16.Guarantor and Non-Guarantor Financial Information

In March 2015, Helmerich & Payne International Drilling Co. (“the issuer”), a wholly-owned subsidiary of Helmerich & Payne, Inc. (“parent”, “the guarantor”), issued senior unsecured notes with an aggregate principal amount of $500.0 million. The notes are fully and unconditionally guaranteed by the parent. No subsidiaries of parent currently guarantee the notes, subject to certain provisions that if any subsidiary guarantees certain other debt of the issuer or parent, then such subsidiary will provide a guarantee of the obligations under the notes.

In connection with the notes, we are providing the following condensed consolidating financial information for the issuer, Helmerich & Payne International Drilling Co. and parent/guarantor, Helmerich & Payne, Inc., in accordance with the Commission disclosure requirements. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)


	Three Months Ended June 30, 2016
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		$	315,077		$	51,429		$	(20	)	$	366,486
Operating costs and other	3,712			314,620			61,700			(290		)	379,742

Operating income (loss) from continuing operations	(3,712		)	457			(10,271		)	270			(13,256		)

Other income, net	16			1,290			276			(270		)	1,312
Interest expense	(62		)	(5,597		)	(748		)	—			(6,407		)
Equity in net loss of subsidiaries	(18,572		)	(7,796		)	—			26,368			—

Loss from continuing operations before income taxes	(22,330		)	(11,646		)	(10,743		)	26,368			(18,351		)
Income tax provision	(1,130		)	7,230			(3,258		)	—			2,842

Loss from continuing operations	(21,200		)	(18,876		)	(7,485		)	26,368			(21,193		)

Income from discontinued operations before income taxes	—			—			2,193			—			2,193
Income tax provision	—			—			2,200			—			2,200

Loss from discontinued operations	—			—			(7		)	—			(7		)


Net loss	$	(21,200	)	$	(18,876	)	$	(7,492	)	$	26,368		$	(21,200	)

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Three Months Ended June 30, 2016
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated

Net loss	$	(21,200	)	$	(18,876	)	$	(7,492	)	$	26,368	$	(21,200	)
Other comprehensive income, net of income taxes:
Unrealized appreciation on securities, net	—			9,744			—			—		9,744
Minimum pension liability adjustments, net	107			207			—			—		314

Other comprehensive income	107			9,951			—			—		10,058

Comprehensive loss	$	(21,093	)	$	(8,925	)	$	(7,492	)	$	26,368	$	(11,142	)

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)


	Three Months Ended June 30, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		$	543,834		$	117,629		$	(18	)	$	661,445
Operating costs and other	3,072			423,409			100,941			(1,026		)	526,396

Operating income (loss) from continuing operations	(3,072		)	120,425			16,688			1,008			135,049

Other income (expense), net	(103		)	1,565			852			(1,007		)	1,307
Interest expense	(40		)	(4,638		)	(1,458		)	—			(6,136		)
Equity in net income of subsidiaries	92,413			13,040			—			(105,453		)	—

Income from continuing operations before income taxes	89,198			130,392			16,082			(105,452		)	130,220
Income tax provision	(1,674		)	38,941			2,054			—			39,321

Income from continuing operations	90,872			91,451			14,028			(105,452		)	90,899

Loss from discontinued operations before income taxes	—			—			(27		)	—			(27		)
Income tax provision	—			—			—			—			—

Loss from discontinued operations	—			—			(27		)	—			(27		)


Net income	$	90,872		$	91,451		$	14,001		$	(105,452	)	$	90,872

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Three Months Ended June 30, 2015, as adjusted
	Guarantor/		Issuer			Non-Guarantor					Total
	Parent		Subsidiary			Subsidiaries		Eliminations			Consolidated

Net income	$	90,872	$	91,451		$	14,001	$	(105,452	)	$	90,872
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(3,307		)	—		—			(3,307		)
Minimum pension liability adjustments, net	82		115			—		—			197

Other comprehensive income (loss)	82		(3,192		)	—		—			(3,110		)

Comprehensive income	$	90,954	$	88,259		$	14,001	$	(105,452	)	$	87,762

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)


	Nine Months Ended June 30, 2016
	Guarantor/			Issuer		Non-Guarantor						Total
	Parent			Subsidiary		Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		1,103,361		$	189,216		$	(53	)	$	1,292,524
Operating costs and other	9,573			1,003,369		213,640			(1,093		)	1,225,489

Operating income (loss) from continuing operations	(9,573		)	99,992		(24,424		)	1,040			67,035

Other income (expense), net	(235		)	2,680		1,831			(1,040		)	3,236
Interest expense	(186		)	(15,587	)	(879		)	—			(16,652		)
Equity in net income (loss) of subsidiaries	22,042			(23,811	)	—			1,769			—

Income (loss) from continuing operations before income taxes	12,048			63,274		(23,472		)	1,769			53,619
Income tax provision	(3,959		)	42,114		(4,415		)	—			33,740

Income (loss) from continuing operations	16,007			21,160		(19,057		)	1,769			19,879

Income from discontinued operations before income taxes	—			—		2,241			—			2,241
Income tax provision	—			—		6,113			—			6,113

Loss from discontinued operations	—			—		(3,872		)	—			(3,872		)


Net income (loss)	$	16,007		21,160		$	(22,929	)	$	1,769		$	16,007

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Nine Months Ended June 30, 2016
	Guarantor/		Issuer			Non-Guarantor					Total
	Parent		Subsidiary			Subsidiaries			Eliminations		Consolidated

Net income (loss)	$	16,007	21,160			$	(22,929	)	$	1,769	$	16,007
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(2,719		)	—			—		(2,719		)
Minimum pension liability adjustments, net	322		618			—			—		940

Other comprehensive income (loss)	322		(2,101		)	—			—		(1,779		)

Comprehensive income (loss)	$	16,329		19,059		$	(22,929	)	1,769		$	14,228

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands)


	Nine Months Ended June 30, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor						Total
	Parent			Subsidiary			Subsidiaries			Eliminations			Consolidated

Operating revenue	$	—		$	2,270,839		$	337,121		$	(58	)	$	2,607,902
Operating costs and other	9,152			1,600,530			304,566			(3,092		)	1,911,156

Operating income (loss) from continuing operations	(9,152		)	670,309			32,555			3,034			696,746

Other income (expense), net	(100		)	6,224			1,444			(3,033		)	4,535
Interest expense	(59		)	(4,741		)	(4,526		)	—			(9,326		)
Equity in net income of subsidiaries	453,478			23,131			—			(476,609		)	—

Income from continuing operations before income taxes	444,167			694,923			29,473			(476,608		)	691,955
Income tax provision	(3,856		)	243,986			3,761			—			243,891

Income from continuing operations	448,023			450,937			25,712			(476,608		)	448,064

Loss from discontinued operations before income taxes	—			—			(118		)	—			(118		)
Income tax provision	—			—			(77		)	—			(77		)

Loss from discontinued operations	—			—			(41		)	—			(41		)


Net income	$	448,023		$	450,937		$	25,671		$	(476,608	)	$	448,023

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


	Nine Months Ended June 30, 2015, as adjusted
	Guarantor/		Issuer			Non-Guarantor					Total
	Parent		Subsidiary			Subsidiaries		Eliminations			Consolidated

Net income	$	448,023	$	450,937		$	25,671	$	(476,608	)	$	448,023
Other comprehensive income (loss), net of income taxes:
Unrealized depreciation on securities, net	—		(46,754		)	—		—			(46,754		)
Minimum pension liability adjustments, net	246		344			—		—			590

Other comprehensive income (loss)	246		(46,410		)	—		—			(46,164		)

Comprehensive income	$	448,269	$	404,527		$	25,671	$	(476,608	)	$	401,859

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)


	June 30, 2016
	Guarantor/			Issuer		Non-Guarantor					Total
	Parent			Subsidiary		Subsidiaries		Eliminations			Consolidated

ASSETS
Current assets:
Cash and cash equivalents	$	(920	)	$	892,476	$	15,476	$	—		$	907,032
Short-term investments	—			49,565		—		—			49,565
Accounts receivable, net of reserve	39,698			269,495		42,995		(871		)	351,317
Inventories	—			88,438		40,447		—			128,885
Prepaid expenses and other	7,997			33,403		39,638		(2,017		)	79,021
Assets held for sale	—			21,772		—		—			21,772
Current assets of discontinued operations	—			—		80		—			80

Total current assets	46,775			1,355,149		138,636		(2,888		)	1,537,672

Investments	12,848			87,050		—		—			99,898
Property, plant and equipment, net	61,989			4,840,172		404,273		—			5,306,434
Intercompany	15,982			1,426,888		264,212		(1,707,082		)	—
Other assets	10,713			1,019		31,262		(10,479		)	32,515
Investment in subsidiaries	5,645,245			203,812		—		(5,849,057		)	—


Total assets	$	5,793,552		$	7,914,090	$	838,383	$	(7,569,506	)	$	6,976,519


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	—		$	39,234	$	—	$	—		$	39,234
Accounts payable	80,926			8,718		3,904		(856		)	92,692
Accrued liabilities	20,936			138,267		37,474		(2,032		)	194,645
Current liabilities of discontinued operations	—			—		38		—			38

Total current liabilities	101,862			186,219		41,416		(2,888		)	326,609

Noncurrent liabilities:
Long-term debt	—			493,150		—		—			493,150
Deferred income taxes	—			1,321,148		48,424		(11,479		)	1,358,093
Intercompany	971,750			257,947		476,285		(1,705,982		)	—
Other	18,478			28,455		46,288		—			93,221
Noncurrent liabilities of discontinued operations	—			—		3,984		—			3,984

Total noncurrent liabilities	990,228			2,100,700		574,981		(1,717,461		)	1,948,448

Shareholders’ equity:
Common stock	11,138			100		—		(100		)	11,138
Additional paid-in capital	442,883			47,372		547		(47,919		)	442,883
Retained earnings	4,438,748			5,577,943		221,439		(5,799,382		)	4,438,748
Accumulated other comprehensive loss	(3,156		)	1,756		—		(1,756		)	(3,156		)
Treasury stock, at cost	(188,151		)	—		—		—			(188,151		)

Total shareholders’ equity	4,701,462			5,627,171		221,986		(5,849,157		)	4,701,462

Total liabilities and shareholders’ equity	$	5,793,552		$	7,914,090	$	838,383	$	(7,569,506	)	$	6,976,519

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)


	September 30, 2015, as adjusted
	Guarantor/			Issuer		Non-Guarantor					Total
	Parent			Subsidiary		Subsidiaries		Eliminations			Consolidated

ASSETS
Current assets:
Cash and cash equivalents	$	(838	)	$	693,273	$	36,949	$	—		$	729,384
Short-term investments	—			45,543		—		—			45,543
Accounts receivable, net of reserve	152			374,383		71,418		(5		)	445,948
Inventories	—			88,010		40,531		—			128,541
Deferred income taxes	2,834			19,277		—		(4,905		)	17,206
Prepaid expenses and other	20,018			6,713		45,647		(7,903		)	64,475
Current assets of discontinued operations	—			—		8,097		—			8,097

Total current assets	22,166			1,227,199		202,642		(12,813		)	1,439,194

Investments	12,871			91,483		—		—			104,354
Property, plant and equipment, net	55,902			5,063,705		443,563		—			5,563,170
Intercompany	15,875			1,192,634		230,652		(1,439,161		)	—
Other assets	8,387			1,389		38,901		(8,153		)	40,524
Investment in subsidiaries	5,623,754			227,587		—		(5,851,341		)	—


Total assets	$	5,738,955		$	7,803,997	$	915,758	$	(7,311,468	)	$	7,147,242


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt due within one year	$	—		$	39,094	$	—	$	—		$	39,094
Accounts payable	80,673			20,404		7,097		(5		)	108,169
Accrued liabilities	10,688			151,721		46,251		(11,103		)	197,557
Current liabilities of discontinued operations	—			—		3,377		—			3,377

Total current liabilities	91,361			211,219		56,725		(11,108		)	348,197

Noncurrent liabilities:
Long-term debt	—			492,443		—		—			492,443
Deferred income taxes	—			1,275,428		33,546		(13,058		)	1,295,916
Intercompany	733,008			186,784		516,169		(1,435,961		)	—
Other	18,740			31,560		59,820		—			110,120
Noncurrent liabilities of discontinued operations	—			—		4,720		—			4,720

Total noncurrent liabilities	751,748			1,986,215		614,255		(1,449,019		)	1,903,199

Shareholders’ equity:
Common stock	11,099			100		—		(100		)	11,099
Additional paid-in capital	420,141			45,824		349		(46,173		)	420,141
Retained earnings	4,648,346			5,556,783		244,429		(5,801,212		)	4,648,346
Accumulated other comprehensive income (loss)	(1,377		)	3,856		—		(3,856		)	(1,377		)
Treasury stock, at cost	(182,363		)	—		—		—			(182,363		)

Total shareholders’ equity	4,895,846			5,606,563		244,778		(5,851,341		)	4,895,846

Total liabilities and shareholders’ equity	$	5,738,955		$	7,803,997	$	915,758	$	(7,311,468	)	$	7,147,242

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)


	Nine Months Ended June 30, 2016
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated

Net cash provided by (used in) operating activities	$	4,127		$	631,371		$	(20,088	)	$	—	$	615,410

INVESTING ACTIVITIES:
Capital expenditures	(15,515		)	(200,611		)	(3,423		)	—		(219,549		)
Intercompany transfers	15,515			(15,515		)	—			—		—
Purchase of short-term investments	—			(36,958		)	—			—		(36,958		)
Proceeds from sale of short-term investments	—			32,681			—			—		32,681
Proceeds from asset sales	8			10,956			1,840			—		12,804

Net cash provided by (used in) investing activities	8			(209,447		)	(1,583		)	—		(211,022		)

FINANCING ACTIVITIES:
Dividends paid	(224,040		)	—			—			—		(224,040		)
Intercompany transfers	224,040			(224,040		)	—			—		—
Debt issuance costs	—			(32		)	—			—		(32		)
Exercise of stock options, net of tax withholding	483			—			—			—		483
Tax withholdings related to net share settlements of restricted stock	(3,912		)	—			—			—		(3,912		)
Excess tax benefit from stock-based compensation	(788		)	1,351			198			—		761

Net cash provided by (used in) financing activities	(4,217		)	(222,721		)	198			—		(226,740		)

Net increase (decrease) in cash and cash equivalents	(82		)	199,203			(21,473		)	—		177,648
Cash and cash equivalents, beginning of period	(838		)	693,273			36,949			—		729,384

Cash and cash equivalents, end of period	$	(920	)	$	892,476		$	15,476		$	—	$	907,032

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended June 30, 2015, as adjusted
	Guarantor/			Issuer			Non-Guarantor					Total
	Parent			Subsidiary			Subsidiaries			Eliminations		Consolidated

Net cash provided by operating activities	$	66,448		$	1,068,214		$	16,894		$	—	$	1,151,556

INVESTING ACTIVITIES:
Capital expenditures	(18,708		)	(911,844		)	(41,050		)	—		(971,602		)
Intercompany transfers	18,708			(18,708		)	—			—		—
Proceeds from asset sales	1			16,804			952			—		17,757

Net cash provided by (used in) Investing activities	1			(913,748		)	(40,098		)	—		(953,845		)

FINANCING ACTIVITIES:
Proceeds from senior notes, net of discount	—			497,125			—			—		497,125
Debt issuance costs	—			(5,202		)	—			—		(5,202		)
Proceeds on short-term debt	—			—			1,002			—		1,002
Payments on short-term debt	—			—			(1,002		)	—		(1,002		)
Net increase in bank overdraft	—			—			10,824			—		10,824
Dividends paid	(223,827		)	—			—			—		(223,827		)
Intercompany transfers	223,827			(223,827		)	—			—		—
Repurchase of common stock	(59,654		)	—			—			—		(59,654		)
Exercise of stock options, net of tax withholding	(609		)	—			—			—		(609		)
Tax withholdings related to net share settlements of restricted stock	(5,104		)	—			—			—		(5,104		)
Excess tax benefit from stock-based compensation	91			2,853			25			—		2,969

Net cash provided by (used in) financing activities	(65,276		)	270,949			10,849			—		216,522

Net increase (decrease) in cash and cash equivalents	1,173			425,415			(12,355		)	—		414,233
Cash and cash equivalents, beginning of period	(2,050		)	329,655			32,702			—		360,307

Cash and cash equivalents, end of period	$	(877	)	$	755,070		$	20,347		$	—	$	774,540