Filed by Helmerich & Payne. Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Helmerich & Payne Exploration and Production Co.
Commission File No.: 132-02238
#1
[H&P LOGO [KEY PRODUCTION COMPANY,
OMITTED] INC. LOGO omitted]
|
CIMAREX ENERGY COMPANY
THE MERGER ANNOUNCEMENT OF
HELMERICH & PAYNE'S E&P DIVISION
AND
KEY PRODUCTION COMPANY
#2
FORWARD-LOOKING STATEMENTS
This presentation contains certain "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include, without limitation, statements
regarding the consummation of the proposed distribution and merger, its
effect on future earnings, cash flow or other operating results, any other
effect or benefit of the proposed distribution and merger, market
prospects, and any other statements that are not historical facts. H&P and
Key strongly encourage readers to note that some or all of the assumptions
upon which such forward-looking statements are based are beyond their
ability to control or estimate precisely, and may in some cases be subject
to rapid and material changes. More detailed information about the factors
that could cause actual results to differ materially from those described
in the forward-looking statements is set forth in H&P and Key's filings
with the Securities and Exchange Commission, which are available free of
charge on the SEC's website at www.sec.gov. H&P and Key undertake no
obligation to publicly update any forward-looking statements discussed in
this presentation, whether as a result of new information, future events or
otherwise.
#3
ADDITIONAL INFORMATION
In connection with the proposed spin-off and merger, Key and Cimarex will file a proxy statement/prospectus with the SEC. Investors and security holders are urged to carefully read the proxy statement/prospectus regarding the proposed transaction when it becomes available, because it will contain important information. Investors and security holders may obtain a free copy of the proxy statement/prospectus (when it is available) and other documents containing information about Key and H&P's oil and gas division, without charge, at the SEC's web site at www.sec.gov. Copies of the proxy statement/prospectus and the SEC filings that will be incorporated by reference in the proxy statement/prospectus may also be obtained for free by directing a request to either: Key Production Company, Inc., 707 Seventeenth Street, Suite 3300, Denver, Colorado 80202, Attention: Sharon M. Pope, Assistant Corporate Secretary; telephone 303-295-3995, fax: 303-295-3494, or Helmerich & Payne, Inc., Utica at Twenty-First Street, Tulsa, Oklahoma 74114, Attention: Steven R. Mackey, Corporate Secretary; telephone 918-742-5531, fax: 918-743-2671.
Participants in Solicitation
H&P, Cimarex, Key and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Key's shareholders in connection with the proposed merger. Information concerning Key's participants in the solicitation is set forth in Key's proxy statement dated April 26, 2001, which is filed with the SEC. Hans Helmerich, Douglas E. Fears and Steven R. Mackey are currently directors of Cimarex, and each of them and Steven R. Shaw are currently officers of Cimarex (the "Cimarex Participants"). None of the Cimarex Participants beneficially owns any shares of Cimarex common stock. The Cimarex Participants are all executive officers of H&P. Information concerning H&P's participants in the solicitation is set forth in H&P's proxy statement dated January 25, 2002, which is filed with the SEC. Key's shareholders may obtain additional information about the interests of all such participants in the proposed merger by reading the proxy statement/prospectus when it becomes available. Investors should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions.
#4
ORIGINAL GOALS
> Increase focus and visibility
> Use financial strength to enhance shareholder value
> Strengthen E&P division's position
> Capture tax efficiency
> Create a combination where the whole is greater than the sum of its parts
#5
TRANSACTION SUMMARY
> Merger of H&P oil and gas division with Key to create Cimarex Energy Company
> H&P shareholders will own 65.25% of a new and scaled up independent producer
> Structured as a tax-free spinoff
> Closing targeted for 3rd quarter 2002
#6
CIMAREX ENERGY AT A GLANCE
> Proved reserves: 392 Bcfe (78% gas)
> Production: 190 MMcfe per day
- Creates 20th largest U.S.-based independent natural gas producer
> Enterprise value: ~$640MM
> Debt: $34MM
> 245 total employees
> Experienced management team with proven track record
#7
WHY KEY PRODUCTION?
> Impressive people and organization
> Complementary and overlapping asset base
> Strong balance sheet
> Similar philosophies and cultures
#8
CIMAREX ENERGY MANAGEMENT
F. H. Merelli - Chairman & CEO
Steve Shaw - Executive VP
Paul Korus - Vice President & CFO
#9
OVERVIEW OF KEY PRODUCTION
> Founded in 1988 as the successor to Apache Petroleum Company, LP
> Passive to active asset management in 1992
> Objective: Consistent, profitable growth
> Approach: Focus on drilling, measure progress on a per share basis
#10
KEY PRODUCTION - THEN AND NOW
($ in millions) 1992 2001
---- ----
Market Cap $ 25 $ 240
Debt $ 3 $ 34
Stock price ($/share) $ 3 $ 17
Reserves (Bcfe) 38 147
Reserves (Mcfe/share) 3.6 10.5
Production (Bcfe) 8.3 26.0
Gross Wells Drilled -- 107
|
#11
WHY H&P?
> High-quality asset base
> High-margin, gas-oriented production
> Good people
> Production operations capacity
> No debt
> Similar drill bit strategies
#12
CIMAREX ENERGY CHARACTERISTICS
> Objective: Consistent, profitable growth
> Strategies: Exploration, acquisitions and exploitation
> Strong balance sheet
> Diversified base of high-quality production
> Attractive drilling opportunities
> Focused on adding value and per share results
#13
BASE PROPERTIES
___________________________________
Helmerich & Payne, Inc.
-----------------------------------
Proved reserves (Bcfe) 245
% Natural gas 87%
Production (MMcfe/d) 116
[MAP GRAPHIC OMITTED] Net undeveloped acres 150,401
___________________________________
Key Production Company
Denver -----------------------------------
Tulsa
District Operating Offices Proved reserves (Bcfe) 147
% Natural gas 62%
Production (MMcfe/d) 74
Net undeveloped acres 119,251
___________________________________
Cimarex Energy Company
-----------------------------------
Proved reserves (Bcfe) 392
% Natural gas 78%
Production (MMcfe/d) 190
Net undeveloped acres 269,652
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#14
PROVED RESERVES
By Region
---------
Kansas Gulf Coast
------ ----------
21% 13%
[PIE CHART GRAPHIC OMITTED]
Western Mid-Continent
------- -------------
23% 43%
By Type By Category
------- -----------
[PIE CHART GRAPHIC OMITTED] [PIE CHART GRAPHIC OMITTED]
Gas Oil PUD PDNP PDP
--- --- --- ---- ---
78% 22% 2% 6% 92%
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#15
MID-CONTINENT OPERATIONS
\
169 Bcfe
Gas Oil
[MAP GRAPHIC OMITTED] --- ---
85% 15%
[PIE CHART GRAPHICS OMITTED]
H&P Key
Denver --- ---
Tulsa 53% 47%
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#16
KANSAS OPERATIONS
80 Bcfe
Gas Oil
[MAP GRAPHIC OMITTED] --- ---
86% 14%
|
[PIE CHART GRAPHICS OMITTED]
H&P
Denver ---
Tulsa 100%
#17
MID-CONTINENT / KS OVERLAP
OK / KS Acreage
H&P Gross: 283,414
[GRAPHIC OMITTED]
H&P Net: 153,144
Key Gross: 237,057
Key Net: 78,669
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Location of Properties
Helmerich & Payne
Key Production
Common Counties
#18
GULF COAST OPERATIONS
51 Bcfe
Gas Oil
[MAP GRAPHIC OMITTED] --- ---
66% 34%
[PIE CHART GRAPHICS OMITTED]
H&P Key
Denver --- ---
Tulsa 37% 63%
District Operating Offices
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#19
PERMIAN / WESTERN OPERATIONS
92 Bcfe
Gas Oil
[MAP GRAPHIC OMITTED] --- ---
65% 35%
[PIE CHART GRAPHICS OMITTED]
H&P Key
Denver --- ---
Tulsa 61% 39%
District Operating Offices
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#20
CIMAREX ENERGY GROWTH STRATEGIES
______________________________\
Focused Exploration Program >
------------------------------/
Cimarex Grow Production,
Strategy ______________________________\ Reserves
Exploitation of Base Properties > and Asset Value
------------------------------/
______________________________\
Acquisitions >
------------------------------/
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#21
EXPLORATION
Cimarex ______________________________\ Grow Production,
Strategy Focused Exploration Program > Reserves
------------------------------/ and Asset Value
|
o Strategy is to concentrate on moderate risk plays:
- 480 Bcfe net unrisked reserve potential
- 2002 / 2003 plans are being high-graded and prioritized
- Mid-Continent and onshore Gulf Coast focus
#22
2002 CAPITAL BUDGET
($ in millions) H&P Key Total
--- --- -----
Mid-Continent / Kansas $ 10 $ 34 $ 44
Gulf Coast 39 16 55
Permian / Western 6 8 14
----- ---- ------
Total $ 55 $ 58 $ 113
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#23
GULF COAST EXPLORATION
Allen Parish MS Salt Basin
------------ -------------
50% WI 40% WI
~ $3 MM ~ $6 MM
[GRAPHIC OMITTED]
Jefferson County Cameron Prairie
---------------- ---------------
30% -66% WI 13%-30% WI
~ $14 MM ~ $9 MM
Cook Mountain Lobo
------------- ----
50% WI 33% WI
~ $4 MM ~ $2 MM
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#24
MID-CONTINENT / KANSAS
Kansas Ellis County
------ ------------
50% WI 75% WI
~ $1 MM ~ $2 MM
[GRAPHIC OMITTED]
Hardeman Red Fork / Atoka
-------- ----------------
100% WI 50% WI
~ $9 MM ~ $15 MM
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#25
EXPLOITATION
Cimarex ______________________________\ Grow Production,
Strategy Exploitation of Base Properties > Reserves
------------------------------/ and Asset Value
|
o Strategy is to optimize production rates and rates of return
- Recompletions / Workovers
- Field studies
- Selective divestitures
o Core business
o Good exploitation makes for good acquisitions
#26
TARGET ACQUISITIONS
Cimarex ______________________________\ Grow Production,
Strategy Acquisitions > Reserves
------------------------------/ and Asset Value
|
o Strategy: seeking quality proved reserves with upside drilling and exploitation potential
o Substantial acquisition "dry-powder"
o New core business
#27
CIMAREX ENERGY
FINANCIAL INFORMATION
Key H&P Combined
($ in millions) --- ----- --------
YE01 Proved reserves, Bcfe 147 245 392
2002E Production, MMcfe/d 74 116 190
% Gas Production 65% 90% 80%
2001E EBITDAX $ 80 $ 146 $ 226
Debt at 12/31/01 $ 34 -- $ 34
Shares outstanding (millions) 14.0 40.6
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#28
ACCOUNTING
o Acquisition of Key by Cimarex Energy Company
o Purchase accounting treatment
o H&P: Successful efforts
Key: Full cost
Cimarex: Seek full cost treatment
o Fiscal year: 12/31
#29
BALANCE SHEET
As Of 12/31/01
-----------------------------
Key
($ in millions, unaudited) H&P E&P (estimated)
------------ -----------
Current Assets $ 39.2 $ 20.5
PP&E (Net) 162.1 194.0
Other .2 1.5
------------ -----------
Total Assets $ 201.5 $ 216.0
============ ===========
Current Liabilities $ 40.2 $ 19.0
Long-Term Debt (incl. current mat.) - 34.0
Deferred Taxes / Other 21.8 29.0
Shareholders' Equity 139.5 134.0
------------ -----------
Total Liabilities and
Shareholders' Equity $ 201.5 $ 216.0
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#30
EQUITY MARKET CAP
[BAR GRAPH graphic omitted
($ in millions)
KP NEV MHR PRZ KWK DNR ROIL EAC POG MARY Cimarex COG EVG WRC TMBR PRS
-- --- --- --- --- --- ---- --- --- ---- ------- --- --- --- ---- ---
222 242 257 271 336 355 359 396 559 566 600 631 679 896 965 996
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#31
CIMAREX ENERGY RECAP
o New independent with critical mass of people and assets
o $600MM equity market cap
o Limited debt and substantial financial capacity
o Predominantly Mid-Continent production base
o Gulf Coast and Mid-Continent oriented exploration programs
#32
TRANSACTION STRUCTURE
________________________________ ______________________________
| Step 1: H&P distributes | | Step 2: H&P distributes 100% |
| Oil and Gas Division to | | of Spinco shares |
| Spinco | | to H&P shareholders |
|________________________________| |______________________________
------ ------
| HP | | HP |
------ ------
Oil & Gas | ^ |
Division | | 26.6MM | Spinco
| | Shares | Shares
\/ | \/
________ ______________________
| Spinco | | H&P Shareholders |
|________| |_____________________|
#33
TRANSACTION STRUCTURE
________________________________ ______________________________
| Step 3: Spinco forms | | Step 4: Merged entity |
|
| acquisition subsidiary to | | trading as Cimarex Energy | | merge with Key | | | |________________________________| |______________________________
| S/Hs | | Sub | | S/Hs | | S/Hs |
------- / ----------- ------- -----------
| / | ^ \ /
100% | / | | 1:1 \ /
| / | | Key 65.25% \ / 34.75%
| / \|/ | Shares \ /
____|___/ ___________ __\_________/_
| Spinco | | Key | | Cimarex |
| Sub | |Production | | Energy |
-------- ----------- --------------
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#34
HELMERICH & PAYNE, INC.
Balance Sheet as of 12/31/01
------------------------------------------------
H&P E&P H&P, Inc. Consolidated
------- --------- ------------
Current Assets $ 39.2 $ 228.9 $ 268.1
Investments 0 230.1 230.1
PP&E (net) 162.1 698.6 860.7
Other .2 13.2 13.4
------- -------- ---------
Total Assets $ 201.5 $1,170.8 $1,372.3
======= ======== ========
Current Liabilities $ 40.2 $ 39.6 $ 79.8
Long-Term Debt 0 50.0 50.0
Deferred Taxes / Other 21.8 164.6 186.4
Shareholders' Equity 139.5 916.6 1,056.1
------- ------- ---------
Total Liabilities and
Shareholders' Equity $ 201.5 $1,170.8 $1,372.3
======= ======== ========
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#35
HELMERICH & PAYNE, INC.
What makes H&P attractive as a
"pure play" contract drilling company?
o The premier drilling contractor with U.S. land, international and platform rigs
o Opportunities for increased cash flow and earnings as rig fleet expands and drilling environment improves
o Strong balance sheet
o Expanded analyst coverage and ownership interest
#36
HELMERICH & PAYNE, INC.
(pre-transaction)
[PIE CHART GRAPHIC OMITTED]
Contract Drilling E&P Portfolio
----------------- --------- ---------
101 rigs 245 Bcfe $275MM
> $1.6 billion market cap
> ~ 50 million shares outstanding
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#37
HELMERICH & PAYNE, INC.
> Implied value of E&P division in
excess of $400 million,
based on recent KP stock price
> ~ $8.00 per HP share
#38
HELMERICH & PAYNE, INC.
> ~ $5.50 per HP share
#39
HELMERICH & PAYNE, INC.
Contract Drilling
-----------------
> 101 total rigs
- 58 U.S. land
[PIE CHART GRAPHIC OMITTED] - 10 U.S. offshore
- 33 International land
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> 10 FlexRigs(R) to spud in 2002
> 15 FlexRigs(R) to spud in 2003
#40
HELMERICH & PAYNE, INC.
Contract Drilling EBITDA
[LINE GRAPH GRAPHIC OMMITED]
($ per share)
2000A 2001A 2002E 2003E 2004E 2005E
----- ----- ----- ----- ----- -----
High Case $2.26 $3.5 $4.7 $4.9
Low Case 2.21 3.02 3.13 3.09
Actual $2.93 $3.7
U.S. land rig rates
-------------------
High Case $14,000/d*
Low Case $11,000/d*
Actual $14,200/d*
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#41
HELMERICH & PAYNE, INC.
[BAR GRAPH GRAPHIC OMITTED]
U.S. Land Rigs
--------------
1998 1999 2000 2001 2002E 2003E
---- ---- ---- ---- ----- -----
36 36 38 49 68 83
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#42
HELMERICH & PAYNE, INC.
[BAR GRAPH GRAPHIC OMITTED]
Total Rigs
----------
1998 1999 2000 2001 2002E 2003E
---- ---- ---- ---- ----- -----
90 90 88 96 113 128
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#43
[NORTH AMERICA/SOUTH AMERICA MAP GRAPHICS OMITTED}
> 68 U.S. rigs
U.S. 58
Gulf of Mexico 10
> 33 International rigs
Offshore Colombia 3
Ecuador 8
Gulf of Mexico 10
Venezuela 14
Bolivia 6
Argentina 2
---
> 101 Total rigs 101
#44
CIMAREX ENERGY COMPANY
THE MERGER ANNOUNCEMENT OF
HELMERICH & PAYNE'S E&P DIVISION
AND
KEY PRODUCTION COMPANY
|