrels Price per barrel Cost per Barrel ---- ----------- ---------------- --------------- 1993 875,713 $17.58 $8.63 1994 887,455 $14.83 $7.74 1995 808,058 $16.37 $7.86
I-30 32 Natural Gas Sales The Registrant's net sales of natural and casinghead gas for the three fiscal years 1993 through 1995 are as follows:
Average Sales Average Lifting Year Net Mcf Price per Mcf Cost per Mcf ---- ------- ------------- --------------- 1993 28,478,530 $1.84 $0.3460 1994 26,627,776 $1.72 $0.3760 1995 26,421,434 $1.27 $0.3640
Following is a summary of the net wells drilled by the Registrant for the fiscal years ended September 30, 1993, 1994, and 1995:
Exploratory Wells Development Wells ------------------ -------------------- 1993 1994 1995 1993 1994 1995 ---- ---- ---- ---- ---- ---- Productive 2.866 1.021 0.7 8.760 12.334 20.7695 Dry 1.393 1.436 2.596 2.858 0.233 3.2867
On September 30, 1995, the Registrant was in the process of drilling or completing one gross or 0.1633 net wells. Acreage Holdings The Registrant's holdings of acreage under oil and gas leases, as of September 30, 1995, were as follows: I-31 33
Developed Acreage Undeveloped Acreage -------------------- --------------------- Gross Net Gross Net ----- --- ----- --- Alabama 480.00 112.21 146.00 18.12 Arkansas 3,508.23 1,915.90 -0- -0- Colorado -0- -0- 1,000.00 260.28 Kansas 122,701.88 85,192.04 4,935.53 2,682.61 Louisiana 9,948.87 2,883.85 181,932.79 97,722.95 Mississippi 168.17 55.77 479.00 117.24 Montana 2,037.19 381.54 4,668.95 1,476.17 Nebraska 480.00 168.00 -0- -0- Nevada -0- -0- 38,825.87 30,147.71 New Mexico 960.00 54.86 161.88 38.85 North Dakota -0- -0- 4,777.15 575.51 Oklahoma 143,366.70 47,719.39 32,499.74 16,214.27 Texas 90,392.22 42,017.94 12,976.71 6,988.05 wyoming -0- -0- 5,826.02 1,381.07 ---------- ---------- ---------- ---------- Total 374,043.26 180,501.50 288,229.64 157,622.83
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, 1995, were as follows:
Oil Wells Gas Wells --------- --------- Gross Net Gross Net ----- --- ----- --- 3,348 250 834 354
Additional information required by this item with respect to the Registrant's oil and gas operations may be found on pages I-12 through I-23 of Item 1. BUSINESS, and pages 28 through 30 of the Registrant's Annual Report to Shareholders for fiscal 1995, "Notes to Consolidated Financial Statements" and "Note 12 Supplementary Financial Information for Oil and Gas Producing Activities." I-32 34 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 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-24 through I-26. STOCK At the end of fiscal 1995: The Registrant owned 466,451 shares of the common stock of Sun Company, Inc., and 329,053 shares of the Sun Company, Inc. preferred series "A". The Registrant owned 625,000 shares of Oryx Energy Company, 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. I-33 35 The Registrant owned 240,000 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 395,000 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 4%. The Registrant also owned lesser holdings in several other publicly traded corporations. Item 3. LEGAL PROCEEDINGS There are no material legal proceedings pending against the Registrant. 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. I-34 36 W. H. Helmerich, III, 72 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 Hans Helmerich, 37 Director since March 4, 1987; appointed President and 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, 61 Appointed Vice President, Exploration, in 1977 President George S. Dotson, 54 Director since March 7, 1990; appointed 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, 46 Appointed Vice President, Finance, on March Vice President 11, 1988, prior to which he was Internal Auditor from June 30, 1986 Steven R. Mackey, 44 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, 56 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, 44 Appointed Vice President, Production, on Vice President July 8, 1985 Gordon K. Helm, 42 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-35 37 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:
1994 1995 ---- ---- Quarter High Low High Low ------- ---- --- ---- --- First 34 1/2 26 1/2 31 1/4 25 5/8 Second 30 26 27 1/2 24 1/2 Third 27 1/8 25 1/8 31 26 5/8 Fourth 28 1/8 25 5/8 30 27 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 1994 1995 1994 1995 ------- ---- ---- ---- ---- First $0.120 $0.125 $2,956,498 $3,089,758 Second 0.120 0.125 2,960,098 3,087,958 Third 0.120 0.125 2,960,314 3,092,973 Fourth 0.125 0.125 3,087,902 3,094,813
The Registrant paid a cash dividend of $0.125 per share on December 1, 1995, to shareholders of record on November 15, 1995. Payment of future dividends will depend on earnings and other factors. As of December 15, 1995, there were 1,656 record holders of the Registrant's common stock as listed by the transfer agent's records. II - 1 38 Item 6. SELECTED FINANCIAL DATA
Five-year Summary of Selected Financial Data -------------------------------------------- 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- Sales, operating, and other revenues $213,946 $239,700 $315,097 $329,001 $325,776 Income from con- tinuing operations 21,241 10,849 24,550 20,971 9,751 Income from con- tinuing operations per common share 0.88 0.45 1.01 0.86 0.40 Total assets 575,168 585,504 610,935 624,827 710,165 Long-term debt 5,693 8,339 3,600 -0- -0- Cash dividends declared per common share 0.46 0.47 0.48 0.49 0.50
Registrant adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 121 during the fourth quarter of fiscal 1995 which resulted in an impairment charge of $20,000,000 to Registrant's oil and gas division and $2,000,000 to its real estate division. These non-cash, non-recurring charges reduced income from continuing operations for the quarter and fiscal year by 13.6 million dollars ($0.55 per share). 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 1995, which is incorporated herein by reference. II - 2 39 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 1995, 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 - 3 40 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information required under this item with respect to Directors and with respect to delinquent filers pursuant to Item 405 of Regulation S-K is incorporated by reference from the Registrant's definitive Proxy Statement for the Annual Meeting of Stockholders to be held March 6, 1996, to be filed with the Commission not later than 120 days after September 30, 1995. See pages I-34 through I-35 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 6, 1996, to be filed with the Commission not later than 120 days after September 30, 1995. 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 6, 1996, to be filed with the Commission not later than 120 days after September 30, 1995. 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 6, 1996, to be filed with the Commission not later than 120 days after September 30, 1995. III - 1 41 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 1995. 2. The Report of Independent Public Accountants on Financial Statements and Financial Statement Schedules for the fiscal year ended September 30, 1993, is filed as a part of this Form. 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. * 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.
IV-1 42 * 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 1995. 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 43 (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, 1995. IV-3 44 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993 To the Shareholders and Board of Directors of Helmerich & Payne, Inc.: We have audited the 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 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. 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. 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 the year then ended, 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 the year then ended, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tulsa, Oklahoma November 16, 1993 IV-4 45 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 18, 1995 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 18, 1995 Date: December 18, 1995 By George S. Dotson By C. W. Flint, Jr. -------------------------------- -------------------------------- George S. Dotson, Director C. W. Flint, Jr., Director Date: December 18, 1995 Date: December 18, 1995 By Hans Helmerich By W. H. Helmerich, III -------------------------------- -------------------------------- Hans Helmerich, Director and CEO W. H. Helmerich, III, Director Date: December 18, 1995 Date: December 18, 1995 By George A. Schaefer By H. W. Todd -------------------------------- -------------------------------- George A. Schaefer, Director H. W. Todd, Director Date: December 18, 1995 Date: December 18, 1995 By John D. Zeglis By Douglas E. Fears -------------------------------- -------------------------------- John D. Zeglis, Director Douglas E. Fears Date: December 18, 1995 (Principal Financial Officer) Date: December 18, 1995 By Gordon K. Helm -------------------------------- Gordon K. Helm, Controller (Principal Accounting Officer) Date: December 18, 1995 46 HELMERICH & PAYNE, INC. Index to Exhibits Not Incorporated by Reference
Exhibit No. Page - ----------- ---- 13. Annual Report to Shareholders for fiscal 1995 48 22. Subsidiaries of the Registrant 84 23.1 Consent of Independent Public Accountants 85 23.2 Consent of Independent Auditors (Ernst & Young LLP) 86 27 Finanical Data Schedule 87
EX-13 2 ANNUAL REPORT 1 EXHIBIT 13 ================================================================================ HELMERICH & PAYNE, INC. ANNUAL REPORT FOR 1995 ================================================================================
========================================================================================= HIGHLIGHTS ========================================================================================= Years Ended September 30, 1995 1994 ----------------------------------------------------------------------------------------- Revenues $ 325,776,000 $ 329,001,000 ----------------------------------------------------------------------------------------- Net Income $ 9,751,000 $ 24,971,000 ----------------------------------------------------------------------------------------- Earnings Per Share $ .40 $ 1.02 ----------------------------------------------------------------------------------------- Dividends Paid Per Share $ .50 $ .485 ----------------------------------------------------------------------------------------- Capital Expenditures $ 111,776,000 $ 105,883,000 ----------------------------------------------------------------------------------------- Total Assets $ 710,165,000 $ 624,827,000 -----------------------------------------------------------------------------------------
================================================================================ 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. In our fast paced lives, we easily forget to pause long enough to reflect on our significant milestones. The Company's celebration of its 75th year anniversary provided such an opportunity during 1995. The theme of that celebration is captured by Peter Drucker when he suggests that people are a Company's only strategic asset. From the first days of the partnership between my grandfather and Bill Payne, the Company has been built on the principle that success springs from the character and competency of its people. The acceleration of change in today's world and the challenge of generating growth and economic returns in a stagnate energy industry only act to underscore that our future will be measured by our ability to carry forward the successful combination of talent and integrity characteristic of the people that have served the Company during its first 75 years. On the first score, I am convinced we will continue to recruit and develop a team with superior skills and training. In fact, today we are stronger than ever and are building a roster loaded with talent as we face the opportunities ahead. But talent is not enough. It must be teamed together with the inner qualities of integrity and trustworthiness. This elusive quality of heart is more a matter of daily habit than a slogan or catch phrase. It is not scripted by company policy, but from deep inside, a kind of internal reflex of character. My grandfather was fond of saying that you must always hire good people and that life was just too short to do business with the wrong people. Over the years, our nation has produced a goodness, a strength of character in its people that has fueled the greatest economy and quality of life ever before in all of history. 2 3 Looking forward, does de Tocqueville's classic observation that America's greatness is secured from the wellspring of her basic goodness still hold true for our children? In his tour across America, Colin Powell lamented that our society had lost its sense of shame. Our young people are paying a terrible price. We lead the industrialized world in illegitimate births, abortions, teenage suicide, and violent crime while ranking at the bottom in our elementary and secondary school achievement scores. By its nature, the government cannot impart goodness, and displacing parental responsibility with political compassion is doomed to fail. We see our prisons and welfare rolls dominated by the fatherless. If a young person's core principles and goodness of heart are nurtured from early childhood, shaped and cultivated within families, then every business person and citizen has a stake in their success. Strong families drive our future. Scripture speaks of turning the hearts of the fathers to the children and an African proverb says the raising of a child is so important that it takes an entire village to do it. While the government can play a role by reforming welfare and reducing the crushing tax burden, only parents, families, relatives, pastors, troop leaders, coaches, and teachers can build and safeguard our nation's most strategic asset, our children. Sincerely, Hans Helmerich December 15, 1995 President 3 4 ================================================================================ DRILLING HELMERICH & PAYNE INTERNATIONAL DRILLING CO. ================================================================================ SUMMARY At the close of 1995, Helmerich & Payne International Drilling Co. owned 30 land rigs and 11 offshore platform rigs in the United States, and 35 land rigs in the countries of Venezuela (18), Colombia (10), Ecuador (4), Bolivia (2), and Trinidad (1). Financial results in 1995 improved considerably over 1994 with revenues and pre-tax operating profit increasing 11 and 38 percent, respectively. INTERNATIONAL OPERATIONS The Company has had operations in South America since the 1950's and today the region ranks among the most active contract drilling arenas in the world. A total of nine rigs were moved to South America in 1995, three of which were deployed to Colombia for the Cusiana/Cupiagua development operated by BP Exploration, and two rigs were moved to Bolivia for Exxon and Total. Four rigs were sent to Venezuela and one more was en route at the close of the fiscal year. For the first time in several decades, Venezuela is encouraging outside investment to develop its prolific oil and gas resources. This change in policy is expected to stimulate additional demand for drilling services in the future. DOMESTIC OPERATIONS Land rig utilization averaged 73 percent in 1995, compared with 66 percent the previous year. An average of five more rigs worked throughout the year than in 1994, primarily due to the Company's acquisition of ENSCO's domestic land drilling business in the third quarter of last year. Offshore platform activity declined in 1995, with Company-owned rigs averaging 66 percent utilization compared with 79 percent in 1994. Five rigs worked continually in the Gulf of Mexico and two rigs offshore California. The Company 4 5 also provided labor and other services for two Exxon-owned platform rigs located offshore California. In the spring of 1995, Helmerich & Payne International Drilling Co. was awarded a contract to design, build, and operate an offshore platform rig for Shell Offshore Inc.'s (SOI) Mars tension leg platform (TLP) in the Gulf of Mexico. The Mars project, considered by many to be the largest discovery in the Gulf of Mexico in more than 20 years, is scheduled to begin in the spring of 1996 and will be set at a water depth exceeding 2,900 feet. The Company was also awarded a letter of intent to build a similar rig for SOI's Ram-Powell project which is scheduled to begin in 1997. The Ram- Powell TLP will be set at a water depth of approximately 3,200 feet. Deepwater developments like these will be pivotal to the future of the offshore oil and gas industry, and the Company is well positioned to participate at the forefront of this trend. OUTLOOK Four points stand out among the myriad issues and challenges facing the Company and this industry. First, safety and the prevention of accidents is and will continue to be a crucial objective. Second, the organizational structure needs to have the agility to respond effectively in periods of both high and low demand. Third, as customers continue to hone their organizations to achieve better efficiency and productivity, this will create opportunities for contractors to provide additional services. Finally, each of these three points is contributing to the formation of alliances between operators, contractors, and other service companies. The Company is leading and participating in several of these relationships, and is committed to further enhancing its ability to add value to the customer. 5 6 ================================================================================ EXPLORATION & PRODUCTION HELMERICH & PAYNE, INC. ================================================================================ SUMMARY Helmerich & Payne, Inc. explores for, develops, and acquires oil and natural gas reserves primarily in the states of Oklahoma, Kansas, Texas, and Louisiana. Additionally, the Company provides natural gas marketing services through its wholly-owned subsidiary, Helmerich & Payne Energy Services, Inc. At year-end, the Company reported proved reserves of approximately 280 billion cubic feet (Bcf) of natural gas and 6.3 million barrels of oil. Reserves were approximately 290.7 Bcf and 6.7 million barrels in 1994. PRODUCTION OVERVIEW Natural gas production averaged 72,387 thousand cubic feet (Mcf) per day in 1995, compared with a 72,953 Mcf per day average in 1994. The average price received for natural gas fell by 45 cents per Mcf to $1.27 in 1995, reducing natural gas revenue by 25 percent for the year. Oil production averaged 2,214 barrels per day compared with 2,431 barrels in 1994. The average price received per barrel of oil increased to $16.37 per barrel in 1995, from $14.83 the previous year. FINANCIAL OVERVIEW Effective in 1995, the Company adopted Statement of Financial Accounting Standards No. 121 (SFAS 121) "Accounting for the Impairment of Long-Lived Assets" which resulted in a $20 million non-cash charge to pre-tax operating profit. Under SFAS 121, the Company measures impairment to oil and gas assets on a field-by-field basis, rather than using a single cost center. This impairment charge, coupled with the collapse of natural gas prices, had a significant negative impact on the year's financial results. 6 7
- ---------------------------------------------------------------------------------------------------- FINANCIAL SUMMARY - ---------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------- (in thousands) Oil Revenue . . . . . . . . . . . . . . . . $13,227 $13,161 $15,392 Natural Gas Revenue . . . . . . . . . . . . 33,851 45,261 52,446 Pre-tax Operating Profit (Loss) . . . . . . (23,961) 3,245 19,495 Depreciation and Depletion . . . . . . . . 19,913 19,523 18,294 SFAS 121 Impairment . . . . . . . . . . . . 19,982 -- -- Capital Expenditures . . . . . . . . . . . 20,956 45,809 25,551 - ----------------------------------------------------------------------------------------------------
DRILLING AND EXPLORATION The Company participated in the drilling of 59 (27.4 net) wells in 1995, 46 (24.1 net) of which were development wells, and 13 (3.3 net) were classified as exploratory wells. A total of 42 wells (21.5 net) were productive and 17 (5.9 net) wells were dry holes. During 1995, the Company increased its investment in exploration prospects. The Company had working interests in several high profile, yet unsuccessful wells including the Sealind 1-11 in Wyoming, and the Shadyside A-1 and the Miami Fee No. 5 in Louisiana. In the Louisiana Austin Chalk, the Company is exchanging or pooling some of its acreage on the western side of this prospect for overriding royalties or carried interests in exploratory drilling efforts. The Company intends to minimize its financial exposure to the exploratory phase of this prospect, while retaining an acreage position for potential development opportunities. OUTLOOK In September of 1995, the Company restructured its Exploration and Production Division around geographically focused teams. Each team will review and develop drilling, workover, and acquisition prospects for a specific region. The objective is to enhance performance by refocusing on the Company's strengths in key geographic regions. 7 8 ================================================================================ REAL ESTATE HELMERICH & PAYNE PROPERTIES, INC. ================================================================================ SUMMARY The purchase of Utica Square Shopping Center in 1964 marked the beginning of the Company's active involvement in Tulsa's commercial real estate market. Through its wholly-owned subsidiary, Helmerich & Payne Properties, Inc., the Company owns 1,652,311 square feet of leasable space and approximately 257 acres of undeveloped land. An increase in industrial leasing activity helped move the Company's occupancy level from an average of 83 percent in 1994, to 87 percent in 1995. Pre-tax operating profit fell sharply in 1995, as the Company adopted Statement of Financial Accounting Standards No. 121 (SFAS 121) which resulted in a write-down in the book value of two combination office/warehouse properties acquired in the mid-1980's.
- ----------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ----------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------- (in thousands) Gross Revenues . . . . . . . . . . . $ 7,570 $ 7,803 $ 7,630 Pre-Tax Operating Profit . . . . . . 2,157 4,460 4,149 Depreciation Expense . . . . . . . . 1,623 1,624 1,679 SFAS 121 Impairment . . . . . . . . 2,000 -- -- Capital Expenditures . . . . . . . . 907 916 458 Year-End Book Value . . . . . . . . 23,353 26,065 27,006 Average Occupancy . . . . . . . . . 87% 83% 86% - -----------------------------------------------------------------------------------------------------
UTICA SQUARE SHOPPING CENTER With its unique outdoor design spread over 30 landscaped acres, Utica Square Shopping Center is the cornerstone of the Company's real estate portfolio and a landmark in the Tulsa community. Nearly 70 merchants and restaurants reside at Utica Square including Ann Taylor, Banana Republic, The Disney Store, Miss Jackson's, The Limited, Pier 1, Saks Fifth Avenue and Williams-Sonoma. 8 9 INDUSTRIAL PROPERTIES The Company's industrial real estate holdings consist of two bulk warehouse developments encompassing 697,500 square feet and four combination office/warehouse developments with a total of 367,234 square feet. All of the Company's properties are located in the southeastern section of Tulsa, proximate to major transportation arteries. During 1994, the Company reorganized its marketing strategy for these properties by outsourcing leasing activities to a local broker specializing in industrial properties. The additional exposure derived from this effort, combined with an improved leasing climate, helped increase occupancy from 77 percent at the end of 1994, to 90 percent at the close of 1995.
- --------------------------------------------------------------------------------------------------- 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 ========== - ---------------------------------------------------------------------------------------------------
OUTLOOK There are a number of positive signs in the Tulsa economy which should help to continue the absorption of excess commercial space into the next year. Tulsa was the beneficiary of some significant expansion and relocation decisions in 1995 and the aviation industry, one of the area's largest employers, appears to be enjoying a modest recovery. While a development boom is not anticipated anytime soon, the Company's property holdings are well positioned in the market to benefit from future growth of the Tulsa area. 9 10 ================================================================================ CHEMICALS NATURAL GAS ODORIZING, INC. ================================================================================ SUMMARY Natural Gas Odorizing, Inc. (NGO), is a leading producer of mercaptan-based chemicals used as warning agents in natural and liquified petroleum gas (LPG). In most North American jurisdictions natural gas and LPG odorization is required by law before the fuels can be sold for commercial or residential purposes. On a smaller scale, NGO produces similarly composed products which are used as sulfides or feed stock in other processes within the chemical and refining industries. The Company's Baytown, Texas, plant neighbors an Exxon refinery from which the Company receives its key raw materials, hydrogen sulfide and olefins. Products are shipped in Company-owned tank trucks or in returnable or non-returnable cylinders to a customer base primarily made up of natural gas utilities and LPG distribution companies. NGO competes with two other suppliers in this small but highly competitive market. Approximately nine percent of NGO's sales came from outside of North America in 1995, compared with eight percent in 1994.
- ---------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ---------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------- (in thousands) Gross Revenues . . . . . . . . . . . . . . . $ 19,055 $ 18,849 $ 14,374 Pre-Tax Operating Profit . . . . . . . . . . 6,221 5,994 3,665 Depreciation Expense . . . . . . . . . . . . 672 654 594 Capital Expenditures . . . . . . . . . . . . 859 619 630 Pounds of Product Sold . . . . . . . . . . . 7,670 8,071 7,930 - ----------------------------------------------------------------------------------------------------
Total revenue and operating profit finished at record levels for the respective sixth and fifth consecutive years in 1995. Product price increases were the major reason for improved results over the past three years. During 1995, an investment banking firm was retained to advise the Company regarding the potential sale of Natural Gas Odorizing, Inc. 10 11 REVENUES AND INCOME BY BUSINESS SEGMENTS ================================================================================ HELMERICH & PAYNE, INC.
- ---------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- (in thousands) SALES AND OTHER REVENUES: Contract Drilling - Domestic . . . . . . . . . . $ 93,890 $ 86,521 $ 60,328 Contract Drilling - International . . . . . . . 110,695 98,111 89,618 --------- --------- -------- Total Contract Drilling Division . . . . . . 204,585 184,632 149,946 --------- --------- -------- Exploration and Production . . . . . . . . . . . 47,986 58,884 69,795 Natural Gas Marketing . . . . . . . . . . . . . 35,301 51,889 63,858 --------- --------- -------- Total Oil and Gas Division . . . . . . . . . . . 83,287 110,773 133,653 --------- --------- -------- Chemical Division . . . . . . . . . . . . . . . 19,055 18,849 14,374 Real Estate Division . . . . . . . . . . . . . . 7,570 7,803 7,630 Investments and Other Income . . . . . . . . . . 11,279 6,944 9,494 --------- --------- -------- Total Revenues . . . . . . . . . . . . . . . . . . $325,776 $329,001 $315,097 ========= ========= ======== OPERATING PROFIT (LOSS): Contract Drilling - Domestic . . . . . . . . . . $ 7,127 $ 5,874 $ 122 Contract Drilling - International . . . . . . . 21,110 14,645 15,281 --------- --------- -------- Total Contract Drilling Division . . . . . . 28,237 20,519 15,403 --------- --------- -------- Exploration and Production . . . . . . . . . . . (23,961) 3,245 19,495 Natural Gas Marketing . . . . . . . . . . . . . 1,892 1,525 667 --------- --------- -------- Total Oil and Gas Division . . . . . . . . . (22,069) 4,770 20,162 --------- --------- -------- Chemical Division . . . . . . . . . . . . . . . 6,221 5,994 3,665 Real Estate Division . . . . . . . . . . . . . . 2,157 4,460 4,149 --------- --------- -------- Total Operating Profit . . . . . . . . . . . 14,546 35,743 43,379 --------- --------- -------- OTHER: Miscellaneous operating . . . . . . . . . . . . (1,624) (1,292) (687) Income from investments . . . . . . . . . . . . 10,846 6,303 9,050 General corporate expense . . . . . . . . . . . (8,801) (8,908) (6,820) Interest expense . . . . . . . . . . . . . . . . (407) (385) (925) Corporate depreciation . . . . . . . . . . . . . (851) (1,162) (766) --------- --------- -------- Total Other . . . . . . . . . . . . . . . . . (837) (5,444) (148) --------- --------- -------- INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE, AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: . . . . . . . . . . $ 13,709 $ 30,299 $ 43,231 ========= ========= ========
- -------------------------------------------------------------------------------- Note: This schedule is an integral part of Note 11 (pages 27-28) 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 1995 was $9,751,000 ($0.40 per share), compared with net income of $24,971,000 ($1.02 per share) in 1994, and $24,550,000 ($1.01 per share) in 1993. Net income in 1995 includes a non-cash, non- recurring charge of $13,600,000 ($0.55 per share) as a result of the Company's adoption of Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Results for 1994 included $4 million ($0.16 per share) of income due to a one-time reduction in the Company's deferred income taxes from the cumulative effect of adopting SFAS No. 109, Accounting for Income Taxes. Included in the Company's net income, but not related to its operations, were after-tax gains from the sale of investment securities of $3,481,000 ($0.14 per share) in 1995, and $1,780,000 ($0.07 per share) in 1993. Also included was the Company's portion of income or losses of its equity affiliate, Atwood Oceanics, Inc., which was $0.04 per share of income in both 1995 and 1994, and a loss of $0.02 per share in 1993. Company revenues declined slightly to $325,776,000 in 1995, from $329,001,000 in 1994, and $315,097,000 in 1993. Although contract drilling revenues rose by 11 percent this past year, oil and gas division revenues declined by almost 25 percent, primarily due to lower natural gas prices and production volumes. Total revenue increased by 4 percent from 1993 to 1994, 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) also fell appreciably in 1994 as oil and natural gas prices and natural gas production volume declined. Total revenues for 1996 are expected to be slightly higher than for 1995 due to increased activity in international contract drilling operations. Revenues from investments rose to $10,846,000 in 1995, after declining to $6,303,000 in 1994, from $9,050,000 in 1993. Gains from the sale of investment securities were $5,697,000 in 1995, $124,000 in 1994 and $2,914,000 in 1993. Dividend income was stable during 1995, 1994 and 1993, but interest income steadily decreased as cash balances and interest rates generally declined during these periods. 12 13 Costs and expenses in 1995 were $312,067,000, 96 percent of total revenues, compared with 91 percent in 1994, and 86 percent in 1993. Total costs for 1995 were abnormally high due to the adoption of SFAS No. 121 which resulted in a total pre-tax impairment charge of $22,000,000 recorded as additional depreciation, depletion, and amortization. Operating costs as a percentage of operating revenues declined in 1995 to 1993 levels (64 percent) after rising slightly to 66 percent in 1994. The operating cost percentages rose slightly in 1994 because of increased 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 of $8,801,000 in 1995 were down slightly from $8,908,000 in 1994, and up significantly from $6,820,000 in 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. It is anticipated that 1996 general and administrative expenses will increase slightly from 1995. Income tax expense, as a percentage of pre-tax income, rose to 37 percent in 1995, from 34 percent in 1994. The effective tax rate for 1994 was lower because of the usage of foreign tax credit carryforwards, tight sands tax credits, and a reduction in Venezuelan taxes as a result of the monetary correction tax law enacted there. The effective tax rate was 42 percent in 1993, prior to the enactment of the monetary correction tax law in Venezuela. CONTRACT DRILLING DIVISION revenues increased by 11 percent this year, following a 23 percent increase from 1993 to 1994. Domestic drilling operating profit increased to $7,127,000 in 1995, from $5,874,000 in 1994 and $122,000 in 1993. From 1993 to 1994, the Company's U.S. offshore platform rig business improved significantly, thereby helping boost revenue and income. During that time and continuing into 1995, the land rig operations also improved substantially, aided by the 1994 purchase of Ensco's south Texas land rig operations. However, it is anticipated that 1996 domestic revenues and income will not materially change from 1995 levels. International revenues climbed to $110,695,000 in 1995, from $98,111,000 in 1994, and $89,618,000 in 1993. Operating profit for the international contract drilling sector improved by 44 percent to $21,110,000 for 1995, compared with $14,645,000 in 1994 and $15,281,000 in 1993. Revenues and profit margins in the Company's two most active international operations, Venezuela and Colombia, improved significantly in 1995. The Company sent four new rigs to Venezuela and three to Colombia, bringing rig counts in those countries to 18 and 10, respectively. The Company anticipates its operating 13 14 profit from international operations will improve for the coming year based on higher activity levels in both Colombia and Venezuela. In 1994, the Venzuelan government fixed the exchange rate which resulted in exchange losses for the Company totaling approximately $2,764,000. During fiscal 1995, the currency exchange rates remained fixed, however, the Company's operating costs increased due to hyperinflation in the Venezuelan economy. These higher costs were partially offset by the purchase of currency at market rates using Brady Bonds. During the first week of December 1995, the government reset the exchange rate, increasing it from 170 Bolivars to 290 Bolivars to the U.S. dollar. It is estimated that the Company will not experience a material loss, if any, from this devaluation. It is uncertain when the government will reset the exchange rate again but the Company does not expect losses from future fluctuations in the exchange rate during 1996 to be material. The Company will continue to purchase Brady Bonds to help offset a portion of any future exchange losses or higher operating costs as a result of inflation. OIL AND GAS DIVISION revenues and operating profit have declined over the past two years due to a significant decrease in natural gas prices from $1.84 per Mcf in 1993, to $1.72 in 1994 and $1.27 in 1995. Natural gas production volumes also declined over the same period of time from approximately 78 milion cubic feet a day (Mmcf/d) in 1993, to 73 Mmcf/d in 1994, and 72.4 Mmcf/d in 1995. During 1995, the Company elected to adopt SFAS No. 121, resulting in a $19,982,000 charge to the Oil and Gas Division. Because of the decline in natural gas volumes and prices, revenues fell from $69,795,000 in 1993, to $58,884,000 in 1994, and to $47,986,000 in 1995. Operating profit over the same period fell from $19,495,000 in 1993, to $3,245,000 in 1994, and to a loss of $23,961,000 in 1995, which includes the $19,982,000 charge discussed above. Dry-hole and abandonment charges for the oil and gas division rose from $6,938,000 in 1993, to $8,932,000 in 1994, and to $8,981,000 in 1995. Abandonment charges in 1994 increased significantly due to the reduction in the carrying value of the Company's leasehold position in its Austin Chalk prospect in south central Louisiana. Dry-hole expense was up in 1995 due to increased exploratory activity during the year. A lawsuit was filed in an Oklahoma state court in November of 1995 against Helmerich & Payne, Inc., in which five named plaintiffs, on behalf of themselves and other unnamed plaintiffs, are demanding their royalty share of a gas contract settlement. The plaintiffs are attempting to certify a class which would contain certain of the Company's lessors and certain other mineral owners who own an interest in wells covered by such gas contract settlement. The Company intends to vigorously defend this lawsuit. However, if a certified class is awarded a royalty share of the gas contract settlement, then any such award could have a material impact 14 15 on income from continuing operations for the applicable quarter. Management believes that any such award should not exceed approximately $2.7 million. Natural gas marketing revenues, which are primarily derived from selling natural gas produced by other companies (third party), declined to $35,301,000 in 1995, from $51,889,000 in 1994, and $63,858,000 in 1993. Operating profit was $1,892,000 in 1995, $1,525,000 in 1994, and $667,000 in 1993. 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 revenue and income from third party sales in the coming year. CHEMICAL DIVISION revenues increased by 1 percent from 1994 to 1995 to $19,055,000, and by 31 percent from 1993 to 1994. Operating profit increased by 4 percent from 1994 to 1995 to $6,221,000, and by 64 percent from 1993 to 1994. Product price increases and improved margins accounted for the significant rise in revenues and income in 1994. Growth flattened during 1995 as prices remained stable. The Company has engaged an investment banking firm for the purpose of advising the Company regarding the potential sale of its chemical operations in 1996. Specialty chemical companies appear to be valued at premium prices at this time and the Company believes that, given an attractive price, the timing may be appropriate to sell the Division. REAL ESTATE DIVISION revenues for 1994 were up, compared to 1995 and 1993, due to the sale of a small parcel of land which resulted in a $450,000 gain. Operating profit for 1995 was down significantly due to a $2,000,000 charge to two properties in connection with the adoption of SFAS No. 121. However, occupancy for 1995 was slightly improved and it is anticipated that the division will return to normal levels of revenues and income during 1996. FINANCIAL CONDITION The Company has maintained a very strong balance sheet for many years with current ratios above 1.65 for the last three years and long-term debt to total capitalization remaining below 2 percent for that same period. During 1995, the Company signed a three-year agreement with a syndicate of banks for a line of credit totaling $75 million. At year end, $21,700,000 had been borrowed under the facility. This was the first time the Company had gone to outside sources for capital funding since the early 1980's. Capital expenditures for the last two years were over $100 million and exceeded the funds generated internally. It is anticipated that during 1996 the capital expenditures will again exceed $100 million and that additional borrowings will be necessary to fund those expenditures. Cash flow provided by operating activities totaled $88,572,000 for 1995, $79,909,000 for 1994, and $74,619,000 for 1993. It is 15 16 anticipated that cash generated by operating activities will increase again during the coming year due to improvement in rig utilization and profitability in South America. As it did in 1993 and 1995, the Company may choose to sell a portion of its investment portfolio to aid in the funding of capital expenditures. Capital expenditures budgeted for 1996 include continued exploration and development drilling activities, major offshore platform rig construction projects for Gulf of Mexico operations, and the completion of the Company's investment in a joint venture with its equity affiliate, Atwood Oceanics. 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 cost basis of $87,299,000 at September 30, 1995, and a total market value at that time of $158,201,000, including its investment in Atwood. During 1995, the Company adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which resulted in the balance sheet adjustment to market values for investments in companies owned less than 20 percent. Accordingly, a deferred tax estimate was added to deferred taxes under the liability section and the net unrealized holding gains were reflected in the shareholders' equity section of the balance sheet. During 1995, the Company paid a dividend of $.50 per share which represented the 24th consecutive year of dividend increases.
- ---------------------------------------------------------------------------------------------------------- STOCK PORTFOLIO HELD BY THE COMPANY - ---------------------------------------------------------------------------------------------------------- Number of September 30, 1995 Shares Book Value Market Value - ---------------------------------------------------------------------------------------------------------- (in thousands,except share amounts) Schlumberger, Ltd. . . . . . . . . . . . . . . . . . 740,000 $ 23,511 $ 48,378 Atwood Oceanics, Inc. . . . . . . . . . . . . . . . . 1,600,000 22,495 32,100 Sun Company, Inc. . . . . . . . . . . . . . . . . . . 466,451 5,742 12,011 Sun Company PFD A . . . . . . . . . . . . . . . . . . 329,053 3,192 9,172 Phillips Petroleum Company . . . . . . . . . . . . . 240,000 5,976 7,800 Liberty Bancorp. . . . . . . . . . . . . . . . . . . 395,000 5,743 14,516 Oryx Energy Company . . . . . . . . . . . . . . . . . 625,000 6,032 8,125 Oneok . . . . . . . . . . . . . . . . . . . . . . . . 225,000 2,751 5,231 Other . . . . . . . . . . . . . . . . . . . . . . . . 11,857 20,868 --------- --------- Total . . . . . . . . . . . . . . . . . . $ 87,299 $ 158,201 ========= =========
16 17 CONSOLIDATED STATEMENTS OF INCOME ================================================================================ HELMERICH & PAYNE, INC.
- ---------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- (in thousands, except per share amounts) REVENUES: Sales and other operating revenues . . . . . . . $ 314,930 $ 322,698 $ 306,047 Income from investments . . . . . . . . . . . . 10,846 6,303 9,050 ----------------------------------------- 325,776 329,001 315,097 ----------------------------------------- COSTS AND EXPENSES: Operating costs . . . . . . . . . . . . . . . . 200,240 213,427 194,856 Depreciation, depletion and amortization . . . . 77,115 50,068 48,609 Dry holes and abandonments . . . . . . . . . . . 10,096 10,369 6,893 Taxes, other than income taxes . . . . . . . . . 15,408 15,545 13,763 General and administrative . . . . . . . . . . . 8,801 8,908 6,820 Interest . . . . . . . . . . . . . . . . . . . . 407 385 925 ----------------------------------------- 312,067 298,702 271,866 ----------------------------------------- INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . 13,709 30,299 43,231 INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . 5,044 10,232 18,279 EQUITY IN INCOME (LOSS) OF AFFILIATE, net of income taxes . . . . . . . . . . . . . . 1,086 904 (402) ----------------------------------------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . 9,751 20,971 24,550 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . -- 4,000 -- ----------------------------------------- NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 9,751 $ 24,971 $ 24,550 ========================================= PER COMMON SHARE: INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . $ .40 $ .86 $ 1.01 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE . -- .16 -- ----------------------------------------- NET INCOME . . . . . . . . . . . . . . . . . . . . . $ .40 $ 1.02 $ 1.01 ========================================= AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . 24,536 24,416 24,307
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. 17 18 CONSOLIDATED BALANCE SHEETS ================================================================================ HELMERICH & PAYNE, INC. Assets
- ---------------------------------------------------------------------------------------------------------- September 30, 1995 1994 - ---------------------------------------------------------------------------------------------------------- (in thousands) CURRENT ASSETS: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 19,661 $ 29,447 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . 8,989 8,997 Accounts receivable, less reserve of $489 and $1,480 . . . . . . . . 59,314 59,897 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,313 20,995 Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 5,717 3,603 --------------------------- Total current assets . . . . . . . . . . . . . . . . . . . . . . 114,994 122,939 --------------------------- INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,908 87,414 --------------------------- PROPERTY, PLANT AND EQUIPMENT, at cost: Contract drilling equipment . . . . . . . . . . . . . . . . . . . . 501,682 444,432 Oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . 392,806 389,100 Real estate properties . . . . . . . . . . . . . . . . . . . . . . . 46,642 47,827 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,592 61,743 --------------------------- 1,010,722 943,102 Less--Accumulated depreciation, depletion and amortization . . . . . 586,960 542,451 --------------------------- Net property, plant and equipment . . . . . . . . . . . . . . . . 423,762 400,651 --------------------------- OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,501 13,823 --------------------------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 710,165 $624,827 ===========================
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. 18 19 LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------- September 30, 1995 1994 - ---------------------------------------------------------------------------------------------------------- (in thousands) CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,382 $ 22,645 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 21,529 24,056 Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,700 --- --------------------------- Total current liabilities . . . . . . . . . . . . . . . . . . 69,611 46,701 --------------------------- NONCURRENT LIABILITIES: Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 66,047 44,462 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,072 9,330 --------------------------- Total noncurrent liabilities . . . . . . . . . . . . . . . . . 78,119 53,792 --------------------------- 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 . . . . . . . . . . . . . . . . . . . . . 48,436 48,196 Net unrealized holding gains . . . . . . . . . . . . . . . . . . . . 38,004 -- Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 495,692 496,280 --------------------------- 584,809 547,153 Less treasury stock, 1,999,856 shares in 1995 and 2,054,364 shares in 1994, at cost . . . . . . . . . . . . . . . . . . . . . . . . . 22,374 22,819 --------------------------- Total shareholders' equity . . . . . . . . . . . . . . . . . . 562,435 524,334 --------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . $710,165 $624,827 ===========================
- -------------------------------------------------------------------------------- The accompanying notes are an integral part of these statements. 19 20 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ================================================================================ HELMERICH & PAYNE, INC.
Net Common Stock Additional Unrealized Treasury Stock ---------------- Paid-In Holding Retained ------------------- Shares Amount Capital Gains Earnings Shares Amount - ------------------------------------------------------------------------------------------------------------------------ (in thousands) 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) Adjustment to beginning balance for change in accounting method, net of income taxes of $21,106 . . . . . --- --- --- 34,435 --- --- --- Change in net unrealized holding gains, net of income taxes of $2,187 . . . . . . . . . . . . . . --- --- --- 3,569 --- --- --- Cash dividends ($.50 per share) . . . . --- --- --- --- (12,372) --- --- Exercise of stock options . . . . . . . --- --- 859 --- --- (69) 615 Lapse of restrictions on Restricted Stock Awards . . . . . . . . . . . . --- --- (229) --- --- --- --- Forfeiture of restricted stock award . . --- --- (390) --- 560 15 (170) Amortization of deferred compensation . . . . . . . . . . . . --- --- --- --- 1,473 --- --- Net income . . . . . . . . . . . . . . . --- --- --- --- 9,751 --- --- ---------------------------------------------------------------------------- Balance, September 30, 1995 . . . . . . . . 26,764 $2,677 $48,436 $38,004 $495,692 2,000 $(22,374) ============================================================================ - -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 20 21 CONSOLIDATED STATEMENTS OF CASH FLOWS ================================================================================ HELMERICH & PAYNE, INC.
- ------------------------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------- (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,751 $ 24,971 $ 24,550 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation, depletion and amortization . . . . . . . . . . 77,115 50,068 48,609 Dry holes and abandonments . . . . . . . . . . . . . . . . . 10,096 10,369 6,893 Cumulative effect of change in accounting principle . . . . --- (4,000) --- Equity in (income) loss of affiliate before income taxes . . (1,752) (1,458) 435 Amortization of deferred compensation . . . . . . . . . . . 1,473 1,815 1,716 Gain on sale of securities . . . . . . . . . . . . . . . . . (5,697) (124) (2,914) Gain on sale of fixed assets, other . . . . . . . . . . . . (1,115) (2,465) (557) Change in assets and liabilities- (Increase) decrease in accounts receivable . . . . . . . 583 (3,592) (13,486) Increase in inventories . . . . . . . . . . . . . . . . (318) (3,349) (35) (Increase) decrease in prepaid expenses and other . . . (2,792) 5,050 (492) Increase (decrease) in accounts payable . . . . . . . . 2,675 (1,191) 7,523 Increase (decrease) in accrued liabilities . . . . . . . (2,481) 1,617 (1,619) Increase (decrease) in deferred income taxes . . . . . (1,708) 3,739 5,600 Increase (decrease) in other noncurrent liabilities . . 2,742 (1,541) (1,604) ------------------------------------ Total adjustments . . . . . . . . . . . . . . . . . . . 78,821 54,938 50,069 ------------------------------------ Net cash provided by operating activities . . . . . 88,572 79,909 74,619 ------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, including dry hole costs . . . . . . . . . . (110,760) (102,883) (54,209) Proceeds from sale of property, plant and equipment . . . . . . . . 2,923 5,971 4,801 Purchase of investments . . . . . . . . . . . . . . . . . . . . . (12,858) (1,500) (2,400) Proceeds from sale of investments . . . . . . . . . . . . . . . . . 11,713 373 7,904 Purchase of short-term investments . . . . . . . . . . . . . . . . --- (12) (3,036) Proceeds from sale of short-term investments . . . . . . . . . . . 7 124 7,055 ------------------------------------ Net cash used in investing activities . . . . . . . (108,975) (97,927) (39,885) ------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt . . . . . . . . . . . . . --- --- 2,070 Payments made on long-term debt . . . . . . . . . . . . . . . . . --- (3,139) (2,180) Proceeds from notes payable . . . . . . . . . . . . . . . . . . . 37,100 --- --- Payments made on notes payable . . . . . . . . . . . . . . . . . . (15,400) --- --- Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (12,365) (11,965) (11,808) Proceeds from exercise of stock options . . . . . . . . . . . . . . 1,282 913 1,254 ------------------------------------ Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . 10,617 (14,191) (10,664) ------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . (9,786) (32,209) 24,070 CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . . 29,447 61,656 37,586 ------------------------------------ CASH AND CASH EQUIVALENTS, end of period . . . . . . . . . . . . . . $ 19,661 $ 29,447 $ 61,656 ==================================== - -------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. 21 22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ HELMERICH & PAYNE, INC. September 30, 1995, 1994 and 1993 - -------------------------------------------------------------------------------- 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 gain for 1995 was $1,845,000 with losses for the years 1994 and 1993 of $2,764,000, and $493,000, 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. Undeveloped leases are amortized based on management's estimate of recoverability. Costs of surrendered leases are charged to the amortization reserve. Effective July 1, 1995, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which requires impairment losses to be recognized for long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows are not sufficient to recover the assets carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Under the new statement, the Company now evaluates impairment of exploration and production assets on a field by field basis rather than using one worldwide cost center for its proved properties. Fair values are based on discounted future cash flows or information provided by sales and purchases of similar assets. 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 - Prior to October 1, 1994, investments in companies owned less than 20 percent were carried at the lower of cost or market. The Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", effective October 1, 1994. SFAS No. 115 requires that the Company's investments in companies owned less than 20 percent, all of which are considered available-for-sale securities, be carried at their fair value. Upon adoption of SFAS No. 115, the Company recorded an increase to shareholders' equity of $34 million, which is net of income taxes of $21 million. The Company determines fair value of its investments in companies owned less than 20 percent based on quoted market prices. The cost of securities used in determining realized gains and losses is based on average cost of the security sold. 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 24.14 percent and 24.3 percent of Atwood Oceanics, Inc. (Atwood) at September 30, 1995 and 1994, respectively. The quoted market value of the Company's investment was $32,100,000 and $22,800,000 at September 30, 1995 and 1994, respectively. Retained earnings at September 30, 1995 include approximately $10,315,000 of undistributed earnings of Atwood. At September 30, 1995, the Company also had invested $8.3 million in a joint venture with Atwood to build and operate a new generation offshore platform drilling rig, which is currently under construction. The Company has a receivable from Atwood of $2.2 million related to the construction of the drilling rig. - -------------------------------------------------------------------------------- 22 23 Summarized financial information of Atwood is as follows:
- -------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- (in thousands) Gross revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,315 $ 68,045 $ 54,219 Costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . (70,255) (62,045) (56,010) -------- --------- --------- Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,060 $ 6,000 $ (1,791) ======== ========= ========= Helmerich & Payne, Inc.'s equity in net income (loss) of affiliates, net of income taxes . . . . . . . . . . . $ 1,086 $ 904 $ (402) ======== ========= ========= Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,266 $ 37,965 $ 27,903 Noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . 118,587 115,065 122,356 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 20,505 13,752 11,900 Noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . 37,456 53,000 58,609 Shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . 94,892 86,278 79,750 ======== ========= ========= Helmerich & Payne, Inc.'s investment . . . . . . . . . . . . . . . . $ 22,495 $ 20,743 $ 19,285 ======== ========= ========= - --------------------------------------------------------------------------------------------------------------------
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 year ended September 30, 1993, 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. The liability for the benefits provided is not material. Effective October 1, 1995, the Company offered medical benefits to employees who retired after November 1, 1992, with retirees to pay the entire estimated cost of such benefits. 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. - -------------------------------------------------------------------------------- NOTE 2 SHORT-TERM BORROWINGS AND CREDIT ARRANGEMENTS - -------------------------------------------------------------------------------- The Company maintains a line of credit agreement with certain banks which provides for maximum borrowing of $75,000,000 at adjustable interest rates. Under the agreement, $75,000,000 may be borrowed through May 1996, and $45,000,000 may be borrowed through May 1998. As of September 30, 1995, the Company had borrowed $21,700,000 at a weighted average interest rate of 7.27%, leaving an unused portion of $53,300,000. Under the line of credit agreement, the Company must meet certain requirements regarding levels of debt, net worth and earnings. The Company has an additional $8.5 million uncommitted line of credit with a bank which can be used primarily for letters of credit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 23 24 - -------------------------------------------------------------------------------- NOTE 3 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, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- (in thousands) CURRENT: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,102 $ 3,645 $ 6,190 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,442 2,763 5,106 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370 777 911 ------------------------------------------- 7,914 7,185 12,207 ------------------------------------------- DEFERRED: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,155) (292) 3,174 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 3,430 2,616 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (249) (91) 282 ------------------------------------------- (2,870) 3,047 6,072 ------------------------------------------- TOTAL PROVISION: $ 5,044 $ 10,232 $ 18,279 ===========================================
- -------------------------------------------------------------------------------- The amounts of domestic and foreign income are as follows: - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- (in thousands) INCOME BEFORE INCOME TAXES, EQUITY IN INCOME (LOSS) OF AFFILIATE, AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE: Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (5,816) $ 17,513 $ 29,051 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,525 12,786 14,180 ------------------------------------------- $ 13,709 $ 30,299 $ 43,231 ===========================================
- -------------------------------------------------------------------------------- Effective income tax rates as compared to the U.S. Federal income tax rate are as follows: - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------------- U.S. Federal income tax rate . . . . . . . . . . . . . . . . . . . . 35% 35% 35% Dividends received deduction . . . . . . . . . . . . . . . . . . . . (4) (2) (1) Excess statutory depletion . . . . . . . . . . . . . . . . . . . . . (2) (1) (1) Effect of higher foreign tax rates . . . . . . . . . . . . . . . . . 11 3 7 Non-conventional fuel source credits utilized . . . . . . . . . . . . (5) (1) - Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 - 2 ------------------------------------ Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . 37% 34% 42% ====================================
- -------------------------------------------------------------------------------- The components of the Company's net deferred tax liabilities are as follows: - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 - -------------------------------------------------------------------------------------------------------------------- (in thousands) DEFERRED TAX LIABILITIES: Property, plant and equipment $40,702 $ 42,406 Available-for-sale securities 23,293 --- Pension provision 4,774 4,632 Equity Investment 3,920 3,254 Other 846 744 ------- ------- Total deferred tax liabilities 73,535 51,036 ------- ------- DEFERRED TAX ASSETS: Financial accruals 5,376 4,419 Other 2,112 2,155 ------- ------- Total deferred tax assets 7,488 6,574 ------- ------- Valuation allowance --- --- ------- ------- Net deferred tax assets 7,488 6,574 ------- ------- NET DEFERRED TAX LIABILITIES $66,047 $44,462 ======= ======= - --------------------------------------------------------------------------------------------------------------------
24 25 The deferred income tax provision (benefit) for 1993 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:
- -------------------------------------------------------------------------------------------------------------- Year Ended September 30, 1993 - -------------------------------------------------------------------------------------------------------------- (in thousands) Effect of intangible development costs expensed for income tax purposes over (under) costs amortized for financial reporting purposes . . . . . . . . . . . $ 1,302 Financial under income tax depreciation . . . . . . . . . . . . . . . . . . . . . . 2,134 Pension income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Geophysical expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51) Insurance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36) Amortization of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . (652) Restricted stock options vesting . . . . . . . . . . . . . . . . . . . . . . . . . . 609 Deferred mobilization revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 566 Sales of long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 484 Excess depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 Oil and gas revenue recognition timing differences . . . . . . . . . . . . . . . . . 262 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 ------- $ 6,072 =======
- -------------------------------------------------------------------------------- NOTE 4 STOCK OPTIONS, AWARD PLAN AND RIGHTS - -------------------------------------------------------------------------------- The Company has reserved 1,361,681 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, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- Outstanding at October 1, . . . . . . . . . . . . . . . . . 835,879 780,079 860,713 Granted . . . . . . . . . . . . . . . . . . . . . . . . . . 107,750 110,250 -- Exercised . . . . . . . . . . . . . . . . . . . . . . . . . (78,094) (46,510) (67,112) Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . (24,264) (7,940) (13,522) ------- ------- ------- Outstanding at September 30, . . . . . . . . . . . . . . . 841,271 835,879 780,079 ======= ======= ======= Exercisable at September 30, . . . . . . . . . . . . . . . 110,399 70,889 19,782 ======= ======= ======= Weighted average exercise price of options outstanding. . . $ 26.39 $ 25.65 $ 25.20 ======= ======= ======= Weighted average exercise price of options exercised . . . $ 19.68 $ 21.77 $ 21.53 ======= ======= ======= - ----------------------------------------------------------------------------------------------------------
As of September 30, 1995, the Company has issued 360,000 shares of treasury stock under a Restricted Stock Award Plan (the "Plan"). 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. The deferred compensation is being amortized over a seven-year period as compensation expense. The unamortized balance at September 30, 1995 and 1994 was $3,189,000 and $5,223,000, respectively. In 1995, 1994, and 1993, restrictions lapsed with respect to 61,000 shares, and the shares were released to Plan participants. In 1995 there was a forfeiture of 15,000 shares. On September 30, 1995, the Company had 24,764,620 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 FINANCIAL INSTRUMENTS Short-term investments consist mainly of U.S. treasury notes carried at cost, which approximates fair value, and are pledged as collateral for a renewable letter of credit. Notes payable bear interest at market rates and is carried at cost which approximates fair value. The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting (see Note 1):
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value (in thousands) ------------------------------------------------------------- Equity Securities, September 30, 1995 $64,804 $61,455 $158 $126,101
25 26 During the years ended September 30, 1995, 1994, and 1993, marketable equity available-for-sale securities with a fair value at the date of sale of $11,713,000, $373,000 and $7,904,000, respectively, were sold. The gross realized gains on such sales of available-for-sale securities totaled $5,734,000, $124,000, and $3,579,000, respectively, and the gross realized losses totaled $37,000, $0, and $665,000, respectively. - -------------------------------------------------------------------------------- NOTE 6 IMPAIRMENT OF LONG-LIVED ASSETS - -------------------------------------------------------------------------------- Adoption of SFAS No. 121, effective July 1, 1995, resulted in a before-tax charge of $22 million which is included in depreciation, depletion and amortization expense. The charge reduced 1995 after-tax net income by $13.6 million, or $.55 per share. The before-tax charges included $20 million for proved Exploration and Production properties and $2 million for Real Estate properties. The fair values of the proved properties were determined using the present value of expected future net cash flows. The fair values of the impaired real estate properties were determined based on the estimated sales price of comparable assets. - -------------------------------------------------------------------------------- NOTE 7 EMPLOYEE BENEFIT 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, 1995 1994 1993 - -------------------------------------------------------------------------------------------------------------- (in thousands) Service cost-benefits earned during the year . . . . . . . . $ 1,589 $ 1,557 $ 1,304 Interest cost on projected benefit obligations . . . . . . . 1,301 1,191 1,105 Return on plan assets . . . . . . . . . . . . . . . . . . . . (2,798) (2,639) (522) Net amortization and deferral . . . . . . . . . . . . . . . . (301) (302) (2,477) ------ ------ ------ Net pension credit . . . . . . . . . . . . . . . . . $ (209) $ (193) $ (590) ====== ====== ======
The discount rate used in determining the actuarial value of the projected benefit obligation for 1995, 1994 and 1993 was 7.25%, 7.5% and 7.0%, respectively. The average expected rate of return on plan assets was 8.5% for 1995, 1994 and 1993. The assumed rate of increase in compensation was 5.0% for 1995 and 1994, and 5.5% for 1993. The following table sets forth the plans' funded status and amounts recognized in the balance sheet:
- ------------------------------------------------------------------------------------------------------------ Years Ended September 30, 1995 1994 - ------------------------------------------------------------------------------------------------------------ (in thousands) Actuarial present value of benefit obligations: Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . $ 16,199 $ 13,323 ======== ======== Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . $ 19,215 $ 15,758 ======== ======== Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . $ 21,735 $ 17,755 ======== ======== Plan assets at fair value, primarily listed stocks, U.S. Government securities and guaranteed insurance contracts . . . . . . . . . . . . . $ 38,114 $ 33,317 ======== ======== Projected benefit obligation less than plan assets . . . . . . . . . . . $ 16,379 $ 15,562 Unrecognized net gain, including unrecognized net assets existing at October 1, 1987 . . . . . . . . . . . . . . . . (5,959) (5,589) Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . 1,978 2,216 -------- -------- Prepaid pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,398 $ 12,189 ======== ========
- -------------------------------------------------------------------------------- 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 $1,735,000, $1,588,000 and $1,304,000 in 1995, 1994 and 1993, respectively. - -------------------------------------------------------------------------------- 26 27 - -------------------------------------------------------------------------------- NOTE 8 ACCRUED LIABILITIES - -------------------------------------------------------------------------------- Accrued liabilities consist of the following:
- ------------------------------------------------------------------------------------------------------------ Years Ended September 30, 1995 1994 - ------------------------------------------------------------------------------------------------------------ (in thousands) Accrued royalties payable . . . . . . . . . . . . . . . . . . . . . $ 5,977 $ 6,293 Accrued taxes payable . . . . . . . . . . . . . . . . . . . . . . . 3,109 4,669 Accrued workers compensation claims . . . . . . . . . . . . . . . . 2,430 2,364 Accrued equipment cost . . . . . . . . . . . . . . . . . . . . . . 4,017 3,000 Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 5,996 7,730 -------- -------- $ 21,529 $ 24,056 ======== ======== - ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NOTE 9 CONCENTRATIONS OF CREDIT RISK - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------ Years Ended September 30, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------ (in thousands) Cash payments: Interest paid . . . . . . . . . . . . . . . . $ 408 $ 371 $ 370 Income taxes paid . . . . . . . . . . . . . . 4,624 9,516 15,924 Noncash investing activity: Accrued equipment cost . . . . . . . . . . . $ 1,016 $3,000 $ -- - ------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- NOTE 10 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 11 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 18 percent, 14 percent, and 11.8 percent of the total consolidated revenues during the years ended September 30, 1995, 1994 and 1993, respectively. Collectively, revenues from three companies controlled by the Venezuelan government accounted for approximately 13.4 percent of total consolidated revenues for the year ended September 30, 1995. Summarized revenues and operating profit by industry segment for the years ended September 30, 1995, 1994 and 1993 are located on page 11. Additional financial information by industry segment is as follows: - -------------------------------------------------------------------------------- 27 28
- ----------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- (in thousands) Identifiable assets: Contract drilling - Domestic . . . . . . . $138,359 $132,804 $112,435 Contract drilling - International . . . . . 188,587 131,767 113,844 Exploration and Production . . . . . . . . 142,184 175,003 162,618 Natural Gas Marketing . . . . . . . . . . . 10,192 8,846 13,289 Chemical division . . . . . . . . . . . . . 9,822 9,532 9,753 Real Estate division . . . . . . . . . . . 24,380 26,958 27,845 Corporate and other . . . . . . . . . . . . 196,641 139,917 171,151 -------- -------- -------- $710,165 $624,827 $610,935 ======== ======== ======== Depreciation, depletion and amortization: Contract drilling - Domestic . . . . . . . $ 12,213 $ 11,085 $ 10,126 Contract drilling - International . . . . . 19,557 15,722 16,929 Exploration and Production . . . . . . . . 39,895 19,523 18,294 Natural Gas Marketing . . . . . . . . . . . 298 290 279 Chemical division . . . . . . . . . . . . . 672 654 594 Real Estate division . . . . . . . . . . . 3,623 1,624 1,679 Corporate and other . . . . . . . . . . . . 959 1,265 864 Intersegment elimination . . . . . . . . . (102) (95) (156) -------- -------- -------- $ 77,115 $ 50,068 $ 48,609 ======== ======== ======== Capital expenditures: Contract drilling - Domestic . . . . . . . $ 32,503 $ 31,692 $ 16,261 Contract drilling - International . . . . . 55,044 25,723 10,375 Exploration and Production . . . . . . . . 20,956 45,809 25,551 Natural Gas Marketing . . . . . . . . . . . 252 76 205 Chemical division . . . . . . . . . . . . . 859 619 630 Real Estate division . . . . . . . . . . . 907 916 458 Corporate and other . . . . . . . . . . . . 1,255 1,048 729 -------- -------- -------- $111,776 $105,883 $ 54,209 ======== ======== ========
- -------------------------------------------------------------------------------- NOTE 12 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, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- (in thousands) Revenues . . . . . . . . . . . . . . . . . . $ 47,986 $58,884 $69,795 -------- -------- -------- Production costs . . . . . . . . . . . . . . 18,035 18,854 19,378 Exploration expense and valuation provisions 14,017 17,262 12,628 Depreciation, depletion and amortization . . 39,895 19,523 18,294 Income tax expense . . . . . . . . . . . . . (7,243) 890 6,481 -------- -------- -------- Total cost and expenses . . . . . . . . . . 64,704 56,529 56,781 -------- -------- -------- Results of operations (excluding corporate overhead and interest costs) . . . . . . . $(16,718) $ 2,355 $13,014 ======== ======== ========
- -------------------------------------------------------------------------------- Capitalized Costs - - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------- At September 30, 1995 1994 - ----------------------------------------------------------------------------------------------------------- (in thousands) Properties being amortized: Proved properties . . . . . . . . . . . . . . . . . . . . . . $384,755 $377,371 Unproved properties . . . . . . . . . . . . . . . . . . . . . 8,051 11,729 -------- -------- Total costs being amortized . . . . . . . . . . . . . . . . 392,806 389,100 Accumulated depreciation, depletion and amortization . . . . 257,988 225,902 -------- -------- Net Capitalized Costs . . . . . . . . . . . . . . . . . . . $134,818 $163,198 ======== ========
- -------------------------------------------------------------------------------- 28 29 Costs Incurred Relating to Oil and Gas Producing Activities -
- ---------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------- (in thousands) Property acquisition: Proved . . . . . . . . . . . . . . . . . . . $ 1,228 $23,115 $ 3,100 Unproved . . . . . . . . . . . . . . . . . . 1,565 4,893 2,409 Exploration . . . . . . . . . . . . . . . . . . 13,497 12,418 11,769 Development . . . . . . . . . . . . . . . . . . 9,703 12,888 13,964 -------- ------- -------- Total . . . . . . . . . . . . . . . . . . . . $25,993 $53,314 $31,242 ======== ======= ========
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, 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 Revisions of previous estimates . . . . . . . . . . . . . . . . . . . . . 124,361 5,222 Extensions, discoveries and other additions . . . . . . . . . . . . . . . 328,539 8,775 Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (808,058) (26,421) Purchases of reserves-in-place . . . . . . . . . . . . . . . . . . . . . 310 1,934 Sales of reserves-in-place . . . . . . . . . . . . . . . . . . . . . . . (26,251) (116) --------- ------- Proved reserves at September 30, 1995 . . . . . . . . . . . . . . . . . . 6,329,112 280,046 ========= ======= Proved developed reserves at September 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . 6,882,783 282,033 ========= ======= September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 6,649,672 267,688 ========= ======= September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 6,270,216 262,319 ========= =======
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. 29 30
- ----------------------------------------------------------------------------------------------------------- At September 30, 1995 1994 - ----------------------------------------------------------------------------------------------------------- (in thousands) Future cash inflows . . . . . . . . . . . . . . . . . . . . . . . . . . . $429,259 $478,426 Future costs - Future production and development costs . . . . . . . . . . . . . . (173,633) (191,464) Future income tax expense . . . . . . . . . . . . . . . . . . . . . (63,183) (71,320) -------- -------- Future net cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . 192,443 215,642 10% annual discount for estimated timing of cash flows . . . . . . . . . (81,509) (91,019) -------- -------- Standardized Measure of discounted future net cash flows . . . . . . . . $110,934 $124,623 ======== ========
Changes in Standardized Measure Relating to Proved Oil and Gas Reserves (Unaudited)
- ----------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------- (in thousands) Standardized Measure - Beginning of year . . . . . . . . . . $124,623 $178,757 $173,644 Increases (decreases) - Sales, net of production costs . . . . . . . . . . . (29,951) (40,030) (50,417) Net change in sales prices, net of production costs . (12,917) (80,347) 16,292 Discoveries and extensions, net of related future development and production costs . . . . . . . . . 8,179 9,653 12,439 Changes in estimated future development costs . . . . (4,672) (14,571) (7,624) Development costs incurred . . . . . . . . . . . . . 9,703 12,888 13,964 Revisions of previous quantity estimates . . . . . . 2,825 483 6,820 Accretion of discount . . . . . . . . . . . . . . . . 16,171 23,678 22,619 Net change in income taxes . . . . . . . . . . . . . (7,538) 20,942 (12,656) Purchases of reserves-in-place . . . . . . . . . . . 1,202 11,219 3,820 Sales of reserves-in-place . . . . . . . . . . . . . (51) (62) (652) Other . . . . . . . . . . . . . . . . . . . . . . . 3,360 2,013 508 -------- -------- -------- Standardized Measure - End of year . . . . . . . . . . . $110,934 $124,623 $178,757 ======== ======== ========
- -------------------------------------------------------------------------------- NOTE 13 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - --------------------------------------------------------------------------------
Quarter Ended ---------------------------------------------------- Dec. 31, March 31, June 30, Sept. 30, 1994 1995 1995 1995 - ----------------------------------------------------------------------------------------------------------- (in thousands, except per share amounts) - ----------------------------------------------------------------------------------------------------------- Revenues . . . . . . . . . . . . . . . . . . $79,944 $79,301 $78,756 $87,775 Gross profit (loss) . . . . . . . . . . . . 8,909 11,550 9,389 (6,931) Net income (loss)(1) . . . . . . . . . . . . 4,416 5,820 4,584 (5,069) Earnings (loss) per share . . . . . . . . . .18 .24 .19 (.21) - -----------------------------------------------------------------------------------------------------------
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 accounting principle . . . . . . . . . 7,253 6,155 4,660 2,903 Net income (2) . . . . . . . . . . . . . . . 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 - -----------------------------------------------------------------------------------------------------------
Gross profit (loss) represents total revenues less operating costs, depreciation, depletion and amortization, dry holes and abandonments, and taxes, other than income taxes. - -------------------------------------------------------------------------------- (1) The quarter ended September 30, 1995 included an after-tax charge of $13.6 million ($.55 per share) related to the Company adopting SFAS No. 121 (see note 6). (2) The quarter ended September 30, 1994 included an after-tax charge of $2.7 million ($.11 per share) for impairment of leases ($1.35 million) and dry-hole costs ($1.35 million) in the Austin Chalk prospect in Louisiana. - -------------------------------------------------------------------------------- 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 sheets of Helmerich & Payne, Inc. as of September 30, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for the years 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 audits. The consolidated statements of income, shareholders' equity, and cash flows for the year 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 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. In our opinion, the 1995 and 1994 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Helmerich & Payne, Inc. at September 30, 1995 and 1994, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. As discussed in Note 6 to the financial statements, effective July 1, 1995, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". As discussed in Note 1 to the financial statements, effective October 1, 1994, the Company adopted SFAS No., 115, "Accounting for Certain Investments in Debt and Equity Securities." As discussed in Note 3 to the financial statements, effective October 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Tulsa, Oklahoma /s/ ERNST & YOUNG LLP November 17, 1995
STOCK PRICE INFORMATION ========================================================================================================== Closing Market Price Per Share --------------------------------------------------- 1995 1994 - ---------------------------------------------------------------------------------------------------------- QUARTERS HIGH LOW HIGH LOW First . . . . . . . . . . . . . . . . . $ 31 1/4 $ 25 5/8 $ 34 1/2 $26 1/2 Second . . . . . . . . . . . . . . . . . 27 1/2 24 1/2 30 26 Third . . . . . . . . . . . . . . . . . 31 26 5/8 27 1/8 25 1/8 Fourth . . . . . . . . . . . . . . . . . 30 27 5/8 28 1/8 25 5/8 - ----------------------------------------------------------------------------------------------------------
DIVIDEND INFORMATION ========================================================================================================== Paid Per Share Total Payment --------------------------------------------------- 1995 1994 1995 1994 - ---------------------------------------------------------------------------------------------------------- QUARTERS First . . . . . . . . . . . . . . . . . $.125 $.120 $3,089,758 $2,956,498 Second . . . . . . . . . . . . . . . . . .125 .120 3,087,958 2,960,098 Third . . . . . . . . . . . . . . . . . .125 .120 3,092,973 2,960,314 Fourth . . . . . . . . . . . . . . . . . .125 .125 3,094,813 3,087,902 - ----------------------------------------------------------------------------------------------------------
================================================================================ STOCKHOLDERS' MEETING The annual meeting of stockholders will be held on March 6, 1996. A formal notice of the meeting, together with a proxy statement and form of proxy, will be mailed to shareholders on or about January 25, 1996. ================================================================================ 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 As of December 15, 1995, there were 1,656 record holders of Helmerich & Payne, Inc. common stock as listed by the transfer agent's records. Our Transfer Agent is responsible for our shareholder records, issuance of stock certificates, and distribution of our dividends and the IRS Form 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, 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ REVENUES AND INCOME* Contract Drilling Revenues . . . . . . . . . . . . 203,325 182,781 149,661 Crude Oil Sales . . . . . . . . . . . . . . . . . . 13,227 13,161 15,392 Natural Gas Sales . . . . . . . . . . . . . . . . . 33,851 45,261 52,446 Gas Marketing Revenues** . . . . . . . . . . . . . 34,729 51,874 63,786 Chemical Sales . . . . . . . . . . . . . . . . . . 18,986 18,746 14,286 Real Estate Revenues . . . . . . . . . . . . . . . 7,560 7,396 7,620 Dividend Income . . . . . . . . . . . . . . . . . . 3,389 3,621 3,535 Other Revenues . . . . . . . . . . . . . . . . . . 10,709 6,161 8,371 Total Revenues . . . . . . . . . . . . . . . . . . 325,776 329,001 315,097 Net Cash Provided by Operating Activities++ . . . . 88,572 79,909 74,619 Net Income+ . . . . . . . . . . . . . . . . . . . . 9,751 24,971 24,550 - ------------------------------------------------------------------------------------------------------ PER SHARE DATA Net Income+ . . . . . . . . . . . . . . . . . . . . .40 1.02 1.01 Cash Dividends . . . . . . . . . . . . . . . . . . .50 .485 .48 Shares Outstanding* . . . . . . . . . . . . . . . . 24,765 24,710 24,637 - ------------------------------------------------------------------------------------------------------ FINANCIAL POSITION Net Working Capital* . . . . . . . . . . . . . . . 45,383 76,238 104,085 Ratio of Current Assets to Current Liabilities . . 1.65 2.63 3.24 Investments* . . . . . . . . . . . . . . . . . . . 156,908 87,414 84,945 Total Assets* . . . . . . . . . . . . . . . . . . . 710,165 624,827 610,935 Long-Term Debt* . . . . . . . . . . . . . . . . . . -- -- 3,600 Shareholders' Equity* . . . . . . . . . . . . . . . 562,435 524,334 508,927 - ------------------------------------------------------------------------------------------------------ CAPITAL EXPENDITURES* Contract Drilling Equipment . . . . . . . . . . . . 80,943 53,752 24,101 Wells and Equipment . . . . . . . . . . . . . . . . 19,384 40,916 23,142 Chemical Plant and Equipment . . . . . . . . . . . 793 572 540 Real Estate . . . . . . . . . . . . . . . . . . . . 873 902 436 Other Assets (includes undeveloped leases) . . . . 9,783 9,741 5,990 Total Capital Outlays . . . . . . . . . . . . . . . 111,776 105,883 54,209 PROPERTY, PLANT AND EQUIPMENT AT COST* Contract Drilling Equipment . . . . . . . . . . . . 501,682 444,432 418,004 Producing Properties . . . . . . . . . . . . . . . 384,755 377,371 340,176 Undeveloped Leases . . . . . . . . . . . . . . . . 8,051 11,729 10,010 Chemical Plant and Equipment . . . . . . . . . . . 13,210 12,417 11,845 Real Estate . . . . . . . . . . . . . . . . . . . . 46,642 47,827 47,502 Other . . . . . . . . . . . . . . . . . . . . . . 56,382 49,326 45,785 Total Property, Plant and Equipment . . . . . . . . 1,010,722 943,102 873,322 - ------------------------------------------------------------------------------------------------------
* 000's omitted ** Gas Marketing activities began in 1990 ++ Funds generated by operations for 1985 + Includes $13.6 million (.55 per share) effect of impairment charge for adoption of SFAS No. 121 in 1995 and cumulative effect of change in accounting for income taxes of $4,000,000 ($.16 per share) in 1994 32 33
- ---------------------------------------------------------------------------------------------------------- Years Ended September 30, 1992 1991 1990 1989 - ---------------------------------------------------------------------------------------------------------- REVENUES AND INCOME* Contract Drilling Revenues . . . . . . . . . . . 112,833 105,364 90,974 78,315 Crude Oil Sales . . . . . . . . . . . . . . . . . 16,369 17,374 16,058 14,821 Natural Gas Sales . . . . . . . . . . . . . . . . 38,370 35,628 37,697 33,013 Gas Marketing Revenues** . . . . . . . . . . . . 40,410 10,055 10,566 -- Chemical Sales . . . . . . . . . . . . . . . . . 13,411 12,674 12,067 10,754 Real Estate Revenues . . . . . . . . . . . . . . 7,541 7,542 7,636 7,778 Dividend Income . . . . . . . . . . . . . . . . . 4,050 5,285 7,402 9,127 Other Revenues . . . . . . . . . . . . . . . . . 6,716 20,024 56,144 17,361 Total Revenues . . . . . . . . . . . . . . . . . 239,700 213,946 238,544 171,169 Net Cash Provided by Operating Activities++ . . . 63,331 52,110 55,422 67,099 Net Income+ . . . . . . . . . . . . . . . . . . . 10,849 21,241 47,562 22,700 - ---------------------------------------------------------------------------------------------------------- PER SHARE DATA Net Income+ . . . . . . . . . . . . . . . . . . . .45 .88 1.97 .94 Cash Dividends . . . . . . . . . . . . . . . . . .465 .46 .44 .42 Shares Outstanding* . . . . . . . . . . . . . . . 24,576 24,488 24,485 24,173 - ---------------------------------------------------------------------------------------------------------- FINANCIAL POSITION Net Working Capital* . . . . . . . . . . . . . . 82,800 108,212 146,741 114,357 Ratio of Current Assets to Current Liabilities . 3.31 4.19 3.72 3.12 Investments* . . . . . . . . . . . . . . . . . . 87,780 96,471 99,574 130,443 Total Assets* . . . . . . . . . . . . . . . . . . 585,504 575,168 582,927 591,229 Long-Term Debt* . . . . . . . . . . . . . . . . . 8,339 5,693 5,648 49,087 Shareholders' Equity* . . . . . . . . . . . . . . 493,286 491,133 479,485 443,396 - ---------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES* Contract Drilling Equipment . . . . . . . . . . . 43,049 56,297 18,303 17,901 Wells and Equipment . . . . . . . . . . . . . . . 21,617 34,741 16,489 30,673 Chemical Plant and Equipment . . . . . . . . . . 104 2,478 1,089 745 Real Estate . . . . . . . . . . . . . . . . . . . 690 2,104 1,467 878 Other Assets (includes undeveloped leases) . . . 17,038 6,909 5,512 6,787 Total Capital Outlays . . . . . . . . . . . . . . 82,498 102,529 42,860 56,984 - ---------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT AT COST* Contract Drilling Equipment . . . . . . . . . . . 404,155 370,494 324,293 323,313 Producing Properties . . . . . . . . . . . . . . 329,264 312,438 287,248 279,768 Undeveloped Leases . . . . . . . . . . . . . . . 12,973 5,552 5,507 5,441 Chemical Plant and Equipment . . . . . . . . . . 11,305 11,202 8,723 7,635 Real Estate . . . . . . . . . . . . . . . . . . . 47,286 46,671 44,928 48,016 Other . . . . . . . . . . . . . . . . . . . . . 43,810 37,059 32,682 30,237 Total Property, Plant and Equipment . . . . . . . 848,793 783,416 703,381 694,410 - ----------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------- Years Ended September 30, 1988 1987 1986 1985 - ------------------------------------------------------------------------------------------------- REVENUES AND INCOME* Contract Drilling Revenues . . . . . . . . . . . 75,985 64,718 68,220 90,647 Crude Oil Sales . . . . . . . . . . . . . . . . . 14,001 15,223 20,020 32,447 Natural Gas Sales . . . . . . . . . . . . . . . . 26,154 17,251 21,308 28,335 Gas Marketing Revenues** . . . . . . . . . . . . -- -- -- -- Chemical Sales . . . . . . . . . . . . . . . . . 11,265 9,603 8,471 8,778 Real Estate Revenues . . . . . . . . . . . . . . 7,878 7,561 6,839 5,658 Dividend Income . . . . . . . . . . . . . . . . . 10,069 9,757 11,033 10,878 Other Revenues . . . . . . . . . . . . . . . . . 15,213 34,766 29,244 18,054 Total Revenues . . . . . . . . . . . . . . . . . 160,565 158,879 165,135 194,797 Net Cash Provided by Operating Activities++ . . . 57,967 38,337 54,756 72,552 Net Income+ . . . . . . . . . . . . . . . . . . . 20,150 22,016 7,025 18,498 - ------------------------------------------------------------------------------------------------- PER SHARE DATA Net Income+ . . . . . . . . . . . . . . . . . . . .83 .91 .28 .74 Cash Dividends . . . . . . . . . . . . . . . . . .40 .38 .36 .35 Shares Outstanding* . . . . . . . . . . . . . . . 24,166 24,187 24,187 25,146 - ------------------------------------------------------------------------------------------------- FINANCIAL POSITION Net Working Capital* . . . . . . . . . . . . . . 135,275 135,139 108,331 118,340 Ratio of Current Assets to Current Liabilities . 6.10 6.68 5.61 4.58 Investments* . . . . . . . . . . . . . . . . . . 133,726 140,431 158,311 163,045 Total Assets* . . . . . . . . . . . . . . . . . . 576,473 571,348 563,236 616,034 Long-Term Debt* . . . . . . . . . . . . . . . . . 70,715 74,732 79,340 85,532 Shareholders' Equity* . . . . . . . . . . . . . . 430,804 420,833 408,185 427,860 - ------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURES* Contract Drilling Equipment . . . . . . . . . . . 19,110 13,993 23,673 27,777 Wells and Equipment . . . . . . . . . . . . . . . 25,936 27,402 11,767 9,527 Chemical Plant and Equipment . . . . . . . . . . 688 307 232 175 Real Estate . . . . . . . . . . . . . . . . . . . 3,095 6,128 1,409 9,782 Other Assets (includes undeveloped leases) . . . 2,623 2,041 2,075 5,397 Total Capital Outlays . . . . . . . . . . . . . . 51,452 49,871 39,156 52,658 - ------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT AT COST* Contract Drilling Equipment . . . . . . . . . . . 313,289 309,865 307,199 287,641 Producing Properties . . . . . . . . . . . . . . 251,445 228,214 215,488 218,102 Undeveloped Leases . . . . . . . . . . . . . . . 3,305 4,197 7,294 10,403 Chemical Plant and Equipment . . . . . . . . . . 6,889 6,201 5,894 5,662 Real Estate . . . . . . . . . . . . . . . . . . . 47,165 44,070 38,131 36,538 Other . . . . . . . . . . . . . . . . . . . . . 28,279 28,675 28,846 28,345 Total Property, Plant and Equipment . . . . . . . 650,372 621,222 602,852 586,691 - -------------------------------------------------------------------------------------------------
33 34 ELEVEN-YEAR OPERATING REVIEW HELMERICH & PAYNE, INC.
- ------------------------------------------------------------------------------------------------------------------------------- Years Ended September 30, 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------------------------- CONTRACT DRILLING Drilling Rigs, United States . . . . . . . . . . 41 47 42 39 46 49 Drilling Rigs, International . . . . . . . . . . 35 29 29 30 25 20 Contract Wells Drilled, United States . . . . . 212 162 128 100 106 119 Total Footage Drilled, United States* . . . . . 1,933 1,842 1,504 1,085 1,301 1,316 Average Depth per Well, United States . . . . . 9,119 11,367 11,746 10,853 12,274 11,059 Percentage Rig Utilization, United States . . . 71 69 53 42 47 50 Percentage Rig Utilization, International . . . 84 88 68 69 69 46 - ------------------------------------------------------------------------------------------------------------------------------- PETROLEUM EXPLORATION AND DEVELOPMENT Gross Wells Completed . . . . . . . . . . . . . 59 44 42 54 45 36 Net Wells Completed . . . . . . . . . . . . . . 27.4 15 15.9 17.8 20.3 15.3 Net Dry Holes . . . . . . . . . . . . . . . . . 5.9 1.7 4.3 4.3 4.3 3.4 - ------------------------------------------------------------------------------------------------------------------------------- PETROLEUM PRODUCTION Net Crude Oil and Natural Gas Liquids Produced (barrels daily) . . . . . . . . . . . . 2,214 2,431 2,399 2,334 2,152 2,265 Net Oil Wells Owned - Primary Recovery . . . . . 186 202 202 220 227 223 Net Oil Wells Owned - Secondary Recovery . . . . 64 71 71 74 55 46 Secondary Oil Recovery Projects . . . . . . . . 12 14 14 14 12 12 Net Natural Gas Produced (thousands of cubic feet daily) . . . . . . . 72,387 72,953 78,023 75,470 66,617 65,147 Net Gas Wells Owned . . . . . . . . . . . . . . 354 341 307 289 278 194 - ------------------------------------------------------------------------------------------------------------------------------- NATURAL GAS ODORANTS AND OTHER CHEMICALS Chemicals Sold (pounds)* . . . . . . . . . . . . 7,670 8,071 7,930 8,452 8,155 8,255 - ------------------------------------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT Gross Leasable Area (square feet)* . . . . . . . 1,652 1,652 1,656 1,656 1,664 1,664 Percentage Occupancy . . . . . . . . . . . . . . 87 83 86 87 86 85 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF EMPLOYEES Helmerich & Payne, Inc. and Subsidiariesa . . 3,245 2,787 2,389 1,928 1,758 1,864 - -------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------- Years Ended September 30, 1989 1988 1987 1986 1985 - ---------------------------------------------------------------------------------------------------------- CONTRACT DRILLING Drilling Rigs, United States . . . . . . . . . . 49 48 50 48 47 Drilling Rigs, International . . . . . . . . . . 20 18 19 19 19 Contract Wells Drilled, United States . . . . . 108 115 110 110 111 Total Footage Drilled, United States* . . . . . 1,350 1,284 1,182 1,384 1,477 Average Depth per Well, United States . . . . . 12,500 11,165 10,745 12,582 13,306 Percentage Rig Utilization, United States . . . 44 45 39 44 65 Percentage Rig Utilization, International . . . 46 30 16 30 47 - ---------------------------------------------------------------------------------------------------------- PETROLEUM EXPLORATION AND DEVELOPMENT Gross Wells Completed . . . . . . . . . . . . . 45 45 18 27 42 Net Wells Completed . . . . . . . . . . . . . . 15.2 14.6 5.2 10.3 19.5 Net Dry Holes . . . . . . . . . . . . . . . . . 2.8 1.6 .5 3.6 9.7 - ---------------------------------------------------------------------------------------------------------- PETROLEUM PRODUCTION Net Crude Oil and Natural Gas Liquids Produced (barrels daily) . . . . . . . . . . . . 2,486 2,463 2,578 3,077 3,388 Net Oil Wells Owned - Primary Recovery . . . . . 201 202 199 234 234 Net Oil Wells Owned - Secondary Recovery . . . . 214 222 237 235 259 Secondary Oil Recovery Projects . . . . . . . . 17 21 20 18 19 Net Natural Gas Produced (thousands of cubic feet daily) . . . . . . . 57,490 45,480 31,752 32,392 35,288 Net Gas Wells Owned . . . . . . . . . . . . . . 205 197 180 180 174 - ---------------------------------------------------------------------------------------------------------- NATURAL GAS ODORANTS AND OTHER CHEMICALS Chemicals Sold (pounds)* . . . . . . . . . . . . 7,702 8,507 8,165 7,554 9,123 - ---------------------------------------------------------------------------------------------------------- REAL ESTATE MANAGEMENT Gross Leasable Area (square feet)* . . . . . . . 1,669 1,670 1,595 1,433 1,333 Percentage Occupancy . . . . . . . . . . . . . . 90 90 94 95 93 - ---------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF EMPLOYEES Helmerich & Payne, Inc. and Subsidiariesa . . 1,100 1,156 1,026 844 1,126 - ----------------------------------------------------------------------------------------------------------
* 000's omitted. + 1985-1989 include U.S. employees only 34 35
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 ALLEN S. BRAUMILLER WILLIAM L. ARMSTRONG Vice President, Chairman, Ambassador Media Corporation, Exploration Denver, Colorado GEORGE S. DOTSON GLENN A. COX* Vice President, President and Chief Operating Officer, Retired, President of Helmerich & Payne Phillips Petroleum Co., International Drilling Co. Bartlesville, Oklahoma DOUGLAS E. FEARS GEORGE S. DOTSON Vice President, Vice President, Finance President of Helmerich & Payne International Drilling Co., STEVEN R. MACKEY Tulsa, Oklahoma Vice President, Secretary, and General Counsel C. W. FLINT, JR.* Chairman, JAMES L. PAYNE Flint Industries, Inc., Vice President, Tulsa, Oklahoma Real Estate GEORGE A. SCHAEFER STEVEN R. SHAW Chairman and Chief Executive Officer, Retired, Vice President, Caterpillar Inc., Production Peoria, Illinois 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 36 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 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 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 ANDERSON LLP Tulsa, Oklahoma December 22, 1995 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 17, 1995, included in the 1995 Annual Report to Shareholders of Helmerich & Payne, Inc. We also consent to the incorporation by reference in the Registration Statements (Form 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 17, 1995, with respect to the consolidated financial statements of Helmerich & Payne, Inc. incorporated by reference in the Annual Report (Form 10-K) for the year ended September 30, 1995. ERNST & YOUNG LLP Tulsa, Oklahoma December 22, 1995 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 YEAR SEP-30-1995 OCT-01-1994 SEP-30-1995 19,661 156,908 59,803 489 21,313 114,994 1,010,722 586,960 710,165 69,611 0 2,677 0 0 559,758 710,165 314,930 325,776 302,859 302,859 8,801 0 407 13,709 5,044 9,751 0 0 0 9,751 .40 .40
-----END PRIVACY-ENHANCED MESSAGE-----