<PAGE> 1
EXHIBIT 13
HELMERICH & PAYNE, INC. ANNUAL REPORT FOR 2000
REVENUE BREAKDOWN FOR 2000
[PIE CHART]
<TABLE>
<S> <C>
CONTRACT DRILLING
International 22%
Domestic 34%
OIL AND GAS
Exploration & Production 25%
Natural Gas Marketing 13%
Real Estate 1%
Investments and Other Income 5%
</TABLE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999
----------------- -----------------
<S> <C> <C>
Revenues $ 631,095,000 $ 564,319,000
Net Income $ 82,300,000 $ 42,788,000
Diluted Earnings Per Share $ 1.64 $ .86
Dividends Paid Per Share $ .285 $ .28
Capital Expenditures $ 131,932,000 $ 122,951,000
Total Assets $ 1,259,492,000 $ 1,109,699,000
</TABLE>
<PAGE> 2
PRESIDENT'S LETTER
To the Co-owners of Helmerich & Payne, Inc.
Listening to Al Gore's concession speech tonight, after a remarkable thirty-six
days of post election rancor, left mixed emotions. On the positive side, tanks
in the streets were never even a consideration. As Vice President Gore
eloquently stated, "Ours is a nation not under man, but under God and law." Our
great democracy was tested and prevailed once again.
At the same time, it is discouraging to see the level of political discourse
deteriorate to such lows. Congressman Tom DeLay's charge of Al Gore trying to
"steal the election" or Jesse Jackson's claim that George W. Bush had won using
"Nazi tactics" is why both the victor and the vanquished called for a spirit of
reconciliation.
What are the prospects for progress on important policy matters? Sizing up the
challenges facing the new President, one political analyst predicted he would
spend the next four years appeasing his enemies and betraying his friends.
Let's hope not. Constructive debate is one thing and following a zero-sum
approach that in the end hurts every American is something altogether different.
Stalemate is not a luxury available to us. Take energy policy as an example.
The new administration inherits an energy quagmire: Oil and gas prices setting
ten year highs, the reemergence of a stronger, more cohesive OPEC, and a
precarious balance between tight supplies and increasing demand. This situation
underscores the absence of any thought-out national energy policy. We are left
with political jockeying and farce, illustrated by a year of pitiful pleading
with OPEC for more
2
<PAGE> 3
production and the pre-election "emergency" release of thirty million barrels of
oil from the strategic oil reserve.
For years, the industry has faced a punitive regulatory and tax structure, been
blocked from constructing new refinery capacity, and had the most promising
domestic exploratory areas for new supply locked away. Progress should be met by
the highest standards of environmental sensitivity and worker safety. It should
not be sacrificed on the altar of partisan politics.
George W. Bush set the right tone tonight from the Texas Capitol, "I know
America wants reconciliation and unity. I know Americans want progress. And we
must seize this moment and deliver. Together, guided by a spirit of common
sense, common courtesy and common goals, we can unite and inspire the American
citizens."
We should all wish him Godspeed.
This year marks the fiftieth year of my father's service as a Director to the
Company. His wisdom, energy, and intuitive understanding of the industry will
continue to serve our Co-owners well in the years ahead. I consider it an honor
to have worked with him for twenty years.
Sincerely,
/s/ HANS HELMERICH
Hans Helmerich
December 13, 2000 President
3
<PAGE> 4
DRILLING HELMERICH & PAYNE INTERNATIONAL DRILLING CO.
SUMMARY Helmerich & Payne International Drilling Co. owns 38 land rigs and ten
offshore platform rigs in the United States, and 40 land rigs located in the
countries of Venezuela (18), Colombia (7), Ecuador (6), Bolivia (6), and
Argentina (3). The Company also has four management contracts, three for
platform rigs operating offshore California and one for a platform rig operating
offshore Equatorial Guinea, West Africa. Additionally, the Company owns a 50
percent interest in an offshore platform rig that is currently stacked in
Australia.
Significant increases in the prices of crude oil and natural gas produced a
positive, but measured, response in terms of drilling activity during the year.
Led by activity increases in the U.S., the industry worldwide rig count rose by
one-third over the prior year. In contrast, the Company's key South American
markets did not respond to the improved commodity prices. Total contract
drilling revenues and operating profit declined in 2000 by 11 and 24 percent,
respectively, primarily due to continued weakness in international markets.
FIVE-YEAR OPERATING SUMMARY
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
UNITED STATES
Revenues ............. $ 214,531 $ 213,647 $ 177,059 $ 140,294 $ 108,336
EBITDA ............... $ 71,163 $ 61,498 $ 60,053 $ 44,066 $ 24,409
Operating Profit ..... $ 35,808 $ 30,154 $ 35,817 $ 24,437 $ 10,066
Activity Days ........ 15,083 12,509 14,237 12,872 11,660
Rig Utilization ...... 87% 75% 95% 88% 82%
INTERNATIONAL
Revenues ............. $ 136,549 $ 182,987 $ 253,072 $ 176,651 $ 135,695
EBITDA ............... $ 47,853 $ 66,075 $ 82,650 $ 69,621 $ 53,603
Operating Profit ..... $ 9,753 $ 29,845 $ 50,834 $ 43,118 $ 31,176
Activity Days ........ 7,067 8,442 12,832 12,253 11,215
Rig Utilization ...... 47% 53% 88% 91% 85%
</TABLE>
4
<PAGE> 5
INTERNATIONAL OPERATIONS Revenues and earnings before interest, taxes,
depreciation, and amortization (EBITDA) fell 25 and 28 percent, respectively, in
2000 and rig utilization declined to an average of 47 percent, compared with 53
percent in 1999. The majority of these declines came in the Company's largest
international markets of Venezuela and Colombia. At year-end only seven rigs
were under contract in Venezuela, but there are encouraging signs that more
activity is on the horizon in 2001. In anticipation of this, the Company is
adding three new top drive systems to the four already working in Venezuela.
Operations in Colombia also experienced a decline in activity in 2000, and at
year-end, four out of seven rigs were working in that country. The Company moved
three rigs from Colombia for new contracts in Argentina, Bolivia, and Ecuador
during 2000, and after the close of the year, a fourth rig returned for work in
the U.S. market. Operations in Ecuador increased from four to six rigs in 2000,
and after the close of the year the Company was moving an additional rig to
Ecuador from Venezuela. The Company also began work during the second quarter of
2000 under a management contract on Exxon-Mobil's Jade platform located offshore
Equatorial Guinea, West Africa.
UNITED STATES OPERATIONS Land rig utilization averaged 85 percent in 2000,
compared with 69 percent in 1999. The Company kept an average of 32 land rigs
working throughout 2000, seven more than in 1999. Gross daywork revenues and
EBITDA increased 45 and 113 percent, respectively, over the prior year. In
March, the Company announced that it had placed a firm order for 12 highly
mobile land rigs utilizing the same FlexRig(TM) design as the six rigs
(TM)FlexRig is a trademark of Helmerich & Payne International Drilling Co.
5
<PAGE> 6
constructed by the Company in 1998. The FlexRig's depth versatility of 8,000 to
18,000 feet, faster mobilization times, and state of the art technology, all
combine to increase drilling efficiency. The first rig out of the new order
should be ready by January 2001, with the remaining 11 scheduled two per quarter
thereafter. Two of the new FlexRigs will be working as part of a three-year,
five-rig contract in Wyoming that is scheduled to begin early in 2001.
Offshore platform rig utilization remained high throughout the year, averaging
94 percent, compared with 95 percent in 1999. Domestic offshore platform
revenues and EBITDA increased six and eight percent, respectively, in 2000 over
the prior year. The Company began an upgrade of rig 107 late in the year, which
should enable that rig to return to the market by the second quarter of 2001.
Additionally, tension-leg platform (TLP) rig 202 is earning a standby rate until
April 2001, when it is scheduled to begin working on Shell's new TLP, Brutus.
OUTLOOK Consolidations among active drilling customers, as well as the
collective memory of the volatile downturn experienced by the industry two years
ago, tempered the significant new exploration investment expected at the recent
higher commodity price levels. Yet demand is growing and, once again, the
Company and the industry are faced with the challenge of attracting, training,
and retaining qualified employees. Helmerich & Payne International Drilling Co.
has been successful in maintaining very low turnover among its skilled positions
and this experience at the rig level will enhance the Company's objective of
delivering reliable, incident-free operations in the field. In addition to
experienced and competent personnel, the Company is a leader in designing,
engineering, and constructing the newest and most modern rigs available in the
market.
6
<PAGE> 7
EXPLORATION & PRODUCTION HELMERICH & PAYNE, INC.
SUMMARY Helmerich & Payne, Inc. explores for and produces oil and natural gas
primarily in the states of Oklahoma, Kansas, Texas, and Louisiana. The Company
also markets natural gas through its wholly-owned subsidiary, Helmerich & Payne
Energy Services, Inc. In 2000, the Company produced approximately 880,000
barrels of oil and 47 billion cubic feet (Bcf) of natural gas, increases of 36
and six percent, respectively, over the previous year. The Company finished the
year with proved reserves of 6.3 million barrels of oil and 262 Bcf of natural
gas, compared with 4.8 million barrels and 240 Bcf in 1999.
The Company received an average price of $27.95 per barrel for oil and $2.79 per
thousand cubic feet (Mcf) for natural gas in 2000, compared with $14.60 and
$1.83 in 1999. Higher production and commodity prices propelled a 64 percent
increase in exploration and production revenues in 2000, and a record $66.6
million in operating profit. Helmerich and Payne Energy Services, Inc. also
reported record results in 2000, with revenues and operating profit increases of
46 and 19 percent, respectively.
EXPLORATION ACTIVITIES In 2000, the Company participated in 81(42.7 net) wells,
of which 65 (33.6 net) were productive and 16 (9.1 net) were dry holes. Over
one-third of the Company's net wells were exploration risks in 2000, more than
double the annual average number of net exploratory wells drilled over the
previous five-year period. A focal area this year was Jefferson County, Texas,
where the Company has experienced an overall 71 percent success rate utilizing
3D seismic. There remain several additional exploration opportunities in this
area, which should be drilled during 2001.
7
<PAGE> 8
The Company also succeeded in two out of three wells drilled in Reeves County,
Texas, during the year, which were producing at a combined gross rate of 9,000
Mcf per day at year-end.
FIVE-YEAR OPERATING SUMMARY
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ............................ $ 157,583 $ 95,953 $ 98,696 $ 111,512 $ 76,643
Operating Profit .................... $ 66,604 $ 11,245 $ 28,088 $ 55,191 $ 26,333
Average Oil Price per barrel ........ $ 27.95 $ 14.60 $ 14.74 $ 20.77 $ 19.00
Oil Production (barrels) ............ 880,304 649,370 701,180 985,633 809,571
Proved Oil Reserves (barrels) ....... 6,305,137 4,833,898 4,761,313 5,805,386 6,468,116
Average Natural Gas Prices per Mcf .. $ 2.79 $ 1.83 $ 2.04 $ 2.24 $ 1.75
Natural Gas Production (Mcf) ........ 46,922,752 44,240,332 42,862,300 40,463,374 34,535,184
Proved Natural Gas Reserves (Bcf) ... 262.5 239.6 251.6 263.2 272.3
Gross Wells Completed ............... 81.0 49.0 62.0 100.0 63.0
Net Wells Completed ................. 42.7 23.9 35.7 49.3 35.3
Net Dry Holes ....................... 9.1 7.1 4.2 9.6 7.3
</TABLE>
OUTLOOK Five years ago, the Company embarked on a plan to improve exploration
success by increasing both the quantity and quality of its exploration
professionals and by organizing in geographically-focused teams. In 2000, the
Company recorded an $.87 per Mcf equivalent finding cost, as well as a 12
percent growth in proved reserves. With this improved performance, the Company
is poised to grow internally with a number of quality exploration prospects, and
has also begun to review other means of enhancing growth. Toward that end, the
Company retained the investment banking firm of Petrie Parkman & Co. this year
to assist in identifying and developing strategic alternatives for the Oil and
Gas Division.
8
<PAGE> 9
REVENUES AND OPERATING PROFIT BY BUSINESS SEGMENTS
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
--------- --------- ---------
(in thousands)
<S> <C> <C> <C>
SALES AND OTHER REVENUES:
Contract Drilling - Domestic ......... $ 214,531 $ 213,647 $ 177,059
Contract Drilling - International .... 136,549 182,987 253,072
--------- --------- ---------
Total Contract Drilling ........... 351,080 396,634 430,131
--------- --------- ---------
Exploration and Production ........... 157,583 95,953 98,696
Natural Gas Marketing ................ 80,907 55,259 53,499
--------- --------- ---------
Total Oil and Gas Operations ...... 238,490 151,212 152,195
--------- --------- ---------
Real Estate .......................... 8,999 8,671 8,922
Other ................................ 32,526 7,802 45,392
--------- --------- ---------
Total Revenues ............................ $ 631,095 $ 564,319 $ 636,640
========= ========= =========
OPERATING PROFIT:
Contract Drilling - Domestic ......... $ 35,808 $ 30,154 $ 35,817
Contract Drilling - International .... 9,753 29,845 50,834
--------- --------- ---------
Total Contract Drilling ........... 45,561 59,999 86,651
--------- --------- ---------
Exploration and Production ........... 66,604 11,245 28,088
Natural Gas Marketing ................ 5,271 4,418 2,418
--------- --------- ---------
Total Oil and Gas Operations ...... 71,875 15,663 30,506
--------- --------- ---------
Real Estate .......................... 5,346 5,338 5,371
--------- --------- ---------
Total Operating Profit ............ 122,782 81,000 122,528
--------- --------- ---------
OTHER:
Income from investments .............. 31,973 7,757 44,603
General and administrative expense ... (11,578) (14,198) (11,762)
Interest expense ..................... (3,076) (6,481) (942)
Corporate depreciation ............... (2,152) (1,565) (1,280)
Other corporate expense .............. (1,186) (1,575) (927)
--------- --------- ---------
Total Other ....................... 13,981 (16,062) 29,692
--------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE ........ $ 136,763 $ 64,938 $ 152,220
========= ========= =========
</TABLE>
Note: See Note 13 (pages 30, 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 2000 was
$82,300,000 ($1.64 per share), compared with net income of $42,788,000 ($0.86
per share) in 1999, and $101,154,000 ($2.00 per share) in 1998. Included in the
Company's net income, but not related to its operations, were after-tax gains
from the sale of investment securities of $8,152,000 ($0.16 per share) in 2000,
$1,562,000 ($0.03 per share) in 1999, and $23,417,000 ($0.46 per share) in 1998.
In addition to income from security sales, the Company also recorded net income
during 2000 of $6,637,000 ($0.13 per share) from gains relating to non-monetary
dividends received. Also
10
<PAGE> 11
included is the Company's portion of income from its equity affiliate, Atwood
Oceanics, Inc., which was $0.06 per share in 2000, $0.07 per share in 1999, and
$0.11 per share in 1998. Net income also included non-cash charges of $2,502,000
($0.05 per share) in 2000, $6,237,000 ($0.13 per share) in 1999, and $3,356,000
($0.07 per share) in 1998 related to write-downs of producing properties as
described in Note 1 of Notes to Consolidated Financial Statements.
Consolidated revenues were $631,095,000 in 2000, $564,319,000 in 1999, and
$636,640,000 in 1998. The 12 percent increase from 1999 to 2000 was due to
higher oil and natural gas prices resulting in an increase of $87,278,000 in Oil
and Gas Division revenues and increased investment revenues of $24,216,000.
Partially offsetting these increases was a reduction of international contract
drilling revenues of $46,438,000. 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 during 1999.
Revenues from investments were $31,973,000 in 2000, $7,757,000 in 1999, and
$44,603,000 in 1998. Included in revenues from investments were pre-tax gains
from the sale of investment securities of $13,295,000 in 2000, $2,547,000 in
1999, and $38,421,000 in 1998. Interest income from short-term investments
increased in 2000 because the cash/cash equivalents were substantially higher in
2000 than in 1999 and 1998. Dividend income increased in 2000 due to $10,706,000
in non-monetary dividends received when three Company investees spun-off
subsidiaries to their shareholders.
Costs and expenses in 2000 were $494,332,000, 78 percent of revenues, compared
with 88 percent in 1999, and 76 percent in 1998. Operating costs, as a
percentage of operating revenues, were 53 percent in 2000, 60 percent in 1999,
and 58 percent in 1998. Operating costs, as a percentage of operating revenues,
declined from 1999 to 2000 primarily due to proportionately higher oil and gas
revenues.
Depreciation, depletion, and amortization (DD&A) expense increased by only 1.5
percent in 2000, but increased by approximately 24 percent from 1998 to 1999.
The increases were affected by write-downs of producing properties of $4,036,000
in 2000, $10,059,000 in 1999, and $5,413,000 in 1998, which are included in
DD&A.
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<PAGE> 12
General and administrative expenses decreased by 18 percent to $11,578,000 in
2000, compared with $14,198,000 in 1999, and $11,762,000 in 1998. Expenses were
higher than normal in 1999 due to reduced allocations of charges to operations
and to unusually high expenses relating to corporate aircraft maintenance. The
Company completed all Year 2000 readiness and subsequently, experienced no
significant problems or related expenses. Because of the impact of foreign
taxes, income tax expense rose to 42 percent of pre-tax income in 2000, from 40
percent in 1999, and 37 percent in 1998.
Interest expense decreased to $3,076,000 in 2000, from $6,481,000 in 1999. In
1998, interest expense was $942,000. Interest expense was a function of
outstanding bank loans arising at the end of 1998 and into the first half of
1999 as the Company completed a substantial capital expenditure program and
repurchased some of its stock during 1998. Debt reductions occurred in the last
half of 1999 and early 2000.
CONTRACT DRILLING DIVISION revenues, which include both domestic and
international segment revenues, declined 11 percent to $351,080,000 during 2000,
from $396,634,000 in 1999. Revenues for 1999 were down eight percent over the
previous year. Division operating profit declined 24 percent to $45,561,000
during 2000, compared with a 31 percent decrease from 1998 to 1999.
Domestic segment revenues were $214,531,000 in 2000, $213,647,000 in 1999, and
$177,059,000 in 1998. Domestic segment operating profit was $35,808,000 in 2000,
$30,154,000 in 1999, and $35,817,000 in 1998. Rig utilization for the U.S. land
fleet was 85 percent in 2000, 69 percent in 1999, and 94 percent in 1998.
Domestic platform rig utilization was 94 percent in 2000, 95 percent in 1999,
and 99 percent in 1998.
An increase in revenues from U.S. land operations in 2000 helped offset the
reduction in Jade construction revenues recorded in 1999 (as described below),
while offshore platform revenues were up slightly from the previous year. Higher
revenues and profit margins from the U.S. land rig operation were the main
reason for improved domestic operating profit for 2000. Domestic segment
revenues increased from 1998 to 1999, primarily due to $40,790,000 of revenues
from the Mobil Jade rig construction project and increased offshore platform rig
revenues. Domestic operating profit in 1999
12
<PAGE> 13
was down from 1998 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.
International segment revenues fell 25 percent to $136,549,000 during 2000, from
$182,987,000 in 1999. Revenues were $253,072,000 in 1998. Operating profit for
the international segment declined to $9,753,000 in 2000, from $29,845,000 in
1999, and $50,834,000 in 1998. International rig utilization averaged 47 percent
during 2000, 53 percent in 1999, and 88 percent in 1998.
As crude oil prices declined during 1998, international activity and
profitability began to decline during the second half of that year and into
1999. Activity continued to wane in 2000, particularly in Venezuela and
Colombia. The Company expects activity to improve in Venezuela during 2001, but
the timing and extent of improvements are uncertain. Activity in Colombia is not
expected to improve during 2001. Therefore, the Company has redeployed to other
locations four of the ten rigs previously located there.
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 2000, the
Company experienced a loss of $687,000 due to devaluation of the bolivar,
compared with a $712,000 loss in 1999, and a $2,204,000 loss in 1998. The
Company anticipates additional devaluation losses in Venezuela during 2001, 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 $600,000 to $1,000,000. Using the same
assumptions in 1999 resulted in the Company estimating foreign currency losses
in Venezuela for 2000 ranging from $350,000 to $600,000.
13
<PAGE> 14
During the latter part of calendar 2000, the Company commenced an economic
evaluation of the useful lives of its drilling rigs. The evaluation is not yet
complete, but if results indicate that the useful lives are longer than
currently estimated, the Company's annual rig depreciation expense may be
reduced beginning in fiscal 2001.
OIL AND GAS DIVISION operating results include those from its Exploration and
Production segment, as depicted in the following table. The Natural Gas
Marketing segment will be discussed separately.
<TABLE>
<CAPTION>
Exploration & Production 2000 1999 1998
------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
Revenues (in 000's) ...................... $ 157,583 $ 95,953 $ 98,696
Operating Profit (in 000's) .............. $ 66,604 $ 11,245 $ 28,088
Natural Gas Production (Mmcf per day) .... 128.2 121.2 117.4
Average Natural Gas Price (per Mcf) ...... $ 2.79 $ 1.83 $ 2.04
Crude Oil Production (barrels per day) ... 2,405 1,779 1,921
Average Crude Oil Price (per barrel) ..... $ 27.95 $ 14.60 $ 14.74
</TABLE>
Exploration and Production segment revenues and operating profit increased
significantly this year as average prices received for the Company's production
rose dramatically. Average prices received for natural gas increased by 52
percent and average crude oil prices increased by 91 percent. Crude oil and
natural gas production for the Company increased by 36 percent and six percent,
respectively. Increased exploration drilling caused dry hole and abandonment
charges to rise to $22.6 million in 2000, compared with $11.4 million in 1999,
and $10.9 million in 1998. Revenues and operating profit for 1999 declined from
the previous year due to a ten percent reduction in natural gas prices and a
seven percent reduction in oil production. Additionally, geophysical expense
rose during that period from $4.5 million in 1998, to $8.2 million in 1999. Also
negatively impacting 1999 results was a $10.1 million impairment charge. That
charge compares with $5.4 million in 1998, and $4.0 million in 2000.
During 2001, the Company intends to increase its capital spending over the
previous year in order to participate in more exploration opportunities.
Therefore, operating profit for the coming year could be impacted by possible
increases in geophysical, dry hole, and abandonment expenses. Although natural
gas prices were higher during the early part of fiscal 2001, it is difficult to
predict the level of crude oil and natural gas prices for the remainder of the
year and the impact on operating profit.
14
<PAGE> 15
The Company has retained the investment banking firm of Petrie Parkman & Co. to
analyze, develop, and facilitate possible strategic options for the Oil and Gas
segment. It is uncertain whether such a transaction will occur or, if so, when
it might occur.
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
$80,907,000 in 2000, $55,259,000 in 1999, and $53,499,000 in 1998. Operating
profit was $5,271,000 in 2000, $4,418,000 in 1999, and $2,418,000 in 1998. 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 59 percent of its total natural
gas production. At times, the Exploration and Production segment may direct
HPESI to enter into fixed price natural gas sales contracts on its behalf for a
small portion (normally less than 20 percent) of its natural gas sales for
periods of less than 12 months to guarantee a certain price. In 2000, HPESI had
approximately 13.6 percent of its natural gas sales portfolio dedicated to such
fixed price sales contracts compared to 2.3 percent in 1999. As of September 30,
2000, HPESI had fixed price contracts for less than four percent of its
projected monthly sales for the months of November, 2000 through March, 2001,
and no fixed price contracts thereafter.
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
SFAS No. 138, 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 effect
of SFAS No. 133 on the Company's results of operations and financial position
for fiscal year 2001 is not expected to be material.
15
<PAGE> 16
REAL ESTATE DIVISION revenues totaled $8,999,000 for 2000, $8,671,000 for 1999,
and $8,922,000 for 1998. Operating profit was $5,346,000 in 2000, $5,338,000 in
1999, and $5,371,000 in 1998. Occupancy rates, revenues, and operating profit
remained solid in 2000 due to the continued strength of the Tulsa economy. No
material changes are anticipated in the Real Estate Division in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital spending was $131,932,000 in 2000, $122,951,000 in 1999,
and $266,299,000 in 1998. Net cash provided from operating activities for those
same time periods were $201,836,000 in 2000, $158,694,000 in 1999, and
$113,533,000 in 1998. In addition to the net cash provided by operating
activities, the Company also generated net proceeds from the sale of portfolio
securities of $12,569,000 in 2000, $2,803,000 in 1999, and $73,949,000 in 1998.
In June 1998, the board of directors authorized the Company to repurchase up to
2,000,000 shares of its own stock. A total of 999,100 shares were repurchased in
1998 at a total cost of $19,112,000 and 20,600 shares were repurchased in 2000
at a total cost of $450,000. The Company plans to increase capital spending
during 2001 in its Exploration and Production segment and its Contract Drilling
Division. During fiscal 2000, the Company ordered 12 new rigs at an approximate
cost of between $7.5 million and $8.25 million each and expects to take delivery
of 11 of the new rigs in calendar 2001. The potential for new contract drilling
projects requiring large amounts of capital is difficult to predict at this
time. Total capital spending for the Company will likely exceed $200 million for
2001 and could be greater if additional attractive opportunities become
available. Funding will come from internally generated cash, proceeds from
security sales, and/or additional borrowings.
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
purchase of Company stock, the Company increased its available short-term lines
of credit and obtained long-term financing. As described in Note 2 of Notes to
Consolidated Financial Statements, in October 1998, the Company obtained $50
million in long-term debt proceeds, which was used to pay off short-term
borrowings. The $50 million of long-term debt matures in October 2003. The
interest rate on this debt fluctuates based on the 30-day London Interbank
Offered Rate (LIBOR). However, simultaneous to receiving
16
<PAGE> 17
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 five-year term of the note. The estimated fair value of the interest rate
swap was $2,329,000 at September 30, 2000. The Company's interest rate risk
exposure is limited to its potential short-term borrowings and results
predominately from fluctuations in short-term interest rates as measured by
30-day LIBOR.
The strength of the Company's balance sheet is substantial, with current ratios
for 2000 and 1999 at 3.4 and 2.2, respectively, and with total bank borrowings
of only four percent of total assets at September 30, 2000. Additionally, the
Company manages a large portfolio of marketable securities that, at the close of
2000, had a market value of $383,036,000, with a cost basis of $133,254,000. The
portfolio, heavily weighted in energy stocks, is subject to fluctuation in the
market and may vary considerably over time. Excluding the Company's investment
in Atwood Oceanics, Inc., which is accounted for as an equity-method investment,
the portfolio is marked to market on the Company's balance sheet for each
reporting period. During 2000, the Company paid a dividend of $0.285 per share,
or a total of $14,175,000, representing the 29th consecutive year of dividend
increases.
STOCK PORTFOLIO HELD BY THE COMPANY
<TABLE>
<CAPTION>
Number of
September 30, 2000 Shares Cost Basis Market Value
--------- ---------- ------------
(in thousands, except share amounts)
<S> <C> <C> <C>
Occidental Petroleum Corporation ... 1,000,000 $ 23,775 $ 21,812
Atwood Oceanics, Inc. .............. 3,000,000 46,353 125,063
Schlumberger, Ltd. ................. 1,480,000 23,511 121,823
Transocean Sedco Forex, Inc. ....... 286,528 9,509 16,798
SUNOCO, Inc. ....................... 312,546 2,873 8,419
Phillips Petroleum Company ......... 240,000 5,976 15,060
BANK ONE CORPORATION ............... 175,000 1,969 6,661
Kerr-McGee Corporation ............. 184,500 4,899 12,223
ONEOK, Inc. ........................ 225,000 2,751 8,947
Other .............................. 11,638 46,230
---------- ----------
Total .................. $ 133,254 $ 383,036
========== ==========
</TABLE>
17
<PAGE> 18
CONSOLIDATED BALANCE SHEETS
HELMERICH & PAYNE, INC.
ASSETS
<TABLE>
<CAPTION>
September 30, 2000 1999
----------- -----------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 108,087 $ 21,758
Accounts receivable, less reserve of $2,003 and $2,908 ... 106,630 99,598
Inventories .............................................. 25,598 25,187
Prepaid expenses and other ............................... 24,829 14,081
----------- -----------
Total current assets ................................. 265,144 160,624
----------- -----------
INVESTMENTS .................................................. 304,326 238,475
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Contract drilling equipment .................................. 891,749 881,269
Oil and gas properties ....................................... 457,724 446,889
Real estate properties ....................................... 50,649 49,065
Other .................................................... 80,268 71,139
----------- -----------
1,480,390 1,448,362
Less--Accumulated depreciation, depletion and amortization ... 806,785 757,147
----------- -----------
Net property, plant and equipment .................... 673,605 691,215
----------- -----------
OTHER ASSETS ................................................. 16,417 19,385
----------- -----------
TOTAL ASSETS ................................................. $ 1,259,492 $ 1,109,699
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 19
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 2000 1999
---------- ----------
(in thousands,
except share data)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable ..................................................................... $ 32,279 $ 25,704
Accrued liabilities .................................................................. 46,615 41,200
Notes payable ........................................................................ -- 5,000
---------- ----------
Total current liabilities .................................................... 78,894 71,904
---------- ----------
NONCURRENT LIABILITIES:
Long-term notes payable .............................................................. 50,000 50,000
Deferred income taxes ................................................................ 156,650 116,588
Other ................................................................................ 18,245 23,098
---------- ----------
Total noncurrent liabilities ................................................. 224,895 189,686
---------- ----------
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 ........................................................... 66,090 61,411
Retained earnings .................................................................... 813,885 745,956
Unearned compensation ................................................................ (3,277) (4,487)
Accumulated other comprehensive income ............................................... 106,064 75,182
---------- ----------
988,115 883,415
Less treasury stock, 3,548,480 shares in 2000 and 3,903,285 shares in 1999, at cost .. 32,412 35,306
---------- ----------
Total shareholders' equity ................................................... 955,703 848,109
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................................ $1,259,492 $1,109,699
========== ==========
</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, 2000 1999 1998
---------- ---------- ----------
(in thousands,
except per share amounts)
<S> <C> <C> <C>
REVENUES:
Sales and other operating revenues ......... $ 599,122 $ 556,562 $ 592,037
Income from investments .................... 31,973 7,757 44,603
---------- ---------- ----------
631,095 564,319 636,640
---------- ---------- ----------
COSTS AND EXPENSES:
Operating costs ............................ 316,933 332,330 346,066
Depreciation, depletion and amortization ... 110,851 109,167 88,350
Dry holes and abandonments ................. 22,692 11,727 11,572
Taxes, other than income taxes ............. 29,202 25,478 25,728
General and administrative ................. 11,578 14,198 11,762
Interest ................................... 3,076 6,481 942
---------- ---------- ----------
494,332 499,381 484,420
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE ............... 136,763 64,938 152,220
INCOME TAX EXPENSE ............................. 57,684 25,706 56,677
EQUITY IN INCOME OF AFFILIATE
net of income taxes ......................... 3,221 3,556 5,611
---------- ---------- ----------
NET INCOME ..................................... $ 82,300 $ 42,788 $ 101,154
========== ========== ==========
EARNINGS PER COMMON SHARE:
BASIC ...................................... $ 1.66 $ 0.87 $ 2.03
DILUTED .................................... $ 1.64 $ 0.86 $ 2.00
AVERAGE COMMON SHARES OUTSTANDING:
BASIC ...................................... 49,534 49,243 49,948
DILUTED .................................... 50,035 49,817 50,565
</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
-------- -------- ---------- ------------ --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
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
Comprehensive Income:
Net Income ............................ -- -- -- -- 82,300
Other comprehensive income,
net of tax--unrealized gains on
available-for-sale securities ....... -- -- -- -- --
Comprehensive income ................... -- -- -- -- --
Cash dividends ($.285 per share) ....... -- -- -- -- (14,448)
Exercise of Stock Options .............. -- -- 4,491 -- --
Purchase of stock for treasury ......... -- -- -- -- --
Lapse of restrictions on
Restricted Stock Awards .............. -- -- 31 -- --
Stock issued under Restricted
Stock Award Plan ..................... -- -- 157 (248) --
Amortization of deferred
Compensation ......................... -- -- -- 1,458 77
------ ---------- ---------- ---------- ----------
Balance, Sept. 30, 2000 ................ 53,529 $ 5,353 $ 66,090 $ (3,277) $ 813,885
====== ========== ========== ========== ==========
</TABLE>
<TABLE>
<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, 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
Comprehensive Income:
Net Income ............................ -- -- -- 82,300
Other comprehensive income,
net of tax--unrealized gains on
available-for-sale securities ....... -- -- 30,882 30,882
----------
Comprehensive income ................... -- -- -- 113,182
----------
Cash dividends ($.285 per share) ....... -- -- -- (14,448)
Exercise of Stock Options .............. (366) 3,253 -- 7,744
Purchase of stock for treasury ......... 21 (450) -- (450)
Lapse of restrictions on
Restricted Stock Awards .............. -- -- -- 31
Stock issued under Restricted
Stock Award Plan ..................... (10) 91 -- --
Amortization of deferred
Compensation ......................... -- -- -- 1,535
------ ---------- ---------- ----------
Balance, Sept. 30, 2000 ................ 3,548 $ (32,412) $ 106,064 $ 955,703
====== ========== ========== ==========
</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, 2000 1999 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 82,300 $ 42,788 $ 101,154
---------- ---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization ......................... 110,851 109,167 88,350
Dry holes and abandonments ....................................... 22,692 11,727 11,572
Equity in income of affiliate before income taxes ................ (5,196) (5,735) (9,050)
Amortization of deferred compensation ............................ 1,535 1,566 1,352
Gain on sale of securities and non-monetary investment income .... (24,000) (2,547) (38,421)
Gain on sale of property, plant and equipment .................... (2,479) (6,900) (2,951)
Other - net ...................................................... 944 2,148 974
Change in assets and liabilities:
Accounts receivable ........................................... (7,032) 19,797 (20,698)
Inventories ................................................... (411) 214 (5,762)
Prepaid expenses and other .................................... (7,780) (5,079) (4,682)
Accounts payable .............................................. 6,575 (16,147) (194)
Accrued liabilities ........................................... 7,557 2,367 (8,692)
Deferred income taxes ......................................... 21,133 559 (1,231)
Other noncurrent liabilities .................................. (4,853) 4,769 1,812
---------- ---------- ----------
119,536 115,906 12,379
---------- ---------- ----------
Net cash provided by operating activities .................. 201,836 158,694 113,533
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including dry hole costs ........................ (131,932) (122,951) (266,299)
Proceeds from sale of property, plant and equipment ................... 18,044 9,990 15,414
Purchase of investments ............................................... -- (537) 1,056
Proceeds from sale of securities ...................................... 12,569 2,803 73,949
---------- ---------- ----------
Net cash used in investing activities ...................... (101,319) (110,695) (175,880)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ........................................... -- 102,000 169,800
Payments made on notes payable ........................................ (5,000) (141,800) (80,000)
Dividends paid ........................................................ (14,175) (13,849) (13,802)
Purchases of stock for treasury ....................................... (450) -- (19,112)
Proceeds from exercise of stock options ............................... 5,437 2,932 1,974
---------- ---------- ----------
Net cash provided by (used in) financing activities ........ (14,188) (50,717) 58,860
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS .............................................................. 86,329 (2,718) (3,487)
CASH AND CASH EQUIVALENTS, beginning of period ........................... 21,758 24,476 27,963
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period ................................. $ 108,087 $ 21,758 $ 24,476
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HELMERICH & PAYNE, INC. September 30, 2000, 1999 and 1998
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 2000,
1999, and 1998 was $664,000, $21,000, and $1,953,000, 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 oil and gas reserves as determined by
the Company and its 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 2000, the Company recognized an impairment charge of approximately
$4.0 million for proved Exploration and Production properties which is included
in depreciation, depletion and amortization expense. After-tax, the impairment
charge reduced 2000 net income by approximately $2.5 million, $0.05 per share on
a diluted basis. 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 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 2000 and 1999 contract drilling revenues also include revenues of
$4,109,000 and $40,790,000, respectively, 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 Company does not currently have any third party rig construction
contracts.
GAS IMBALANCES -
The Company recognizes revenues from gas wells on the sales method, and a
liability is recorded for permanent imbalances resulting from gas wells in which
the Company has sold more production than it is entitled.
INVESTMENTS -
The cost of securities used in determining realized gains and losses is based on
average cost of the security sold. Net income in 2000 includes approximately
$6,637,000, $0.13 per share on a diluted basis, on gains related to non-monetary
transactions within the Company's available-for-sale security investment
portfolio which were accounted for at fair value.
Investments in companies owned from 20 to 50 percent are accounted for using the
equity method with the Company recognizing
23
<PAGE> 24
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, 2000 and 1999. The quoted market value of the Company's investment
was $125,063,000 and $91,687,500 at September 30, 2000 and 1999, respectively.
Retained earnings at September 30, 2000 includes approximately $21,918,000 of
undistributed earnings of Atwood.
Summarized financial information of Atwood is as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Gross revenues .................................... $ 134,514 $ 150,009 $ 151,809
Costs and expenses ................................ 111,366 122,289 112,445
---------- ---------- ----------
Net income ........................................ $ 23,148 $ 27,720 $ 39,364
========== ========== ==========
Helmerich & Payne, Inc.'s equity in net income,
net of income taxes ......................... $ 3,221 $ 3,556 $ 5,611
========== ========== ==========
Current assets .................................... $ 63,951 $ 50,532 $ 51,587
Noncurrent assets ................................. 248,334 243,072 230,150
Current liabilities ............................... 17,484 19,013 26,723
Noncurrent liabilities ............................ 77,332 82,362 91,248
Shareholders' equity .............................. 217,469 192,229 163,766
========== ========== ==========
Helmerich & Payne, Inc.'s investment .............. $ 46,353 $ 41,157 $ 35,422
========== ========== ==========
</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 October 1998. 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, 2000, the Company had committed bank lines totaling $85
million; $50 million expires October 2003 and $35 million expires May 2001.
Additionally, the Company had uncommitted credit facilities totaling $10
million. Collectively, the Company had $50 million in outstanding borrowings and
outstanding letters of credit totaling $8.2 million against these lines at
September 30, 2000. Concurrent with a $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, 2000, was approximately 6.61
percent on a 360 day basis.
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, 2000 1999 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CURRENT:
Federal ...................... $ 25,736 $ 9,684 $ 36,705
Foreign ...................... 8,766 15,963 18,728
State ........................ 3,366 1,744 4,751
-------- -------- --------
37,868 27,391 60,184
-------- -------- --------
DEFERRED:
Federal ...................... 12,318 (842) (4,108)
Foreign ...................... 6,146 (771) 927
State ........................ 1,352 (72) (326)
-------- -------- --------
19,816 (1,685) (3,507)
-------- -------- --------
TOTAL PROVISION: .................. $ 57,684 $ 25,706 $ 56,677
======== ======== ========
</TABLE>
The amounts of domestic and foreign income are as follows:
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE:
Domestic.......................... $129,373 $ 41,693 $106,228
Foreign........................... 7,390 23,245 45,992
-------- -------- --------
.............................. $136,763 $ 64,938 $152,220
======== ======== ========
</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, 2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
U.S. Federal income tax rate .................... 35% 35% 35%
Dividends received deduction .................... -- (1) --
Effect of foreign taxes ......................... 5 5 2
Non-conventional fuel source credits utilized ... -- (1) --
Other, net ...................................... 2 2 --
---- ---- ----
Effective income tax rate ....................... 42% 40% 37%
==== ==== ====
</TABLE>
The components of the Company's net deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
September 30, 2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property, plant and equipment $ 75,653 $ 59,695
Available-for-sale securities 72,583 53,651
Pension provision 4,075 3,951
Equity investment 12,734 10,759
Other 1,217 923
------------ ------------
Total deferred tax liabilities 166,262 128,979
------------ ------------
DEFERRED TAX ASSETS:
Financial accruals 9,612 8,832
Other -- 3,559
------------ ------------
Total deferred tax assets 9,612 12,391
------------ ------------
NET DEFERRED TAX LIABILITIES $ 156,650 $ 116,588
============ ============
</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
and in fiscal 2000 purchased 20,600 shares at a cost of approximately $450,000.
The Company did not purchase any shares in fiscal 1999. As of September 30,
2000, the Company is authorized to repurchase up to 979,400 additional shares.
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 983,776 shares of its treasury stock to satisfy the
exercise of stock options issued under the 1990 Stock Option Plan. Effective
December 4, 1996, additional options are no longer granted under this plan.
Options granted under the 1990 plan generally vest over a seven year period.
Options granted under the plan become exercisable in increments as outlined in
the plan.
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, 2000, 1,776,900 shares were
available for grant under the Stock Incentive Plan.
On September 30, 2000, 393,000 shares were available for grant under the Stock
Incentive Plan as restricted stock awards. In fiscal 2000, 1999 and 1998,
10,000, 17,000 and 180,000 shares of restricted stock, respectively, were
granted at a weighted-average price of $24.75, $17.00 and $37.73, respectively,
which approximated fair market value at the date of grant. Unearned compensation
of $248,000, $289,000 and $6,791,000 for fiscal 2000, 1999 and 1998,
respectively, is being amortized over a five-year period as compensation
expense.
The following summary reflects the stock option activity and related information
(shares in thousands):
<TABLE>
<CAPTION>
------------------------- ------------------------- -------------------------
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, 2,574 $ 21.34 2,090 $ 22.09 1,745 $ 16.44
Granted 767 24.75 726 16.81 544 36.84
Exercised (364) 15.44 (238) 14.28 (175) 12.15
Forfeited/Expired (22) 23.00 (4) 13.51 (24) 17.54
------- ------------ ------- ----------- ------ -----------
Outstanding on September 30, 2,955 $ 22.94 2,574 $ 21.34 2,090 $ 22.09
------- ------------ ------- ----------- ------ -----------
Exercisable on September 30, 1,046 $ 22.40 782 $ 20.13 453 $ 15.63
------- ------------ ------- ----------- ------ -----------
Shares available on September 30,
for options that may be granted 1,777 2,537 3,280
------- ------------ ------- ----------- ------ -----------
</TABLE>
The following table summarizes information about stock options at
September 30, 000 (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>
$12.00 to $16.50 625 4.2 years $13.64 437 $13.60
$16.51 to $26.50 1,797 8.2 years $22.05 342 $22.40
$26.51 to $37.00 533 7.2 years $36.84 267 $36.84
-------------------- ------ ---------- ------- ------ -------
$12.00 to $37.00 2,955 7.2 years $22.94 1,046 $22.40
-------------------- ------ ---------- ------- ------ -------
</TABLE>
The following table reflects pro forma net income and earnings per share had the
Company elected to adopt 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, 2000 1999 1998
---------- ---------- ----------
(in thousands, except per share data)
<S> <C> <C> <C>
Net Income:
As reported .................... $ 82,300 $ 42,788 $ 101,154
Pro forma ...................... $ 78,788 $ 40,268 $ 99,437
Basic earnings per share:
As reported .................... $ 1.66 $ .87 $ 2.03
Pro forma ...................... $ 1.59 $ .82 $ 1.99
Diluted earnings per share:
As reported .................... $ 1.64 $ .86 $ 2.00
Pro forma ...................... $ 1.57 $ .81 $ 1.97
</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 2000,
1999 and 1998 were $10.80, $6.81, and $14.63, 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>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Expected years until exercise............ 5.5 5.5 7.0
Expected stock volatility................ 41% 38% 34%
Dividend yield........................... .8% 1.2% 1.6%
Risk-free interest rate.................. 6.0% 6.0% 5.9%
</TABLE>
On September 30, 2000, the Company had 49,980,472 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 $0.01 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) 2000 1999 1998
------- -------- -------
<S> <C> <C> <C>
Basic weighted-average shares................ 49,534 49,243 49,948
Effect of dilutive shares:
Stock options.............................. 492 561 595
Restricted stock........................... 9 13 22
------- -------- -------
501 574 617
------- -------- -------
Diluted weighted-average shares................. 50,035 49,817 50,565
======= ======== =======
</TABLE>
Restricted stock of 180,000 shares at a weighted-average price of $37.73 and
options to purchase 533,000 shares of common stock at a price of $36.84 were
outstanding at September 30, 2000, but were not included in the computation of
diluted earnings per common share.
At September 30, 1999, 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, but were not included in the computation of
diluted earnings per common share.
At September 30, 1998, restricted stock of 180,000 shares at a weighted-average
price of $37.73 and options to purchase 919,000 shares of common stock at a
price of $32.40 were outstanding, 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.
27
<PAGE> 28
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 $2,329,000 at September 30, 2000, 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, 2000 $ 86,901 $173,137 $ 2,065 $257,973
September 30, 1999 $ 76,057 $122,369 $ 1,108 $197,318
</TABLE>
During the years ended September 30, 2000, 1999, and 1998, marketable equity
available-for-sale securities with a fair value at the date of sale of
$12,640,000, $2,803,000, and $62,792,000, respectively, were sold. The gross
realized gains on such sales of available-for-sale securities totaled
$12,576,000, $2,547,000, and $30,820,000, respectively, and the gross realized
losses totaled $0, $0, and $1,034,000 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, 2000 1999 1998
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Balance, beginning of period ................ $ 75,182 $ 54,689 $ 114,454
Unrealized gains (losses) on
available-for-sale securities .......... 73,810 35,600 (66,610)
Less: Reclassification adjustment
for net gains realized in net income ... (24,000) (2,547) (29,786)
----------- ----------- -----------
Net unrealized gains (losses) ........ 49,810 33,053 (96,396)
Tax benefit (expense) .................... (18,928) (12,560) 36,631
----------- ----------- -----------
Net-of-tax amount .................... 30,882 20,493 (59,765)
----------- ----------- -----------
Balance, end of period ...................... $ 106,064 $ 75,182 $ 54,689
=========== =========== ===========
</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, 2000 1999
---------- ----------
(in thousands)
<S> <C> <C>
Benefit obligation at beginning of year ........ $ 36,995 $ 36,954
Service cost ................................... 3,427 3,700
Interest cost .................................. 2,741 2,468
Actuarial (gain) loss .......................... 3,059 (4,468)
Benefits paid .................................. (1,384) (1,659)
---------- ----------
Benefit obligation at end of year .............. $ 44,838 $ 36,995
========== ==========
</TABLE>
Change in plan assets:
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999
---------- ----------
(in thousands)
<S> <C> <C>
Fair value of plan assets at beginning
of year ...................................... $ 58,517 $ 51,572
Actual return on plan assets ................... 3,478 8,604
Benefits paid .................................. (1,384) (1,659)
---------- ----------
Fair value of plan assets at end of year ....... $ 60,611 $ 58,517
========== ==========
Funded status of the plan ...................... $ 15,773 $ 21,522
Unrecognized net actuarial gain ................ (5,016) (10,127)
Unrecognized prior service cost ................ 786 1,025
Unrecognized net transition asset .............. (1,079) (1,619)
---------- ----------
Prepaid benefit cost ........................... $ 10,464 $ 10,801
========== ==========
</TABLE>
28
<PAGE> 29
WEIGHTED-AVERAGE ASSUMPTIONS:
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Discount rate ........................ 7.50% 7.50% 6.75%
Expected return on plan .............. 9.00% 9.00% 8.50%
Rate of compensation increase ........ 5.00% 5.00% 5.00%
</TABLE>
Components of net periodic cost:
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Service cost ................................ $ 3,427 $ 3,700 $ 2,836
Interest cost ............................... 2,741 2,468 2,430
Expected return on plan assets .............. (5,226) (4,606) (4,542)
Amortization of prior service cost .......... 238 238 238
Amortization of transition asset ............ (540) (540) (540)
Recognized net actuarial gain ............... (303) 14 (65)
---------- ---------- ----------
Net pension expense ......................... $ 337 $ 1,274 $ 357
========== ========== ==========
</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 $3,545,000, $3,315,000,
and $3,009,000 in 2000, 1999, and 1998, respectively.
NOTE 9 ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, 2000 1999
---------- ----------
(in thousands)
<S> <C> <C>
Royalties payable ...................... $ 18,918 $ 9,625
Taxes payable - operations ............. 6,861 6,990
Ad valorem tax ......................... 7,783 7,177
Income taxes payable ................... -- 3,278
Workers compensation claims ............ 2,840 3,122
Payroll and employee benefits .......... 4,055 3,970
Other .................................. 6,158 7,038
---------- ----------
$ 46,615 $ 41,200
========== ==========
</TABLE>
NOTE 10 SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
CASH PAYMENTS:
Interest paid .............. $ 2,491 $ 5,705 $ 1,721
Income taxes paid .......... $ 39,673 $ 27,843 $ 61,056
</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 temporary cash investments with established
financial institutions and invests in a diversified portfolio of highly rated,
short-term money market instruments. 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.
The Company's decreased rig utilization rates during fiscal 1999 continued in
fiscal 2000. Depressed oil prices, the primary cause of the decrease, have since
recovered, with utilization recovery lagging behind. 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.
29
<PAGE> 30
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.
NOTE 12 NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS No. 137 and
SFAS No. 138, 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
will adopt the provisions of SFAS No. 133, as amended, effective October 1,
2000. The impact of the Company's adoption of SFAS No. 133, as amended, on the
Company's results of operations and financial position is not expected to be
material.
NOTE 13 SEGMENT INFORMATION
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 and corporate operations. The "other" component of Total Assets also
includes the Company's investment in equity-owned investments.
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, 2000, 1999, and 1998 is shown in the following
table:
<TABLE>
<CAPTION>
Depreciation Additions
External Inter- Total Operating Depletion & Total to Long-Lived
(in thousands) Sales Segment Sales Profit Amortization Assets Assets
---------- ---------- ---------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
2000:
CONTRACT DRILLING
Domestic ...................... $ 214,531 $ 3,048 $ 217,579 $ 35,808 $ 35,310 $ 342,278 $ 40,722
International ................. 136,549 -- 136,549 9,753 38,096 259,892 13,825
---------- ---------- ---------- ---------- ----------- --------- ----------
351,080 3,048 354,128 45,561 73,406 602,170 54,547
---------- ---------- ---------- ---------- ----------- --------- ----------
OIL & GAS OPERATIONS
Exploration and Production .... 157,583 -- 157,583 66,604 33,462 174,466 65,804
Natural Gas Marketing ......... 80,907 -- 80,907 5,271 164 21,897 175
---------- ---------- ---------- ---------- ----------- --------- ----------
238,490 238,490 71,875 33,626 196,363 65,979
---------- ---------- ---------- ---------- ----------- --------- ----------
REAL ESTATE ..................... 8,999 1,545 10,544 5,346 1,598 24,235 2,909
OTHER ........................... 32,526 -- 32,526 -- 2,221 436,724 8,497
ELIMINATIONS .................... -- (4,593) (4,593) -- -- -- --
---------- ---------- ---------- ---------- ----------- --------- ----------
TOTAL ....................... $ 631,095 -- $ 631,095 $ 122,782 $ 110,851 $1,259,492 $ 131,932
========== ========== ========== ========== =========== ========= ==========
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
Depreciation Additions
External Inter- Total Operating Depletion & Total to Long-Lived
(in thousands) Sales Segment Sales Profit 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
======== ======== ======== ======== ======== ========== ========
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
======== ======== ======== ======== ======== ========== ========
</TABLE>
The following table reconciles segment operating profit per the table on pages
30 and 31 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, 2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Segment operating profit .................... $ 122,782 $ 81,000 $ 122,528
Unallocated amounts:
Income from investments .................. 31,973 7,757 44,603
General and administrative expense ....... (11,578) (14,198) (11,762)
Interest expense ......................... (3,076) (6,481) (942)
Corporate depreciation ................... (2,152) (1,565) (1,280)
Other corporate expense .................. (1,186) (1,575) (927)
--------- --------- ---------
Total unallocated amounts .............. 13,981 (16,062) 29,692
--------- --------- ---------
Income before income taxes and equity in
Income of affiliate ...................... $ 136,763 $ 64,938 $ 152,220
========= ========= =========
</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, 2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenues
United States ......... $494,546 $381,332 $383,568
Venezuela ............. 34,922 59,481 131,137
Colombia .............. 42,509 60,838 79,675
Other Foreign ......... 59,118 62,668 42,260
-------- -------- --------
Total ............... $631,095 $564,319 $636,640
======== ======== ========
Long-Lived Assets
United States ......... $477,593 $479,753 $475,832
Venezuela ............. 37,001 62,931 85,703
Colombia .............. 26,361 46,621 59,848
Other Foreign ......... 132,650 101,910 70,988
-------- -------- --------
Total ............... $673,605 $691,215 $692,371
======== ======== ========
</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 15.2 percent, 17.5 percent and 14.5 percent of the
total consolidated revenues during the years ended September 30, 2000, 1999, and
1998, respectively. Revenues from another company doing business with the
contract drilling segment accounted for approximately 7.4 percent, 12 percent,
and 10 percent of total consolidated revenues in the years ended September 30,
2000, 1999, and 1998, respectively. Collectively, revenues from companies
controlled by the Venezuelan government accounted for approximately 3.6 percent,
5.6 percent and 16 percent of total consolidated revenues for the years ended
September 30, 2000, 1999, and 1998, respectively. Collectively, the receivables
from these customers were approximately $24.0 million and $35.6 million at
September 30, 2000 and 1999, 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, 2000 1999 1998
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Revenues ................................................ $ 157,583 $ 95,953 $ 98,696
------------ ------------ ------------
Production costs ........................................ 26,685 23,058 21,786
Exploration expense and valuation provisions............. 30,832 22,992 19,005
Depreciation, depletion and amortization................. 33,462 38,658 29,817
Income tax expense ...................................... 23,447 3,437 9,415
------------ ------------ ------------
Total cost and expenses ............................... 114,426 88,145 80,023
------------ ------------ ------------
Results of operations (excluding corporate overhead
and interest costs) ................................... $ 43,157 $ 7,808 $ 18,673
============ ============ ============
</TABLE>
Capitalized Costs -
<TABLE>
<CAPTION>
September 30, 2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Proved properties ............................................ $ 430,675 $ 421,552
Unproved properties .......................................... 27,050 25,337
------------ ------------
Total costs ................................................ 457,725 446,889
Less - Accumulated depreciation, depletion and amortization .. 314,091 312,644
------------ ------------
Net ........................................................ $ 143,634 $ 134,245
============ ============
</TABLE>
Costs Incurred Relating to Oil and Gas Producing Activities -
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
----------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Property acquisition:
Proved ................................. $ 105 $ 89 $ 107
Unproved ............................... 11,040 14,385 9,096
Exploration .............................. 43,833 22,292 18,107
Development .............................. 18,843 19,167 28,259
----------- ----------- -----------
Total .................................. $ 73,821 $ 55,933 $ 55,569
=========== =========== ===========
</TABLE>
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 Netherland, Sewell &~Associates, Inc. at September 30, 2000. All
prior years were estimated by the Company and reviewed by independent engineers.
32
<PAGE> 33
<TABLE>
<CAPTION>
OIL (Bbls) GAS (Mmcf)
---------- ----------
<S> <C> <C>
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
Revisions of previous estimates ............... 1,316,714 17,363
Extensions, discoveries and other additions ... 1,119,314 52,569
Production .................................... (880,304) (46,923)
Purchases of reserves-in-place ................ 1,502 242
Sales of reserves-in-place .................... (85,987) (373)
---------- ----------
Proved reserves at September 30, 2000 ......... 6,305,137 262,498
========== ==========
Proved developed reserves at
September 30, 1998 ......................... 4,754,319 249,376
========== ==========
September 30, 1999 ......................... 4,828,071 229,765
========== ==========
September 30, 2000 ......................... 5,847,217 217,334
========== ==========
</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, 2000 1999
------------- -------------
(in thousands)
<S> <C> <C>
Future cash inflows ........................................ $ 1,377,922 $ (688,766)
Future costs -
Future production and development costs ................ (317,898) (188,579)
Future income tax expense .............................. (331,672) (135,763)
------------- -------------
Future net cash flows ...................................... 728,352 364,424
10% annual discount for estimated timing of cash flows ..... (240,281) (131,806)
------------- -------------
Standardized Measure of discounted future net cash flows ... $ 488,071 $ 232,618
============= =============
</TABLE>
33
<PAGE> 34
Changes in Standardized Measure Relating to Proved Oil and Gas Reserves
(Unaudited) -
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Standardized Measure - Beginning of year ..................... $ 232,618 $ 125,927 $ 205,035
Increases (decreases) -
Sales, net of production costs ............................. (130,898) (72,895) (76,910)
Net change in sales prices, net of production costs ........ 261,926 142,970 (97,938)
Discoveries and extensions, net of related future
development and production costs ....................... 156,840 38,164 21,922
Changes in estimated future development costs .............. (36,994) (11,095) (14,142)
Development costs incurred ................................. 13,587 16,558 25,149
Revisions of previous quantity estimates ................... 57,730 17,713 5,089
Accretion of discount ...................................... 30,951 16,700 28,012
Net change in income taxes ................................. (114,762) (40,671) 30,436
Purchases of reserves-in-place ............................. 542 96 65
Sales of reserves-in-place ................................. (700) (1,390) (2,875)
Other ...................................................... 17,231 541 2,084
------------ ------------ ------------
Standardized Measure - End of year ........................... $ 488,071 $ 232,618 $ 125,927
============ ============ ============
</TABLE>
NOTE 15 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
2000 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ............................ $ 149,581 $ 151,848 $ 151,968 $ 177,698
Gross profit ........................ 37,852 36,256 32,605 44,704
Net income .......................... 20,461 19,273 18,557 24,009
Basic net income per share .......... .41 .39 .37 .48
Diluted net income per share ........ .41 .39 .37 .48
</TABLE>
<TABLE>
<CAPTION>
1999 1st 2nd 3rd 4th
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>
Gross profit represents total revenues less operating costs, depreciation,
depletion and amortization, dry holes and abandonments, and taxes, other than
income taxes.
The sum of earnings per share for the four quarters may not equal the total
earnings per share for the year due to changes in the average number of common
shares outstanding.
Net income in the first quarter of 2000 includes approximately $6.3 million
($0.13 per share, on a diluted basis) on gains related to a non-monetary
dividend received and a gain on the conversion of shares of common stock of a
Company investee pursuant to that investee being acquired.
Net income in the fourth quarter of 2000 includes an after-tax charge of $2.5
million ($0.05 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, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended September 30, 2000. 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 auditing standards generally
accepted in the United States. 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, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Tulsa, Oklahoma
November 17, 2000
STOCK PRICE INFORMATION
<TABLE>
<CAPTION>
Closing Market Price Per Share
----------------------------------------
2000 1999
------------------ ------------------
QUARTERS HIGH LOW HIGH LOW
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
First............................... $ 27.44 $ 19.13 $ 24.50 $ 16.75
Second.............................. 31.00 20.00 23.94 16.06
Third............................... 37.75 29.06 26.75 20.38
Fourth.............................. 38.31 30.06 30.19 23.00
</TABLE>
DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Paid Per Share Total Payment
-------------- --------------------------
2000 1999 2000 1999
----- ----- ---------- ----------
QUARTERS
--------
<S> <C> <C> <C> <C>
First............................. $.070 $.070 $3,474,612 $3,457,626
Second............................ .070 .070 3,475,623 3,459,168
Third............................. .070 .070 3,484,189 3,464,109
Fourth............................ .075 .070 3,740,863 3,468,377
</TABLE>
STOCKHOLDERS' MEETING
The annual meeting of stockholders will be held on March 7, 2001. A formal
notice of the meeting, together with a proxy statement and form of proxy, will
be mailed to shareholders on or about January 26, 2001.
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, 2000, there were 1,170 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
35
<PAGE> 36
ELEVEN-YEAR FINANCIAL REVIEW
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES AND INCOME*(2)
Contract Drilling Revenues ....................... 349,992 394,715 427,713
Crude Oil Sales .................................. 24,601 9,479 10,333
Natural Gas Sales ................................ 131,056 81,533 87,646
Gas Marketing Revenues ........................... 78,921 54,263 52,469
Real Estate Revenues ............................. 8,991 8,663 8,587
Dividend Income .................................. 14,482 3,569 4,117
Other Revenues ................................... 23,052 12,097 45,775
Total Revenues+ .................................. 631,095 564,319 636,640
Net Cash Provided by Continuing Operations+ ...... 201,836 158,694 113,533
Income from Continuing Operations ................ 82,300 42,788 101,154
Net Income ....................................... 82,300 42,788 101,154
PER SHARE DATA
Income from Continuing Operations(1):
Basic ........................................ 1.66 .87 2.03
Diluted ...................................... 1.64 .86 2.00
Net Income(1):
Basic ........................................ 1.66 .87 2.03
Diluted ...................................... 1.64 .86 2.00
Cash Dividends ................................... .285 .28 .275
Shares Outstanding* .............................. 49,980 49,626 49,383
FINANCIAL POSITION
Net Working Capital* ............................. 186,250 88,720 58,861
Ratio of Current Assets to Current Liabilities ... 3.36 2.23 1.47
Investments* ..................................... 304,326 238,475 200,400
Total Assets* .................................... 1,259,492 1,109,699 1,090,430
Long-Term Debt* .................................. 50,000 50,000 50,000
Shareholders' Equity* ............................ 955,703 848,109 793,148
CAPITAL EXPENDITURES*
Contract Drilling Equipment ...................... 49,774 68,639 206,794
Wells and Equipment .............................. 54,764 29,947 38,970
Real Estate ...................................... 2,880 1,435 854
Other Assets (includes undeveloped leases) ....... 24,514 22,930 19,681
Discontinued Operations .......................... -- -- --
Total Capital Outlays ............................ 131,932 122,951 266,299
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment ...................... 891,749 881,269 829,217
Producing Properties ............................. 430,674 421,552 414,770
Undeveloped Leases ............................... 27,050 25,337 20,977
Real Estate ...................................... 50,649 49,065 48,451
Other ............................................ 80,268 71,139 65,120
Discontinued Operations .......................... -- -- --
Total Property, Plant and Equipment .............. 1,480,390 1,448,362 1,378,535
</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>
Years Ended September 30, 1997 1996 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES AND INCOME*(2)
Contract Drilling Revenues ....................... 315,327 244,338 203,325 182,781
Crude Oil Sales .................................. 20,475 15,378 13,227 13,161
Natural Gas Sales ................................ 87,737 60,500 33,851 45,261
Gas Marketing Revenues ........................... 66,306 57,817 34,729 51,874
Real Estate Revenues ............................. 8,224 8,076 7,560 7,396
Dividend Income .................................. 5,268 3,650 3,389 3,621
Other Revenues ................................... 14,522 3,496 10,640 6,058
Total Revenues+ .................................. 517,859 393,255 306,721 310,152
Net Cash Provided by Continuing Operations+ ...... 165,568 121,420 84,010 74,463
Income from Continuing Operations ................ 84,186 45,426 5,788 17,108
Net Income ....................................... 84,186 72,566 9,751 24,971
PER SHARE DATA
Income from Continuing Operations(1):
Basic ........................................ 1.69 .92 .12 .35
Diluted ...................................... 1.67 .91 .12 .35
Net Income(1):
Basic ........................................ 1.69 1.47 .20 .51
Diluted ...................................... 1.67 1.46 .20 .51
Cash Dividends ................................... .26 .2525 .25 .2425
Shares Outstanding* .............................. 50,028 49,771 49,529 49,420
FINANCIAL POSITION
Net Working Capital* ............................. 62,837 51,803 50,038 76,238
Ratio of Current Assets to Current Liabilities ... 1.66 1.83 1.74 2.63
Investments* ..................................... 323,510 229,809 156,908 87,414
Total Assets* .................................... 1,033,595 821,914 707,061 621,689
Long-Term Debt* .................................. -- -- -- --
Shareholders' Equity* ............................ 780,580 645,970 562,435 524,334
CAPITAL EXPENDITURES*
Contract Drilling Equipment ...................... 109,036 79,269 80,943 53,752
Wells and Equipment .............................. 35,024 21,142 19,384 40,916
Real Estate ...................................... 1,095 752 873 902
Other Assets (includes undeveloped leases) ....... 16,022 7,003 9,717 9,695
Discontinued Operations .......................... -- 1,581 859 618
Total Capital Outlays ............................ 161,177 109,747 111,776 105,883
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment ...................... 643,619 568,110 501,682 444,432
Producing Properties ............................. 395,812 392,562 384,755 377,371
Undeveloped Leases ............................... 14,109 9,242 8,051 11,729
Real Estate ...................................... 47,682 46,970 46,642 47,827
Other ............................................ 59,659 53,547 55,655 48,612
Discontinued Operations .......................... -- -- 13,937 13,131
Total Property, Plant and Equipment .............. 1,160,881 1,070,431 1,010,722 943,102
<CAPTION>
Years Ended September 30, 1993 1992 1991 1990
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES AND INCOME*(2)
Contract Drilling Revenues ....................... 149,661 112,833 105,364 90,974
Crude Oil Sales .................................. 15,392 16,369 17,374 16,058
Natural Gas Sales ................................ 52,446 38,370 35,628 37,697
Gas Marketing Revenues ........................... 63,786 40,410 10,055 10,566
Real Estate Revenues ............................. 7,620 7,541 7,542 7,636
Dividend Income .................................. 3,535 4,050 5,285 7,402
Other Revenues ................................... 8,283 6,646 20,020 56,131
Total Revenues+ .................................. 300,723 226,219 201,268 226,464
Net Cash Provided by Continuing Operations+ ...... 72,493 60,414 50,006 53,288
Income from Continuing Operations ................ 22,158 8,973 19,608 45,489
Net Income ....................................... 24,550 10,849 21,241 47,562
PER SHARE DATA
Income from Continuing Operations(1):
Basic ........................................ .46 .19 .41 .94
Diluted ...................................... .45 .19 .41 .93
Net Income(1):
Basic ........................................ .51 .22 .44 .98
Diluted ...................................... .50 .22 .44 .98
Cash Dividends ................................... .24 .2325 .23 .22
Shares Outstanding* .............................. 49,275 49,152 48,976 48,971
FINANCIAL POSITION
Net Working Capital* ............................. 104,085 82,800 108,212 146,741
Ratio of Current Assets to Current Liabilities ... 3.24 3.31 4.19 3.72
Investments* ..................................... 84,945 87,780 96,471 99,574
Total Assets* .................................... 610,504 585,504 575,168 582,927
Long-Term Debt* .................................. 3,600 8,339 5,693 5,648
Shareholders' Equity* ............................ 508,927 493,286 491,133 479,485
CAPITAL EXPENDITURES*
Contract Drilling Equipment ...................... 24,101 43,049 56,297 18,303
Wells and Equipment .............................. 23,142 21,617 34,741 16,489
Real Estate ...................................... 436 690 2,104 1,467
Other Assets (includes undeveloped leases) ....... 5,901 16,984 6,793 5,448
Discontinued Operations .......................... 629 158 2,594 1,153
Total Capital Outlays ............................ 54,209 82,498 102,529 42,860
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment ...................... 418,004 404,155 370,494 324,293
Producing Properties ............................. 340,176 329,264 312,438 287,248
Undeveloped Leases ............................... 10,010 12,973 5,552 5,507
Real Estate ...................................... 47,502 47,286 46,671 44,928
Other ............................................ 45,085 43,153 36,423 32,135
Discontinued Operations .......................... 12,545 11,962 11,838 9,270
Total Property, Plant and Equipment .............. 873,322 848,793 783,416 703,381
</TABLE>
37
<PAGE> 38
ELEVEN-YEAR OPERATING REVIEW
HELMERICH & PAYNE, INC.
<TABLE>
<CAPTION>
Years Ended September 30, 2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
CONTRACT DRILLING
Drilling Rigs, United States................. 48 46 46
Drilling Rigs, International................. 40 44 44
Contract Wells Drilled, United States........ 335 242 242
Total Footage Drilled, United States*........ 4,058 2,938 2,938
Average Depth per Well, United States........ 12,115 12,142 12,142
Percentage Rig Utilization, United States.... 87 75 95
Percentage Rig Utilization, International.... 47 53 88
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed........................ 81 49 62
Net Wells Completed.......................... 42.7 23.9 35.7
Net Dry Holes................................ 9.1 7.1 4.2
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily)................... 2,405 1,779 1,921
Net Oil Wells Owned -- Primary Recovery...... 107.1 124 124
Net Oil Wells Owned -- Secondary Recovery.... 55.5 54 53
Secondary Oil Recovery Projects.............. 3 5 5
Net Natural Gas Produced
(thousands of cubic feet daily)............ 128,204 121,206 117,431
Net Gas Wells Owned.......................... 453 439 436
REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)*........... 1,652 1,652 1,652
Percentage Occupancy......................... 91 95 97
TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries..... 3,606 3,440 3,340
</TABLE>
* 000's omitted.
38
<PAGE> 39
<TABLE>
<CAPTION>
Years Ended September 30, 1997 1996 1995 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONTRACT DRILLING
Drilling Rigs, United States................. 38 41 41 47 42 39 46 49
Drilling Rigs, International................. 39 36 35 29 29 30 25 20
Contract Wells Drilled, United States........ 246 233 212 162 128 100 106 119
Total Footage Drilled, United States*........ 2,753 2,499 1,933 1,842 1,504 1,085 1,301 1,316
Average Depth per Well, United States........ 11,192 10,724 9,119 11,367 11,746 10,853 12,274 11,059
Percentage Rig Utilization, United States.... 88 82 71 69 53 42 47 50
Percentage Rig Utilization, International.... 91 85 84 88 68 69 69 45
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed........................ 100 63 59 44 42 54 45 36
Net Wells Completed.......................... 49.3 35.3 27.4 15 15.9 17.8 20.2 15.3
Net Dry Holes................................ 9.6 7.3 5.9 1.7 4.3 4.3 4.3 3.4
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily)................... 2,700 2,212 2,214 2,431 2,399 2,334 2,152 2,265
Net Oil Wells Owned -- Primary Recovery...... 133 176.9 186 202 202 220 227 223
Net Oil Wells Owned -- Secondary Recovery.... 49 63.8 64 71 71 74 55 46
Secondary Oil Recovery Projects.............. 5 12 12 14 14 14 12 12
Net Natural Gas Produced
(thousands of cubic feet daily)............ 110,859 94,358 72,387 72,953 78,023 75,470 66,617 65,147
Net Gas Wells Owned.......................... 410 378 354 341 307 289 278 194
REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)*........... 1,652 1,654 1,652 1,652 1,656 1,656 1,664 1,664
Percentage Occupancy......................... 95 94 87 83 86 87 86 85
TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries..... 3,627 3,309 3,245 2,787 2,389 1,928 1,758 1,864
</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
Vice President,
WILLIAM L. ARMSTRONG** President of Helmerich & Payne
Chairman International Drilling Co.
Transland Financial Services, Inc.
Denver, Colorado DOUGLAS E. FEARS
Vice President and
GLENN A. COX* Chief Financial Officer
President and Chief Operating 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
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