<PAGE> 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, 1999
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)
<TABLE>
<S> <C>
DELAWARE 73-0679879
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
UTICA AT TWENTY-FIRST STREET, TULSA, OKLAHOMA 74114
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code (918) 742-5531
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
<S> <C>
Common Stock ($0.10 par value) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
</TABLE>
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, 1999, the aggregate market value of the voting stock held
by non-affiliates was $964,657,219.
Number of shares of common stock outstanding at December 15, 1999:
49,642,750.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
1999 -- Parts I, II, and IV.
(2) Proxy Statement for Annual Meeting of Security Holders to be held March
1, 2000 -- Part III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN
THIS REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE
REGISTRANT'S FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS, PROJECTED
COSTS AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE
FORWARD-LOOKING STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS GENERALLY
CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY",
"WILL", "EXPECT", "INTEND", "ESTIMATE", "ANTICIPATE", "BELIEVE", OR "CONTINUE"
OR THE NEGATIVE THEREOF OR SIMILAR TERMINOLOGY. ALTHOUGH THE REGISTRANT BELIEVES
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE
CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THE REGISTRANT'S EXPECTATIONS ARE DISCLOSED IN MANAGEMENT'S DISCUSSION &
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION ON PAGES 10 THROUGH 17
IN REGISTRANT'S ANNUAL REPORT TO THE SHAREHOLDERS FOR FISCAL 1999 AND IN THE
REMAINDER OF THIS REPORT. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE REGISTRANT, OR PERSONS ACTING ON ITS BEHALF, ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. THE
REGISTRANT ASSUMES NO DUTY TO UPDATE OR REVISE ITS FORWARD-LOOKING STATEMENTS
BASED ON CHANGES IN INTERNAL ESTIMATES OR EXPECTATIONS OR OTHERWISE.
<PAGE> 3
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1999
PART I
Item 1. BUSINESS
Helmerich & Payne, Inc. (the "Registrant"), was incorporated under the
laws of the State of Delaware on February 3, 1940, and is successor to a
business originally organized in 1920. Registrant is primarily engaged 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
ownership, development, and operation of commercial real estate.
The Registrant is organized into three separate autonomous operating
divisions being contract drilling; oil & gas operations; 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, conducts their respective business through wholly
owned subsidiaries. Operating decentralization is balanced by a centralized
finance division, which handles all accounting, data processing, budgeting,
insurance, cash management, and related activities.
<PAGE> 4
Most of the Registrant's current exploration efforts are 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, Michigan, and Mississippi. Substantially all of the
Registrant's gas production is sold to and resold by its marketing subsidiary.
This subsidiary also purchases gas from unaffiliated third parties for resale.
The Registrant's domestic contract drilling is conducted primarily in
Oklahoma, Texas, and Louisiana, and offshore from platforms in the Gulf of
Mexico and offshore California. The Registrant has also operated during fiscal
1999 in six international locations: Venezuela, Ecuador, Colombia, Peru,
Argentina and Bolivia. In the second quarter of fiscal 2000, the Registrant
expects to operate a customer-owned offshore platform rig in Equatorial Guinea.
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 international areas. For its international operations, the Registrant
operates certain 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. The Registrant also drills for its own
oil and gas division. In South America, the Registrant's current customers
I - 2
<PAGE> 5
include the Venezuelan state petroleum company and major international oil
companies.
In fiscal 1999, Registrant received approximately 57% of its
consolidated revenues from the Registrant's ten largest contract drilling
customers. BP Amoco and Shell Oil Co., including their affiliates,
(respectively, "BPA" and "Shell") are the Registrant's two largest contract
drilling customers. The Registrant performs drilling services for BPA and Shell
on a world-wide basis. Revenues from drilling services performed for BPA and
Shell in fiscal 1999 accounted for approximately 18% and 12%, respectively, of
the Registrant's consolidated revenues for the same period. While the Registrant
believes that its relationship with all of these customers is good, the loss of
BPA or Shell or a simultaneous loss of several of its larger customers would
have a material adverse effect on the drilling subsidiary and the Registrant.
The Registrant provides drilling rigs, equipment, personnel, and camps
on a contract basis. These services are provided so that Registrant's customers
may explore for and develop oil and gas from onshore areas and from fixed
platforms in offshore areas. Each of the drilling rigs consists of engines,
drawworks, a mast, pumps, 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 land drilling rig may be moved from location to
location without modification to the rig. Conversely, a platform rig is
specifically designed to perform drilling operations upon a particular platform.
While a platform rig may be moved from its original platform, significant
expense is incurred to modify a platform rig for operation on each subsequent
I - 3
<PAGE> 6
platform. In addition to traditional platform rigs, Registrant operates self-
moving minimum space platform drilling rigs and drilling rigs to be used on
tension leg platforms. The minimum space rig is designed to be moved without the
use of expensive derrick barges. The tension leg platform rig allows drilling
operations to be conducted in much deeper water than traditional fixed
platforms. A helicopter rig is one that can be disassembled into component part
loads of approximately 4,000-20,000 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. 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.
The Registrant's drilling contracts are obtained through competitive
bidding or as a result of negotiations with customers, and sometimes cover
multi-well and multi-year projects. Each drilling rig operates under a separate
drilling contract. 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. The Registrant has previously performed contracts on a
combination "footage" and "daywork" basis, under which the Registrant charged 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. Also, the
I - 4
<PAGE> 7
Registrant has previously accepted "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. Registrant has not accepted a
"footage" or "turnkey" contract during fiscal 1999. The Registrant believes that
under current market conditions "footage" and "turnkey" contract rates do not
adequately compensate contractors for the added risks. The duration of the
Registrant's drilling contracts are "well-to-well" or for a fixed term.
"Well-to-well" contracts are cancelable at the option of either party upon the
completion of drilling at any one site. 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. However, the contracting parties have no
legal obligation to extend the contracts. Contracts generally contain renewal or
extension provisions exercisable at the option of the customer at prices
mutually agreeable to the Registrant and the customer. In most instances
contracts 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,
government owned petroleum companies are more frequently requesting that a
I - 5
<PAGE> 8
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, 1999, the
Registrant had 50 (40 land rigs and 10 platform rigs) of its rigs operating in
the United States and had management contracts for two customer-owned rigs.
During fiscal 1999, four land rigs and one platform rig were relocated
from the Registrant's operations in Venezuela to the Registrant's domestic
operations. In November of 1999, Registrant returned one of such land rigs to
Venezuela. In addition, one of the Registrant's older platform rigs was sold.
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. At the end of fiscal 1999, the Registrant owned and
operated 18 land drilling rigs in Venezuela with a utilization rate of 36% for
such fiscal year. The Registrant worked for the Venezuelan State Petroleum
Company during fiscal 1999, and revenues from this work accounted for
approximately 6% of the Registrant's consolidated revenues during the fiscal
year.
I - 6
<PAGE> 9
Registrant's rig utilization rate in Venezuela has decreased from
approximately 92% during the 1998 fiscal year to approximately 36% in fiscal
1999. This reduction in utilization is primarily due to curtailed production and
development activities resulting from a reduction in worldwide oil prices. At
this time, the Registrant is unable to predict future fluctuations in its
utilization rates during fiscal 2000.
The Venezuelan government, in early 1996, permitted foreign exploration
and production companies to acquire rights to explore for and produce oil and
gas in Venezuela. Registrant has performed contract drilling services in
Venezuela for six independent oil companies during fiscal 1999.
At the end of fiscal 1999, the Registrant owned and operated ten
drilling rigs in Colombia. The Registrant's utilization rate was 71% during
fiscal 1999. During fiscal 1999 the revenue generated by Colombian drilling
operations contributed approximately 10.8% of the Registrant's consolidated
revenues.
In addition to its operations in Venezuela and Colombia, the Registrant
in fiscal 1999 owned and operated four rigs in Ecuador, five rigs in Bolivia,
and two rigs in Argentina. In Ecuador, Bolivia and Argentina, the contracts are
with large international oil companies.
Drilling operations ended during 1999 on a joint venture platform rig
in Australia. The rig is owned 50% by the Registrant and 50% by Registrant's
equity affiliate, Atwood Oceanics, Inc.
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
I - 7
<PAGE> 10
primarily on a regional basis and may vary significantly by region at any
particular time. Land 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, safety and
environmental awareness.
Regulations and Hazards
The drilling operations of the Registrant are subject to the many
hazards inherent in the business, including blowouts and well fires. These
hazards could cause personal injury, suspend drilling operations, seriously
damage or destroy the equipment involved, and cause substantial damage to
producing formations and the surrounding areas.
The Registrant believes that it has adequate insurance coverage for
comprehensive general liability, public liability, property damage (including
insurance against loss by fire and storm, blowout, and cratering risks), workers
compensation and employer's liability. No insurance is carried against loss of
earnings or business interruption. The Registrant is unable to obtain
significant amounts of insurance to cover risks of underground reservoir damage;
however, the Registrant is generally indemnified under its drilling contracts
from this risk. The Registrant's present insurance coverage has been secured
I - 8
<PAGE> 11
through fiscal 2000. 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 2000 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
which 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, the
Registrant's future operations in certain areas may be conducted through
entities in which local citizens own interests and through entities (including
joint ventures) in which the Registrant holds only a minority interest, or
pursuant to arrangements under which the Registrant conducts operations under
contract to local entities. While the Registrant believes that neither operating
through such entities nor pursuant to such arrangements 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
I - 9
<PAGE> 12
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 1999, approximately 32% of the Registrant's consolidated
revenues were generated from the international contract drilling business. Over
95% of the international revenues were from Venezuela, Colombia, Bolivia,
Ecuador and Argentina. Exposure to potential losses from currency devaluation is
minimal in the above-mentioned countries except for Venezuela. 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 60% of the Registrant's invoice billings
are in U.S. dollars and the other 40% are in the local currency, the bolivar.
The Registrant is exposed to 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. In April of 1996, the bolivar
was again devalued when the government decided to abolish its fixed rate policy
and to allow a floating market exchange rate. During fiscal 1998, the Registrant
experienced losses of approximately US$2,204,000 and in fiscal 1999 it
experienced losses of US$712,000 as a result of the devaluation of the bolivar.
Registrant is unable to predict future devaluation in Venezuela. In the event a
25% to 50% devaluation would occur, the Registrant could experience potential
currency valuation losses ranging from approximately US$350,000 to US$600,000.
I - 10
<PAGE> 13
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. Any
such nationalization could result in Registrant's loss of all or a portion of
its assets and business in Venezuela.
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 liability arising from
pollution, except in certain cases of surface pollution. However, 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. Additional legislation or
regulation may reasonably be anticipated, and the effect thereof on operations
cannot be predicted.
I - 11
<PAGE> 14
OIL & GAS OPERATIONS
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, Michigan, Mississippi, and
the Rocky Mountain area.
The Registrant's exploration and production division includes seven
geographical exploitation teams comprised of geological, engineering, and land
personnel. These personnel primarily develop in-house oil and gas prospects as
well as review outside prospects and acquisitions for their respective
geographical areas. The Registrant believes that this structure allows each team
to gain greater expertise in its respective geographical area and reduces risk
in the development of prospects.
The Registrant continued its involvement in the Mountain Front play
during 1999, spending $10.2 million drilling and completing extensional and
development wells in both its Rocky and Kiowa Flats fields. In 1999, Registrant
drilled 13 wells, of which seven were completed as producing wells. Current
producing rates from the two fields are 63 MMCFD gross and 40 MMCFD net. The
Mountain Front area is located in Kiowa and Washita Counties, Oklahoma.
I - 12
<PAGE> 15
During fiscal 1998 and 1999, the Registrant has focused on developing
prospects using 3D seismic technology. Currently, the Registrant is involved in
3D surveys covering more than 850 square miles. Approximately 700 square miles
of land covered by such surveys is located near the Texas and Louisiana onshore
Gulf Coast. This is Registrant's first major exploration effort in the Gulf
Coast area. The following summarizes the Registrant's activities, during fiscal
1999, on the lands covered by these 3D surveys.
During fiscal 1999, the Registrant participated in or purchased three
3D seismic surveys covering approximately 185 square miles of lands in Jefferson
County, Texas. After successfully drilling four consecutive producing wells, the
Company extended these seismic surveys by approximately 42 square miles.
Registrant's working interests in the lands covered by this survey range from
54% to 66%. In addition, one well is currently being drilled in West Texas on
lands covered by a 65 square mile 3D survey.
Four wells have been drilled in Galveston County, Texas, based upon a
94 square mile 3D survey. Two of the wells were completed as producers. This 3D
survey was extended by 27 square miles during the 1999 fiscal year. Registrant's
working interests in this area range from 25% to 87%.
The Registrant recently completed the purchase of a 42% working
interest in a 50 square mile 3D survey in Calcasieu Parish, Louisiana. A wildcat
well is in the process of being completed. The purchase of a 35% working
interest in a 200 square mile 3D shoot in South Texas has also been finalized.
One wildcat well is currently being drilled on these lands.
The Registrant's exploration and development program has covered a
range of prospects, from shallow "bread and butter" programs to deep expensive,
high
I - 13
<PAGE> 16
risk/high return wells. During fiscal 1999, the Registrant participated in 49
development and/or wildcat wells, which resulted in new discoveries of
approximately 22.5 BCF of gas and 151,829 barrels of oil and condensate. The
Registrant participated in five additional development wells, which resulted in
the development of approximately 1.2 BCF of gas which was previously classified
as proved undeveloped or proved developed nonproducing reserves. A total of
$36,613,104 was spent in the Registrant's exploration and development program
during fiscal 1999. This figure includes $8,216,501 of geophysical expense, but
is exclusive of expenditures for acreage and acquisition of proved oil and gas
reserves. The Registrant's total company-wide acquisition cost for acreage in
fiscal 1999 was approximately $14.4 million.
The Registrant spent $88,997 for the acquisition of proved oil and gas
reserves during fiscal 1999. The reserves associated with these acquisitions
were 77,826 MCF.
The Registrant's fiscal 2000 exploration and production budget of
approximately $80 million is 70% greater than its actual exploration and
production expenditures in fiscal 1999. This increase is necessary to exploit
the additional amounts of acreage acquired in fiscal years 1998 and 1999.
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, price, 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
I - 14
<PAGE> 17
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 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 and development wells. The Registrant is of the opinion that the
natural gas market will continue to experience high volatility. This high
volatility (as evidenced by the mid-summer increase in natural gas prices, and
the subsequent price reductions during early November, 1999) is a result of ever
changing perceptions throughout the industry centered around supply and demand.
Pricing perceptions constantly change as members of the natural gas industry
weigh the impacts of decline in deliverability of domestic supply; increased use
of natural gas for electrical generation; continued U.S. economic growth;
increased usage and better management of natural gas storage; seasonal usage;
fuel switching; usage of gas as a feed stock; and importation of gas from Canada
and Mexico. Registrant presently believes that natural gas price volatility will
continue for the next three to five years as the natural gas industry reacts to
these factors. Long term pricing will obviously react to these short term
factors, as well as other considerations affecting supply/demand.
Historically, the Registrant has had no long-term sales contracts for
its crude oil and condensate production. The Registrant continues its 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 the best price in the area for crude oil production. During fiscal 1999, the
price that Registrant received
I - 15
<PAGE> 18
for the sale of its crude oil has steadily increased. Registrant's average per
barrel crude oil sales price in fiscal 1999 for each of the first through fourth
quarters was $11.26, $11.21, $15.77 and $19.67, respectively.
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 believes that it should continue to prepare for increased
exploration activity without committing to a definite drilling timetable. The
Registrant also believes that competition for the acquisition of gas producing
properties will continue. Considering the Registrant's conservative acquisition
strategy, the Registrant believes that it may be unable to acquire significant
proved developed producing reserves from third parties. The Registrant intends
to continue its review of properties in areas where the Registrant has
expertise. The Registrant's competitors include major oil companies, other
independent oil companies, and individuals. Many of these competitors have
financial resources, staffs, and facilities substantially larger than those of
the Registrant. The effect of these competitive factors on the Registrant cannot
be predicted.
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,
I - 16
<PAGE> 19
liens 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
compliance with existing federal, state and local laws, rules and regulations
will not
I - 17
<PAGE> 20
have a material adverse effect upon its capital expenditures, earnings or
competitive position.
Regulatory Controls
Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated under the Natural Gas Act ("NGA") and
the Natural Gas Policy Act of 1978 ("NGPA") and the regulations promulgated
thereunder.
The Natural Gas Wellhead Decontrol Act of 1989 amended both the price
and non-price decontrol provisions of the NGPA 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.
Commencing in April, 1992, the Federal Energy Regulatory Commission
("FERC") issued Order 636, Order 636-A, and Order 636-B (collectively, "Order
636") 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. 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. Order 636 and numerous related orders pertaining
to individual pipelines have been largely upheld by the Courts. However, certain
appeals remain pending, and the FERC continues to review and modify open access
regulations.
In particular, the FERC recently issued new rules and policies
pertaining to interstate pipeline certificates which require notification
I - 18
<PAGE> 21
of landowners affected by proposed pipeline construction, and which presume
incremental pricing is appropriate for new construction. The FERC also has
proposed rules governing short term transportation which, among other matters,
would eliminate cost-based regulation for such transportation, allow pipelines
to negotiate rates and terms of service, and require the allocation of all short
term pipeline capacity through a competitive auction process. In addition, the
FERC has requested comments on certain issues related to its regulation of long
term 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.
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. In recent years, the FERC has slightly narrowed its statutory tests
for establishing gathering status. A number of states have either enacted new
laws or are considering the adequacy of existing laws affecting gathering rates
and/or services. For example, in May, 1997, Kansas enacted new gathering
oversight legislation that, among other matters, requires reporting of gathering
prices and authorizes the Kansas Corporation Commission ("KCC") to oversee open
access on gathering systems to assure it is just, reasonable, and
non-discriminatory. Thus, natural gas gathering may receive greater regulatory
scrutiny by state agencies. In addition, the FERC has approved several transfers
by interstate pipelines of gathering facilities to unregulated gathering
companies, including affiliates. This could allow such companies to compete more
effectively with
I - 19
<PAGE> 22
independent gatherers. It is not possible at this time to predict the ultimate
effect of the 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 materially affected by
modification to the statutory criteria.
In February, 1994, the KCC issued an order which modified allowables
applicable to wells within the Hugoton Gas Field so that those proration units
upon which infill wells had been drilled would be assigned a larger allowable
than those units without infill wells. As a consequence of this order, the
Registrant has drilled 137 infill wells and believes that it will be necessary
in fiscal 2000 to drill an additional 3 infill wells at a total estimated cost
of $360,000.
In September, 1997, the FERC ruled that ad valorem tax levied by the
State of Kansas was not a severance tax within the meaning of Section 110 of the
NGPA. Therefore, to the extent that first sellers collected revenues in excess
of the maximum lawful price as a result of reimbursement of Kansas ad valorem
taxes, then first sellers would be required to make refunds with interest for
such excess revenues on tax bills rendered during the period October 4, 1983
through June 28, 1988. Based upon schedules provided to Registrant by certain
interstate pipelines, the total reimbursement obligation of all working interest
owners in Registrant-operated wells approximated $13 million as of November,
1997. During this period, Registrant estimated that its reimbursement obligation
totaled approximately $6.7 million, being approximately $2.7 million of
principal and $4.0 million of interest. Approximately 12.5% of such amount would
be owed by Registrant's royalty owners.
I - 20
<PAGE> 23
Neither the FERC nor Congress has provided the first sellers with any
generic relief on this issue. However, the FERC has permitted the filing of
individual adjustment proceedings by each first seller. Registrant has filed
such adjustment proceedings requesting that its ad valorem tax refund obligation
be reduced. The FERC has not ruled in any of Registrant's adjustment
proceedings.
During the period February through July, 1998, Registrant paid, under
protest, approximately $1,379,000 to four interstate pipelines as partial ad
valorem tax reimbursement and escrowed approximately $6,370,000 pending the
FERC's decision in Registrant's adjustment proceedings. The escrowed amount
includes Registrant's share of the amount of reimbursement obligation allegedly
owed by Registrant's royalty owners. The final outcome of this matter cannot be
predicted at this time.
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. The
I - 21
<PAGE> 24
Registrant has considered the effects of such federal income tax laws on its
operations and does not anticipate that there will be any material impact on the
capital expenditures, earnings or competitive position of the Registrant.
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 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
tenth 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, gathering services and processing for a
fee. During fiscal year 1999, HPESI's sales of third-party gas constituted
approximately 10% 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
I - 22
<PAGE> 25
three months to seven years. However, recent contracts have tended toward
shorter terms. The remainder of the Registrant's gas is sold under spot market
contracts having a duration of 30 days or less. For fiscal 2000, HPESI's term
gas sales contracts provide for the sale of approximately 16 BCF of gas at
prices which are indexed to market prices. 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-22 regarding the market, competition, and regulation of natural gas.
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 (93% 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 (64% 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.
Registrant has completed two phases of a three-phase renovation for
major existing tenants in Utica Square Shopping Center. This renovation
I - 23
<PAGE> 26
has resulted in a temporary occupancy reduction of approximately 4%. During
fiscal 2000, occupancy is expected to reach approximately 97%.
At the end of the 1999 fiscal year the Registrant owned 12 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. Three condominium units were sold
during fiscal 1999. Twelve 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 1999. Registrant has
leased approximately 29,000 square feet of office space in Tulsa and relocated
Registrant's oil and gas division from Registrant's office building to such
leased office space. The vacated space within Registrant's office building has
been used to accommodate the growth of the remaining segments of its businesses.
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 100%. The Registrant also owns approximately 1.5
acres of undeveloped land lying adjacent to such warehouses.
I - 24
<PAGE> 27
Registrant owns approximately 253.5 acres in Southpark consisting of
approximately 240.5 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
decreased from 100% to 96% due to the loss of one tenant. The Registrant
believes that a high quality office park, with peripheral commercial,
office/warehouse, and hotel sites, is the best development use for the remaining
land. However, no development plans are currently pending.
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 decreased from 96% to 93% during
fiscal 1999 due primarily to the loss of one 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. During fiscal 1999, occupancy has remained at 96%.
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 1999, occupancy has
remained at 100%. The second, called Maxim Place, consists of one
office/warehouse building containing
I - 25
<PAGE> 28
approximately 33,750 square feet and located on approximately 2.25 acres. During
fiscal 1999, occupancy has remained at 100%.
Registrant believes that the recent increase in demand for multi-tenant
warehouse space in the Tulsa market will continue. Registrant is unable to
determine how long this increase in demand will continue.
Competition.
The Registrant has numerous competitors in the multi-tenant leasing
business. The size and financial capacity of these competitors range from one
property sole proprietors to large international corporations. The primary
competitive factors include price, location and configuration of space.
Registrant's competitive position is enhanced by the location of its properties,
its financial capability and the long-term ownership of its properties. However,
many competitors have financial resources greater than Registrant and have more
contemporary facilities.
FINANCIAL
Information relating to Revenue and Operating Profit by Business
Segments may be found on pages 9 and 30 through 31 of the Registrant's Annual
Report to Shareholders for fiscal 1999, which is incorporated herein by
reference.
EMPLOYEES
The Registrant had 2,162 employees within the United States (16 of
which were part-time employees) and 1,278 employees in international
operations as of September 30, 1999.
Item 2. PROPERTIES
CONTRACT DRILLING
The following table sets forth certain information concerning the
Registrant's domestic drilling rigs as of September 30, 1999:
I - 26
<PAGE> 29
<TABLE>
<CAPTION>
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
- ----------- -------------- ------------- --------
<S> <C> <C> <C>
140 Medium Depth 10,000 Texas
158 Medium Depth 10,000 Texas
110 Medium Depth 12,000 Texas
156 Medium Depth 12,000 Texas
159 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
155 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
162 Medium Depth 16,000 Texas
164 Medium Depth 16,000 Texas
165 Medium Depth 16,000 Texas
166 Medium Depth 16,000 Texas
167 Medium Depth 16,000 Texas
168 Medium Depth 16,000 Texas
169 Medium Depth 16,000 Texas
108 Medium Depth 18,000 Gulf of Mexico
79 Deep 20,000 Louisiana
80 Deep 20,000 Texas
89 Deep 20,000 Texas
91 Deep 20,000 Gulf of Mexico
92 Deep 20,000 Oklahoma
94 Deep 20,000 Texas
98 Deep 20,000 Oklahoma
122 Deep 20,000 Louisiana
203 Deep 20,000 Gulf of Mexico
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 Alabama
73 Very Deep 30,000 Texas
100 Very Deep 30,000 Gulf of Mexico
105 Very Deep 30,000 Gulf of Mexico
106 Very Deep 30,000 Gulf of Mexico
107 Very Deep 30,000 Gulf of Mexico
157 Very Deep 30,000 Texas
161 Very Deep 30,000 Texas
163 Very Deep 30,000 Louisiana
201 Very Deep 30,000 Gulf of Mexico
202 Very Deep 30,000 Gulf of Mexico
204 Very Deep 30,000 Gulf of Mexico
</TABLE>
I - 27
<PAGE> 30
The following table sets forth information with respect to the
utilization of the Registrant's domestic drilling rigs for the periods
indicated:
<TABLE>
<CAPTION>
Years ended September 30,
-----------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of rigs owned at end of
period 41 41 38 46 50
Average rig utilization rate
during period (1) 71% 82% 88% 95% 75%
</TABLE>
(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 as of September 30, 1999:
<TABLE>
<CAPTION>
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- ------------- --------
<S> <C> <C> <C>
14 Workover/drilling 6,000 Venezuela
19 Workover/drilling 6,000 Venezuela
20 Workover/drilling 6,000 Venezuela
171 Medium Depth 16,000 Bolivia
172 Medium Depth 16,000 Bolivia
22 Medium Depth (Heli Rig) 18,000 Ecuador
23 Medium Depth (Heli Rig) 18,000 Colombia
132 Medium Depth 18,000 Ecuador
176 Medium Depth 18,000 Ecuador
121 Deep 20,000 Venezuela
173 Deep 20,000 Bolivia
45 Deep 26,000 Venezuela
82 Deep 26,000 Venezuela
83 Deep 26,000 Venezuela
117 Deep 26,000 Venezuela
123 Deep 26,000 Bolivia
138 Deep 26,000 Ecuador
148 Deep 26,000 Venezuela
160 Deep 26,000 Venezuela
170 Deep (Heli Rig) 26,000 Venezuela
113 Very Deep 30,000 Venezuela
115 Very Deep 30,000 Venezuela
116 Very Deep 30,000 Venezuela
125 Very Deep 30,000 Colombia
127 Very Deep 30,000 Venezuela
128 Very Deep 30,000 Venezuela
129 Very Deep 30,000 Venezuela
133 Very Deep 30,000 Colombia
134 Very Deep 30,000 Colombia
135 Very Deep 30,000 Colombia
136 Very Deep 30,000 Colombia
150 Very Deep 30,000 Venezuela
</TABLE>
I - 28
<PAGE> 31
<TABLE>
<CAPTION>
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- ------------- --------
<S> <C> <C> <C>
151 Very Deep 30,000 Colombia
152 Very Deep 30,000 Colombia
153 Very Deep 30,000 Colombia
174 Very Deep 30,000 Argentina
175 Very Deep 30,000 Bolivia
177 Very Deep 30,000 Argentina
139 Super Deep 30,000+ Colombia
</TABLE>
<TABLE>
Joint Venture Rig:
- ------------------
<S> <C> <C> <C>
200 Deep 20,000 JV w/Atwood Australia
</TABLE>
The following table sets forth information with respect to the
utilization of the Registrant's international drilling rigs for the periods
indicated:
<TABLE>
<CAPTION>
Years ended September 30,
----------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of rigs owned at end of
period 35 36 39 44 39
Average rig utilization rate
during period (1) 84% 85% 91% 88% 53%
</TABLE>
(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 located
within the continental United States.
Crude Oil Sales
The Registrant's net sales of crude oil and condensate for the fiscal
years 1997 through 1999 are shown below:
<TABLE>
<CAPTION>
Average Sales Average Lifting
Year Net Barrels Price per Barrel Cost per Barrel
---- ----------- ---------------- ---------------
<S> <C> <C> <C>
1997 985,633 $20.77 $6.98
1998 701,180 $14.74 $7.40
1999 649,370 $14.60 $7.02
</TABLE>
I - 29
<PAGE> 32
Natural Gas Sales
The Registrant's net sales of natural and casinghead gas for the three
fiscal years 1997 through 1999 are as follows:
<TABLE>
<CAPTION>
Average Sales Average Lifting
Year Net MCF Price per MCF Cost per MCF
---- ------- ------------- ---------------
<S> <C> <C> <C>
1997 40,463,374 $2.23 $0.3213
1998 42,862,300 $2.04 $0.3110
1999 44,240,332 $1.83 $0.3300
</TABLE>
Following is a summary of the net wells drilled by the Registrant for
the fiscal years ended September 30, 1997, 1998, and 1999:
<TABLE>
<CAPTION>
Exploratory Wells Development Wells
------------------ --------------------
1997 1998 1999 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Productive 0.500 1.910 2.917 39.239 29.614 13.846
Dry 8.459 2.900 2.615 1.136 1.310 4.502
</TABLE>
On September 30, 1999, the Registrant was in the process of drilling or
completing three gross or 2.868 net wells.
I - 30
<PAGE> 33
Acreage Holdings
The Registrant's holdings of acreage under oil and gas leases, as of
September 30, 1999, were as follows:
<TABLE>
<CAPTION>
Developed Acreage Undeveloped Acreage
---------------------- ----------------------
Gross Net Gross Net
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Arkansas 3,068.23 1,725.11 -0- -0-
Colorado -0- -0- 320.00 160.00
Kansas 121,983.07 85,662.60 16,603.87 14,422.30
Louisiana 1,584.77 910.66 7,099.56 2,275.77
Michigan -0- -0- 13,684.68 13,281.84
Montana 2,037.19 423.37 3,428.95 984.37
Nebraska 480.00 168.00 -0- -0-
Nevada -0- -0- 5,264.04 5,064.04
New Mexico 1,002.91 99.54 121.88 40.22
North Dakota 200.00 11.52 -0- -0-
Oklahoma 129,722.88 50,880.80 13,207.79 8,211.65
Texas 94,184.45 42,833.35 284,001.91 69,756.18
Wyoming -0- -0- 440.00 105.59
---------- ---------- ---------- ----------
Total 354,263.50 182,714.95 344,172.68 114,301.96
</TABLE>
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. As
shown in the above table, the Registrant has a significant portion of its
undeveloped acreage in Texas, with five major prospects accounting for 39,700
net acres. The average minimum remaining term of leases in these five prospects
is approximately 30 months.
I - 31
<PAGE> 34
Productive Wells
The Registrant's total gross and net productive wells as of September
30, 1999, were as follows:
<TABLE>
<CAPTION>
Oil Wells Gas Wells
------------ ------------
Gross Net Gross Net
----- --- ----- ---
<S> <C> <C> <C> <C>
3,577 178 962 439
</TABLE>
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 23 through 34 of the Registrant's Annual Report to
Shareholders for fiscal 1999, "Notes to Consolidated Financial Statements" and
"Note 14 Supplementary Financial Information for Oil and Gas Producing
Activities."
Estimates of oil and gas reserves, future net revenues, and present
value of future net revenues were audited by Lee Keeling and Associates, Inc.,
15 East 5th Street, Suite 3500, Tulsa, Oklahoma 74103. 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.
REAL ESTATE OPERATIONS
See Item 1. BUSINESS, pages I-23 through I-26.
STOCK
As of December 15, 1999:
The Registrant owned 312,546 shares of the common stock of SUNOCO, Inc.
and 184,500 shares of Kerr McGee Corporation which the Registrant received in a
stock merger for Registrant's 500,000 shares of Oryx Energy Company, Inc.
The Registrant owned 3,000,000 shares of the common stock of Atwood
Oceanics, Inc., a Houston, Texas based company engaged in offshore contract
drilling. The Registrant owns approximately 22% of Atwood.
I - 32
<PAGE> 35
The Registrant owned 1,480,000 shares of the common stock of
Schlumberger, Ltd.
The Registrant owned 240,000 shares of the common stock of Phillips
Petroleum Company, Inc.
The Registrant owned 1,000,000 shares of the common stock of Occidental
Petroleum Corporation, Inc.
The Registrant owned 175,000 shares of the common stock of Banc One
Corporation.
The Registrant owned 225,000 shares of the common stock of ONEOK Inc.
The Registrant owned 150,000 shares of the common stock of Citrix
Systems, Inc.
The Registrant owned 190,000 shares of the common stock of Legato
Systems, Inc.
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 - 33
<PAGE> 36
<TABLE>
<S> <C>
W. H. Helmerich, III, 76 Director since 1949; Chairman of the Board
Chairman of the Board since 1960
Hans Helmerich, 41 Director since 1987; President and Chief
President Executive Officer since 1989
George S. Dotson, 58 Director since 1990; Vice President,
Vice President Drilling since 1977 and President and
Chief Operating Officer of Helmerich &
Payne International Drilling Co. since 1977
Douglas E. Fears, 50 Vice President, Finance, since 1988
Vice President
Steven R. Mackey, 48 Secretary since 1990; Vice President and
Vice President and General Counsel since 1988
Secretary
Steven R. Shaw, 48 Vice President, Production, since 1985;
Vice President Vice President, Exploration and Production
since 1996
Gordon K. Helm, 46 Chief Accounting Officer of the Registrant;
Controller Controller since December 10, 1993
</TABLE>
I - 34
<PAGE> 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:
<TABLE>
<CAPTION>
1998 1999
----------------- -----------------
Quarter High Low High Low
------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
First 44.97 31.06 24.50 16.75
Second 33.19 24.56 23.94 16.06
Third 33.25 21.56 26.75 20.38
Fourth 24.38 16.25 30.19 23.00
</TABLE>
The Registrant paid quarterly cash dividends during the past two years
as shown in the following table:
<TABLE>
<CAPTION>
Paid per Share Total Payment
----------------- -------------------------
Fiscal Fiscal
----------------- -------------------------
Quarter 1998 1999 1998 1999
------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C>
First $0.065 $0.070 $3,256,874 $3,457,626
Second 0.070 0.070 3,519,195 3,459,168
Third 0.070 0.070 3,521,332 3,464,109
Fourth 0.070 0.070 3,504,269 3,468,377
</TABLE>
The Registrant paid a cash dividend of $0.07 per share on December 1,
1999, to shareholders of record on November 15, 1999. Payment of future
dividends will depend on earnings and other factors.
As of December 15, 1999, there were 1,306 record holders of the
Registrant's common stock as listed by the transfer agent's records.
II - 1
<PAGE> 38
Item 6. SELECTED FINANCIAL DATA
The Five-year Summary of Selected Financial Data described below
excludes results of Natural Gas Odorizing, Inc. ("NGO") operations. Registrant,
on August 30, 1996, sold its wholly-owned subsidiary, NGO, to Occidental
Petroleum Corporation.
<TABLE>
<CAPTION>
Five-year Summary of Selected Financial Data
-------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales, operating,
and other revenues $306,721 $393,255 $517,859 $636,640 $564,319
Income from con-
tinuing operations 5,788 45,426 84,186 101,154 42,788
Income from con-
tinuing operations
per common share:
Basic 0.12 0.92 1.69 2.03 0.87
Diluted 0.12 0.91 1.67 2.00 0.86
Total assets 707,061 821,914 1,033,595 1,090,430 1,109,699
Long-term debt -0- -0- -0- 50,000 50,000
Cash dividends
declared per
common share 0.25 0.255 0.26 0.275 0.28
</TABLE>
II - 2
<PAGE> 39
The following Five-year Summary of Selected Financial Data includes
only the results of NGO operations.
<TABLE>
<CAPTION>
Five-year Summary of Selected Financial Data for NGO
----------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Sales, operating,
and other revenues $19,055 $19,540 $ -0- $ -0- $ -0-
Income from discon-
tinued operations 3,963 3,090 -0- -0- -0-
Income from discon-
tinued operations
per common share:
Basic 0.08 0.06 -0- -0- -0-
Diluted 0.08 0.06 -0- -0- -0-
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Information required by this item may be found on pages 10 through 17,
Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 1999,
which is incorporated herein by reference.
Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item may be found on the following pages
of Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 1999,
which is incorporated herein by reference:
II - 3
<PAGE> 40
<TABLE>
<CAPTION>
Market Risk Page
----------- ----
<S> <C>
o Foreign Currency Exchange Rate Risk 12
o Commodity Price Risk 12-14
o Interest Rate Risk 17
o Equity Price Risk 17
</TABLE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item may be found on pages 18 through 34
in the Registrant's Annual Report to Shareholders for fiscal 1999, which is
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
II - 4
<PAGE> 41
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 1, 2000, to be filed with
the Commission not later than 120 days after September 30, 1999. See pages I-33
and I-34 for information covering the Registrant's Executive Officers.
Item 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 1, 2000, to be filed with the Commission not later than 120 days after
September 30, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 1, 2000, to be filed with the Commission not later than 120 days after
September 30, 1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 1, 2000, to be filed with the Commission not later than 120 days after
September 30, 1999.
III - 1
<PAGE> 42
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 1999.
2. 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 to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
3.2 By-Laws of the Registrant are incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
4.1 Rights Agreement dated as of January 8, 1996, between
the Registrant and The Liberty National Bank and
Trust Company of Oklahoma City, N.A. is incorporated
herein by reference to the Registrant's Form 8- A,
dated January 17, 1996.
* 10.1 Incentive Stock Option Plan is incorporated herein by
reference to Exhibit 4.2 to the Registrant's
Registration Statement No. 33-16771 on Form S-8.
* 10.2 Form of Incentive Stock Option Plan Stock Option
Contract for the Incentive Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
* 10.3 Consulting Services Agreement between W. H.
Helmerich, III, and the Registrant effective
January 1, 1990, as amended is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
- -----------------------
* Compensatory Plan or Arrangement.
IV-1
<PAGE> 43
* 10.4 Restricted Stock Plan for Senior Executives of
Helmerich & Payne, Inc. is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
* 10.5 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 to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
* 10.6 Supplemental Retirement Income Plan for Salaried
Employees of Helmerich & Payne, Inc. is incorporated
herein by reference to Registrant's Annual Report on
Form 10-K to the Securities and Exchange Commission
for fiscal 1996.
* 10.7 Helmerich & Payne, Inc. 1990 Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
* 10.8 Form of Nonqualified Stock Option Agreement for
the 1990 Stock Option Plan is incorporated by
reference to Exhibit 99.2 to the Registrant's
Registration Statement No. 33-55239 on Form S-8,
dated August 24, 1994.
* 10.9 Supplemental Savings Plan for Salaried Employees of
Helmerich and Payne, Inc.
* 10.10 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated herein by reference to Registrant's
Registration Statement No. 333-34939 on Form S-8
dated September 4, 1997.
* 10.11 Form of Nonqualified Stock Option Agreement for
Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement on Form S-8
dated September 4, 1997.
* 10.12 Form of Restricted Stock Agreement for Helmerich &
Payne, Inc. 1996 Stock Incentive Plan is incorporated
by reference from Registrant's Annual Report on Form
10-K to the Securities and Exchange Commission for
fiscal 1997.
- -----------------------
* Compensatory Plan or Arrangement.
IV-2
<PAGE> 44
* 10.13 Helmerich & Payne, Inc. Non-Employee Directors
Stock Compensation Plan is hereby incorporated by
reference to Exhibit "B" of Registrant's Proxy
Statement dated January 27, 1997.
13. The Registrant's Annual Report to Shareholders for
fiscal 1999.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
(b) Report on Form 8-K
None.
- -----------------------
* Compensatory Plan or Arrangement.
IV-3
<PAGE> 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 /s/ Hans Helmerich
------------------------------
Hans Helmerich, President
(Chief Executive Officer)
Date: December 17, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
By /s/ William L. Armstrong By /s/ Glenn A. Cox
------------------------------ --------------------------------
William L. Armstrong, Director Glenn A. Cox, Director
Date: December 17, 1999 Date: December 17, 1999
By /s/ George S. Dotson By /s/ Hans Helmerich
------------------------------ --------------------------------
George S. Dotson, Director Hans Helmerich, Director and CEO
Date: December 17, 1999 Date: December 17, 1999
By /s/ W. H. Helmerich, III By /s/ L. F. Rooney, III
------------------------------ --------------------------------
W. H. Helmerich, III, Director L. F. Rooney, III, Director
Date: December 17, 1999 Date: December 17, 1999
By /s/ Edward B. Rust, Jr. By /s/ George A. Schaefer
------------------------------ --------------------------------
Edward B. Rust, Jr., Director George A. Schaefer, Director
Date: December 17, 1999 Date: December 17, 1999
By /s/ John D. Zeglis By /s/ Douglas E. Fears
------------------------------ --------------------------------
John D. Zeglis, Director Douglas E. Fears
Date: December 17, 1999 (Principal Financial Officer)
Date: December 17, 1999
By /s/ Gordon K. Helm
------------------------------
Gordon K. Helm, Controller
(Principal Accounting Officer)
Date: December 17, 1999
</TABLE>
<PAGE> 46
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation and Amendment
to Restated Certificate of Incorporation of the
Registrant are incorporated herein by reference to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
3.2 By-Laws of the Registrant are incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
4.1 Rights Agreement dated as of January 8, 1996, between
the Registrant and The Liberty National Bank and
Trust Company of Oklahoma City, N.A. is incorporated
herein by reference to the Registrant's Form 8- A,
dated January 17, 1996.
* 10.1 Incentive Stock Option Plan is incorporated herein by
reference to Exhibit 4.2 to the Registrant's
Registration Statement No. 33-16771 on Form S-8.
* 10.2 Form of Incentive Stock Option Plan Stock Option
Contract for the Incentive Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
* 10.3 Consulting Services Agreement between W. H.
Helmerich, III, and the Registrant effective
January 1, 1990, as amended is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
</TABLE>
- ----------------
* Compensatory Plan or Arrangement.
<PAGE> 47
<TABLE>
<S> <C> <C>
* 10.4 Restricted Stock Plan for Senior Executives of
Helmerich & Payne, Inc. is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
* 10.5 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 to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
* 10.6 Supplemental Retirement Income Plan for Salaried
Employees of Helmerich & Payne, Inc. is incorporated
herein by reference to Registrant's Annual Report on
Form 10-K to the Securities and Exchange Commission
for fiscal 1996.
* 10.7 Helmerich & Payne, Inc. 1990 Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
* 10.8 Form of Nonqualified Stock Option Agreement for
the 1990 Stock Option Plan is incorporated by
reference to Exhibit 99.2 to the Registrant's
Registration Statement No. 33-55239 on Form S-8,
dated August 24, 1994.
* 10.9 Supplemental Savings Plan for Salaried Employees of
Helmerich and Payne, Inc.
* 10.10 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated herein by reference to Registrant's
Registration Statement No. 333-34939 on Form S-8
dated September 4, 1997.
* 10.11 Form of Nonqualified Stock Option Agreement for
Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement on Form S-8
dated September 4, 1997.
* 10.12 Form of Restricted Stock Agreement for Helmerich &
Payne, Inc. 1996 Stock Incentive Plan is incorporated
by reference from Registrant's Annual Report on Form
10-K to the Securities and Exchange Commission for
fiscal 1997.
</TABLE>
- -------------------
* Compensatory Plan or Arrangement.
<PAGE> 48
<TABLE>
<S> <C> <C>
* 10.13 Helmerich & Payne, Inc. Non-Employee Directors
Stock Compensation Plan is hereby incorporated by
reference to Exhibit "B" of Registrant's Proxy
Statement dated January 27, 1997.
13. The Registrant's Annual Report to Shareholders for
fiscal 1999.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
</TABLE>
- ----------------
* Compensatory Plan or Arrangement.
<PAGE> 1
EXHIBIT 10.9
SUPPLEMENTAL SAVINGS PLAN
FOR SALARIED EMPLOYEES OF
HELMERICH & PAYNE, INC.
THIS SUPPLEMENTAL SAVINGS PLAN FOR EMPLOYEES OF HELMERICH & PAYNE, INC.
is hereby adopted under the following terms and conditions.
ARTICLE I
NAME AND PURPOSE OF PLAN
1.1 Name of Plan. This Plan shall be hereafter known as the
SUPPLEMENTAL SAVINGS PLAN FOR EMPLOYEES OF HELMERICH & PAYNE, INC.
1.2 Purpose. The Plan is established and maintained by Helmerich &
Payne, Inc. and certain of its subsidiaries for the purpose, in part, of
providing benefits for certain key management salaried employees of the Company
or any Subsidiary. This Plan shall be binding on the Company and any Subsidiary
whose employees are selected for participation in the Plan. It is intended that
this Plan be unfunded for federal income tax purposes and for purposes of Title
I of the Employee Retirement Income Security Act of 1974.
ARTICLE II
DEFINITIONS
2.1 Definitions. Where the following capitalized words and phrases
appear in this instrument, they shall have the respective meanings set forth
below unless a different context is clearly expressed herein.
(a) "Accounts" means the Supplemental Deferrals of
Compensation Account and the Supplemental Employer Matching Contribution
Account.
(b) "Beneficiary" means the person or persons (including,
without limitation, the trustees of any testamentary or inter vivos trust)
designated from time to time in writing by the Participant to receive payments
under the Plan after the death of the Participant, or, in the absence of any
such designation, or, in the event that such designated person or persons shall
predecease the Participant or shall not be in existence or shall otherwise be
unable to receive such payments, the person or persons designated under such
Participant's last will and testament, or, in absence of such designation, to
his estate. A Beneficiary Designation Form is attached hereto as Exhibit "A."
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any regulations relating thereto.
1
<PAGE> 2
(e) "Committee" means the committee appointed by the Company
pursuant to Article VII hereof to administer the Plan.
(f) "Company" means Helmerich & Payne, Inc., a corporation,
or, to the extent provided in Section 9.6 below, any successor corporation or
other entity resulting from a merger or consolidation into or with the Company
or a transfer or sale of substantially all of the assets of the Company.
(g) "Compensation" means the total regular base wages and
salary (prior to reduction for Supplemental Deferrals of Compensation under this
Plan) which would be paid to a Participant during a Plan Year and reported by
the Employer to the Internal Revenue Service on Form W-2 including (i) bonuses
and overtime, (ii) vacation pay, (iii) sick pay, (iv) compensation paid for boat
time travelling to drilling rigs, (v) shift differential; and (vi) any amount
deferred by a Participant pursuant to Section 401(k) of the Code with respect to
an employee benefit plan sponsored by the Employer or Section 125 of the Code
with respect to a "cafeteria plan" sponsored by the Employer, but excluding (i)
any amount recognized on the exercise of a stock option, upon becoming vested in
any stock award or grant or upon the premature disposition of stock acquired
under an inactive stock option, (ii) dividends received as compensation under
any stock award plan, (iii) relocation allowances, (iv) deferred compensation
except in the year included in income and except as provided under this Plan,
and (v) all allowances, reimbursements and other extraordinary sums paid for
travel, expenses or special payments for extraordinary services, (vi) coverall
and uniform allowances, (vii) phantom overrides, (viii) overseas housing
allowances, (ix) income attributable to group life insurance over $50,000, (x)
disability income paid under the Employer's long term disability plan, (xi)
bonuses or payments mandated by foreign laws, (xii) safety awards, (xiii)
expatriate foreign service premiums, (xiv) expatriate foreign service
allowances, and (xv) other fringe or welfare benefits of the Employer which are
includable in the income of the Participant such as executive medical
reimbursements, premium payments and tax reimbursement.
(h) "Disability" shall mean the inability of any Participant
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months. The permanence and degree of such impairment shall be
supported by medical evidence. In the event of a dispute, such shall be settled
by a majority decision of three physicians, one to be appointed by the
Committee, one by the Participant and the third by the two physicians previously
appointed.
(i) "Early Retirement Date" shall mean the date that a
Participant may elect to terminate employment on or after attaining the age of
at least 55 years and commence receipt of his benefit.
(j) "Employer" means the Company, its parent, or any
Subsidiary who is the employer of the Participant.
(k) "Investment Guidelines" means any of those investment
options which are described in Section 5.2 hereof.
2
<PAGE> 3
(l) "Limitations on Benefits" means the limitations imposed by
Sections 401(k), 401(m), 402(g), 401(a) s(17) and 415 of the Code on the accrual
of benefits under the Qualified Plan.
(m) "Normal Retirement Date" shall mean the date on which a
Participant attains the age of 65 years.
(n) "Participant" means a key management salaried employee of
the Company, its parent or any Subsidiary who (i) is a participant under the
Qualified Plan (or any successor or replacement retirement plan qualified under
Section 401(a) and 501(a) of the Code) and to whom or with respect to whom a
benefit is payable under the Qualified Plan, and (ii) has been selected by the
Committee to participate in the Plan. The initial participants are listed on
Exhibit "B" attached hereto.
(o) "Plan" means this "Supplemental Savings Plan for Salaried
Employees of Helmerich & Payne, Inc."
(p) "Plan Year" means the annual period commencing January 1
through December 31.
(q) "Qualified Plan" means the "Helmerich & Payne, Inc.
Employees' 401(k)/Thrift Plan" amended and restated effective January 1, 1987,
and each predecessor, successor or replacement employees retirement plan
qualified under Section 401(a) and 501(a) of the Code.
(r) "Qualified Plan Employer Matching Contribution" means the
total of all matching contributions made by the Employer for the benefit of a
Participant under and in accordance with the terms of the Qualified Plan in any
Plan Year.
(s) "Qualified Plan Employee Section 401(k) Contributions"
means the Section 401(k) Contributions deferred from the Participant's
Compensation as made by the Employer for the benefit of a Participant under and
in accordance with the terms of the Qualified Plan in any Plan Year.
(t) "Qualified Plan Employee Section 401(k) Contribution
Account" means the account established for a Participant under the Qualified
Plan and known as the Employee Section 401(k) Contribution Account.
(u) "Qualified Plan Employer Matching Contribution Account"
means the account established for a Participant under the Qualified Plan and
known as the Employer Matching Contribution Account.
(v) "Salary Reduction Agreement" means the written salary
reduction agreement entered into by a Participant with the Employer pursuant to
the Qualified Plan.
(w) "Subsidiary" means any corporation with 80% or more of its
voting common stock being owned by the Company.
3
<PAGE> 4
(x) "Supplemental Deferrals of Compensation" means the amount
of the salary reduction credit made by the Employer to the Participant's
Supplemental Deferrals of Compensation Account under and in accordance with the
terms of this Plan in any Plan Year.
(y) "Supplemental Deferrals of Compensation Account" means the
bookkeeping account maintained by the Employer under the Plan for a Participant
that is credited with amounts contributed under Section 4.1 of the Plan.
(z) "Supplemental Employer Matching Contribution" means the
amount of the matching credit made by the Employer to the Participant's
Supplemental Employer Matching Contribution Account under and in accordance with
the terms of the Plan in any Plan Year.
(aa) "Supplemental Employer Matching Contribution Account"
means the bookkeeping account maintained by the Employer under the Plan for a
Participant that is credited with amounts contributed under Section 4.3 of the
Plan.
(bb) "Supplemental Salary Reduction Agreement" means the
written salary reduction agreement entered into by a Participant and the Company
pursuant to this Plan. A form of Supplemental Salary Reduction Agreement is
attached as Exhibit "B."
(cc) "Trust" means the Helmerich & Payne, Inc. Supplemental
Benefits Trust which has been established and may be used by the Company, its
parent or any Subsidiary as the device for assisting the Company, its parent or
any Subsidiary in meeting their respective obligations under the Plan. The Trust
will hold Supplemental Deferrals of Compensation and Supplemental Employer
Matching Contributions and earnings on such amounts. The Trust and any assets
held by the Trust will conform to the terms of the model trust as described in
Revenue Procedure 92-64, as modified by the Internal Revenue Service.
(dd) "Trustee" or "Trustees" means the entity who has been
designated by the Company to serve as Trustee of the Trust.
2.2 Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. Any word appearing herein in the plural shall include
the singular, where appropriate, and likewise the singular shall include the
plural, unless the context clearly indicates to the contrary.
ARTICLE III
ELIGIBILITY
A Participant who (i) is eligible to receive a Qualified Plan Employee
Section 401(k) Contribution and Qualified Plan Employer Matching Contribution,
but the amount of such benefits are reduced by reason of the application of the
Limitations on Benefits, as in effect on the date of commencement of the
Qualified Plan Employee Section 401(k) Contributions and Qualified Plan Employer
Matching Contributions, or as in effect at any time thereafter, shall be
eligible to participate in the Plan and (ii) is among a group of key management
employees and who are included in a classification to coverage under this Plan
has been extended. A Participant shall only be able to participate in the Plan
for any Plan Year with respect to Supplemental
4
<PAGE> 5
Deferrals of Compensation and Supplemental Employer Matching Contributions only
if such Participant has made the maximum elective deferrals under Section 402(g)
of the Code or the maximum elective contributions permitted under the terms of
the Qualified Plan determined as of the first day of the applicable Plan Year.
ARTICLE IV
SUPPLEMENTAL CONTRIBUTIONS
4.1 Supplemental Deferrals of Compensation. The Supplemental Deferrals
of Compensation to be made by the Employer under this Plan for the benefit of a
Participant for any Plan Year shall be in an amount equal to the difference
between (a) "minus" (b) below where:
(a) is the Qualified Plan Employee Section 401(k)
Contributions which would have been allocated to the Qualified Plan Employee
Section 401(k) Contribution Account of the Participant for the Plan Year, as
determined by the Salary Reduction Agreement between the Participant and the
Company in effect for such Plan Year pursuant to the terms of the Qualified Plan
based on the assumption that the Participant elected to defer 15% of
Compensation (or a lesser percentage which has been designated by the
Participant under the Supplemental Salary Reduction Agreement) into the
Qualified Plan Employee Section 401(k) Contribution Account, without giving
effect to the Limitations on Benefits applicable to the Qualified Plan; and
(b) is the amount of the Qualified Plan Employee Section
401(k) Contributions actually elected by the Participant to the Qualified Plan
Employee Section 401(k) Contribution Account of the Participant for the Plan
Year determined as of the first day of the plan year applicable to the Qualified
Plan.
Provided, in order to be eligible to make Supplemental Deferrals of
Compensation into this Plan for any Plan Year, the Participant must have elected
to make the maximum Qualified Plan Employee Section 401(k) Contributions to the
Qualified Plan as provided under either Sections 401(k)(3) or 402(g) of the
Code, or as otherwise limited by the terms of the Qualified Plan. Provided
further, the calculation of whether the Participant has made the required
maximum contribution to the Qualified Plan will be made as of the beginning of
the applicable Plan Year to which such Supplemental Deferrals of Compensation
shall be applicable, and once such determination has been made for such Plan
Year, then, the Participant may make Supplemental Deferrals of Compensation into
this Plan. Provided further, in no event will any Qualified Plan Employee
Section 401(k) Contributions or any Qualified Plan Employer Matching
Contributions attributable to any Participant be deferred or contributed into
this Plan or the Trust from the Qualified Plan.
4.2 Supplemental Salary Reduction Agreement. As a condition to the
Company's obligation to make Supplemental Deferrals of Compensation for the
benefit of a Participant pursuant to Section 4.1 above, the Participant must
execute a Supplemental Salary Reduction Agreement in the form attached hereto as
Exhibit "C." The Supplemental Salary Reduction Agreement for any Plan Year shall
be made before the beginning of that Plan Year and shall remain in full force
and effect for subsequent Plan Years unless revoked by a Participant by written
instrument delivered to the Company prior to the beginning of the Plan Year in
which
5
<PAGE> 6
such revocation is to be effective. Provided, for the Plan Year commencing
January 1, 1993, this election may be made prior to December 1, 1993 and such
election shall be effective as of December 1, 1993 with respect to Supplemental
Deferrals of Compensation and Supplemental Employer Matching Contributions made
after December 1, 1993 through December 31, 1993 but based on compensation paid
during calendar year 1993. Also, the Participant may elect to terminate
Supplemental Deferrals of Compensation at any time during the Plan Year, and if
such election is made, the Participant may not reenter the Plan until the
beginning of the next Plan Year.
4.3 Supplemental Employer Matching Contributions. The Supplemental
Employer Matching Contribution to be made by the Company or any Subsidiary for
the benefit of a Participant for any Plan Year shall be in an amount equal to
the difference between (a) "minus" (b) below where:
(a) is the Qualified Plan Employer Matching Contribution which
would have been allocated to the Qualified Plan Employer Matching Contribution
Account of the Participant for the Plan Year based on the assumption that the
Participant elected to defer 5% of Compensation into the Qualified Plan Employee
Section 401(k) Contribution Account without giving effect to any reduction in
the Qualified Plan Employer Matching Contribution required by the Limitations on
Benefits applicable to the Qualified Plan; and
(b) is the amount of the Qualified Plan Employer Matching
Contribution which would be actually allocated to the Qualified Plan Employer
Matching Contribution Account of the Participant for the Plan Year.
4.4 Source of Contributions. For the purpose of this Plan, all
Supplemental Deferrals of Compensation will be a reduction of the Participant's
Compensation prior to the time such amounts would otherwise be actually deferred
into the Qualified Plan as an Employee Section 401(k) Contribution; and, all
Supplemental Employer Matching Contributions will be made by the Employer
without application of any amounts otherwise contributed by the Employer to the
Qualified Plan.
4.5 Establishment of Accounts. Supplemental Deferrals of Compensation
made for the benefit of a Participant for any Plan Year shall be credited to a
Supplemental Employee Contribution Account maintained under the Plan in the name
of such Participant within 30 days after the last day of such Plan Year.
Supplemental Employer Matching Contributions made for the benefit of a
Participant for any Plan Year shall be credited to a Supplemental Employer
Matching Contribution Account maintained under the Plan in the name of such
Participant at regular intervals during the Plan Year but no later than 30 days
after the last day of such Plan Year.
4.6 Form of Benefit. The Supplemental Retirement Benefit payable to a
Participant shall be paid in the form of a single lump sum payment. The
Participant's election under the Qualified Plan of any optional form of payment
of his Qualified Plan Retirement Benefit shall in no manner whatsoever be
applicable to or effect the payment of his Supplemental Retirement Benefit under
this Plan.
6
<PAGE> 7
4.7 Commencement of Benefit. Payment of the Supplemental Retirement
Benefit to a Participant shall commence on the same date as payment of the
Qualified Plan Retirement Benefit to the Participant commences but in no event
will payment commence later than 30 days following the Participant's termination
of employment or date of death, as the case may be.
4.8 Cost of Benefits. The cost of all benefits under this Plan shall be
paid by the Company; however, the Company may require reimbursement for the cost
of such benefits from either its parent or any Subsidiary whose employees have
been selected to participate in this Plan.
ARTICLE V
INVESTMENT OF SUPPLEMENTAL CONTRIBUTIONS
5.1 Form of Investment. All amounts equal to Supplemental Deferrals of
Compensation and Supplemental Employer Matching Contributions will be held by
the Trustee of the Trust to be administered in accordance with the terms and
provisions of the Trust. Amounts equivalent to Supplemental Deferrals of
Compensation will be contributed to the Trust within a reasonable period of time
following the deferral of such amounts by the Participant. Amounts equivalent to
Supplemental Employer Matching Contributions will be contributed at such time as
the Company elects but in no event will such amount be contributed later than 30
days following the end of the Plan Year. Amounts contributed to the Trust shall
be invested in accordance with the terms of the Trust; provided, however, in no
event shall the assets held in the Trust be invested in any securities issued by
the Company, its Subsidiaries or its parent. The Trustee will establish an
Account for each Participant which will be used only for recordkeeping purposes,
and no Participant shall have any ownership or other rights in such Accounts.
The Participants may elect to request the manner of deemed investment of their
Plan Accounts represented by Supplemental Deferrals of Compensation (but not
Supplemental Employer Matching Contributions) pursuant to such Investment
Guidelines as are provided by the Company as provided in Section 5.2 below. The
Company will establish methods for accounting for gains and losses with respect
to the Accounts in the Trust on a uniform and nondiscriminatory basis.
Supplemental Employer Matching Contributions will be credited to the
Participant's Supplemental Employer Matching Contribution Account.
5.2 Investment Guidelines. From time to time during the Plan Year the
Company will provide "investment guidelines" ("Investment Guidelines") to each
Participant and the Company will request each Participant to provide each such
Participant's request as to the manner in which each Participant's Supplemental
Deferrals of Compensation Account may be deemed to be invested during the
following Plan Year. After receipt of each Participants' request as to the
appropriate Investment Guidelines, the Company will develop an investment policy
(the "Policy") which may or may not be based on such Investment Guidelines, and
the Company will forward this Policy to the Trustee of the Trust who has the
responsibility to make all investment decisions with regard to the Trust assets
in accordance with the terms of the Policy.
7
<PAGE> 8
ARTICLE VI
DISTRIBUTIONS
6.1 Time and Form of Distributions. Except as provided under Section
6.3 below, all amounts credited to a Participant's Supplemental Employee
Contribution Account and Supplemental Employer Matching Contribution Account,
including gains and losses credited in accordance with Section 5.1 of the Plan
shall be distributed to or with respect to a Participant only upon termination
of the Participant's employment with the Employer for any reason including
death. All amounts distributable under the Plan shall be distributed in a single
lump sum payment within 30 days following the Participant's termination of
employment. Distributions may be made in cash or in kind, in the Company's sole
discretion.
6.2 Death of Participant. If a Participant should die before
distribution of the full amount of Supplemental Employee Contribution Account
and Supplemental Employer Matching Contribution Account has been made to him,
any remaining amounts shall be distributed to his Beneficiary.
6.3 Beneficiary Designation. The Company will provide a Beneficiary
Designation Form on which the Participant shall designate to whom payments
should be made in the event of his death. If there is no surviving Beneficiary,
then, the Company may make payment to the Participant's estate, his surviving
spouse or his surviving children as determined by the Company.
6.4 Termination of Employment - Vesting of Accounts.
(a) General. Unless sooner vested under this Plan, when a
Participant ceases to be an Employee, his benefit represented by Supplemental
Employer Matching Contribution Accounts shall be determined in accordance with
the following Subsection.
(b) Vesting. A Participant shall have vested and
nonforfeitable rights in all or part of his benefit represented by his
Supplemental Employer Matching Contribution Account, as set forth by the
percentages in the applicable table hereafter set forth:
<TABLE>
<CAPTION>
Years of Percent of Supplemental Employer
Credited Service Matching Contribution Account Vested
- ---------------- -------------------------------------
<S> <C>
Less than: 3 0%
At least: 3 20%
4 40%
5 60%
6 80%
7 100%
</TABLE>
With respect to a Participant who has any unvested portion of his
Supplemental Employer Matching Contribution Account, such Account shall be
forfeited and be returned to the Company.
8
<PAGE> 9
ARTICLE VII
ADMINISTRATION OF THE PLAN
7.1 Administration by the Company. The Company shall be responsible for
the general operation and administration of the Plan and for carrying out the
provisions thereof.
7.2 Allocation of Responsibility to the Committee for Plan
Administration. The Committee shall have only those specific powers, duties,
responsibilities and obligations as are specifically given them under the Plan
or the Trust. In general, the Company shall have the sole responsibility for
appointing and removing Committee members, as provided in Section 7.3 herein.
The Committee shall have the sole responsibility for the administration of this
Plan, which responsibility is specifically described in this Plan.
7.3 Appointment of Committee. The Plan shall be administered by a Human
Resources Committee consisting of at least three members of the Board who shall
be appointed by and serve at the pleasure of the Board. No member of the Human
Resources Committee shall be eligible to participate in the Plan.
7.4 Rules and Decisions. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate to administer the Plan.
7.5 Authorization of Benefit Payments". The Committee shall issue
directions to the Trustees concerning all Benefits which are to be paid from the
Plan.
ARTICLE VIII
AMENDMENT OR TERMINATION
8.1 Amendment or Termination. The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution.
8.2 Effect of Amendment or Termination No amendment to or termination
of the Plan shall directly or indirectly deprive any current or former
Participant of all or any portion of any Supplemental Deferrals of Compensation
or Supplemental Employer Matching Contribution payment of which has accrued
prior to the effective date of such amendment or termination or which would be
payable if the Participant terminated employment for any reason, including
death, on such effective date of amendment or termination. Further in the event
of the termination of this Plan by the Company, each Participant shall be 100%
vested and nonforfeitable in all of his benefit accrued as of such date of
termination.
9
<PAGE> 10
ARTICLE IX
GENERAL PROVISIONS
9.1 Funding. The Plan at all times shall be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Employer for payment of any benefits hereunder. No Participant or any other
person shall have any interest in any particular assets of the Company by reason
of the right to receive a benefit under the Plan and any such Participant or
other person shall have only the rights of a general unsecured creditor of the
Employer with respect to any rights under the Plan. No right or benefit under
this Plan shall in any manner be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by
creditors of any Participant or Beneficiary, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities, or torts of the person entitled to such benefit.
If any Participant under this Plan should become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber, or charge any right to a
benefit hereunder or under the Plan, then such right or benefit shall, in the
discretion of the Employer, cease and determine, and, in such event, the
Employer may hold or apply the same or any part thereof for the benefit of such
Participant, his or her spouse, children, or other dependents, or any of them,
in such manner and in such portion as the Employer, in its sole and absolute
discretion, may deem proper.
9.2 No Guaranty of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Employer or any other entity or person that the
assets of the Employer will be sufficient to pay any benefit hereunder.
9.3 No Enlargement of Employee Rights. No Participant shall have any
right to a benefit under the Plan except in accordance with the terms of the
Plan. The establishment of the Plan shall not be construed to give any
Participant the right to be retained in the employment service of the Employer.
9.4 Spendthrift Provision. No action under this Plan by the Employer or
its Board shall be construed as creating a trust, escrow or other secured or
segregated fund in favor of the Participant or any other persons otherwise
entitled to his Supplemental Employee Contribution Account or Supplemental
Employer Matching Contribution Account which is not otherwise subject to the
claims of unsecured creditors of the Company. The Plan constitutes a mere
promise by the Company to make benefit payments in the future. The status of the
Participant with respect to any liabilities assumed by the Employer hereunder
shall be solely those of unsecured creditors of the Employer and its
Subsidiaries who employ such Participant. Any asset acquired or held by the
Employer in connection with liabilities assumed by it hereunder, shall not be
deemed to be held under any trust (other than the Helmerich & Payne, Inc.
Supplemental Benefits Trust), escrow or other secured or segregated fund for the
benefit of the Participant or to be security for the performance of the
obligations of the Employer, but shall be, and remain a general, unpledged,
unrestricted asset of the Employer at all times subject to the claims of general
creditors of the Employer. The Company has created the Trust which relates to
the Plan. The assets in the Trust will at all times be subject to the unsecured
creditors of the Company.
10
<PAGE> 11
9.5 Incapacity of Recipient. If any person entitled to a benefit
payment under the Plan is deemed by the Company to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Company may provide for such payment or any
part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.
9.6 Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate subject
to the provisions of Section 8.2.
9.7 Unclaimed Benefit. Each Participant shall keep the Company informed
of his current address and the current address of his Beneficiary. The Company
shall not be obligated to search for the whereabouts of any person. If the
location of a Participant is not made known to the Company within three years
after the date on which payment of the Participant's Supplemental Employee
Contribution Account and Supplemental Employer Matching Contribution Account may
first be made, payment may be made as though the Participant had died at the end
of the three-year period. If, within one additional year after such three-year
period has elapsed, or, within three years after the actual death of a
Participant, the Company is unable to locate any designated Beneficiary of the
Participant, then, the Company shall have no further obligation to pay any
benefit hereunder to such Participant or designated Beneficiary or any other
person and such benefit shall be irrevocably forfeited.
9.8 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Employer nor any individual acting as an
employee or agent of the Employer shall be liable to any Participant, former
Participant, or any other person for any claim, loss, liability or expense
incurred in connection with the Plan unless such claim, loss, liability or
expense is due to the gross negligence or willful misconduct of the Employer.
9.9 Withholding and Other Employment Taxes. The Employer shall comply
with all federal and state laws and regulations respecting the withholding,
deposit and payment of any income or other taxes relating to any payments made
under this Plan.
9.10 Claims Procedure.
(a) The Company shall make all determinations as to the right
of any person to benefits under this Plan. If any request for benefits is wholly
or partially denied, the Company shall notify the person requesting such
benefits, in writing, of such denial, including in such notification the
following information:
(i) the specific reason or reasons for such denial;
11
<PAGE> 12
(ii) the specific references to the pertinent Plan
provisions upon which the denial is based;
(iii) a description of any additional material and
information which may be needed to clarify the request, including an
explanation of why such information is required; and
(iv) an explanation of the Plan's review procedure
with respect to denial of such benefits.
Provided, that any such notice to be delivered to any Participant or beneficiary
must be personally delivered to such Participant by obtaining a signed receipt
therefor or must be mailed by certified or registered mail to such Participant.
(b) Any Participant or beneficiary, whose claim has been
denied, may appeal to the Company for review of such denial by making a written
request therefor within 60 days after receipt of the notification of such
denial. Such Participant or beneficiary may examine documents pertinent to the
review and may submit to the Company written issues and comments. Within 60 days
after receipt of the request for review, the Company shall communicate to the
claimant, in writing, its decision, and the communication shall set forth the
reason for the decision and specific reference to those Plan provisions upon
which the decision is based.
9.11 Applicable Law. The Plan shall be construed and administered under
the laws of the State of Oklahoma.
9.12 Binding Effect. To the extent provided in this Plan, the Plan
shall be binding upon the Company and its successors and assigns.
9.13 Effective Date. The effective date of this Plan shall be
November 1, 1993.
HELMERICH & PAYNE, INC., a Delaware
corporation
ATTEST:
Steven R. Mackey By Hans C. Helmerich
- --------------------------------- ------------------------------------
Secretary President
[SEAL]
12
<PAGE> 13
EXHIBIT "A"
TO
SUPPLEMENTAL SAVINGS PLAN
FOR EMPLOYEES OF
HELMERICH & PAYNE, INC.
1. Hans C. Helmerich
2. Allen S. Braumiller
3. George S. Dotson
4. Douglas E. Fears
5. Jerome T. Johnson
6. Steven R. Mackey
7. Merrill A. Miller, Jr.
8. James L. Payne
9. Steven Shaw
10. Todd F. Sprague
11. Clint K. Whisenhunt
13
<PAGE> 14
EXHIBIT "B"
TO
SUPPLEMENTAL SAVINGS PLAN FOR
SALARIED EMPLOYEES OF HELMERICH & PAYNE, INC.
BENEFICIARY DESIGNATION FORM
The undersigned Participant hereby designates the following primary and
contingent beneficiaries to receive all benefits payable to him under the
Supplemental Savings Plan for Salaried Employees of Helmerich & Payne, Inc. (the
"Plan") in the event of his death:
Primary
-------
Name Address Relationship
- ---- ------- ------------
Contingent
----------
Name Address Relationship
- ---- ------- ------------
The undersigned Participant understands that during his lifetime, he
shall have the right at any time to select and change selection of the
beneficiary or beneficiaries by delivering to Helmerich & Payne, Inc. a request
for a change of beneficiaries. Upon receipt and acceptance by the Company, all
previous beneficiary designations shall be null and void.
---------------------------
Participant's Signature
Date:
-------------------------
ACCEPTED THIS ______ DAY OF _________________, 19__ BY ______________________ ON
BEHALF OF HELMERICH & PAYNE, INC.
HELMERICH & PAYNE, INC., a
Delaware corporation
ATTEST:
By
- --------------------------------- ------------------------------------
Secretary President
14
<PAGE> 15
EXHIBIT "C"
TO
SUPPLEMENTAL SAVINGS PLAN
FOR SALARIES EMPLOYEES OF
HELMERICH & PAYNE, INC.
SUPPLEMENTAL SALARY REDUCTION AGREEMENT
As a condition to receiving Supplemental Deferrals of Compensation
under the Supplemental Savings Plan for Salaried Employees of Helmerich & Payne,
Inc., I hereby agree that:
1. The Compensation otherwise payable to me by the Employer for the
period commencing _________________, 19__ and ending ________________, 19__,
shall be reduced by an amount of Supplemental Deferrals of Compensation
determined by electing one of the following:
__ 15% of Compensation
__ ________ (Enter 1% - 14%) of Compensation
2. I have received a copy of the Plan and agree to be bound by the
terms and provisions thereof.
Dated:
--------------------
------------------------------
Participant
"PARTICIPANT"
Dated: HELMERICH & PAYNE, INC., a
-------------------- Delaware corporation
By:
---------------------------
President
"COMPANY"
15
<PAGE> 1
HELMERICH & PAYNE, INC. ANNUAL REPORT FOR 1999
Revenue Breakdown for 1999
[CHART]
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998
--------------- ---------------
<S> <C> <C>
Revenues $ 564,319,000 $ 636,640,000
Net Income $ 42,788,000 $ 101,154,000
Diluted Earnings Per Share $ .86 $ 2.00
Dividends Paid Per Share $ .28 $ .275
Capital Expenditures $ 122,951,000 $ 266,299,000
Total Assets $ 1,109,699,000 $ 1,090,430,000
</TABLE>
<PAGE> 2
PRESIDENT'S LETTER
To the Co-owners of Helmerich & Payne, Inc.
At the closing of this century, dubbed by some "The Century of Oil," energy
continues to play a fascinating role on the world stage. Wars have been waged
over its control and strategic advantage. Great machines of commerce, defense,
and development have been fueled by its availability and abundance. It is hard
to imagine turning through the pages of history for the last hundred years
without the oil patch occupying a prominent place.
Your Company has been privileged to play a part of that story for eighty years.
Perhaps by now, we should be able to figure out where things are going. But true
to character, predicting the future of the energy business remains elusive.
Earlier this year, prices plunged to a fifty-year, inflation-adjusted low,
prompting seasoned observers, notably The Economist, to predict the specter of
prolonged pricing pain in a range of $5 per barrel. Within mere months, oil
prices threatened to reach a $30 threshold on the strength of OPEC solidarity
and recovering worldwide demand. These dramatic price swings reflect the
unprecedented shifts occurring in the industry at the change of the century.
What can be said as we move into the new millennium?
While no one is suggesting "The Century of Oil, Part Two," future worldwide
energy needs will continue to grow, even in a world of less steel and more
E-commerce.
The global economy's appetite for more energy will be met primarily from OPEC's
low cost supplies. While OPEC's market share will certainly grow, the non-OPEC
countries must still provide around half of the demand, and their major fields
continue to mature and deplete. New production will be supplied from expensive
frontier and deepwater exploration efforts.
2
<PAGE> 3
The need for new drilling is even more profound for declining natural gas
production. Over the next ten years, the United States is expected to burn half
again our current domestic reserves. Going forward, an emerging cycle of strong
supply and demand fundamentals is taking shape. Like always before, there will
be ups and downs and unforeseen surprises.
Predictably, financial strength and flexibility will be needed to cope with the
industry's cyclicality and constant change. Technology will continue to be a key
driver in delivering added value and reducing costs. Yet the challenge that will
determine the clearest strategic advantage is on the people side of the
business.
From the beginning, our Company has succeeded on the skill, experience, and
creative contributions of its people. At the same time, we operate in an
industry that has lost over half of its workforce during the last twenty years
and continues to suffer from an immeasurable drain of institutional knowledge.
Thankfully, that is not the case at Helmerich & Payne, Inc. We are stronger and
more talented throughout the organization than ever before. No annual report can
capture the enterprise value found in the culture, shared values, and loyalty of
its people. Perhaps that story is best told by customers, partners, suppliers,
and competitors who know us best and with whom we earn our reputation everyday.
As the calendar turns to the year 2000, your Company is confident and excited
about the future.
Sincerely,
/s/ HANS HELMERICH
Hans Helmerich
December 15, 1999 President
3
<PAGE> 4
DRILLING HELMERICH & PAYNE INTERNATIONAL DRILLING CO.
SUMMARY Helmerich & Payne International Drilling Co. is a leading drilling
contractor with a fleet of 89 drilling rigs worldwide. The Company owns 79 land
rigs, 40 of which were located in the United States at year-end, and 39 located
in the countries of Venezuela (18), Colombia (10), Bolivia (5), Ecuador (4), and
Argentina (2). Additionally, the Company owns 10 offshore platform rigs in the
Gulf of Mexico and jointly owns, with Atwood Oceanics, Inc., an offshore
platform rig located in Australia. Helmerich & Payne International Drilling Co.
also provides management services for two Exxon-owned platform rigs operating
offshore California.
Low oil prices had a considerable negative impact on the financial performance
of the Company, as well as on the contract drilling industry worldwide. Total
contract drilling revenues slipped eight percent in 1999, interrupting a string
of consecutive increases which began over a decade ago in 1987. Earnings before
interest, taxes, depreciation, and amortization (EBITDA) fell ten percent to
$127.3 million, and pre-tax operating profit fell to $60 million, from $86.7
million in 1998.
INTERNATIONAL OPERATIONS Rig utilization fell to an average of 53 percent in
1999, compared to 88 percent in 1998. The Company's Venezuelan operation was the
hardest hit during the year as rig activity fell to less than half of the
previous year's level, resulting in revenue and EBITDA declines of 55 percent
and 65 percent, respectively, in that country. As a leading member of OPEC,
Venezuela sharply curtailed production and development activities in its effort
to adhere to the revised quota arrangement set forth by the cartel. During 1999,
the Company transferred four land rigs and one offshore platform rig from
Venezuela to the United
4
<PAGE> 5
States. One of the land rigs and the platform rig began working in the U.S.
market during 1999, and another land rig is committed to stay in the U.S. Out of
the two remaining land rigs, one was returned to Venezuela in November after
refurbishment, and the other will return to the international market at the
earliest opportunity.
The Company's operations in Colombia also slowed, with revenues and EBITDA there
decreasing 23 percent and 18 percent, respectively. Improvements in the
Venezuelan and Colombian drilling markets will likely correlate highly with the
health of the world oil market. Additionally, both of these countries grapple
with considerable socioeconomic and political challenges, which could also have
a significant impact on the speed at which oil exploration and development
activities resume to levels the Company has experienced in years past.
Increased activity in Argentina and Bolivia helped offset part of the decline
experienced internationally in 1999. A significant portion of the drilling in
Argentina and Bolivia is aimed at developing natural gas supplies for growing
markets in the southern cone region of South America.
The Company completed the rig construction phase of Mobil's Jade project, which
made a significant contribution to revenues and EBITDA during 1999. Separately,
Helmerich & Payne International Drilling Co. was awarded a management contract
for the Jade offshore platform, which is scheduled to begin early in calendar
year 2000 in Equatorial Guinea, West Africa.
UNITED STATES OPERATIONS The weak crude oil market also factored into the U.S.
drilling market during
5
<PAGE> 6
1999, resulting in lower activity levels and dayrates. Utilization averaged 75
percent in 1999, compared with 95 percent in 1998. Lower activity, coupled with
decreased dayrates, caused domestic land drilling revenues and EBITDA to decline
by 26 percent and 64 percent, respectively. The U.S. land drilling market is
becoming increasingly skewed toward natural gas, so future activity levels are
likely to become more dependent on the price of this commodity and less on the
price of crude oil. During 1999, the Company's active rigs drilled almost
exclusively for natural gas.
The Company's ten offshore platform rigs remained highly active through most of
the year, averaging a utilization rate of 95 percent. Domestic offshore revenues
and EBITDA increased 24 percent and 39 percent, respectively, over the 1998
level.
OUTLOOK Two important factors drive the Company's operating strategy going
forward. First, financial strength and flexibility are important in an industry
where cycles are as severe as the one recently experienced. Second, customers
will increasingly demand better rig equipment and technology, and higher
standards for safety and operating performance in their drilling programs. Even
under depressed industry conditions, when the dayrate seems to reign as the
paramount component in a bid, the Company has quantified the significant impact
that quality performance can have on the ultimate cost of a well. Safety and
training programs, high standards for rig maintenance, and design, engineering,
and construction experience are in and of themselves sound investments. The
return on these investments comes in new projects, solid, long-term customer
relationships, a well-recognized reputation for quality performance, and the
highest rig utilization among our peers in key drilling markets.
6
<PAGE> 7
EXPLORATION & PRODUCTION HELMERICH & PAYNE, INC.
SUMMARY Helmerich & Payne, Inc. explores for and produces crude oil and natural
gas primarily in the states of Kansas, Louisiana, Oklahoma, and Texas.
Additionally, the Company provides natural gas marketing services through its
wholly-owned subsidiary, Helmerich & Payne Energy Services, Inc.
Helmerich & Payne, Inc. produced an average of 1,779 barrels of oil per day in
1999, compared with 1,921 barrels per day in 1998. Although oil prices fell in
1999 to their lowest point in many years, the average price the Company received
declined only slightly to $14.60 per barrel, from $14.74 per barrel in 1998.
Natural gas production increased to 121,206 thousand cubic feet (Mcf) per day,
from 117,431 Mcf per day. The average price received for natural gas fell ten
percent to $1.83 per Mcf, from $2.04 per Mcf in 1998. Reductions in both oil
production and natural gas prices pushed revenues down three percent, to $96
million. Additionally, higher depreciation, geophysical, and lease abandonment
expenses reduced operating profit to $11.2 million in 1999, compared with $28.1
million in 1998.
NATURAL GAS MARKETING Helmerich & Payne Energy Services, Inc. realized a three
percent increase in revenues and an 83 percent increase in operating profit in
1999. The dramatic increase in operating profit resulted from favorable forward
prices contracted on a small portion of marketed production prior to last year's
mild winter.
EXPLORATION ACTIVITIES Helmerich & Payne, Inc. participated in the drilling of
49 (23.9 net) wells in 1999, of which 33 (15.5 net) were completed as natural
gas wells, two (1.3 net) as oil wells, and 14 (7.1 net) as dry holes. A total of
15 (5.5 net) wells were exploratory and the remaining 34 (18.4 net) were
development wells. Proved reserves at year-end were 4.8 million barrels of oil
and 239.6 billion cubic feet (Bcf) of natural gas.
7
<PAGE> 8
Over the past two years, the Company has focused on prospect development
utilizing 3D seismic technology. The Company is presently involved in a number
of 3D seismic surveys covering over 850 square miles in Texas and Louisiana.
Three of these surveys encompassed 185 square miles in Jefferson County, Texas,
where the Company has an acreage position with working interests ranging from 54
percent to 66 percent. Four successful wells were drilled in this area during
1999. The Company also participated in 65 square miles of 3D seismic in West
Texas and a 94 square mile survey in Galveston County, Texas. Five wells were
drilled on these prospects in 1999; two of four Galveston County wells were
successful and the West Texas well was in progress at year-end. The Company also
participated in a 200 square mile, 3D seismic survey on another south Texas
prospect where a wildcat well was drilling at year-end. The Company could
potentially participate in more than 20 wells in its Texas prospect areas alone
during the first half of fiscal 2000.
In Louisiana, the Company purchased a 42 percent working interest in a prospect
in Calcasieu Parish, as well as 50 square miles of 3D seismic in the area. At
calendar year-end, the first wildcat well was nearing completion and a second
well was about to spud.
OUTLOOK Due to the nature of the exploration business, many projects can take
years to come to fruition. This makes it challenging to gauge the overall
success of an effort, particularly when looking at annual reserve replacement
and finding cost data. Over the past two years, the Company has invested almost
$35 million in acreage and seismic to develop a larger and more
technologically-focused portfolio of promising prospects. With this significant
amount of spadework completed, the Company is poised to participate in more
exploratory drilling in fiscal 2000 than it has in several years.
8
<PAGE> 9
Revenues and Operating Profit by Business Segments HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
SALES AND OTHER REVENUES:
Contract Drilling - Domestic .......... $ 213,647 $ 177,059 $ 140,294
Contract Drilling - International ..... 182,987 253,072 176,651
--------- --------- ---------
Total Contract Drilling ............ 396,634 430,131 316,945
--------- --------- ---------
Exploration and Production ............ 95,953 98,696 111,512
Natural Gas Marketing ................. 55,259 53,499 69,015
--------- --------- ---------
Total Oil and Gas Operations ....... 151,212 152,195 180,527
--------- --------- ---------
Real Estate ........................... 8,671 8,922 8,641
Other ................................. 7,802 45,392 11,746
--------- --------- ---------
Total Revenues ........................... $ 564,319 $ 636,640 $ 517,859
========= ========= =========
OPERATING PROFIT:
Contract Drilling - Domestic .......... $ 30,154 $ 35,817 $ 24,437
Contract Drilling - International ..... 29,845 50,834 43,118
--------- --------- ---------
Total Contract Drilling ............ 59,999 86,651 67,555
--------- --------- ---------
Exploration and Production ............ 11,245 28,088 55,191
Natural Gas Marketing ................. 4,418 2,418 3,363
--------- --------- ---------
Total Oil and Gas Operations ....... 15,663 30,506 58,554
--------- --------- ---------
Real Estate ........................... 5,338 5,371 5,615
--------- --------- ---------
Total Operating Profit ............. 81,000 122,528 131,724
--------- --------- ---------
OTHER:
Income from investments ............... 7,757 44,603 11,437
General and administrative expense .... (14,198) (11,762) (9,346)
Interest expense ...................... (6,481) (942) (4,212)
Corporate depreciation ................ (1,565) (1,280) (919)
Other corporate expense ............... (1,575) (927) (1,269)
--------- --------- ---------
Total Other ........................ (16,062) 29,692 (4,309)
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE ......... $ 64,938 $ 152,220 $ 127,415
========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
Note: See Note 13 (pages 31 and 32) for complete segment disclosure.
9
<PAGE> 10
Management's Discussion & Analysis of
Results of Operations and Financial Condition
HELMERICH & PAYNE, INC.
RISK FACTORS AND FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere herein. The Company's
future operating results may be affected by various trends and factors, which
are beyond the Company's control. These include, among other factors,
fluctuations in oil and natural gas prices, expiration or termination of
drilling contracts, currency exchange gains and losses, changes in general
economic conditions, rapid or unexpected changes in technologies, and uncertain
business conditions that affect the Company's businesses. Accordingly, past
results and trends should not be used by investors to anticipate future results
or trends.
With the exception of historical information, the matters discussed in
Management's Discussion & Analysis of Results of Operations and Financial
Condition include forward-looking statements. These forward-looking statements
are based on various assumptions. The Company cautions that, while it believes
such assumptions to be reasonable and makes them in good faith, assumed facts
almost always vary from actual results. The differences between assumed facts
and actual results can be material. The Company is including this cautionary
statement to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 for any forward-looking statements made
by, or on behalf of, the Company. The factors identified in this cautionary
statement are important factors (but not necessarily all important factors) that
could cause actual results to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
RESULTS OF OPERATIONS
All per share amounts included in the Results of Operations discussion are
stated on a diluted basis. Helmerich & Payne, Inc.'s net income for 1999 was
$42,788,000 ($0.86 per share), compared with net income of $101,154,000 ($2.00
per share) in 1998, and $84,186,000 ($1.67 per share) in 1997. Included in the
Company's net income, but not related to its operations, were after-tax gains
from the sale of investment securities of $1,562,000 ($0.03 per share) in 1999,
$23,417,000 ($0.46 per share) in 1998, and $2,870,000 ($0.06 per share) in 1997.
Also included is the Company's portion of income from its equity affiliate,
Atwood Oceanics, Inc., which was $0.07 per share in 1999, $0.11 per share in
1998, and $0.05 per share in 1997. Net income also included non-cash charges of
$6,237,000 ($0.13 per share) in 1999 and $3,356,000 ($0.07 per share) in 1998
related to the write-down of producing properties in accordance with 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.
10
<PAGE> 11
Consolidated revenues were $564,319,000 in 1999, $636,640,000 in 1998, and
$517,859,000 in 1997. The 11 percent decline from 1998 to 1999 was primarily due
to the $70,085,000 reduction in international contract drilling revenues. An
increase in domestic contract drilling revenues of $36,588,000 was offset by a
decline in investment revenues of $36,846,000. The 23 percent increase from 1997
to 1998 was due to higher dayrates and utilization in the contract drilling
division and higher capital gains from the sales of equity securities.
Significant increases in these areas helped offset lower revenues from the
Exploration and Production Division due to lower crude oil and natural gas
prices.
Revenues from investments were $7,757,000 in 1999, $44,603,000 in 1998, and
$11,437,000 in 1997. Included in revenues from investments were pre-tax gains
from the sale of investment securities of $2,547,000 in 1999, $38,421,000 in
1998, and $4,697,000 in 1997. Interest income was stable during 1999, 1998, and
1997, but dividend income declined slightly as the Company sold shares of
dividend paying stocks during the last two years.
Costs and expenses in 1999 were $499,381,000, 88 percent of revenues, compared
with 76 percent in 1998, and 75 percent in 1997. Operating costs, as a
percentage of operating revenues, were 60 percent in 1999, 58 percent in 1998,
and 55 percent in 1997.
Depreciation, depletion, and amortization (DD&A) expense increased by
approximately 24 percent in each of the last two years, due primarily to
increases in capital investment made by the Company during the last several
years. Also included in DD&A are SFAS 121 impairment charges of $10,059,000 in
1999 and $5,413,000 in 1998. There were no such charges in 1997.
General and administrative expenses increased by 21 percent to $14,198,000 in
1999, compared with $11,762,000 in 1998, and $9,346,000 in 1997. Higher overall
payroll costs and additional information technology staffing were primary
reasons for the increases the last two years. Because of the impact of foreign
taxes, income tax expense rose to 40 percent of pre-tax income in 1999, from 37
percent in 1998, and 36 percent in 1997.
Interest expense rose to $6,481,000 in 1999, from $942,000 in 1998, and
$4,212,000 in 1997. Outstanding bank loans rose at the end of 1998 and into the
first half of 1999 as the Company completed a substantial capital expenditure
program and, in 1998, repurchased some of its stock.
CONTRACT DRILLING DIVISION revenues, which include both domestic and
international segment revenues, declined eight percent to $396,634,000 during
1999, from $430,131,000 in 1998. Revenues for 1998 were up 36 percent over the
previous year. Division operating profit declined 31 percent to $59,999,000
during 1999, compared with a 28 percent increase from 1997 to 1998.
11
<PAGE> 12
Domestic segment revenues were $213,647,000 in 1999, $177,059,000 in 1998, and
$140,294,000 in 1997. Domestic segment operating profit was $30,154,000 in 1999,
$35,817,000 in 1998, and $24,437,000 in 1997. Domestic segment revenues were up
for 1999 mainly due to $40,790,000 of revenues from the Mobil Jade rig
construction project and increased offshore platform rig revenues. Domestic
operating profit was down because of lower land rig utilization and dayrates.
However, operating profit for 1999 was bolstered by several non-recurring items
such as income from the Jade construction project and from several capital
reimbursements from operators for new rig equipment on existing rigs.
Approximately $7.5 million of operating profit from these sources will likely
not occur in fiscal 2000. Domestic segment revenues and operating profit for
1998 increased over 1997 because of improved dayrates from both U.S. land and
offshore rig operations and higher utilization of the Company's offshore
platform rigs. Rig utilization for the U.S. land fleet was 69 percent in 1999,
94 percent in 1998, and 99 percent in 1997. Domestic platform rig utilization
was 95 percent in 1999, 99 percent in 1998, and 63 percent in 1997. Revenues and
operating profit for domestic operations could be lower in 2000 if rig demand
remains soft.
International segment revenues fell 28 percent to $182,987,000 during 1999, from
$253,072,000 in 1998. Revenues were $176,651,000 in 1997. Operating profit for
the international segment declined to $29,845,000 in 1999, from $50,834,000 in
1998, and $43,118,000 in 1997. International rig utilization averaged 53 percent
during 1999, 88 percent in 1998, and 91 percent in 1997. Revenues and operating
profit increased significantly from 1997 to 1998 due to additional rigs and
increased dayrates in Venezuela, Ecuador, Peru, and Bolivia. However, as crude
oil prices declined, rig activity and profitability declined rapidly during the
last half of 1999, particularly in Venezuela. It is anticipated that during
2000, international revenues and operating profit will be down substantially
compared with 1999, because of low rig utilization, dayrates and profit margins,
particularly in Venezuela and Colombia.
The Company has international operations in several South American countries.
With the exception of Venezuela, the Company's exposure to currency valuation
losses is immaterial due to the fact that virtually all billings and payments
are in U.S. dollars. In Venezuela, approximately 60 percent of the Company's
billings are in U.S. dollars and 40 percent are in bolivars, the local currency.
As a result, the Company is exposed to risks of currency devaluation in
Venezuela because of the bolivar denominated receivables. During 1999, the
Company experienced a loss of $711,566 due to devaluation of the bolivar,
compared with a $2,204,000 loss in 1998, and a $579,000 loss in 1997. The
Company anticipates additional devaluation losses in Venezuela during 2000, but
it is unable to predict the extent of either the devaluation, or its financial
impact. Should Venezuela experience a 25 to 50 percent devaluation, Company
losses could range from approximately $350,000 to $600,000. Using the same
assumptions in 1998 resulted in the Company estimating foreign currency losses
in Venezuela for 1999 ranging from $1,500,000 to $2,700,000.
OIL AND GAS DIVISION includes operating results from its Exploration and
Production segment, as depicted in the following table, and its Natural Gas
Marketing segment.
12
<PAGE> 13
<TABLE>
<CAPTION>
Exploration & Production 1999 1998 1997
-------- -------- ---------
<S> <C> <C> <C>
Revenues (in 000's) ....................... $ 95,953 $ 98,696 $ 111,512
Operating Profit (in 000's) ............... $ 11,245 $ 28,088 $ 55,191
Natural Gas Production (mmcf per day) ..... 121.2 117.4 110.9
Average Natural Gas Price (per mcf) ....... $ 1.83 $ 2.04 $ 2.23
Crude Oil Production (barrels per day) .... 1,779 1,921 2,700
Average Crude Oil Price (per barrel) ...... $ 14.60 $ 14.74 20.77
</TABLE>
Exploration and Production segment revenues and operating profit have declined
the past two years as both crude oil and natural gas prices have fallen. Natural
gas production increased slightly over the last two years, while oil production
has decreased substantially. Much of the decline in oil production was due to
the sale of the Company's, Austin Chalk production in the first quarter of 1998.
Operating profit has been impacted the last three years by the Company's efforts
to increase the quantity and quality of its exploration projects. Accordingly,
geophysical expense and reserve for capitalized costs of undeveloped leases have
increased. Also, the Company incurred pre-tax impairment charges as required by
SFAS 121 of $10,059,000 in 1999 and $5,413,000 in 1998. No impairment charges
were incurred in 1997.
During 2000, the Company intends to increase its capital spending over the
previous year in order to participate in more exploratory opportunities.
Therefore, operating profit for the coming year will be impacted by the results
of those efforts. Geophysical expense, reserve for capitalized costs of
undeveloped leases, and dry hole expense could be higher as a result of more
exploration activity. Also, it is difficult to predict the movement of crude oil
and natural gas prices and their impact on operating profit.
The Company's Natural Gas Marketing segment, Helmerich & Payne Energy Services,
Inc., (HPESI) derives most of its revenues from selling natural gas produced by
other unaffiliated companies. Total Natural Gas Marketing segment revenues were
$55,259,000 in 1999, $53,499,000 in 1998, and $69,015,000 in 1997. Operating
profit was $4,418,000 in 1999, $2,418,000 in 1998, and $3,363,000 in 1997. Most
of the natural gas owned and produced by the Exploration and Production segment
is sold through HPESI to third parties at variable prices based on industry
pricing publications or exchange quotations. Revenues for the Company's own
natural gas production are reported by the Exploration and Production segment
with the Natural Gas Marketing segment retaining a market-based fee from the
sale of such production. HPESI sells most of its natural gas with monthly or
daily contracts tied to industry market indices, such as Inside FERC Gas Market
Report. The Company, through HPESI, has natural gas delivery commitments for
periods of less than a year for approximately 35 percent of its total natural
gas production. At times, HPESI may enter into fixed price natural gas sales
contracts on a small portion (less than ten percent) of its natural gas sales
for periods of less than twelve months to guarantee a certain price. In 1999,
HPESI had approximately 2.3 percent of its natural gas sales portfolio dedicated
to such fixed price contracts. As of September 30, 1999, HPESI had fixed price
contracts for approximately 10 percent of its projected monthly sales
13
<PAGE> 14
for the months of November, 1999 through March, 2000, and fixed price contracts
for less than four percent of its projected sales for the remainder of fiscal
year 2000. There were no fixed price contracts in effect at September 30, 1998.
REAL ESTATE DIVISION revenues totaled $8,671,000 for 1999, $8,922,000 for 1998,
and $8,641,000 for 1997. Operating profit was $5,338,000 in 1999, $5,371,000 in
1998, and $5,615,000 in 1997. The general economy in Tulsa continued to grow
during the year resulting in occupancy rates, revenues, and operating profit
remaining strong. Revenues and operating profit for 1997 also reflected the sale
of a small parcel of land for a gain of $400,000. No material changes are
anticipated in the Real Estate Division in 2000.
YEAR 2000 COMPLIANCE
The Company's State of Readiness
THE FOLLOWING INFORMATION SHALL CONSTITUTE THE COMPANY'S "YEAR 2000 READINESS
DISCLOSURE" WITHIN THE MEANING OF THE YEAR 2000 INFORMATION READINESS ACT.
The Company has undertaken various initiatives in an attempt to ensure that its
hardware, software and equipment will function properly with respect to dates
before and after January 1, 2000. For this purpose, the phrase "hardware,
software and equipment" includes systems that are commonly thought of as
Information Technology ("IT") systems, as well as those Non-Information
Technology ("Non-IT") systems and equipment that include embedded technology. IT
systems include computer hardware and software, and other related systems.
Non-IT systems include certain oil and gas drilling and production equipment,
security systems and other miscellaneous systems. The Non-IT systems present the
greatest compliance challenge since identification of embedded technology is
difficult and because the Company is, to a great extent, reliant on third
parties for Non-IT compliance.
The Company has formed a Year 2000 ("Y2K") Project team that is chaired by the
Director of IT. The team includes IT staff, corporate staff and representatives
from the Company's business units. The Company has organized its compliance
efforts into a four-phase approach as follows:
Phase 1: Identification - Identify and inventory mission critical components
of Company operations and systems that may be affected.
Phase 2: Assessment - Determine which hardware, software and equipment must be
modified, upgraded or replaced.
Phase 3: Remediation - Modify, upgrade or replace non-compliant hardware,
software and equipment.
Phase 4: Testing - Fully test all IT systems which are material to the
Company's operations. Selectively test those Non-IT systems and
equipment which are material to the Company's operations.
For the purposes of the Y2K Project material items are those items the Company
believes to have a risk involving safety of individuals, damage to the
environment, material effect on revenues or material damage to property.
14
<PAGE> 15
The following represents the status of the Company's IT and Non-IT Y2K
Compliance:
<TABLE>
<CAPTION>
STATUS OF
IT COMPLETION
<S> <C>
o Core accounting and operational Phases 1, 2, 3 & 4
(mainframe) systems Completed
o Human Resources & Payroll Systems Phases 1, 2, 3 & 4
Completed
o Network Phases 1, 2, 3 & 4
Completed
o Desktop Computer Hardware Phases 1, 2, 3 & 4
Completed
o Standard Company Desktop
Computer Software Phases 1, 2, 3 & 4
Completed
o Business Unit User Software Phases 1, 2, 3 & 4
Completed
NON-IT
o Systems and Equipment Phases 1, 2, 3 & 4
Completed
</TABLE>
As reflected in the above table, the Company has completed the process of
identifying embedded technology and determining the extent to which such
technology is Y2K compliant. As part of this process, the Company mailed letters
to its significant vendors and service providers to confirm that the products
and services purchased from or by such entities are Y2K compliant. Also, the
Company has obtained information from significant customers regarding the extent
to which Y2K issues may affect the amount of business the Company currently
conducts with such customers. As a result of these activities, the Company
conducted discussions with the vendors or manufacturers of such mission critical
equipment to determine the most effective solutions to Y2K compliance issues.
The Cost to Address Y2K Issues
The cost of the Company's Y2K compliance Project was approximately $800,000
which was well below the $1,000,000 budgeted for this purpose. This cost
included costs of employees working on the Y2K Project. Costs for new hardware
and equipment are being capitalized, and other costs were expensed as incurred.
The costs relating to the Company's Y2K Project were paid from the Company's
general funds. This expenditure mainly relates to repair, upgrading or
replacement of existing software and hardware, and solicitation and evaluation
of information received from significant vendors, service providers, or
customers. The total cost included the costs of independent consultants engaged
to review selected Y2K issues.
The Company's Contingency Plan
The Company has refined its contingency plans on a business unit and
departmental basis. These contingency plans include, but are not limited to:
backup and recovery procedures for IT Systems; remediation of existing systems
or equipment; installation
15
<PAGE> 16
of new systems or equipment; stockpiling of Y2K compliant goods and supplies;
stockpiling old equipment which does not contain embedded technology;
replacement of current services with temporary manual processes; finding
non-technological alternatives or sources for information; or identification of
alternative customers, suppliers or outsourcing subcontractors who stand ready
to receive or provide critical goods, equipment and services. The Company has
engaged a computer recovery services contractor as a source of alternative
computer systems as part of its contingency plan.
The Risks of The Company's Y2K Issues
The Company completed an analysis of the operational problems and costs
(including loss of revenues) that would be reasonably likely to result from the
failure by the Company and certain third parties to complete efforts necessary
to achieve Y2K compliance on a timely basis. The Company presently believes that
the Y2K issue will not pose significant operational problems for the Company.
However, if all significant Y2K issues were not properly identified or assessed,
there can be no assurance that the Y2K issue will not materially and adversely
impact the Company's results of operations, liquidity and financial condition or
materially and adversely affect the Company's relationships with customers,
vendors, or others. Additionally, there can be no assurance that the lack of Y2K
compliance by other entities will not have a material and adverse impact on the
Company's operations or financial condition.
The preceding Y2K disclosure is based upon certain forward-looking information.
This forward-looking information is based on Management's good faith estimates.
These estimates were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third-party plans and
other factors. Due to the general uncertainty inherent in Y2K issues, including
the uncertainty of third party Y2K compliance, the Company cannot ensure its
ability to timely and cost-effectively resolve problems associated with Y2K
issues that may affect its operations and business, or expose it to third party
liability.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital spending for 1999 was $122,951,000, less than half of 1998
capital expenditures of $266,299,000, and 24 percent less than the $161,177,000
spent in 1997. Net cash provided from operating activities for those same time
periods were $158,694,000 in 1999, $113,533,000 in 1998, and $165,568,000 in
1997. In addition to the net cash provided by operating activities, the Company
also generated net proceeds from the sale of portfolio securities of $2,803,000
in 1999, $73,949,000 in 1998, and $8,557,000 in 1997. In June 1998, the board of
directors authorized the Company to repurchase up to 2,000,000 shares of its own
stock during a period of one year. A total of 999,100 shares were repurchased in
1998 at a total cost of $19,112,000. The Company plans to increase capital
spending during 2000 in its Exploration and Production segment. The increase
will likely be offset by a decrease in capital spending in the Company's
Contract Drilling Division. The potential for new contract drilling projects
requiring large amounts of capital is difficult to predict at this time.
16
<PAGE> 17
Due to the need for additional funds during 1998 resulting from a reduction in
operating cash flow, a significant increase in capital expenditures, and the
stock buyback program, the Company increased its available short-term lines of
credit and obtained long-term financing. On September 30, 1999, the Company had
$5 million in short-term debt borrowings, which had a weighted average maturity
of 19 days and a weighted average interest rate of approximately 5.73 percent.
As further described in Note 2 of Notes to Consolidated Financial Statements, in
October 1998, the Company obtained an additional $50 million in long-term debt
proceeds which was used to pay off a portion of its short-term borrowings. The
$50 million of long-term debt matures in October 2003. The interest rate on this
debt fluctuates based on 30-day London Interbank Offered Rate (LIBOR), however,
simultaneous to receiving the $50 million in long-term debt proceeds, the
Company entered into a $50 million interest rate swap agreement with a major
national bank. The swap effectively fixes the interest rate on this facility at
5.38 percent for the entire 5-year term of the note. The estimated fair value of
the interest rate swap is $2,574,000 at September 30, 1999. The Company's
interest rate risk exposure is limited to its short-term borrowings and results
predominately from fluctuations in short-term interest rates as measured by
30-day LIBOR. The Company generally borrows for 30-day time periods, and can fix
its interest rate for 30-day increments at spreads ranging from 35 to 50 basis
points over LIBOR.
The strength of the Company's balance sheet is substantial, with current ratios
for 1999 and 1998 at 2.2 and 1.5, respectively, and with total bank borrowings
only 5 percent of total assets at September 30, 1999. Additionally, the Company
manages a large portfolio of marketable securities that, at the close of 1999,
had a market value of $289,005,000, with a cost basis of $117,214,000. The
portfolio, heavily weighted in energy stocks, is subject to fluctuation in the
market and may vary considerably over time. The portfolio is marked to market on
the Company's balance sheet for each reporting period. During 1999, the Company
paid a dividend of $0.28 per share, or a total of $13,849,000, representing the
28th consecutive year of dividend increases.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Stock Portfolio Held by the Company
- --------------------------------------------------------------------------------
Number of
September 30, 1999 Shares Book Value Market Value
------------------ ---------- ---------- ------------
(in thousands, except share amounts)
<S> <C> <C> <C>
Occidental Petroleum Corporation .... 1,000,000 $ 23,775 $ 23,125
Atwood Oceanics, Inc. ............... 3,000,000 41,157 91,687
Schlumberger, Ltd. .................. 1,480,000 23,511 92,223
Sunoco, Inc. ........................ 312,546 3,192 8,556
Phillips Petroleum Company .......... 240,000 5,976 11,700
Bank One Corporation ................ 175,000 1,969 6,092
Kerr-McGee Corporation .............. 184,500 4,899 10,159
ONEOK, Inc. ......................... 225,000 2,751 6,820
Other ............................... 9,984 38,643
---------- -----------
Total ................... $ 117,214 $ 289,005
========== ===========
</TABLE>
17
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
HELMERICH & PAYNE, INC.
- ---------------------------
<TABLE>
<CAPTION>
ASSETS
September 30, 1999 1998
- ------------------------------------------------------------------------ ---------- ----------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 21,758 $ 24,476
Accounts receivable, less reserve of $2,908 and $1,908 ........ 99,598 119,395
Inventories ................................................... 25,187 25,401
Prepaid expenses and other .................................... 14,081 15,073
---------- ----------
Total current assets ................................. 160,624 184,345
---------- ----------
INVESTMENTS ............................................................ 238,475 200,400
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Contract drilling equipment ................................... 881,269 829,217
Oil and gas properties ........................................ 446,889 435,747
Real estate properties ........................................ 49,065 48,451
Other ......................................................... 71,139 65,120
---------- ----------
1,448,362 1,378,535
Less--Accumulated depreciation, depletion and amortization .... 757,147 686,164
---------- ----------
Net property, plant and equipment ......................... 691,215 692,371
---------- ----------
OTHER ASSETS ........................................................... 19,385 13,314
---------- ----------
TOTAL ASSETS ........................................................... $1,109,699 $1,090,430
---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
18
<PAGE> 19
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 1999 1998
----------- -----------
(in thousands,
except share data)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable .............................................................................. $ 25,704 $ 41,851
Accrued liabilities ........................................................................... 41,200 38,833
Notes payable ................................................................................. 5,000 44,800
----------- -----------
Total current liabilities ............................................................... 71,904 125,484
----------- -----------
NONCURRENT LIABILITIES:
Long-term notes payable ....................................................................... 50,000 50,000
Deferred income taxes ......................................................................... 116,588 103,469
Other ......................................................................................... 23,098 18,329
----------- -----------
Total noncurrent liabilities ............................................................ 189,686 171,798
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value, 80,000,000 shares authorized,
53,528,952 shares issued .................................................................... 5,353 5,353
Preferred stock, no par value, 1,000,000 shares authorized,
no shares issued ........................................................................... -- --
Additional paid-in capital .................................................................... 61,411 59,004
Retained earnings ............................................................................. 745,956 716,875
Unearned compensation ......................................................................... (4,487) (5,605)
Accumulated other comprehensive income ........................................................ 75,182 54,689
----------- -----------
883,415 830,316
Less treasury stock, 3,903,286 shares in 1999 and 4,146,120 shares in 1998, at cost ........... 35,306 37,168
----------- -----------
Total shareholders' equity .............................................................. 848,109 793,148
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...................................................... $ 1,109,699 $ 1,090,430
=========== ===========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
19
<PAGE> 20
CONSOLIDATED STATEMENTS OF INCOME
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
-------- -------- --------
(in thousands,
except per share amounts)
<S> <C> <C> <C>
REVENUES:
Sales and other operating revenues .......... $556,562 $592,037 $506,422
Income from investments ..................... 7,757 44,603 11,437
-------- -------- --------
564,319 636,640 517,859
-------- -------- --------
COSTS AND EXPENSES:
Operating costs ............................. 332,330 346,066 276,094
Depreciation, depletion and amortization .... 109,167 88,350 71,691
Dry holes and abandonments .................. 11,727 11,572 7,783
Taxes, other than income taxes .............. 25,478 25,728 21,318
General and administrative .................. 14,198 11,762 9,346
Interest .................................... 6,481 942 4,212
-------- -------- --------
499,381 484,420 390,444
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE ............... 64,938 152,220 127,415
INCOME TAX EXPENSE ................................... 25,706 56,677 45,511
EQUITY IN INCOME OF AFFILIATE
net of income taxes ......................... 3,556 5,611 2,282
-------- -------- --------
NET INCOME ........................................... $ 42,788 $101,154 $ 84,186
======== ======== ========
EARNINGS PER COMMON SHARE:
BASIC ....................................... $ 0.87 $ 2.03 $ 1.69
DILUTED ..................................... $ 0.86 $ 2.00 $ 1.67
AVERAGE COMMON SHARES OUTSTANDING:
BASIC ....................................... 49,243 49,948 49,779
DILUTED ..................................... 49,817 50,565 50,561
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
20
<PAGE> 21
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Common Stock Additional
---------------------- Paid-in Unearned Retained
Shares Amount Capital Compensation Earnings
-------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, Sept. 30, 1996 ................ 53,529 $ 5,353 $ 47,734 $ $ 557,543
Comprehensive Income:
Net Income ............................ -- -- -- -- 84,186
Other comprehensive income,
net of tax unrealized gains on
available-for-sale securities ........ -- -- -- -- --
Comprehensive income ................... -- -- -- -- --
Cash dividends ($.26 per share) ........ -- -- -- -- (12,987)
Exercise of Stock Options .............. -- -- 3,306 -- --
Lapse of restrictions on
Restricted Stock Awards .............. -- -- 276 -- --
Amortization of deferred
Compensation ......................... -- -- -- -- 820
---------- ---------- --------- --------- ----------
Balance, Sept. 30, 1997 ................ 53,529 5,353 51,316 -- 629,562
Comprehensive Income:
Net Income ........................... -- -- -- -- 101,154
Other comprehensive loss, net of
tax--unrealized losses on
available-for-sale securities ....... -- -- -- -- --
Comprehensive income ................... -- -- -- -- --
Cash dividends ($.275 per share) ....... -- -- -- -- (14,007)
Exercise of Stock Options .............. -- -- 1,833 -- --
Purchase of stock for treasury ......... -- -- -- -- --
Lapse of restrictions on
Restricted Stock Awards ............... -- -- 98 -- --
Stock issued under Restricted
Stock Award Plan ...................... -- -- 5,757 (6,791) --
Amortization of deferred
Compensation .......................... -- -- -- 1,186 166
---------- ---------- --------- --------- ----------
Balance, Sept. 30, 1998 ................ 53,529 5,353 59,004 (5,605) 716,875
Comprehensive Income:
Net Income ............................ -- -- -- -- 42,788
Other comprehensive income,
net of tax unrealized gains on
available-for-sale securities ........ -- -- -- -- --
Comprehensive income ................... -- -- -- -- --
Cash dividends ($.28 per share) ........ -- -- -- -- (13,866)
Exercise of Stock Options .............. -- -- 2,201 -- --
Lapse of restrictions on
Restricted Stock Awards ............... -- -- 69 -- --
Stock issued under Restricted
Stock Award Plan ...................... -- -- 137 (289) --
Amortization of deferred
Compensation .......................... -- -- -- 1,407 159
---------- ---------- --------- --------- ----------
Balance, Sept. 30, 1999 ................ 53,529 $ 5,353 $ 61,411 $ (4,487) $ 745,956
========== ========== ========= ========= ==========
<CAPTION>
Accumulated
Treasury Stock Other
---------------------- Comprehensive
Shares Amount Income (Loss) Total
--------- --------- ------------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Balance, Sept. 30, 1996 ................ 3,758 $ (21,210) $ 56,550 $ 645,970
Comprehensive Income:
Net Income ............................ -- -- -- 84,186
Other comprehensive income,
net of tax unrealized gains on
available-for-sale securities ........ -- -- 57,904 57,904
---------
Comprehensive income ................... -- -- -- 142,090
---------
Cash dividends ($.26 per share) ........ -- -- -- (12,987)
Exercise of Stock Options .............. (257) 1,105 -- 4,411
Lapse of restrictions on
Restricted Stock Awards .............. -- -- -- 276
Amortization of deferred
Compensation ......................... -- -- -- 820
--------- --------- ------------- ---------
Balance, Sept. 30, 1997 ................ 3,501 (20,105) 114,454 780,580
Comprehensive Income:
Net Income ........................... -- -- -- 101,154
Other comprehensive loss, net of
tax--unrealized losses on
available-for-sale securities ....... -- -- (59,765) (59,765)
---------
Comprehensive income ................... -- -- -- 41,389
---------
Cash dividends ($.275 per share) ....... -- -- -- (14,007)
Exercise of Stock Options .............. (174) 1,015 -- 2,848
Purchase of stock for treasury ......... 999 (19,112) -- (19,112)
Lapse of restrictions on
Restricted Stock Awards ............... -- -- -- 98
Stock issued under Restricted
Stock Award Plan ...................... (180) 1,034 -- --
Amortization of deferred
Compensation .......................... -- -- -- 1,352
--------- --------- ------------- ---------
Balance, Sept. 30, 1998 ................ 4,146 (37,168) 54,689 793,148
Comprehensive Income:
Net Income ............................ -- -- -- 42,788
Other comprehensive income,
net of tax unrealized gains on
available-for-sale securities ........ -- -- 20,493 20,493
---------
Comprehensive income ................... -- -- -- 63,281
---------
Cash dividends ($.28 per share) ........ -- -- -- (13,866)
Exercise of Stock Options .............. (226) 1,710 -- 3,911
Lapse of restrictions on
Restricted Stock Awards ............... -- -- -- 69
Stock issued under Restricted
Stock Award Plan ...................... (17) 152 -- --
Amortization of deferred
Compensation .......................... -- -- -- 1,566
--------- --------- ------------- ---------
Balance, Sept. 30, 1999 ................ 3,903 $ (35,306) $ 75,182 $ 848,109
========= ========= ============= =========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
21
<PAGE> 22
Consolidated Statements of Cash Flows
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................... $ 42,788 $ 101,154 $ 84,186
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization ...................... 109,167 88,350 71,691
Dry holes and abandonments .................................... 11,727 11,572 7,783
Equity in income of affiliate before income taxes ............. (5,735) (9,050) (3,680)
Amortization of deferred compensation ......................... 1,566 1,352 820
Gain on sale of securities .................................... (2,547) (38,421) (4,697)
Gain on sale of property, plant and equipment ................. (6,900) (2,951) (4,545)
Other - net ................................................... 2,148 974 1,897
Change in assets and liabilities:
Accounts receivable ........................................ 19,797 (20,698) (23,323)
Inventories ................................................ 214 (5,762) (2,724)
Prepaid expenses and other ................................. (5,079) (4,682) (5,020)
Accounts payable ........................................... (16,147) (194) 18,619
Accrued liabilities ........................................ 2,367 (8,692) 15,582
Deferred income taxes ...................................... 559 (1,231) 7,506
Other noncurrent liabilities ............................... 4,769 1,812 1,473
--------- --------- ---------
115,906 12,379 81,382
--------- --------- ---------
Net cash provided by operating activities .............. 158,694 113,533 165,568
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including dry hole costs ..................... (122,951) (266,299) (161,177)
Proceeds from sale of property, plant and equipment ............... 9,990 15,414 9,432
Purchase of investments ........................................... (537) 1,056 (1,404)
Proceeds from sale of securities .................................. 2,803 73,949 8,557
--------- --------- ---------
Net cash used in investing activities .................. (110,695) (175,880) (144,592)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ................................ 102,000 169,800 34,000
Payments made on notes payable ............................. (141,800) (80,000) (34,000)
Dividends paid ............................................. (13,849) (13,802) (12,970)
Purchases of stock for treasury ............................ -- (19,112) --
Proceeds from exercise of stock options .................... 2,932 1,974 3,065
--------- --------- ---------
Net cash provided by (used in) financing activities .... (50,717) 58,860 (9,905)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................ (2,718) (3,487) 11,071
CASH AND CASH EQUIVALENTS, beginning of period ...................... 24,476 27,963 16,892
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period ............................ $ 21,758 $ 24,476 $ 27,963
========= ========= =========
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HELMERICH & PAYNE, INC. September 30, 1999,1998 and 1997
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 end on August 31 to facilitate
reporting of consolidated results.
TRANSLATION OF FOREIGN CURRENCIES -
The Company has determined that the functional currency for its foreign
subsidiaries is the U.S. dollar. The foreign currency transaction loss for 1999,
1998 and 1997 was $21,000, $1,953,000 and $452,000, respectively.
USE OF ESTIMATES -
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.
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. Reserves are
recorded for capitalized costs of undeveloped leases based on management's
estimate of recoverability. Costs of surrendered leases are charged to the
reserve.
In accordance with 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", the Company recognizes impairment losses for long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows are not sufficient to recover the carrying amount of the
asset. In 1999, the Company recognized an impairment charge of approximately
$10.1 million for proved Exploration and Production properties which is included
in depreciation, depletion and amortization expense. After-tax, the impairment
charge reduced 1999 net income by approximately $6.2 million, $0.13 per share on
a diluted basis. In 1998, the Company recognized an impairment charge of
approximately $5.4 million for proved Exploration and Production properties
which is included in depreciation, depletion and amortization expense.
After-tax, the impairment charge reduced 1998 net income by approximately $3.4
million, $0.07 per share on a diluted basis. The Company evaluates impairment of
exploration and production assets on a field by field basis. Fair value on all
long-lived assets are based on discounted future cash flows or information
provided by sales and purchases of similar assets.
Substantially all property, plant and equipment other than oil and gas
properties is depreciated using the straight-line method based on the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Contract drilling equipment ............... 4-10
Real estate buildings and equipment ....... 10-50
Other ..................................... 3-33
</TABLE>
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 -
Contract drilling revenues are comprised primarily of daywork drilling contracts
for which the related revenues and expenses are recognized as work progresses.
Fiscal 1999 contract drilling revenues also include revenues of $40,790,000 from
a rig construction contract for which revenues were recognized based on the
percentage-of-completion method, measured by the percentage that incurred costs
to date bear to total estimated costs. The rig construction contract was
complete by September 30, 1999.
GAS IMBALANCES -
The Company recognizes revenues from gas wells on the sales method, and a
liability is recorded for permanent imbalances.
INVESTMENTS -
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 approximately 22 percent of Atwood
Oceanics, Inc. (Atwood) at both September 30, 1999 and 1998. The quoted market
value of the Company's investment was $91,687,500 and $62,437,500 at September
30, 1999 and 1998, respectively. Retained earnings at September 30, 1999
includes approximately $18,697,000 of undistributed earnings of Atwood.
23
<PAGE> 24
Summarized financial information of Atwood is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Gross revenues ..................................... $150,009 $151,809 $ 89,082
Costs and expenses ................................. 122,289 112,445 73,463
-------- -------- --------
Net income ......................................... $ 27,720 $ 39,364 $ 15,619
======== ======== ========
Helmerich & Payne, Inc.'s equity in net income,
net of income taxes ............................. $ 3,556 $ 5,611 $ 2,282
======== ======== ========
Current assets ..................................... $ 50,532 $ 51,587 $ 47,961
Noncurrent assets .................................. 243,072 230,150 168,279
Current liabilities ................................ 19,013 26,723 19,621
Noncurrent liabilities ............................. 82,362 91,248 73,930
Shareholders' equity ............................... 192,229 163,766 122,689
======== ======== ========
Helmerich & Payne, Inc.'s investment ............... $ 41,157 $ 35,422 $ 28,895
======== ======== ========
</TABLE>
INCOME TAXES -
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
the Company's assets and liabilities.
OTHER POST EMPLOYMENT BENEFITS -
The Company sponsors a health care plan that provides post retirement medical
benefits to retired employees. Employees who retire after November 1, 1992 and
elect to participate in the plan 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 -
Basic earnings per share is based on the weighted-average number of common
shares outstanding during the period. Diluted earnings per share includes the
dilutive effect of stock options and restricted stock.
EMPLOYEE STOCK-BASED AWARDS -
Employee stock-based awards are accounted for under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
information. Fixed plan common stock options do not result in compensation
expense, because the exercise price of the stock equals the market price of the
underlying stock on the date of grant.
TREASURY STOCK -
Treasury stock purchases are accounted for under the cost method whereby the
entire cost of the acquired stock is recorded as treasury stock. Gains and
losses on the subsequent reissuance of shares are credited or charged to
additional paid-in-capital using the average-cost method.
DERIVATIVES -
As described in Note 2, the Company entered into an interest rate swap agreement
in fiscal 1999. This agreement involves the exchange of an amount based on a
fixed interest rate for an amount based on a variable interest rate without an
exchange of the notional amount upon which the payments are based. The
difference to be paid or received is accrued and recognized as an adjustment of
interest expense. Gains and losses from termination of interest rate swap
agreements are deferred and amortized as an adjustment to interest expense over
the original term of the terminated swap agreement.
NOTE 2 NOTES PAYABLE AND LONG-TERM DEBT
At September 30, 1999, the Company had committed bank lines totaling $120
million; $50 million expires October 2003 and $70 million expires May 2000.
Additionally, the Company had uncommitted credit facilities totaling $60
million. Collectively, the Company had $55 million in outstanding borrowings and
outstanding letters of credit totaling $8.4 million against these lines at
September 30, 1999. Concurrent with the $50 million borrowing under the facility
that expires October 2003, the Company entered into an interest rate swap with a
notional value of $50 million. The swap effectively converts this $50 million
facility from a floating rate to a fixed effective rate of 5.38 percent. The
interest rate swap closely correlates with the terms and maturity of the $50
million facility. Excluding the impact of the interest rate swap, the average
interest rate for the borrowings at September 30, 1999, was approximately 5.9
percent. The interest rate swap reduces the average rate to approximately 5.4
percent on year-end borrowings.
Under the various credit agreements, the Company must meet certain requirements
regarding levels of debt, net worth and earnings.
24
<PAGE> 25
NOTE 3 INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ------- -------- --------
(in thousands)
<S> <C> <C> <C>
CURRENT:
Federal .......................... $ 9,684 $ 36,705 $ 18,582
Foreign .......................... 15,963 18,728 17,214
State ............................ 1,744 4,751 2,190
------- -------- --------
27,391 60,184 37,986
------- -------- --------
DEFERRED:
Federal (842) (4,108) 6,349
Foreign (771) 927 603
State (72) (326) 573
------- -------- --------
(1,685) (3,507) 7,525
------- -------- --------
TOTAL PROVISION: $25,706 $ 56,677 $ 45,511
======= ======== ========
</TABLE>
The amounts of domestic and foreign income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ------- -------- --------
(in thousands)
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE:
Domestic ............ $41,693 $106,228 $ 84,723
Foreign ............. 23,245 45,992 42,692
------- -------- --------
$64,938 $152,220 $127,415
======= ======== ========
</TABLE>
Effective income tax rates on income as compared to the U.S. Federal income tax
rate are as follows:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
<S> <C> <C> <C>
U.S. Federal income tax rate ........................ 35% 35% 35%
Dividends received deduction ........................ (1) - (1)
Effect of higher foreign tax rates .................. 5 2 1
Non-conventional fuel source credits utilized ....... (1) - -
Other, net .......................................... 2 - 1
-- -- --
Effective income tax rate ........................... 40% 37% 36%
== == ==
</TABLE>
The components of the Company's net deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
September 30, 1999 1998
-------- --------
(in thousands)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property, plant and equipment $ 59,695 $ 59,413
Available-for-sale securities 53,651 41,154
Pension provision 3,951 4,602
Equity investment 10,759 9,006
Other 923 --
-------- --------
Total deferred tax liabilities 128,979 114,175
-------- --------
DEFERRED TAX ASSETS:
Financial accruals 8,832 8,853
Other 3,559 1,853
-------- --------
Total deferred tax assets 12,391 10,706
-------- --------
NET DEFERRED TAX LIABILITIES $116,588 $103,469
======== ========
</TABLE>
25
<PAGE> 26
NOTE 4 SHAREHOLDERS' EQUITY
In June 1998, the board of directors authorized the repurchase of up to
2,000,000 shares of its common stock in open market or private transactions. The
repurchased shares will be held in treasury and used for general corporate
purposes including use in the Company's benefit plans. During fiscal 1998, the
Company purchased 999,100 shares at a total cost of approximately $19 million.
The Company did not purchase any shares in fiscal 1999.
The Company has several plans providing for common stock-based awards to
employees and to non-employee directors. The plans permit the granting of
various types of awards including stock options and restricted stock. Awards may
be granted for no consideration other than prior and future services. The
purchase price per share for stock options may not be less than the market price
of the underlying stock on the date of grant. Stock options expire 10 years
after grant.
The Company has reserved 1,307,638 shares of its treasury stock to satisfy the
exercise of stock options issued under the 1982 and 1990 Stock Option Plans.
Effective December 4, 1996, additional options are no longer granted under these
plans. Options granted under the 1982 plan vest over a period of nine years
while options granted under the 1990 plan generally vest over a seven year
period. Options granted under both plans become exercisable in increments as
outlined in the plans.
In March 1997, the Company adopted the 1996 Stock Incentive Plan (the "Stock
Incentive Plan"). The Stock Incentive Plan was effective December 4, 1996, and
will terminate December 3, 2006. Under this plan the Company is authorized to
grant options for up to 4,000,000 shares of the Company's common stock at an
exercise price not less than the fair market value of the common stock on the
date of grant. Up to 600,000 shares of the total authorized may be granted to
participants as restricted stock awards. Options granted under the 1996 plan
vest over a four-year period. On September 30, 1999, 2,537,000 shares were
available for grant under the Stock Incentive Plan.
On September 30, 1999, 403,000 shares were available for grant under the Stock
Incentive Plan as restricted stock awards. In fiscal 1999 and 1998, 17,000 and
180,000 shares of restricted stock, respectively, were granted at a
weighted-average price of $17.00 and $37.73, respectively, which approximated
fair market value at the date of grant. Unearned compensation of $289,000 and
$6,791,000 for fiscal 1999 and 1998, respectively, is being amortized over a
five-year vesting period as compensation expense.
The following summary reflects the stock option activity and related information
(shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------------------- ----------------------- ------------------------
Weighted-Average Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price Options Exercise Price
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at October 1, 2,090 $22.09 1,745 $16.44 1,708 $13.63
Granted 726 16.81 544 36.84 393 26.07
Exercised (238) 14.28 (175) 12.15 (270) 13.03
Forfeited/Expired (4) 13.51 (24) 17.54 (86) 14.89
----- ------ ----- ------ ----- ------
Outstanding on September 30, 2,574 $21.34 2,090 $22.09 1,745 $16.44
----- ------ ----- ------ ----- ------
Exercisable on September 30, 782 $20.13 453 $15.63 135 $12.22
----- ------ ----- ------ ----- ------
Shares available on September 30,
for options that may be granted 2,537 3,280 4,000
----- ----- -----
</TABLE>
The following table summarizes information about stock options at September 30,
1999 (shares in thousands):
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
----------------------------------------- -------------------------
Weighted-Average
Range of Remaining Contractural Weighted-Average Weighted-Average
Exercise Prices Options Life Exercise Price Options Exercise Price
--------------- ------- ---------------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
$12.00 to $14.00 812 5.1 years $13.59 431 $13.42
$14.01 to $16.50 117 0.9 years $16.34 66 $16.34
$16.51 to $26.50 1,105 8.5 years $19.99 150 $26.06
$26.51 to $37.00 540 8.2 years $36.84 135 $36.84
====== ====== ===== ========= ====== === ======
$12.00 to $37.00 2,574 7.0 years $21.34 782 $20.13
====== ====== ===== ========= ====== === ======
</TABLE>
The following table reflects pro forma net income and earnings per share had the
Company applied the fair value method of SFAS No. 123, "Accounting for
Stock-Based Compensation", in measuring compensation cost beginning with 1997
employee stock-based awards.
26
<PAGE> 27
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C>
Net Income:
As reported ......................... $42,788 $101,154 $84,186
Pro forma ........................... 40,268 99,437 83,531
Basic earnings per share:
As reported ......................... .87 2.03 1.69
Pro forma ........................... .82 1.99 1.68
Diluted earnings per share:
As reported ......................... .86 2.00 1.67
Pro forma ........................... .81 1.97 1.65
</TABLE>
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years.
The weighted-average fair values of options at their grant date during 1999,
1998 and 1997 were $6.81, $14.63, and $9.50, respectively. The estimated fair
value of each option granted is calculated using the Black-Scholes
option-pricing model. The following summarizes the weighted-average assumptions
used in the model:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Expected years until exercise .......... 5.5 7.0 6.7
Expected stock volatility .............. 38% 34% 27%
Dividend yield ......................... 1.2% 1.6% 1.0%
Risk-free interest rate ................ 6.0% 5.9% 6.1%
</TABLE>
On September 30, 1999, the Company had 49,625,666 outstanding common stock
purchase rights ("Rights") pursuant to terms of the Rights Agreement dated
January 8, 1996. Under the terms of the Rights Agreement each Right entitled the
holder thereof to purchase from the Company one half of one unit consisting of
one one-thousandth of a share of Series A Junior Participating Preferred Stock
("Preferred Stock"), without par value, at a price of $90 per unit. The exercise
price and the number of units of Preferred Stock issuable on exercise of the
Rights are subject to adjustment in certain cases to prevent dilution. The
Rights will be attached to the common stock certificates and are not exercisable
or transferrable apart from the common stock, until 10 business days after a
person acquires 15% or more of the outstanding common stock or 10 business days
following the commencement of a tender offer or exchange offer that would result
in a person owning 15% or more of the outstanding common stock. In the event the
Company is acquired in a merger or certain other business combination
transactions (including one in which the Company is the surviving corporation),
or more than 50% of the Company's assets or earning power is sold or
transferred, each holder of a Right shall have the right to receive, upon
exercise of the Right, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The Rights are redeemable
under certain circumstances at $.01 per Right and will expire, unless earlier
redeemed, on January 31, 2006. As long as the Rights are not separately
transferrable, the Company will issue one half of one Right with each new share
of common stock issued.
NOTE 5 EARNINGS PER SHARE
A reconciliation of the weighted-average common shares outstanding on a basic
and diluted basis is as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
-------------- ---- ---- ----
<S> <C> <C> <C>
Basic weighted-average shares .......... 49,243 49,948 49,779
Effect of dilutive shares:
Stock options ....................... 561 595 747
Restricted stock .................... 13 22 35
------ ------ ------
574 617 782
------ ------ ------
Diluted weighted-average shares .......... 49,817 50,565 50,561
====== ====== ======
</TABLE>
Restricted stock of 180,000 shares at a weighted-average price of $37.73 and
options to purchase 540,000 shares of common stock at a price of $36.84 were
outstanding at September 30, 1999, but were not included in the computation of
diluted earnings per common share. Inclusion of these shares would be
antidilutive, as the exercise prices of the options exceed the average market
price of the common shares.
NOTE 6 FINANCIAL INSTRUMENTS
Notes payable bear interest at market rates and are carried at cost which
approximates fair value. The estimated fair value of the Company's interest rate
swap is $2,574,000 at September 30,1999, based on forward-interest rates derived
from the year-end yield curve as calculated by the financial institution that is
a counterparty to the swap. The estimated fair value of the Company's
available-for-sale securities is primarily based on market quotes.
The following is a summary of available-for-sale securities, which excludes
those accounted for under the equity method of accounting (see Note 1):
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Equity Securities:
September 30, 1999 $76,057 $122,369 $1,108 $197,318
September 30, 1998 $76,770 $ 93,364 $5,156 $164,978
</TABLE>
27
<PAGE> 28
During the years ended September 30, 1999, 1998, and 1997, marketable equity
available-for-sale securities with a fair value at the date of sale of
$2,803,000, $62,792,000 and $8,557,000, respectively, were sold. The gross
realized gains on such sales of available-for-sale securities totaled
$2,547,000, $30,820,000 and $4,697,000, respectively, and the gross realized
losses totaled $0, $1,034,000 and $0 respectively.
NOTE 7 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The table below presents changes in the components of accumulated other
comprehensive income (loss).
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Balance, beginning of period ................. $ 54,689 $114,454 $ 56,550
Unrealized gains (losses) on
available-for-sale securities ............ 35,600 (66,610) 98,091
Less: Reclassification adjustment
for net gains realized in net income ..... (2,547) (29,786) (4,697)
-------- -------- --------
Net unrealized gains (losses) ......... 33,053 (96,396) 93,394
Tax benefit (expense) ...................... (12,560) 36,631 (35,490)
-------- -------- --------
Net-of-tax amount ..................... 20,493 (59,765) 57,904
-------- -------- --------
Balance, end of period ....................... $ 75,182 $ 54,689 $114,454
======== ======== ========
</TABLE>
NOTE 8 EMPLOYEE BENEFIT PLANS
The following tables set forth the Company's disclosures required by SFAS No.
132, "Employers' Disclosures About Pensions and Other Postretirement Benefits".
CHANGE IN BENEFIT OBLIGATION:
<TABLE>
<CAPTION>
Years ended September 30, 1999 1998
------------------------- ---- ----
(in thousands)
<S> <C> <C>
Benefit obligation at beginning of year ......... $ 36,954 $ 33,913
Service cost .................................... 3,700 2,836
Interest cost ................................... 2,468 2,430
Actuarial (gain) loss ........................... (4,468) 231
Benefits paid ................................... (1,659) (2,456)
-------- --------
Benefit obligation at end of year ............... $ 36,995 $ 36,954
======== ========
</TABLE>
CHANGE IN PLAN ASSETS:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998
(in thousands)
<S> <C> <C>
Fair value of plan assets at beginning of year .. $ 51,572 $ 53,834
Actual return on plan assets .................... 8,604 194
Benefits paid ................................... (1,659) (2,456)
-------- --------
Fair value of plan assets at end of year ........ $ 58,517 $ 51,572
======== ========
Funded status of the plan ....................... $ 21,522 $ 14,618
Unrecognized net actuarial gain ................. (10,127) (1,647)
Unrecognized prior service cost ................. 1,025 1,263
Unrecognized net transition asset ............... (1,619) (2,159)
-------- --------
Prepaid benefit cost $ 10,801 $ 12,075
======== ========
</TABLE>
WEIGHTED-AVERAGE ASSUMPTIONS:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
<S> <C> <C> <C>
Discount rate 7.50% 6.75% 7.25%
Expected return on plan 9.00% 8.50% 9.00%
Rate of compensation increase 5.00% 5.00% 5.50%
</TABLE>
28
<PAGE> 29
COMPONENTS OF NET PERIODIC (BENEFIT) COST:
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Service cost ............................. $ 3,700 $ 2,836 $ 2,114
Interest cost ............................ 2,468 2,430 1,797
Expected return on plan assets ........... (4,606) (4,542) (3,592)
Amortization of prior service cost ....... 238 238 239
Amortization of transition asset ......... (540) (540) (540)
Recognized net actuarial gain ............ 14 (65) (66)
------- ------- -------
Net pension expense (credit) ............. $ 1,274 $ 357 $ (48)
======= ======= =======
</TABLE>
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 $3,315,000, $3,009,000
and $2,255,000 in 1999, 1998 and 1997, respectively.
NOTE 9 ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, 1999 1998
------------- -------- --------
(in thousands)
<S> <C> <C>
Royalties payable ................. $ 9,625 $ 6,997
Taxes payable - operations ........ 6,990 6,502
Ad valorem tax .................... 7,177 5,907
Income taxes payable .............. 3,278 4,487
Workers compensation claims ....... 3,122 3,000
Payroll and employee benefits ..... 3,970 5,576
Other ............................. 7,038 6,364
-------- --------
$ 41,200 $ 38,833
======== ========
</TABLE>
NOTE 10 SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------------------- ---- ---- ----
(in thousands)
<S> <C> <C> <C>
Cash payments:
Interest paid ............. $ 5,705 $ 1,721 $ 357
Income taxes paid ......... $ 27,843 $ 61,056 $ 36,347
</TABLE>
NOTE 11 RISK FACTORS
CONCENTRATION OF CREDIT -
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 quality
financial institutions and limits the amount of credit exposure to any one
financial institution. The Company's trade receivables are primarily with
companies in the oil and gas industry. The Company normally does not require
collateral except for certain receivables of customers in its natural gas
marketing operations.
CONTRACT DRILLING OPERATIONS -
International drilling operations are significant contributors to the Company's
revenues and net profit. It is possible that operating results could be affected
by the risks of such activities, including economic conditions in the
international markets in which the Company operates, political and economic
instability, fluctuations in currency exchange rates, changes in international
regulatory requirements, international employment issues, and the burden of
complying with foreign laws. These risks may adversely affect the Company's
future operating results and financial position.
During fiscal 1999, the Company's rig utilization rate decreased compared to the
previous two years primarily as a result of reduced demand caused by a decline
in the price of oil. The Company believes that its rig fleet is not currently
impaired based on an assessment of future cash flows of the assets in question.
However, it is possible that the Company's assessment that it will recover the
carrying amount of its rig fleet from future operations may change in the near
term.
OIL AND GAS OPERATIONS -
In estimating future cash flows attributable to the Company's exploration and
production assets, certain assumptions are made with regard to commodity prices
received and costs incurred. Due to the volatility of commodity prices, it is
possible that the Company's assumptions used in estimating future cash flows for
exploration and production assets may change in the near term.
29
<PAGE> 30
NOTE 12 NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", (SFAS 133). This
statement is effective for fiscal years beginning after June 15, 2000 and
requires that all derivatives be recognized as assets or liabilities in the
balance sheet and that these instruments be measured at fair value. The Company
has not completed the process of evaluating the impact of adopting SFAS 133.
The American Institute of Certified Public Accountants (AICPA) issued Statement
of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities",
effective for fiscal years beginning after December 15, 1998. The SOP requires
that all start-up costs be expensed and that the effect of adopting the SOP be
reported as the cumulative effect of a change in accounting principle. The
Company will adopt this SOP effective October 1, 1999. The effect of this SOP on
the Company's results of operations and financial position will not be material.
NOTE 13 SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures About Segments of an Enterprise and Related Information", during
the fourth quarter of fiscal 1999. SFAS No. 131 establishes standards for
reporting information about segments and related disclosures about products and
services, geographical areas, and major customers. Prior year financial
statements and notes have been reclassified to conform to the requirements of
SFAS No. 131.
The Company operates principally in the contract drilling industry, which
includes a Domestic segment and an International segment, and in the oil and gas
industry, which includes an Exploration and Production segment and a Natural Gas
Marketing segment. The contract drilling operations consist of contracting
Company-owned drilling equipment primarily to major oil and gas exploration
companies. The Company's primary international areas of operation include
Venezuela, Colombia, Ecuador, Argentina and Bolivia. Oil and gas activities
include the exploration for and development of productive oil and gas properties
located primarily in Oklahoma, Texas, Kansas and Louisiana, as well as, the
marketing of natural gas for third parties. The Natural Gas Marketing segment
also markets most of the natural gas produced by the Exploration and Production
segment retaining a market based fee from the sale of such production. The
Company also has a Real Estate segment whose operations are conducted
exclusively in the metropolitan area of Tulsa, Oklahoma. The primary areas of
operations include a major shopping center and several multi-tenant warehouses.
Each reportable segment is a strategic business unit which is managed separately
as an autonomous business. Other includes investments in available-for-sale
securities, equity owned investments, as well as corporate operations.
The Company evaluates performance of its segments based upon operating profit or
loss from operations before income taxes which includes revenues from external
and internal customers; operating costs; depreciation, depletion and
amortization; dry holes and abandonments and taxes other than income taxes. The
accounting policies of the segments are the same as those described in Note 1,
Summary of Accounting Policies. Intersegment sales are accounted for in the same
manner as sales to unaffiliated customers.
Summarized financial information of the Company's reportable segments for each
of the years ended September 30, 1999, 1998, and 1997 is shown in the following
table:
<TABLE>
<CAPTION>
Depreciation Additions
External Inter- Total Operating Depletion & Total to Long-Live
(in thousands) Sales Segment Sales Profit (Loss) Amortization Assets Assets
---------- ---------- ---------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999:
CONTRACT DRILLING
Domestic $ 213,647 $ 2,457 $ 216,104 $ 30,154 $ 31,164 $ 371,766 $ 57,975
International 182,987 -- 182,987 29,845 36,178 271,746 17,293
---------- ---------- ---------- ---------- ---------- ---------- ----------
396,634 2,457 399,091 59,999 67,342 643,512 75,268
---------- ---------- ---------- ---------- ---------- ---------- ----------
OIL & GAS OPERATIONS
Exploration and Production 95,953 -- 95,953 11,245 38,658 151,898 44,333
Natural Gas Marketing 55,259 -- 55,259 4,418 174 15,156 261
---------- ---------- ---------- ---------- ---------- ---------- ----------
151,212 -- 151,212 15,663 38,832 167,054 44,594
---------- ---------- ---------- ---------- ---------- ---------- ----------
REAL ESTATE 8,671 1,531 10,202 5,338 1,427 22,816 1,445
OTHER 7,802 -- 7,802 -- 1,566 276,317 1,644
ELIMINATIONS -- (3,988) (3,988) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL $ 564,319 $ -- $ 564,319 $ 81,000 $ 109,167 $1,109,699 $ 122,951
========== ========== ========== ========== ========== ========== ==========
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Depreciation Additions
External Inter- Total Operating Depletion & Total to Long-Live
(in thousands) Sales Segment Sales Profit (Loss) Amortization Assets Assets
---------- ---------- ---------- ------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1998:
CONTRACT DRILLING
Domestic $ 177,059 $ 4,084 $ 181,143 $ 35,817 $ 23,771 $ 351,193 $ 130,237
International 253,072 -- 253,072 50,834 31,689 303,907 83,843
---------- ---------- ---------- ---------- ---------- ---------- ----------
430,131 4,084 434,215 86,651 55,460 655,100 214,080
---------- ---------- ---------- ---------- ---------- ---------- ----------
OIL & GAS OPERATIONS
Exploration and Production 98,696 -- 98,696 28,088 29,817 156,582 48,066
Natural Gas Marketing 53,499 -- 53,499 2,418 292 15,069 636
---------- ---------- ---------- ---------- ---------- ---------- ----------
152,195 -- 152,195 30,506 30,109 171,651 48,702
---------- ---------- ---------- ---------- ---------- ---------- ----------
REAL ESTATE 8,922 1,526 10,448 5,371 1,501 22,937 875
OTHER 45,392 -- 45,392 -- 1,280 240,742 2,642
ELIMINATIONS -- (5,610) (5,610) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL $ 636,640 $ -- $ 636,640 $ 122,528 $ 88,350 $1,090,430 $ 266,299
========== ========== ========== ========== ========== ========== ==========
1997:
CONTRACT DRILLING
Domestic $ 140,294 $ 2,218 $ 142,512 $ 24,437 $ 17,916 $ 257,505 $ 95,277
International 176,651 -- 176,651 43,118 26,458 210,976 16,900
---------- ---------- ---------- ---------- ---------- ---------- ----------
316,945 2,218 319,163 67,555 44,374 468,481 112,177
---------- ---------- ---------- ---------- ---------- ---------- ----------
OIL & GAS OPERATIONS
Exploration and Production 111,512 -- 111,512 55,191 24,627 152,892 43,381
Natural Gas Marketing 69,015 -- 69,015 3,363 258 18,884 3,170
---------- ---------- ---------- ---------- ---------- ---------- ----------
180,527 -- 180,527 58,554 24,885 171,776 46,551
---------- ---------- ---------- ---------- ---------- ---------- ----------
REAL ESTATE 8,641 1,498 10,139 5,615 1,412 23,310 1,161
OTHER 11,746 -- 11,746 -- 1,020 370,028 1,288
ELIMINATIONS -- (3,716) (3,716) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
TOTAL $ 517,859 $ -- $ 517,859 $ 131,724 $ 71,691 $1,033,595 $ 161,177
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The following table reconciles segment operating profit (loss) per the table on
page 31 and 32 to income before taxes and equity in income of affiliate as
reported on the Consolidated Statements of Income (in thousands).
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Segment operating profit .................... $ 81,000 $ 122,528 $ 131,724
Unallocated amounts:
Income from investments ................... 7,757 44,603 11,437
General corporate expense ................. (14,198) (11,762) (9,346)
Interest expense .......................... (6,481) (942) (4,212)
Corporate depreciation .................... (1,565) (1,280) (919)
Other corporate expense ................... (1,575) (927) (1,269)
----------- ----------- -----------
Total unallocated amounts ............... (16,062) 29,692 (4,309)
----------- ----------- -----------
Income before income taxes and equity in
Income of affiliate ....................... $ 64,938 $ 152,220 $ 127,415
=========== =========== ===========
</TABLE>
The following tables present revenues from external customers and long-lived
assets by country based on the location of service provided (in thousands).
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
United States ................... $ 381,332 $ 383,568 $ 341,208
Venezuela ....................... 59,481 131,137 77,858
Colombia ........................ 60,838 79,675 78,370
Other Foreign ................... 62,668 42,260 20,423
---------- ---------- ----------
Total ......................... $ 564,319 $ 636,640 $ 517,859
========== ========== ==========
Long-Lived Assets
United States ................... $ 479,753 $ 475,832 $ 384,861
Venezuela ....................... 62,931 85,703 50,336
Colombia ........................ 46,621 59,848 69,340
Other Foreign ................... 101,910 70,988 34,488
---------- ---------- ----------
Total ......................... $ 691,215 $ 692,371 $ 539,025
========== ========== ==========
</TABLE>
Long-lived assets are comprised of property, plant and equipment.
31
<PAGE> 32
Revenues from one company doing business with the contract drilling segment
accounted for approximately 17.5 percent, 14.5 percent and 17 percent of the
total consolidated revenues during the years ended September 30, 1999, 1998 and
1997, respectively. Revenues from another company doing business with the
contract drilling segment accounted for approximately 12 percent and 10 percent
of total consolidated revenues in the years ended September 30, 1999 and 1998.
Collectively, revenues from companies controlled by the Venezuelan government
accounted for approximately 5.6 percent, 16 percent and 12 percent of total
consolidated revenues for the years ended September 30, 1999, 1998 and 1997,
respectively. Collectively, the receivables from these customers were
approximately $35.6 million and $60.6 million at September 30, 1999 and 1998,
respectively.
NOTE 14 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 -
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Revenues ......................................... $ 95,953 $ 98,696 $ 111,512
------------ ------------ ------------
Production costs ................................. 23,058 21,786 21,750
Exploration expense and valuation provisions ..... 22,992 19,005 9,943
Depreciation, depletion and amortization ......... 38,658 29,817 24,628
Income tax expense ............................... 3,437 9,415 19,327
------------ ------------ ------------
Total cost and expenses ........................ 88,145 80,023 75,648
------------ ------------ ------------
Results of operations (excluding corporate
overhead and interest costs) ................... $ 7,808 $ 18,673 $ 35,864
============ ============ ============
</TABLE>
Capitalized Costs -
<TABLE>
<CAPTION>
September 30, 1999 1998
---------- ----------
<S> <C> <C>
(in thousands)
Proved properties ................................ $ 421,552 $ 414,770
Unproved properties .............................. 25,337 20,977
---------- ----------
Total costs .................................... 446,889 435,747
Less - Accumulated depreciation, depletion
and amortization ............................ 312,644 295,045
---------- ----------
Net ............................................ $ 134,245 $ 140,702
========== ==========
</TABLE>
Costs Incurred Relating to Oil and Gas Producing Activities -
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Property acquisition:
Proved ......................... $ 89 $ 107 $ 47
Unproved ....................... 14,385 9,096 8,358
Exploration ...................... 22,292 18,107 9,656
Development ...................... 19,167 28,259 27,808
---------- ---------- ----------
Total .......................... $ 55,933 $ 55,569 $ 45,869
========== ========== ==========
</TABLE>
32
<PAGE> 33
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.
<TABLE>
<CAPTION>
OIL (Bbls) GAS (Mmcf)
---------- ----------
<S> <C> <C>
Proved reserves at September 30, 1996 ............ 6,468,116 272,301
Revisions of previous estimates .................. 92,863 6,178
Extensions, discoveries and other additions ...... 419,795 25,762
Production ....................................... (985,633) (40,463)
Purchases of reserves-in-place ................... 120 6
Sales of reserves-in-place ....................... (189,875) (548)
--------- -------
Proved reserves at September 30, 1997 ............ 5,805,386 263,236
Revisions of previous estimates .................. (331,280) 10,877
Extensions, discoveries and other additions ...... 175,265 20,819
Production ....................................... (701,180) (42,862)
Purchases of reserves-in-place ................... 2,890 188
Sales of reserves-in-place ....................... (189,768) (632)
--------- -------
Proved reserves at September 30, 1998 ............ 4,761,313 251,626
Revisions of previous estimates .................. 570,126 11,771
Extensions, discoveries and other additions ...... 151,829 22,491
Production ....................................... (649,370) (44,240)
Purchases of reserves-in-place ................... -- 77
Sales of reserves-in-place ....................... -- (2,105)
--------- -------
Proved reserves at September 30, 1999 ............ 4,833,898 239,620
========= =======
Proved developed reserves at
September 30, 1997 ...................... 5,787,116 256,443
========= =======
September 30, 1998 ...................... 4,754,319 249,376
========= =======
September 30, 1999 ...................... 4,828,071 229,765
========= =======
</TABLE>
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 "Disclosures About Oil and
Gas Producing Activities". 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.
<TABLE>
<CAPTION>
At September 30, 1999 1998
----------- -----------
(in thousands)
<S> <C> <C>
Future cash inflows ........................................ $ 688,766 $ 404,549
Future costs -
Future production and development costs .................. (188,579) (137,068)
Future income tax expense ................................ (135,763) (70,890)
----------- -----------
Future net cash flows ...................................... 364,424 196,591
10% annual discount for estimated timing of cash flows ..... (131,806) (70,664)
----------- -----------
Standardized Measure of discounted future net cash flows ... $ 232,618 $ 125,927
=========== ===========
</TABLE>
33
<PAGE> 34
Changes in Standardized Measure Relating to Proved Oil and Gas Reserves
(Unaudited) -
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Standardized Measure - Beginning of year ................... $ 125,927 $ 205,035 $ 153,864
Increases (decreases) -
Sales, net of production costs ........................... (72,895) (76,910) (89,762)
Net change in sales prices, net of production costs ...... 142,970 (97,938) 77,789
Discoveries and extensions, net of related future
Development and production costs ...................... 38,164 21,922 42,741
Changes in estimated future development costs ............ (11,095) (14,142) (16,570)
Development costs incurred ............................... 16,558 25,149 27,509
Revisions of previous quantity estimates ................. 17,713 5,089 6,146
Accretion of discount .................................... 16,700 28,012 20,691
Net change in income taxes ............................... (40,671) 30,436 (29,397)
Purchases of reserves-in-place ........................... 96 65 2
Sales of reserves-in-place ............................... (1,390) (2,875) (1,551)
Other .................................................... 541 2,084 13,573
------------ ------------ ------------
Standardized Measure - End of year ......................... $ 232,618 $ 125,927 $ 205,035
============ ============ ============
</TABLE>
NOTE 15 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1999 Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues .......................... $ 143,864 $ 155,374 $ 131,799 $ 133,282
Gross profit ...................... 25,071 16,924 23,532 20,090
Net income ........................ 12,811 7,352 12,196 10,429
Basic net income per share ........ .26 .15 .25 .21
Diluted net income per share ...... .26 .15 .24 .21
</TABLE>
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1998 Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues .......................... $ 151,823 $ 142,389 $ 177,136 $ 165,292
Gross profit ...................... 47,351 32,869 55,098 29,606
Net income ........................ 29,165 19,337 33,861 18,791
Basic net income per share ........ .58 .39 .68 .38
Diluted net income per share ...... .57 .38 .67 .38
</TABLE>
Gross profit represents total revenues less operating costs, depreciation,
depletion and amortization, dry holes and abandonments, and taxes, other than
income taxes.
Net income in the fourth quarter of 1998 includes an after-tax charge of $3.1
million ($0.06 per share, on a diluted basis) related to the write-down of
producing properties in accordance with SFAS No. 121.
Net income in the second quarter of 1999 includes an after-tax charge of $5.5
million ($0.11 per share, on a diluted basis) in connection with the drilling
and completion of a pinnacle reef well with reserve values significantly below
its carrying cost.
34
<PAGE> 35
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, 1999 and 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended September 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Helmerich & Payne, Inc. at September 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Tulsa, Oklahoma
November 19, 1999
STOCKHOLDERS' MEETING
The annual meeting of stockholders will be held on March 1, 2000. A formal
notice of the meeting, together with a proxy statement and form of proxy, will
be mailed to shareholders on or about January 27, 2000.
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, 1999, there were 1,306 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 Transfer Agent at the following
address:
UMB Bank
Security Transfer Division
928 Grand Blvd., 13th Floor
Kansas City, MO 64106
Telephone: (800) 884-4225
(816) 860-5000
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
Internet Address: http://www.hpinc.com
STOCK PRICE INFORMATION
<TABLE>
<CAPTION>
Closing Market Price Per Share
---------------------------------------------------
1999 1998
----------------------- -----------------------
QUARTERS HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
First .............. $24.50 $16.75 $44.97 $31.06
Second ............. 23.94 16.06 33.19 24.56
Third .............. 26.75 20.38 33.25 21.56
Fourth ............. 30.19 23.00 24.38 16.25
</TABLE>
DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Paid Per Share Total Payment
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
QUARTERS
<S> <C> <C> <C> <C>
First .............. $ .070 $ .065 $ 3,457,626 $ 3,256,874
Second ............. .070 .070 3,459,168 3,519,195
Third .............. .070 .070 3,464,109 3,521,332
Fourth ............. .070 .070 3,468,377 3,504,269
</TABLE>
35
<PAGE> 36
ELEVEN-YEAR FINANCIAL REVIEW
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES AND INCOME*(2)
Contract Drilling Revenues ...................... 394,715 427,713 315,327
Crude Oil Sales ................................. 9,479 10,333 20,475
Natural Gas Sales ............................... 81,533 87,646 87,737
Gas Marketing Revenues .......................... 54,263 52,469 66,306
Real Estate Revenues ............................ 8,663 8,587 8,224
Dividend Income ................................. 3,569 4,117 5,268
Other Revenues .................................. 12,097 45,775 14,522
Total Revenues++................................. 564,319 636,640 517,859
Net Cash Provided by Continuing Operations++..... 158,694 113,533 165,568
Income from Continuing Operations ............... 42,788 101,154 84,186
Net Income ...................................... 42,788 101,154 84,186
--------- --------- ---------
PER SHARE DATA
Income from Continuing Operations(1):
Basic ......................................... .87 2.03 1.69
Diluted ....................................... .86 2.00 1.67
Net Income(1):
Basic ......................................... .87 2.03 1.69
Diluted ....................................... .86 2.00 1.67
Cash Dividends .................................. .28 .275 .26
Shares Outstanding* ............................. 49,626 49,383 50,028
--------- --------- ---------
FINANCIAL POSITION
Net Working Capital* ............................ 88,720 58,861 62,837
Ratio of Current Assets to Current Liabilities .. 2.23 1.47 1.66
Investments* .................................... 238,475 200,400 323,510
Total Assets* ................................... 1,109,699 1,090,430 1,033,595
Long-Term Debt* ................................. 50,000 50,000 --
Shareholders' Equity* ........................... 848,109 793,148 780,580
--------- --------- ---------
CAPITAL EXPENDITURES*
Contract Drilling Equipment ..................... 68,639 206,794 109,036
Wells and Equipment ............................. 29,947 38,970 35,024
Real Estate ..................................... 1,435 854 1,095
Other Assets (includes undeveloped leases) ...... 22,930 19,681 16,022
Discontinued Operations ......................... -- -- --
Total Capital Outlays ........................... 122,951 266,299 161,177
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment ..................... 881,269 829,217 643,619
Producing Properties ............................ 421,552 414,770 395,812
Undeveloped Leases .............................. 25,337 20,977 14,109
Real Estate ..................................... 49,065 48,451 47,682
Other ........................................... 71,139 65,120 59,659
Discontinued Operations ......................... -- -- --
Total Property, Plant and Equipment ............. 1,448,362 1,378,535 1,160,881
--------- --------- ---------
</TABLE>
* 000's omitted.
++ Chemical operations were sold August 30, 1996. Prior year amounts have been
restated to exclude discontinued operations.
(1) Includes $13.6 million ($.28 per share, on a diluted basis) effect of
impairment charge for adoption of SFAS No. 121 in 1995 and cumulative
effect of change in accounting for income taxes of $4,000,000 ($.08 per
share, on a diluted basis) in 1994.
(2) See Note 13 for segment presentation of revenues.
36
<PAGE> 37
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
244,338 203,325 182,781 149,661 112,833 105,364 90,974 78,315
15,378 13,227 13,161 15,392 16,369 17,374 16,058 14,821
60,500 33,851 45,261 52,446 38,370 35,628 37,697 33,013
57,817 34,729 51,874 63,786 40,410 10,055 10,566 --
8,076 7,560 7,396 7,620 7,541 7,542 7,636 7,778
3,650 3,389 3,621 3,535 4,050 5,285 7,402 9,127
3,496 10,640 6,058 8,283 6,646 20,020 56,131 17,371
393,255 306,721 310,152 300,723 226,219 201,268 226,464 160,425
121,420 84,010 74,463 72,493 60,414 50,006 53,288 65,474
45,426 5,788 17,108 22,158 8,973 19,608 45,489 20,715
72,566 9,751 24,971 24,550 10,849 21,241 47,562 22,700
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
.92 .12 .35 .46 .19 .41 .94 .43
.91 .12 .35 .45 .19 .41 .93 .43
1.47 .20 .51 .51 .22 .44 .98 .47
1.46 .20 .51 .50 .22 .44 .98 .47
.2525 .25 .2425 .24 .2325 .23 .22 .21
49,771 49,529 49,420 49,275 49,152 48,976 48,971 48,346
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
51,803 50,038 76,238 104,085 82,800 108,212 146,741 114,357
1.83 1.74 2.63 3.24 3.31 4.19 3.72 3.12
229,809 156,908 87,414 84,945 87,780 96,471 99,574 130,443
821,914 707,061 621,689 610,504 585,504 575,168 582,927 591,229
-- -- -- 3,600 8,339 5,693 5,648 49,087
645,970 562,435 524,334 508,927 493,286 491,133 479,485 443,396
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
79,269 80,943 53,752 24,101 43,049 56,297 18,303 17,901
21,142 19,384 40,916 23,142 21,617 34,741 16,489 30,673
752 873 902 436 690 2,104 1,467 878
7,003 9,717 9,695 5,901 16,984 6,793 5,448 6,717
1,581 859 618 629 158 2,594 1,153 815
109,747 111,776 105,883 54,209 82,498 102,529 42,860 56,984
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
568,110 501,682 444,432 418,004 404,155 370,494 324,293 323,313
392,562 384,755 377,371 340,176 329,264 312,438 287,248 279,768
9,242 8,051 11,729 10,010 12,973 5,552 5,507 5,441
46,970 46,642 47,827 47,502 47,286 46,671 44,928 48,016
53,547 55,655 48,612 45,085 43,153 36,423 32,135 29,716
-- 13,937 13,131 12,545 11,962 11,838 9,270 8,156
1,070,431 1,010,722 943,102 873,322 848,793 783,416 703,381 694,410
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
</TABLE>
37
<PAGE> 38
ELEVEN-YEAR OPERATING REVIEW
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
CONTRACT DRILLING
Drilling Rigs, United States ................. 50 46 38
Drilling Rigs, International ................. 39 44 39
Contract Wells Drilled, United States ........ 273 242 246
Total Footage Drilled, United States* ........ 3,078 2,938 2,753
Average Depth per Well, United States ........ 11,275 12,142 11,192
Percentage Rig Utilization, United States .... 75 95 88
Percentage Rig Utilization, International .... 53 88 91
------- ------- -------
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed ........................ 49 62 100
Net Wells Completed .......................... 23.9 35.7 49.3
Net Dry Holes ................................ 7.1 4.2 9.6
------- ------- -------
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily) ..................... 1,779 1,921 2,700
Net Oil Wells Owned N Primary Recovery ....... 124 124 133
Net Oil Wells Owned N Secondary Recovery ..... 54 53 49
Secondary Oil Recovery Projects .............. 5 5 5
Net Natural Gas Produced
(thousands of cubic feet daily) ............ 121,206 117,431 110,859
Net Gas Wells Owned .......................... 439 436 410
------- ------- -------
REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)* ........... 1,652 1,652 1,652
Percentage Occupancy ......................... 95 97 95
------- ------- -------
TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries ..... 3,440 3,340 3,627
------- ------- -------
</TABLE>
* 000's omitted.
+ 1988-1989 include U.S. employees only
38
<PAGE> 39
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
41 41 47 42 39 46 49 49
36 35 29 29 30 25 20 20
233 212 162 128 100 106 119 108
2,499 1,933 1,842 1,504 1,085 1,301 1,316 1,350
10,724 9,119 11,367 11,746 10,853 12,274 11,059 12,500
82 71 69 53 42 47 50 44
85 84 88 68 69 69 45 46
------ ------ ------ ------ ------ ------ ------ ------
63 59 44 42 54 45 36 45
35.3 27.4 15 15.9 17.8 20.2 15.3 15.2
7.3 5.9 1.7 4.3 4.3 4.3 3.4 2.8
------ ------ ------ ------ ------ ------ ------ ------
2,212 2,214 2,431 2,399 2,334 2,152 2,265 2,486
176.9 186 202 202 220 227 223 201
63.8 64 71 71 74 55 46 214
12 12 14 14 14 12 12 17
94,358 72,387 72,953 78,023 75,470 66,617 65,147 57,490
378 354 341 307 289 278 194 205
------ ------ ------ ------ ------ ------ ------ ------
1,654 1,652 1,652 1,656 1,656 1,664 1,664 1,669
94 87 83 86 87 86 85 90
------ ------ ------ ------ ------ ------ ------ ------
3,309 3,245 2,787 2,389 1,928 1,758 1,864 1,100
------ ------ ------ ------ ------ ------ ------ ------
</TABLE>
39
<PAGE> 40
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
================================================================================
<S> <C>
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
GEORGE S. DOTSON
WILLIAM L. ARMSTRONG** Vice President,
Chairman President of Helmerich & Payne
Transland Financial Services, Inc. International Drilling Co.
Denver, Colorado
DOUGLAS E. FEARS
GLENN A. COX* Vice President and
President and Chief Operating Officer, Chief Financial Officer
Retired
Phillips Petroleum Company STEVEN R. MACKEY
Bartlesville, Oklahoma Vice President, Secretary,
and General Counsel
GEORGE S. DOTSON
Vice President, STEVEN R. SHAW
President of Helmerich & Payne Vice President,
International Drilling Co. Exploration & Production
Tulsa, Oklahoma
L.F. ROONEY, III*
Chief Executive Officer
Manhattan Construction Company
Tulsa, Oklahoma
EDWARD B. RUST, JR.
Chairman and Chief Executive Officer
State Farm Insurance Companies
Bloomington, Illinois
GEORGE A. SCHAEFER**
Chairman and Chief Executive Officer, Retired
Caterpillar Inc.
Peoria, Illinois
JOHN D. ZEGLIS**
President
AT&T
Basking Ridge, New Jersey
</TABLE>
* Member, Audit Committee
** Member, Human Resources Committee
40
<PAGE> 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)
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 Drilling (Bolivia) S.A.
(Incorporated in Bolivia)
Helmerich & Payne (Colombia) Drilling Co. (Incorporated
in Oklahoma)
Helmerich & Payne (Gabon) Drilling Co. (Incorporated in
Cayman Islands, British West Indies)
Helmerich & Payne (Argentina) Drilling Co. (Incorporated
in Oklahoma)
Helmerich & Payne (Peru) Drilling Co. (Incorporated in
Oklahoma)
Helmerich & Payne (Peru) Drilling Co., Sucursal del Peru,
Lima (Lima Branch - Incorporated in Peru)
Helmerich & Payne (Peru) Drilling Co., Sucursal del Peru
(Iquitos Branch - Incorporated in Peru)
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)
<PAGE> 1
Exhibit 23.1
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 19, 1999,
included in the 1999 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, 33-55239, 333-24211, and 333-34939)
pertaining, respectively, to the Helmerich & Payne, Inc. Incentive Stock Option
Plan, 1990 Stock Option Plan, Non-Employee Directors' Stock Compensation Plan,
and 1996 Stock Incentive Plan of our report dated November 19, 1999, 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, 1999.
ERNST & YOUNG LLP
Tulsa, Oklahoma
December 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 21,758
<SECURITIES> 238,475
<RECEIVABLES> 102,506
<ALLOWANCES> 2,908
<INVENTORY> 25,187
<CURRENT-ASSETS> 160,624
<PP&E> 1,448,362
<DEPRECIATION> 757,147
<TOTAL-ASSETS> 1,109,699
<CURRENT-LIABILITIES> 71,904
<BONDS> 0
0
0
<COMMON> 5,353
<OTHER-SE> 842,756
<TOTAL-LIABILITY-AND-EQUITY> 1,109,699
<SALES> 556,562
<TOTAL-REVENUES> 564,319
<CGS> 485,536
<TOTAL-COSTS> 485,536
<OTHER-EXPENSES> 7,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,481
<INCOME-PRETAX> 64,938
<INCOME-TAX> 25,706
<INCOME-CONTINUING> 42,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,788
<EPS-BASIC> .87
<EPS-DILUTED> .86
</TABLE>
