UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4221
HELMERICH & PAYNE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-0679879
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
UTICA AT TWENTY-FIRST STREET, TULSA, OKLAHOMA 74114
(Address of principal executive offices) (Zip code)
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Registrant's telephone number, including area code (918) 742-5531
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
Common Stock ($0.10 par value) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
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Securities registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
At December 14, 2001, the aggregate market value of the voting stock held by non-affiliates was $1,402,779,905.
Number of shares of common stock outstanding at December 14, 2001:
49,859,297.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30, 2001 -- Parts I, II, and IV.
(2) Proxy Statement for Annual Meeting of Security Holders to be held March 6, 2002 -- Part III.
This Amendment to Part IV, Item 14 of Registrant's Form 10-K is hereby filed solely to correct a typographical error in the Net Income of Registrant for fiscal 2000 as reflected on page 20 of the edgarised version of the Registrant's 2001 Annual Report which is Exhibit 13 hereto.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Document List
1. The financial statements called for by Item 8 are incorporated herein by reference from the Registrant's Annual Report to Shareholders for fiscal 2001.
2. Exhibits required by Item 601 of Regulation S-K:
Exhibit Number:
3.1 Restated Certificate of Incorporation and Amendment to Restated Certificate of Incorporation of the Registrant are incorporated herein by reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1996, SEC File No. 001-04221.
3.2 By-Laws of the Registrant are incorporated herein by reference to Exhibit 3.2 of the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1996, SEC File No. 001-04221.
4.1 Rights Agreement dated as of January 8, 1996, between the Registrant and The Liberty National Bank and Trust Company of Oklahoma City, N.A. is incorporated herein by reference to the Registrant's Form 8-A, dated January 18, 1996, SEC File No. 001-04221.
* 10.1 Consulting Services Agreement between W. H. Helmerich, III, and the Registrant effective January 1, 1990, as amended is incorporated herein by reference to Exhibit 10.3 of the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1996, SEC File No. 001-04221.
* 10.2 Supplemental Retirement Income Plan for Salaried Employees of Helmerich & Payne, Inc. is incorporated herein by reference to Exhibit 10.6 of the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1996, SEC File No. 001-04221.
* 10.3 Helmerich & Payne, Inc. 1990 Stock Option Plan is incorporated herein by reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1996, SEC File No. 001- 04221.
* Compensatory Plan or Arrangement.
IV-1
* 10.4 Form of Nonqualified Stock Option Agreement for the 1990 Stock Option Plan is incorporated by reference to Exhibit 99.2 to the Registrant's Registration Statement No. 33-55239 on Form S-8, dated August 26, 1994.
* 10.5 Supplemental Savings Plan for Salaried Employees of Helmerich and Payne, Inc. is incorporated herein by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1999, SEC File No. 001-04221.
* 10.6 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is incorporated herein by reference to Exhibit 99.1 to Registrant's Registration Statement No. 333-34939 on Form S-8 dated September 4, 1997.
* 10.7 Form of Nonqualified Stock Option Agreement for Helmerich & Payne, Inc. 1996 Stock Incentive Plan is incorporated by reference to Exhibit 99.2 to Registrant's Registration Statement No. 333-34939 on Form S-8 dated September 4, 1997.
* 10.8 Form of Restricted Stock Agreement for Helmerich & Payne, Inc. 1996 Stock Incentive Plan is incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 1997, SEC File No. 001-04221.
* 10.9 Helmerich & Payne, Inc. 2000 Stock Incentive Plan is incorporated herein by reference to Exhibit 99.1 to the Registrant's Registration Statement No. 333- 63124 on Form S-8 dated June 15, 2001.
* 10.10 Form of Agreements for Helmerich & Payne, Inc. 2000
Stock Incentive Plan being (i) Restricted Stock Award
Agreement, (ii) Incentive Stock Option Agreement and
(iii) Nonqualified Stock Option Agreement are
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement No. 333-63124 on
Form S-8 dated June 15, 2001.
13. The Registrant's Annual Report to Shareholders for fiscal 2001.
21. Subsidiaries of the Registrant, incorporated by reference to Exhibit 21 to the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 2001.
* Compensatory Plan or Arrangement.
IV-2
23.1 Consent of Independent Auditors, incorporated by reference to Exhibit 23.1 to the Registrant's Annual Report on Form 10-K to the Securities and Exchange Commission for fiscal 2001.
(b) Report on Form 8-K
None.
* Compensatory Plan or Arrangement.
IV-3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized:
HELMERICH & PAYNE, INC.
By /s/ Steven R. Mackey
-----------------------------
Steven R. Mackey
Vice President and General
Counsel
Date: January 8, 2002
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
3.1 Restated Certificate of Incorporation and Amendment
to Restated Certificate of Incorporation of the
Registrant are incorporated herein by reference to
Exhibit 3.1 of the Registrant's Annual Report on Form
10-K to the Securities and Exchange Commission for
fiscal 1996, SEC File No. 001-04221.
3.2 By-Laws of the Registrant are incorporated herein by
reference to Exhibit 3.2 of the Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1996, SEC File No. 001-04221.
4.1 Rights Agreement dated as of January 8, 1996, between
the Registrant and The Liberty National Bank and
Trust Company of Oklahoma City, N.A. is incorporated
herein by reference to the Registrant's Form 8-A,
dated January 18, 1996, SEC File No. 001-04221.
* 10.1 Consulting Services Agreement between W. H.
Helmerich, III, and the Registrant effective January
1, 1990, as amended is incorporated herein by
reference to Exhibit 10.3 of the Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1996, SEC File No. 001-04221.
* 10.2 Supplemental Retirement Income Plan for Salaried
Employees of Helmerich & Payne, Inc. is incorporated
herein by reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996,
SEC File No. 001-04221.
* 10.3 Helmerich & Payne, Inc. 1990 Stock Option Plan is
incorporated herein by reference to Exhibit 10.7 of
the Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996,
SEC File No. 001- 04221.
* 10.4 Form of Nonqualified Stock Option Agreement for
the 1990 Stock Option Plan is incorporated by
reference to Exhibit 99.2 to the Registrant's
Registration Statement No. 33-55239 on Form S-8,
dated August 26, 1994.
* 10.5 Supplemental Savings Plan for Salaried Employees of
Helmerich and Payne, Inc. is incorporated herein by
reference to Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1999, SEC File No. 001-04221.
* 10.6 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated herein by reference to Exhibit 99.1 to
Registrant's Registration Statement No. 333-34939 on
Form S-8 dated September 4, 1997.
* 10.7 Form of Nonqualified Stock Option Agreement for
Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement No. 333-34939 on
Form S-8 dated September 4, 1997.
* 10.8 Form of Restricted Stock Agreement for Helmerich &
Payne, Inc. 1996 Stock Incentive Plan is incorporated
by reference to Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1997, SEC File No.
001-04221.
* 10.9 Helmerich & Payne, Inc. 2000 Stock Incentive Plan is
incorporated herein by reference to Exhibit 99.1 to
the Registrant's Registration Statement No. 333-
63124 on Form S-8 dated June 15, 2001.
* 10.10 Form of Agreements for Helmerich & Payne, Inc. 2000
Stock Incentive Plan being (i) Restricted Stock Award
Agreement, (ii) Incentive Stock Option Agreement and
(iii) Nonqualified Stock Option Agreement are
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement No. 333-63124 on
Form S-8 dated June 15, 2001.
13. The Registrant's Annual Report to Shareholders for
fiscal 2001.
21. Subsidiaries of the Registrant, incorporated by
reference to Exhibit 21 to the Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 2001.
23.1 Consent of Independent Auditors, incorporated by
reference to Exhibit 23.1 to the Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 2001.
-----------------------
* Compensatory Plan or Arrangement.
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EXHIBIT 13
REVENUE BREAKDOWN FOR 2001
[PIE CHART]
CONTRACT DRILLING: International 19% Domestic 40% OIL AND GAS: Natural Gas Marketing 12% Exploration & Production 26% Real Estate 1% Investments and Other Income 2% |
FINANCIAL HIGHLIGHTS ------------------------------------------------------------------- Years Ended September 30, 2001 2000 ------------------------- -------------- ----------------- Revenues $ 826,854,000 $ 631,095,000 Net Income $ 144,254,000 $ 82,300,000 Diluted Earnings Per Share $ 2.84 $ 1.64 Dividends Paid Per Share $ .30 $ .285 Capital Expenditures $ 274,670,000 $ 131,932,000 Total Assets $1,364,507,000 $ 1,259,492,000 |
To the Co-owners of Helmerich & Payne, Inc.
Sometimes risk factors are difficult to identify, much less quantify. Unthinkable risks confronted each of us and our families in the aftermath of the terrorist attacks on the World Trade Center and Pentagon. Dinner table conversations at home and discussions at work contemplated possible threats of anthrax exposure, bioterror, and even nuclear "dirty bomb" strikes on civilians.
Today we are a nation at war, facing a real and present danger to our basic freedoms and liberty. We are also a nation united and determined. A renewed patriotic spirit has raised a standard against the evil that struck at our core values. We have witnessed acts of untold heroism and sacrifice, along with a flood of prayers and support from friends of freedom around the globe.
We have been inspired by the leadership of President Bush: "The course of this conflict is not known, yet its outcome is certain. Freedom and fear, justice and cruelty have always been at war and we know that God is not neutral between them. The advance of human freedom now depends on us. We will rally the world to this cause by our efforts, by our courage. We will not tire, we will not falter, and we will not fail."
The President has urged all Americans to take up the fight, in part, by leading our lives. That is what your Company intends to do. Each of our employees plays a proud part in an industry vital to our country's energy security.
Remarkably, energy prices are falling at the end of 2001, even in the face of the current geopolitical situation in the Middle East. Will a "smoking gun" surface to further implicate Iraq in terrorist sponsorship? Will a bloody and volatile Palestinian-Israeli conflict deteriorate further?
How should markets price the possible risk of a far-reaching supply disruption?
We're confident the market will sort it all out. That time-tested dynamic of free markets is one of the many enduring principles worth fighting for and defending. All the while, your Company will stand prepared and financially fit for the challenges and opportunities ahead.
Sincerely,
/s/ HANS HELMERICH
Hans Helmerich
December 14, 2001 President
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SUMMARY Both oil and natural gas prices increased substantially at the beginning of the year, resulting in higher demand for land rigs in the United States. Industry census data produced by Reed-Hycalog indicates that 93 percent of all U.S. land rigs were active during 2001, a level of activity not achieved since the early 1980s. The resulting impact of this environment on the Company's 2001 financial performance was significant. Contract drilling revenues increased 39 percent, and earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by over 50 percent, driven primarily by increased activity in the U.S. land market.
FIVE-YEAR OPERATING SUMMARY
-----------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(Dollar figures in thousands)
UNITED STATES
Revenues ........... $332,399 $214,531 $213,647 $177,059 $140,294
EBITDA ............. $133,968 $ 71,163 $ 61,498 $ 60,053 $ 44,066
Operating Profit ... $107,691 $ 35,808 $ 30,154 $ 35,817 $ 24,437
Activity Days ...... 18,656 15,083 12,509 14,237 12,872
Rig Utilization .... 97% 87% 75% 95% 88%
INTERNATIONAL
Revenues ........... $154,890 $136,549 $182,987 $253,072 $176,651
EBITDA ............. $ 47,313 $ 47,853 $ 66,075 $ 82,650 $ 69,621
Operating Profit ... $ 28,475 $ 9,753 $ 29,845 $ 50,834 $ 43,118
Activity Days ...... 7,283 7,067 8,442 12,832 12,253
Rig Utilization .... 56% 47% 53% 88% 91%
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At the close of fiscal 2001, Helmerich & Payne International Drilling Co. owned ten offshore platform rigs located in the Gulf of Mexico, and 81 land rigs located in the United States (49), Venezuela (14), Ecuador (7), Bolivia (6), Colombia (3), and Argentina (2). The Company also had five international land rigs undergoing major upgrades in the U.S., as well as five land rigs and two offshore platform rigs at various stages of new construction at year-end.
Additionally, the Company operates four management contracts on customer-owned platform rigs, three offshore California and one offshore Equatorial Guinea, West Africa.
UNITED STATES OPERATIONS Rig utilization averaged 97 and 98 percent, respectively, for land and offshore platform rigs during the year. The Company worked an average of 41 land rigs and ten offshore platform rigs for the whole year, up from 32 land and nine offshore platform rigs in 2000. A total of 11 rigs were added to the land fleet in 2001, seven new FlexRigs(TM), one reconditioned medium depth rig, and three deep rigs that were transferred from international operations.
The Company plans to complete the construction of 20 FlexRigs during 2002, which will be available for work in the U.S. or international markets. The highly mobile FlexRig, named for its flexible drilling range of 8,000 to 18,000 feet, offers significant drilling efficiencies through improved technology, including disc-brakes, block control system, and the Company's patented round mud tank system. The FlexRig design has reduced the average moving time by more than one-half of that for a conventional 1500 horsepower rig. The FlexRig design includes many health, safety, and environmental (HSE) improvements and features reducing HSE hazards. These include noise abatement, enhanced anti-fall protection, and an integrated fluid containment system around the rig floor.
During 2001, the Company received commitments to build and operate two new self-moving platform rigs in the Gulf of Mexico, one each from Shell Exploration & Production Co. and BP. These rigs are scheduled to commence operations in the third quarter of 2002.
(TM) FlexRig is a trademark of Helmerich & Payne International Drilling Co.
INTERNATIONAL OPERATIONS Rig utilization averaged 56 percent in 2001, compared with 47 percent in 2000, primarily because the Company moved eight rigs to the U.S. for drilling opportunities or refurbishment during 2001. Revenues increased 13 percent over last year, but EBITDA decreased slightly as improvements in Venezuela, Equatorial Guinea, Ecuador, and Argentina were offset by declines in Colombia and Bolivia. Increased operating profit was primarily the result of reduced depreciation expense caused by rig transfers from international to domestic operations, as well as a change in the estimated useful life of drilling equipment, increasing it from ten to 15 years.
OUTLOOK The Company has lowered its expectations for drilling activity in the coming year because of the precipitous drop in both oil and natural gas prices caused by reduced economic activity and mild weather in the U.S. Because the present downturn does not appear to be due to excessive supplies, the Company anticipates that it will be short-lived, improving as energy demand rises in response to U.S. and world economic recovery. This is the second volatile drilling cycle in four years and, with each downturn, the industry loses experienced employees and momentum on capital projects, many of which require long lead times to bring to fruition. The inevitable upturn in the cycle is likely to become even more pronounced, stretching the already thin human, technological, and financial resources of the industry. The Company has focused its investment efforts on delivering the latest in equipment and technology to the field and in training our people to operate safely and effectively. Our primary goal remains to deliver high quality equipment and services that will add measurable value to a customer's drilling operation.
SUMMARY Helmerich & Payne, Inc. explores for and produces oil and natural gas primarily in Kansas, Louisiana, Oklahoma, and Texas. The Company also provides natural gas marketing services through its wholly owned subsidiary, Helmerich & Payne Energy Services, Inc. A substantial increase in the price of natural gas produced record financial results for the Exploration and Production segment in 2001. Revenues and operating profit grew 38 percent and 44 percent, respectively, over 2000 levels. Helmerich & Payne Energy Services, Inc.'s revenues increased 24 percent in 2001, although operating profit remained flat for the year. Oil production declined seven percent to average 2,242 barrels per day in 2001, while prices remained flat at $27.88 per barrel compared with $27.95 per barrel in 2000. Natural gas production also declined to 116,128 thousand cubic feet (Mcf) per day, compared with 128,204 Mcf per day in 2000. Natural gas prices increased 63 percent to average $4.55 per Mcf in 2001, compared with $2.79 per Mcf in 2000.
FIVE-YEAR OPERATING SUMMARY
----------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(Revenues and operating profit in thousands)
Revenues............................... $ 217,194 $ 157,583 $ 95,953 $ 98,696 $ 111,512
Operating Profit....................... $ 95,579 $ 66,604 $ 11,245 $ 28,088 $ 55,191
Average Oil Price per barrel ......... $ 27.88 $ 27.95 $ 14.60 $ 14.74 $ 20.77
Oil Production (barrels) ............. 818,356 880,304 649,370 701,180 985,633
Proved Oil Reserves (barrels) ........ 5,931,595 6,305,137 4,833,898 4,761,313 5,805,386
Average Natural Gas Prices per Mcf ... $ 4.55 $ 2.79 $ 1.83 $ 2.04 $ 2.24
Natural Gas Production (Mcf) ......... 42,386,796 46,922,752 44,240,332 42,862,300 40,463,374
Proved Natural Gas Reserves (Bcf) .... 216.3 262.5 239.6 251.6 263.2
Gross Wells Completed ................ 123.0 81.0 49.0 62.0 100.0
Net Wells Completed .................. 69.5 42.7 23.9 35.7 49.3
Net Dry Holes ........................ 17.0 9.1 7.1 4.2 9.6
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EXPLORATION RESULTS Even though the Company had a record financial performance, it was a disappointing year for the exploration effort. Proved reserves declined from 300 billion cubic feet equivalent (Bcfe) to 252 Bcfe during 2001. Almost half of this decline was the result of the lower natural gas price used in the reserve calculation, which was $1.90 per Mcf in 2001, compared with $5.13 per Mcf in 2000.
The Company participated in 123 (69.5 net) wells in 2001, 29 (17 net) of which
were dry holes. Given the high natural gas prices, additional emphasis was
placed on developing proved undeveloped reserves during the year. Forty-seven
gross wells were drilled for this purpose in 2001. The remaining wells included
40 (19 net) wildcat wells, five of which exposed the Company to over 250 Bcfe in
net potential reserve additions.
OUTLOOK Given that oil and gas prices have declined substantially, the Company plans to be highly selective with regard to drilling prospects in 2002, and will reduce capital expenditures by as much as half of what they were in 2001. With the assistance of the investment bank of Petrie Parkman & Co., the Company is continuing to explore strategic alternatives for the Oil and Gas Division. These alternatives include combining the Company's oil and gas operations with another of similar size to form a separate, stand-alone exploration and production company. The Company engaged in discussions with a number of companies during the past year and plans to continue these efforts into 2002.
Years Ended September 30, 2001 2000 1999
--------------------------------------------------------------- -------- -------- --------
(in thousands)
SALES AND OTHER REVENUES:
Contract Drilling - Domestic.............................. $332,399 $214,531 $213,647
Contract Drilling - International......................... 154,890 136,549 182,987
-------- -------- --------
Total Contract Drilling................................ 487,289 351,080 396,634
-------- -------- --------
Exploration and Production................................ 217,194 157,583 95,953
Natural Gas Marketing..................................... 100,111 80,907 55,259
-------- -------- --------
Total Oil and Gas Operations........................... 317,305 238,490 151,212
-------- -------- --------
Real Estate .............................................. 11,018 8,999 8,671
Other..................................................... 11,242 32,526 7,802
-------- -------- --------
Total Revenues................................................. $826,854 $631,095 $564,319
======== ======== ========
OPERATING PROFIT:
Contract Drilling - Domestic.............................. $107,691 $ 35,808 $ 30,154
Contract Drilling - International......................... 28,475 9,753 29,845
-------- -------- --------
Total Contract Drilling................................ 136,166 45,561 59,999
-------- -------- --------
Exploration and Production................................ 95,579 66,604 11,245
Natural Gas Marketing..................................... 5,254 5,271 4,418
-------- -------- --------
Total Oil and Gas Operations........................... 100,833 71,875 15,663
-------- -------- --------
Real Estate............................................... 6,315 5,346 5,338
-------- -------- --------
Total Operating Profit................................. 243,314 122,782 81,000
-------- -------- --------
OTHER:
Income from investments................................... 10,592 31,973 7,757
General and administrative expense........................ (15,415) (11,578) (14,198)
Interest expense.......................................... 32 (3,076) (6,481)
Corporate depreciation.................................... (2,043) (2,152) (1,565)
Other corporate expense................................... (1,378) (1,186) (1,575)
-------- -------- --------
Total Other............................................ (8,212) 13,981 (16,062)
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATES............................ $235,102 $136,763 $ 64,938
======== ======== =========
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Note: See Note 14 (pages 30, 31 and 32) for complete segment disclosure.
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, risks of foreign operations, uninsured risks, 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 2001 was $144,254,000 ($2.84 per share), compared with net income of $82,300,000 ($1.64 per share) in 2000, and $42,788,000 ($0.86 per share) in 1999. Included in the Company's net income, but not related to its operations, were after-tax gains from the sale of investment securities of $691,000 ($0.01 per share) in 2001, $8,152,000 ($0.16 per share) in 2000, and $1,562,000 ($0.03 per share) in 1999. 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 included in net income is the Company's portion of income from its
equity affiliates, which totaled $0.04 per share in 2001, $0.06 in 2000, and $0.07 in 1999. The Company's equity affiliates are Atwood Oceanics, Inc. and a 50-50 joint venture with Atwood called Atwood Oceanics West Tuna Pty. Ltd., which owns an offshore platform rig.
Consolidated revenues were $826,854,000 in 2001, $631,095,000 in 2000, and $564,319,000 in 1999. The 31 percent increase from 2000 to 2001 was due to significant increases in revenues from all of the operating divisions. Revenues from investments decreased by $21,381,000. Contract Drilling Division revenues increased by 39 percent due to the strengthening of the U.S. land rig market. This resulted in higher utilization of the Company's rigs and higher dayrates. Oil and Gas Division revenues rose 33 percent over 2000 due primarily to higher oil and natural gas prices. The 12 percent increase in consolidated revenues from 1999 to 2000 was primarily 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.
Revenues from investments were $10,592,000 in 2001, $31,973,000 in 2000, and $7,757,000 in 1999. Included in revenues were pre-tax gains from the sale of investment securities of $1,189,000 in 2001, $13,295,000 in 2000, and $2,547,000 in 1999. Interest income from short-term investments increased in 2001 and 2000 because the Company's cash and cash equivalent balances increased in each of these years. Dividend income decreased in 2001, primarily because in 2000, the Company recognized $10,706,000 of non-monetary dividends when three Company investees spun-off subsidiaries to their shareholders.
Costs and expenses in 2001 were $591,752,000, 72 percent of revenues, compared with 78 percent in 2000, and 88 percent in 1999. Operating costs, as a percentage of operating revenues, were 51 percent in 2001, 53 percent in 2000, and 60 percent in 1999. Operating costs, as a percentage of operating revenues, declined each of the last two years, primarily due to proportionately higher revenues.
Effective October 1, 2000, the Company changed the estimated useful life of its drilling equipment from ten years to 15 years, resulting in lower annual depreciation expense of approximately $30 million in 2001. Excluding write-downs of producing properties, depreciation expense was $78,400,000 in 2001, $106,815,000 in 2000, and $99,108,000 in 1999. Producing property
write-downs totaled $8,909,000 in 2001, $4,036,000 in 2000, and $10,059,000 in 1999.
General and administrative expenses increased by 33 percent from 2000 to 2001, to a total of $15,415,000, compared with $11,578,000 in 2000, and $14,198,000 in 1999. Expenses rose this past year due to costs associated with legal, accounting, and investment banking fees related to the potential spin-off of the Oil and Gas Division, settlements of lawsuits, higher pension expense accrual, and higher labor and bonus charges, compared with 2000. General and administrative expenses decreased in 2000, compared to 1999, due to the inclusion in 1999 of reduced allocations of charges to operations and unusually high expenses relating to corporate aircraft maintenance. Income taxes, as a percentage of pre-tax income, were 40 percent in 2001, 42 percent in 2000, and 40 percent in 1999.
Interest expense for the Company was negative $32,000 in 2001, $3,076,000 in 2000, and $6,481,000 in 1999. Most of the expense reduction from 2000 to 2001 resulted from a reversal of interest expense previously accrued relating to an ad valorem tax dispute that was settled for less interest costs than accrued. The specific case was settled during 2001, resulting in a reversal of interest expense of $2,280,000 that had been accrued in 1999. Additionally, the Company reduced its overall debt position during the last half of 1999 and early 2000, resulting in less debt related interest expense booked in the last three years.
CONTRACT DRILLING DIVISION revenues, which include both domestic and international segment revenues, increased 39 percent to $487,289,000 during 2001, from $351,080,000 in 2000. Revenues for 2000 were 11 percent lower than in 1999. Division operating profit of $136,166,000 was almost triple that of the $45,461,000 recorded in 2000. Operating profit for 2000 was 24 percent lower than in 1999.
Domestic segment revenues were $332,399,000 in 2001, $214,531,000 in 2000, and $213,647,000 in 1999. Domestic segment operating profit was $107,691,000 in 2001, $35,808,000 in 2000, and $30,154,000 in 1999. Rig utilization for the U.S. land fleet was 97 percent in 2001, 85 percent in 2000, and 69 percent in 1999. Domestic platform rig utilization was 98 percent in 2001, 94 percent in 2000, and 95 percent in 1999.
Both U.S. land rig and U.S. platform rig revenues increased in 2001 over 2000. Dayrates for U.S. land rigs and total operating days for the U.S. land rig segment increased dramatically during 2001. Operating profit for the
domestic operation improved dramatically from 2000 to 2001, mostly on the strength of average land rig dayrates, which improved more than 50 percent, and the resulting improvement in profit margins. The previously discussed change in the estimated useful life of drilling equipment increased domestic operating profit by approximately $15 million in 2001. U.S. platform rig dayrates did not improve, but total operating days helped boost revenues for the year. Improvements in revenues and operating profit from 1999 to 2000 were primarily the result of average U.S. land rig dayrates and profit margins moving up, while the platform business improved only slightly. During 1999, there were approximately $40 million of revenues recorded as a result of a rig construction project that was completed in early 2000.
International segment revenues increased by 13 percent from 2000 to 2001, after falling by 25 percent from 1999 to 2000. International operating profit rose to $28,475,000 in 2001, from $9,753,000 in 2000. Operating profit for 1999 was $29,845,000. International rig utilization averaged 56 percent during 2001, 47 percent in 2000, and 53 percent in 1999. International operating profit improved during 2001, mainly due to lower depreciation expenses resulting from a change in the estimated useful life of the Company's drilling equipment, as previously discussed. The impact of the change added approximately $15 million to international operating profit in 2001. Revenues in Venezuela increased 24 percent during 2001, and the Company expects to see activity improve slightly in 2002. The Company's labor contract in Equatorial Guinea added $6,054,000 to international revenues in 2001. The decline in operating profit from 1999 to 2000 was primarily due to reduced activity in Colombia where the Company had previously employed ten rigs. Activity in Colombia continued to decline in 2000 and 2001, and currently, the Company has one rig working out of the three remaining in that country. Conversely, Ecuador's rig count has grown from three in 1999 to seven in 2001, and an eighth, newly refurbished rig will be shipped during the second quarter of 2002, to begin work under a one-year contract.
The Company has international operations in several South American countries. With the exception of Venezuela, the Company believes that its exposure to currency valuation losses is minimal due to the fact that virtually all billings and payments are in U.S. dollars. In Venezuela, approximately 50 percent of the Company's billings are in U.S. dollars and 50 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 2001, the Company experienced a loss of $796,000 due to devaluation of the bolivar,
compared with a $687,000 loss in 2000, and a $712,000 loss in 1999. The Company anticipates additional devaluation losses in Venezuela during 2002, but 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 $1,600,000 to $2,600,000.
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.
Exploration & Production 2001 2000 1999 ------------------------------------------ ------------ ------------ ------------ Revenues (in 000's) ...................... $ 217,194 $ 157,583 $ 95,953 Operating Profit (in 000's) .............. $ 95,579 $ 66,604 $ 11,245 Natural Gas Production (Mmcf per day) .... 116.1 128.2 121.2 Average Natural Gas Price (per Mcf) ...... $ 4.55 $ 2.79 $ 1.83 Crude Oil Production (barrels per day) ... 2,242 2,405 1,779 Average Crude Oil Price (per barrel) ..... $ 27.88 $ 27.95 $ 14.60 |
Exploration and Production segment revenues and operating profit increased significantly this year as average prices received for the Company's natural gas production rose dramatically. Average prices received for natural gas increased by 63 percent, while average crude oil prices remained flat, compared to 2000. Natural gas and crude oil production for the Company decreased by nine percent and seven percent, respectively. Increased exploration drilling resulted in dry hole and abandonment charges rising to $33.5 million in 2001, compared with $22.6 million in 2000, and $11.4 million in 1999. Revenues and operating profit for 2000 were up substantially from 1999 due to significant increases in both commodity price levels and Company production volumes for natural gas and crude oil. Average prices for natural gas increased by 52 percent and average crude oil prices increased by 91 percent from 1999 to 2000. In 2000, natural gas and crude oil production increased by six percent and 35 percent, respectively, over 1999 levels. Producing property impairment write-downs totaled $8,909,000 in 2001, $4,036,000 in 2000, and $10,059,000 in 1999.
During 2002, the Company's Oil and Gas Division intends to decrease its capital spending over the previous year. However, dry hole, abandonment, and geophysical expenses are difficult to predict and will continue to impact operating profit for the coming year. Additionally, with a reduced capital spending budget, it is expected that the Company's production volumes for natural gas and crude oil will decline during the year.
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 Division. It is uncertain whether such a transaction will occur or, if so, when.
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 $100,111,000 in 2001, $80,907,000 in 2000, and $55,259,000 in 1999. Operating profit was $5,254,000 in 2001, $5,271,000 in 2000, and $4,418,000 in 1999. The operating profit margin declined to 5.2 percent in 2001, from 6.5 percent in 2000, and 8 percent in 1999. A rapid decline in natural gas prices over the last three-quarters of the year as well as an increasingly competitive gas marketing environment was primarily responsible for lower margins in 2001. 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 2001, HPESI had approximately three percent of its natural gas sales portfolio dedicated to such fixed price sales contracts compared to 13.6 percent in 2000. As of September 30, 2001, HPESI had no long-term fixed contracts.
REAL ESTATE DIVISION revenues totaled $11,018,000 for 2001, $8,999,000 for 2000, and $8,671,000 for 1999. Operating profit was $6,315,000 in 2001, $5,346,000 in 2000, and $5,338,000 in 1999. The increase in revenues and operating profit in 2001 was due to the sale of a small parcel of raw land. Occupancy rates, revenues, and operating profit remained solid in 2001 due to the continued strength of the Tulsa economy. No material changes are anticipated in the Real Estate Division in 2002.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," effective October 1, 2000, which required 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 was not material for fiscal year 2001, and is not expected to be material in 2002.
In 2001, the Financial Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets." The Company does not anticipate that these pronouncements will have an immediate material impact on its results of operations or financial position. More information on these pronouncements can be found in Note 12 on page 30 of this Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital spending was $274,670,000 in 2001, $131,932,000 in 2000, and $122,951,000 in 1999. Net cash provided from operating activities for those same time periods were $278,856,000 in 2001, $201,836,000 in 2000, and $158,694,000 in 1999. In addition to the net cash provided by operating activities, the Company also generated net proceeds from the sale of portfolio securities of $24,439,000 in 2001, $12,569,000 in 2000, and $2,803,000 in 1999.
During 2000, the Company announced a program (FlexRig II program) under which it would construct 12 new FlexRigs at an approximate cost of between $7.5 and $8.25 million each. During 2001, the Company completed construction on seven of those 12 rigs. Additionally, the Company announced in 2001 that it would embark on another construction project (FlexRig III program) to build an additional 25 FlexRigs at an approximate cost of $10.2 million each. It is expected that the Company will complete construction on 15 of those 25 rigs under the FlexRig III program during 2002. During 2001, the Company also announced that it had reached agreement with two operators for offshore platform rig operations in the Gulf of Mexico. This will result in the Company spending approximately $50 million to construct two offshore platform rigs that should commence operations in the Company's third quarter of 2002.
These projects, along with ongoing remodification and refurbishment of existing equipment, plus additional drill pipe and other expenditures, should bring Contract Drilling capital expenditures to approximately $340 million in 2002. Additionally, the Oil and Gas Division has estimated its capital spending needs for the coming year to be approximately $50 million. These capital expenditures, along with miscellaneous real estate and corporate
capital expenditures, should bring total Company capital spending for 2002 close to $400 million. Funding for this significant increase in Company capital expenditures will come from existing cash balances, internally generated cash flow, additional bank borrowings, and proceeds from securities sales.
As described in Note 2 of Notes to Consolidated Financial Statements, in October 1998, the Company obtained $50 million in long-term debt proceeds. 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 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 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. This exposure should increase during 2002, as the Company secures additional debt financing.
The strength of the Company's balance sheet is substantial, with current ratios for 2001 and 2000 at 2.7 and 3.4, respectively, and with total bank borrowings less than four percent of total assets at September 30, 2001. Additionally, the Company manages a large portfolio of marketable securities that, at the close of 2001, had a market value of $226,134,000, with a cost basis of $119,165,000. The portfolio, heavily weighted in energy stocks, is subject to fluctuation in the market and may vary considerably over time. Excluding the Company's equity-method investments, the portfolio is marked to market on the Company's balance sheet for each reporting period. During 2001, the Company paid a dividend of $0.30 per share, or a total of $15,047,000, representing the 30th consecutive year of dividend increases.
STOCK PORTFOLIO HELD BY THE COMPANY
---------------------------------------------------------------------------------------------
Number of
September 30, 2001 Shares Cost Basis Market Value
------------------------------------------ ----------- ------------ ------------
(in thousands, except share amounts)
Atwood Oceanics, Inc. .................... 3,000,000 $ 52,152 $ 78,000
Schlumberger, Ltd. ....................... 1,480,000 23,511 67,636
Transocean Sedco Forex, Inc. ............. 286,528 9,509 7,564
SUNOCO, Inc. ............................. 312,546 2,873 11,127
Phillips Petroleum Company ............... 240,000 5,976 12,946
BANK ONE CORPORATION ..................... 175,000 1,969 5,507
Kerr-McGee Corporation ................... 150,000 3,983 7,787
Occidental Petroleum Corporation ......... 150,000 3,566 3,651
ONEOK, Inc. .............................. 450,000 2,751 7,452
Other .................................... 12,875 24,464
------------ ------------
Total ........................ $ 119,165 $ 226,134
============ ============
|
ASSETS
------------------------------------------------------------------------------------------------------------
September 30, 2001 2000
------------------------------------------------------------------------------ ---------- ----------
(in thousands)
CURRENT ASSETS:
Cash and cash equivalents ................................................ $ 122,962 $ 108,087
Accounts receivable, less reserve of $1,661 in 2001 and $2,003 in 2000 ... 147,235 106,630
Inventories .............................................................. 28,934 25,598
Prepaid expenses and other ............................................... 32,281 24,829
---------- ----------
Total current assets ................................................. 331,412 265,144
---------- ----------
INVESTMENTS .................................................................. 200,286 304,326
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Contract drilling equipment .............................................. 1,028,015 891,749
Oil and gas properties ................................................... 521,673 457,724
Real estate properties ................................................... 50,579 50,649
Other .................................................................... 86,300 80,268
---------- ----------
1,686,567 1,480,390
Less--Accumulated depreciation, depletion and amortization ............... 868,163 806,785
---------- ----------
Net property, plant and equipment .................................... 818,404 673,605
OTHER ASSETS ................................................................. 14,405 16,417
---------- ----------
TOTAL ASSETS ................................................................. $1,364,507 $1,259,492
========== ==========
|
The accompanying notes are an integral part of these statements.
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------------------------
September 30, 2001 2000
----------------------------------------------------------------------------------- ------------ ------------
(in thousands,
except share data)
CURRENT LIABILITIES:
Accounts payable .............................................................. $ 67,595 $ 32,279
Accrued liabilities ........................................................... 53,626 46,615
------------ ------------
Total current liabilities ..................................... 121,221 78,894
------------ ------------
NONCURRENT LIABILITIES:
Long-term notes payable ....................................................... 50,000 50,000
Deferred income taxes ......................................................... 144,439 156,650
Other ......................................................................... 22,370 18,245
------------ ------------
Total noncurrent liabilities .......................................... 216,809 224,895
------------ ------------
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 .................................................... 80,324 66,090
Retained earnings ............................................................. 943,105 813,885
Unearned compensation ......................................................... (1,812) (3,277)
Accumulated other comprehensive income ........................................ 49,309 106,064
------------ ------------
1,076,279 988,115
Less treasury stock, 3,676,155 shares in 2001 and 3,548,480 shares in 2000,
at cost .................................................................... 49,802 32,412
------------ ------------
Total shareholders' equity ............................................. 1,026,477 955,703
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................................ $ 1,364,507 $ 1,259,492
============ ============
|
The accompanying notes are an integral part of these statements.
Years Ended September 30, 2001 2000 1999
------------------------------------------------ ------------ ------------ ------------
(in thousands,
except per share amounts)
REVENUES:
Sales and other operating revenues ......... $ 816,262 $ 599,122 $ 556,562
Income from investments .................... 10,592 31,973 7,757
------------ ------------ ------------
826,854 631,095 564,319
------------ ------------ ------------
COSTS AND EXPENSES:
Operating costs ............................ 413,378 316,933 332,330
Depreciation, depletion and amortization ... 87,309 110,851 109,167
Dry holes and abandonments ................. 34,042 22,692 11,727
Taxes, other than income taxes ............. 41,640 29,202 25,478
General and administrative ................. 15,415 11,578 14,198
Interest ................................... (32) 3,076 6,481
------------ ------------ ------------
591,752 494,332 499,381
------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATES ............. 235,102 136,763 64,938
INCOME TAX EXPENSE ............................. 93,027 57,684 25,706
EQUITY IN INCOME OF AFFILIATES
net of income taxes ........................ 2,179 3,221 3,556
------------ ------------ ------------
NET INCOME ..................................... $ 144,254 $ 82,300 $ 42,788
============ ============ ============
EARNINGS PER COMMON SHARE:
BASIC ...................................... $ 2.88 $ 1.66 $ 0.87
DILUTED .................................... $ 2.84 $ 1.64 $ 0.86
AVERAGE COMMON SHARES OUTSTANDING:
BASIC ...................................... 50,096 49,534 49,243
DILUTED .................................... 50,772 50,035 49,817
|
The accompanying notes are an integral part of these statements.
Accumulated
Common Stock Additional Unearned Treasury Stock Other
-------------- Paid-in Comp- Retained ---------------- Comprehensive
Shares Amount Capital pensation Earnings Shares Amount Income (Loss) Total
------ ------ ---------- --------- -------- ------ ------ ------------- -----------
(in thousands, except per share amounts)
Balance, Sept. 30, 1998 ............ 53,529 $5,353 $59,004 $(5,605) $716,875 4,146 $(37,168) $ 54,689 $ 793,148
Comprehensive income:
Net income ....................... -- -- -- -- 42,788 -- -- -- 42,788
Other comprehensive income
Unrealized gains on available-
for-sale securities, net ..... -- -- -- -- -- -- -- 20,493 20,493
-----------
Comprehensive income ............... 63,281
-----------
Cash dividends ($.28 per share) .... -- -- -- -- (13,866) -- -- -- (13,866)
Exercise of stock options .......... -- -- 2,201 -- -- (226) 1,710 -- 3,911
Tax benefit of stock-based awards .. -- -- 69 -- -- -- -- -- 69
Stock issued under Restricted
Stock Award Plan ................. -- -- 137 (289) -- (17) 152 -- --
Amortization of deferred
compensation ..................... -- -- -- 1,407 159 -- -- -- 1,566
------- ------ ------- ------- -------- ----- -------- --------- -----------
Balance, Sept. 30, 1999 ............ 53,529 5,353 61,411 (4,487) 745,956 3,903 (35,306) 75,182 848,109
Comprehensive income:
Net income ....................... -- -- -- -- 82,300 -- -- -- 82,300
Other comprehensive income,
Unrealized gains on available-
for-sale securities, net ..... -- -- -- -- -- -- -- 30,882 30,882
-----------
Comprehensive income ............... 113,182
-----------
Cash dividends ($.285 per share) ... -- -- -- -- (14,448) -- -- -- (14,448)
Exercise of stock options .......... -- -- 4,491 -- -- (366) 3,253 -- 7,744
Purchase of stock for treasury ..... -- -- -- -- -- 21 (450) -- (450)
Tax benefit of stock-based awards .. -- -- 31 -- -- -- -- -- 31
Stock issued under Restricted
Stock Award Plan ................. -- -- 157 (248) -- (10) 91 -- --
Amortization of deferred
compensation ..................... -- -- -- 1,458 77 -- -- -- 1,535
------- ------ ------- ------- -------- ----- -------- --------- -----------
Balance, Sept. 30, 2000 ............ 53,529 5,353 66,090 (3,277) 813,885 3,548 (32,412) 106,064 955,703
Comprehensive income:
Net income ....................... -- -- -- -- 144,254 -- -- -- 144,254
Other comprehensive income,
Unrealized gains on available-
for-sale securities,net ...... -- -- -- -- -- -- -- (55,769) (55,769)
Derivatives instruments losses,
net .......................... -- -- -- -- -- -- -- (986) (986)
Total other comprehensive
income......................... (56,755)
-----------
Comprehensive income ............... 87,499
-----------
Cash dividends ($.30 per share) .... -- -- -- -- (15,047) -- -- -- (15,047)
Exercise of stock options .......... -- -- 7,965 -- -- (646) 5,808 -- 13,773
Purchase of stock for treasury ..... -- -- -- -- -- 774 (23,198) -- (23,198)
Tax benefit of stock-based awards .. -- -- 6,269 -- -- -- -- -- 6,269
Amortization of deferred
compensation ..................... -- -- -- 1,465 13 -- -- -- 1,478
------- ------ ------- ------- -------- ----- -------- --------- -----------
Balance, Sept. 30, 2001 ............ 53,529 $5,353 $80,324 $(1,812) $943,105 3,676 $(49,802) $ 49,309 $ 1,026,477
======= ====== ======= ======= ======== ===== ======== ========= ===========
|
The accompanying notes are an integral part of these statements.
Years Ended September 30, 2001 2000 1999
---------------------------------------------------------------------------- ---------- ---------- ----------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................. $ 144,254 $ 182,300 $ 42,788
---------- ---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization ........................... 87,309 110,851 109,167
Dry holes and abandonments ......................................... 34,042 22,692 11,727
Equity in income of affiliates before income taxes ................. (4,383) (5,196) (5,735)
Amortization of deferred compensation .............................. 1,478 1,535 1,566
Gain on sale of securities and non-monetary investment income ...... (1,189) (24,000) (2,547)
Gain on sale of property, plant and equipment ...................... (4,895) (2,479) (6,900)
Other - net ........................................................ 906 944 2,148
Change in assets and liabilities:
Accounts receivable ............................................. (39,747) (7,032) 19,797
Inventories ..................................................... (2,062) (411) 214
Prepaid expenses and other ...................................... (4,874) (7,780) (5,079)
Accounts payable ................................................ 34,840 6,575 (16,147)
Accrued liabilities ............................................. 9,065 7,557 2,367
Deferred income taxes ........................................... 21,641 21,133 559
Other noncurrent liabilities .................................... 2,471 (4,853) 4,769
---------- ---------- ----------
134,602 119,536 115,906
---------- ---------- ----------
Net cash provided by operating activities .................... 278,856 201,836 158,694
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including dry hole costs .......................... (274,670) (131,932) (122,951)
Acquisition of business, net of cash acquired ........................... (2,279) -- --
Proceeds from sale of property, plant and equipment ..................... 13,173 18,044 9,990
Purchase of investments ................................................. -- -- (537)
Proceeds from sale of securities ........................................ 24,439 12,569 2,803
---------- ---------- ----------
Net cash used in investing activities ........................ (239,337) (101,319) (110,695)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ............................................. -- -- 102,000
Payments made on notes payable .......................................... -- (5,000) (141,800)
Dividends paid .......................................................... (15,047) (14,175) (13,849)
Purchases of stock for treasury ......................................... (23,198) (450) --
Proceeds from exercise of stock options ................................. 13,601 5,437 2,932
---------- ---------- ----------
Net cash used in financing activities ........................ (24,644) (14,188) (50,717)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................................. 14,875 86,329 (2,718)
CASH AND CASH EQUIVALENTS, beginning of period ............................. 108,087 21,758 24,476
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, end of period ................................... $ 122,962 $ 108,087 $ 21,758
========== ========== ==========
|
The accompanying notes are an integral part of these statements.
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 2001, 2000, and 1999 was $494,000, $664,000, and $21,000, 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. The Company recognized impairment charges of approximately $8.9 million, $4.0 million and $10.1 million in 2001, 2000, and 1999, respectively, for proved Exploration and Production properties which are included in depreciation, depletion, and amortization expense. After-tax, the impairment charge reduced 2001, 2000, and 1999 net income by approximately $5.5 million, $2.5 million, and $6.2 million, respectively. On a diluted basis the impairment charges reduced earnings per share in 2001, 2000, and 1999 by $0.11, $0.05, and $0.13, respectively. The Company evaluates impairment of exploration and production assets on a field by field basis. Fair value on all long-lived assets is 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:
YEARS
-----
Contract drilling equipment...................... 4-15
Real estate buildings and equipment.............. 10-50
Other............................................ 3-33
|
As a result of an economic evaluation of useful lives of its drilling equipment, the Company extended the depreciable life of its rig equipment from ten to 15 years. This change will provide a better matching of revenues and depreciation expense over the useful life of the equipment. This change, effective October 1, 2000, reduced depreciation expense for 2001 by approximately $30 million.
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.
SHIPPING COSTS -
The Company's shipping and handling costs are included under operating costs for all periods presented.
DRILLING REVENUES -
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 the average cost basis of the security sold. Net income in 2001 includes a loss of approximately $1.4 million, $0.03 per share on a diluted basis, resulting from the Company's assessment that the decline in market value of certain available-for-sale securities below their financial cost basis was other than temporary. Net income in 2000 included approximately $6.6 million, $0.13 per share on a diluted basis, on gains related to non-monetary transactions within the Company's available-for-sale security invested 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 its proportionate share of the income or loss of each investee. The Company owned approximately 22% of Atwood Oceanics, Inc. (Atwood) at both September 30, 2001 and 2000. The quoted market value of the Company's investment was $78,000,000 and $125,063,000 at September 30, 2001 and 2000, respectively. Retained earnings at September 30, 2001 includes approximately $25,514,000 of undistributed earnings of Atwood.
Summarized financial information of Atwood is as follows:
2001 2000 1999
---------- ---------- ----------
(in thousands)
Gross revenues ................................... $ 147,540 $ 134,514 $ 150,009
Costs and expenses ............................... 120,395 111,366 122,289
---------- ---------- ----------
Net income ....................................... $ 27,145 $ 23,148 $ 27,720
========== ========== ==========
Helmerich & Payne, Inc.'s equity in net income,
net of income taxes ........................ $ 3,596 $ 3,221 $ 3,556
========== ========== ==========
Current assets ................................... $ 45,891 $ 63,951 $ 50,532
Noncurrent assets ................................ 304,857 248,334 243,072
Current liabilities .............................. 19,144 17,484 19,013
Noncurrent liabilities ........................... 85,948 77,332 82,362
Shareholders' equity ............................. 245,656 217,469 192,229
========== ========== ==========
Helmerich & Payne, Inc.'s investment ............. $ 52,153 $ 46,353 $ 41,157
========== ========== ==========
|
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.
CAPITALIZATION OF INTEREST -
The Company capitalizes interest on major projects during construction. Interest is capitalized on borrowed funds, with the rate based on the average interest rate on related debt. Capitalized interest for 2001, 2000, and 1999 was $1.3 million, $0.4 million, and $0.1 million, respectively.
INTEREST RATE RISK MANAGEMENT -
The Company uses derivatives as part of an overall operating strategy to moderate certain financial market risks and is exposed to interest rate risk from long-term debt. To manage this risk, in October 1998, the Company entered into an interest rate swap to exchange floating rate for fixed rate interest payments through October 2003, the remaining life of the debt. The difference to be paid or received is accrued and recognized as an adjustment of interest expense. As of September 30, 2001, the Company's interest rate swap had a notional principal amount of $50 million.
The Company's accounting policy for these instruments is based on its designation of such instruments as hedging transactions. An instrument is designated as a hedge based in part on its effectiveness in risk reduction and one-to-one matching of derivative instruments to underlying transactions. The Company records all derivatives on the balance sheet at fair value.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure of variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income in stockholders' equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The change in value of the derivative instrument in excess of the cumulative change in the present value of the future cash flows of the risk being hedged, if any, is recognized in the current earnings during the period of change.
The Company's interest rate swap has been designated as a cash flow hedge and is 100% effective in hedging the exposure of variability in the future interest payments attributable to the debt because the terms of the interest swap correlate with the terms of the debt.
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.
At September 30, 2001, the Company had committed bank lines totaling $85 million; $50 million expires October 2003 and $35 million expires May 2002. 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 $10.6 million against these lines at September 30, 2001. As described above, 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 and an expiration date of October 2003. The swap effectively converts this $50 million facility from a floating rate of LIBOR plus 50 basis points to a fixed effective rate of 5.38 percent. Excluding the impact of the interest rate swap, the average interest rate for the borrowings at September 30, 2001, was approximately 5.66 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.
The components of the provision (benefit) for income taxes are as follows:
Years Ended September 30, 2001 2000 1999
-------------------------------------------------------------------- --------- ---------- --------
(in thousands)
CURRENT:
Federal........................................................... $ 57,607 $ 325,736 $ 9,684
Foreign......................................................... 8,870 8,766 15,963
State........................................................... 6,680 3,366 1,744
--------- ---------- --------
73,157 37,868 27,391
--------- ---------- --------
DEFERRED:
Federal......................................................... 14,020 12,318 (842)
Foreign......................................................... 4,701 6,146 (771)
State .......................................................... 1,149 1,352 (72)
--------- ---------- --------
19,870 19,816 (1,685)
--------- ---------- --------
TOTAL PROVISION: $ 93,027 $ 57,684 $ 25,706
========= ========== ========
|
The amounts of domestic and foreign income are as follows:
Years Ended September 30, 2001 2000 1999
-------------------------------------------------------------------- --------- ---------- --------
(in thousands)
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATES:
Domestic........................................................ $ 208,288 $ 129,373 $ 41,693
Foreign......................................................... 26,814 7,390 23,245
--------- ---------- --------
$ 235,102 $ 136,763 $ 64,938
========= ========== ========
|
Effective income tax rates on income as compared to the U.S. Federal income tax rate are as follows:
Years Ended September 30, 2001 2000 1999
--------------------------------------------------------------------- --------- -------- --------
U.S. Federal income tax rate......................................... 35% 35% 35%
Dividends received deduction......................................... -- -- (1)
Effect of foreign taxes.............................................. 2 5 5
Non-conventional fuel source credits utilized........................ -- -- (1)
Other, net........................................................... 3 2 2
--- --- ---
Effective income tax rate............................................ 40% 42% 40%
=== === ===
|
The components of the Company's net deferred tax liabilities are as follows:
September 30, 2001 2000
--------------------------------------------------- ----------- ----------
(in thousands)
DEFERRED TAX LIABILITIES:
Property, plant and equipment $ 101,674 $ 75,653
Available-for-sale securities 33,937 72,583
Pension provision 3,194 4,075
Equity investments 15,637 12,734
Other 506 1,217
----------- ----------
Total deferred tax liabilities 154,948 166,262
----------- ----------
DEFERRED TAX ASSETS:
Financial accruals 6,746 9,612
Other 3,763 --
Total deferred tax assets 10,509 9,612
----------- ----------
NET DEFERRED TAX LIABILITIES $ 144,439 $ 156,650
=========== ==========
|
In January 2000, the board of directors authorized the repurchase of up to 1,000,000 shares of the Company's common stock in the 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 2001, the Company purchased 773,800 shares at a cost of approximately $23,198,000 and in fiscal 2000 purchased 20,600 shares at a cost of approximately $450,000. The Company did not purchase any shares is fiscal 1999. As of September 30, 2001, the Company is authorized to repurchase up to 205,600 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 market price of the underlying stock on the date of grant. Stock options expire ten years after grant.
The Company has reserved 3,135,509 shares of its treasury stock to satisfy the exercise of stock options issued under the 1990 and 1996 Stock Option Plans. Effective after December 6, 2000, additional options are no longer granted under these Plans. Options granted under the 1996 Plan vest over a four-year period. In fiscal 2001, 843,800 options were granted under the 1996 Plan.
In March 2001, the Company adopted the 2000 Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan was effective December 6, 2000, and will terminate December 6, 2010. Under this plan, the Company is authorized to grant options for up to 3,000,000 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 450,000 shares of the total authorized may be granted to participants as restricted stock awards. There was no activity under this plan during fiscal 2001.
In fiscal 2000 and 1999, 10,000 and 17,000 shares of restricted stock, respectively, were granted at a weighted-average price of $24.75 and $17.00, respectively, which approximated fair market value at the date of grant. Unearned compensation of $248,000 and $289,000 for fiscal 2000 and 1999, respectively, is being amortized over a five-year period as compensation expense. There were no restricted stock grants in fiscal 2001.
The following summary reflects the stock option activity and related information (shares in thousands):
2001 2000 1999
---------------------------- --------------------------- --------------------------
Weighted-Average Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price Options Exercise Price
------- ---------------- ------- ---------------- ------- ----------------
Outstanding at October 1, 2,955 $22.94 2,574 $21.34 2,090 $22.09
Granted 844 32.36 767 24.75 726 16.81
Exercised (644) 21.34 (364) 15.44 (238) 14.28
Forfeited/Expired (19) 25.57 (22) 23.00 (4) 13.51
------- -------- ------- -------- ------ --------
Outstanding on September 30, 3,136 $25.78 2,955 $22.94 2,574 $21.34
------- -------- ------- -------- ------ --------
Exercisable on September 30, 1,078 $23.82 1,046 $22.40 782 $20.13
------- -------- ------- -------- ------ --------
Shares available on September 30,
for options that may be granted 3,000 1,777 2,537
------- ------- ------
|
The following table summarizes information about stock options at September 30, 2001 (shares in thousands):
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
-------------------- ------- ---------------------- ---------------- ------- ----------------
$12.00 to $16.50 374 3.7 years $13.78 284 $13.77
$16.51 to $26.50 1,511 7.3 years $22.08 511 $22.18
$26.51 to $38.31 1,251 8.2 years $33.84 283 $36.85
------ --------- ------ ----- ------
$12.00 to $38.31 3,136 7.2 years $25.78 1,078 $23.82
------ --------- ------ ----- ------
|
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.
Years Ended September 30, 2001 2000 1999
------------------------------------------ ------------ ------------ -----------
(in thousands, except per share data)
Net Income:
As reported ........................... $ 144,254 $ 82,300 $ 42,788
Pro forma ............................. $ 139,211 $ 78,788 $ 40,268
Basic earnings per share:
As reported ........................... $ 2.88 $ 1.66 $ .87
Pro forma ............................. $ 2.78 $ 1.59 $ .82
Diluted earnings per share:
As reported ........................... $ 2.84 $ 1.64 $ .86
Pro forma ............................. $ 2.74 $ 1.57 $ .81
|
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 2001, 2000, and 1999 were $13.01, $10.80, and $6.81, 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:
2001 2000 1999
---- ---- ----
Expected years until exercise..................................... 4.5 5.5 5.5
Expected stock volatility......................................... 43% 41% 38%
Dividend yield.................................................... .8% .8% 1.2%
Risk-free interest rate........................................... 5.2% 6.0% 6.0%
|
On September 30, 2001, the Company had 49,852,797 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 ten business days after a person acquires 15% or more of the outstanding common stock or ten 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.
A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows:
(in thousands) 2001 2000 1999
-------------------------------------------------------------- -------- -------- --------
Basic weighted-average shares.............................. 50,096 49,534 49,243
Effect of dilutive shares:
Stock options............................................ 644 492 561
Restricted stock......................................... 32 9 13
------ ------ ------
676 501 574
------ ------ ------
Diluted weighted-average shares............................... 50,772 50,035 49,817
====== ====== ======
|
Restricted stock of 180,000 shares at a weighted-average price of $37.73 and options to purchase 1,250,750 shares of common stock at a weighted-average price of $33.84 were outstanding at September 30, 2001 but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive.
At September 30, 2000, 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 but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive.
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. Inclusion of these shares would be antidilutive.
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 ($1,590,553) at September 30, 2001, 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):
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
-------- ---------- ---------- ---------
(in thousands)
Equity Securities:
September 30, 2001 $63,778 $ 84,257 $3,136 $144,899
September 30, 2000 $86,901 $173,137 $2,065 $257,973
|
During the years ended September 30, 2001, 2000, and 1999, marketable equity available-for-sale securities with a fair value at the date of sale of $24,439,000, $12,640,000, and $2,803,000, respectively, were sold. The gross realized gains on such sales of available-for-sale securities totaled $3,314,000, $12,576,000, and $2,547,000, respectively, and the gross realized losses totaled $0, $0, and $0 respectively.
The table below presents changes in the components of accumulated other comprehensive income (loss).
Unrealized Appreciation Interest
(Depreciation) on Securities Rate Swap Total
---------------------------- --------- -----
Balance at September 30, 1998................................... $ 54,689 $ -- $ 54,689
1999 Change:
Pre-income tax amount...................................... 35,600 -- 35,600
Income tax provision....................................... (13,528) -- (13,528)
Realized gains in net income (net of $968 income tax)...... (1,579) -- (1,579)
-------- ------- --------
............................................................. 20,493 -- 20,493
-------- ------- --------
Balance at September 30, 1999................................... 75,182 -- 75,182
-------- ------- --------
2000 Change:
Pre-income tax amount...................................... 73,810 -- 73,810
Income tax provision....................................... (28,048) -- (28,048)
Realized gains in net income (net of $9,120 income tax).... (14,880) -- (14,880)
-------- ------- --------
............................................................. 30,882 -- 30,882
-------- ------- --------
Balance at September 30, 2000................................... 106,064 -- 106,064
-------- ------- --------
2001 Change:
Pre-income tax amount...................................... (88,762) (1,590) (90,352)
Income tax provision....................................... 33,730 604 34,334
Realized gains in net income (net of $452 income tax)...... (737) -- (737)
-------- ------- --------
............................................................. (55,769) (986) (56,755)
-------- ------- --------
Balance at September 30, 2001................................... $ 50,295 $ (986) $ 49,309
======== ======= ========
|
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:
Years ended September 30, 2001 2000
----------------------------------------------------------------------------- ------- -------
(in thousands)
Benefit obligation at beginning of year................................... $44,838 $36,995
Service cost.............................................................. 3,851 3,427
Interest cost............................................................. 3,330 2,741
Actuarial loss ........................................................... 903 3,059
Benefits paid............................................................. (1,189) (1,384)
------- -------
Benefit obligation at end of year......................................... $51,733 $44,838
======= =======
|
CHANGE IN PLAN ASSETS:
Years ended September 30, 2001 2000
----------------------------------------------------------------------------- ------- -------
(in thousands)
Fair value of plan assets at beginning of year............................ $60,611 $ 58,517
Actual return (loss) on plan assets....................................... (5,435) 3,478
Benefits paid............................................................. (1,189) (1,384)
------- --------
Fair value of plan assets at end of year ................................. $53,987 $ 60,611
======= ========
Funded status of the plan................................................. $ 2,254 $ 15,773
Unrecognized net actuarial (gain) loss.................................... 6,720 (5,016)
Unrecognized prior service cost........................................... 548 786
Unrecognized net transition asset......................................... (540) (1,079)
------- --------
Prepaid benefit cost...................................................... $ 8,982 $(10,464)
======= ========
|
WEIGHTED-AVERAGE ASSUMPTIONS:
Years Ended September 30, 2001 2000 1999
-------------------------------------- ------- ------ -------
Discount rate 7.50% 7.50% 7.50%
Expected return on plan 9.00% 9.00% 9.00%
Rate of compensation increase 5.00% 5.00% 5.00%
|
COMPONENTS OF NET PERIODIC PENSION EXPENSE:
Years Ended September 30, 2001 2000 1999
-------------------------------------------------------------- ------- -------- --------
(in thousands)
Service cost............................................... $ 3,851 $ 3,427 $ 3,700
Interest cost.............................................. 3,330 2,741 2,468
Expected return on plan assets............................. (5,415) (5,226) (4,606)
Amortization of prior service cost......................... 238 238 238
Amortization of transition asset........................... (540) (540) (540)
Recognized net actuarial gain.............................. 17 (303) 14
------- ------- -------
Net pension expense........................................ $ 1,481 $ (337) $ 1,274
======= ======= =======
|
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 $4,935,000, $3,545,000, and $3,315,000 in 2001, 2000, and 1999, respectively.
Accrued liabilities consist of the following:
September 30, 2001 2000
----------------------------------------------------------------------------- -------- --------
(in thousands)
Royalties payable......................................................... $13,527 $18,918
Taxes payable - operations................................................ 9,996 6,861
Ad valorem tax............................................................ 354 7,783
Income taxes payable...................................................... 739 --
Workers compensation claims............................................... 2,585 2,840
Payroll and employee benefits............................................. 5,676 4,055
Loss contingency (see note 13)............................................ 10,000 --
Other..................................................................... 10,749 6,158
------- -------
$53,626 $46,615
======= =======
|
Years Ended September 30, 2001 2000 1999
-------------------------------------------------------------- ------- -------- --------
(in thousands)
CASH PAYMENTS:
Interest paid.............................................. $ 5,030 $ 2,491 $ 5,705
Income taxes paid.......................................... $73,039 $39,673 $27,843
|
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 believes that its rig fleet is not currently impaired based on an assessment of future cash flows of the assets in question. However, it is possible that the Company's assessment that it will recover the carrying amount of its rig fleet from future operations may change in the near term.
OIL AND GAS OPERATIONS -
In estimating future cash flows attributable to the Company's exploration and production assets, certain assumptions are made with regard to commodity prices received and costs incurred. Due to the volatility of commodity prices, it is possible that the Company's assumptions used in estimating future cash flows for exploration and production assets may change in the near term.
Effective October 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities," as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS 133, as amended, requires that all derivatives be recorded on the balance sheet at fair value. Upon adoption at October 1, 2000, the effect of complying with SFAS 133, as amended, was immaterial to the Company's results of operations and financial position.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs and amends FASB Statement No. 19, "Financial Accounting and Reporting by Oil and Gas Producing Companies." The Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the associated asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. The Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The effect of this standard on the Company's results of operations and financial position is being evaluated.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and amends Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The Statement retains the basic framework of SFAS No. 121, resolves certain implementation issues of SFAS No. 121, extends applicability to discontinued operations, and broadens the presentation of discontinued operations to include a component of an entity. The Statement will be applied prospectively and is effective for financial statements issued for fiscal years beginning after December 15, 2001. Adoption of the Statement is not expected to have any initial impact on the Company's results of operations or financial position.
LITIGATION SETTLEMENT -
As previously discussed in the Company's filings on Forms 8-K dated March 16, 2001, and June 13, 2001, and in the Company's Form 10-Q filed on August 13, 2001, the Company is a defendant in Verdin v. R&B Falcon Drilling USA, Inc., et al., a civil action in the United States District Court, Galveston, Texas. The lawsuit alleges, among other things, that the company and many other defendant companies whose collective operations represent a substantial majority of the U.S. offshore drilling industry, conspired to fix wages and benefits paid to drilling employees. Plaintiff contends that this alleged conduct violates federal and state antitrust laws. Plaintiff sought treble damages, attorneys' fees and costs on behalf of himself and an alleged class of offshore workers.
In May 2001, the Company reached an agreement in principle with Plaintiff's counsel to settle all claims pending court approval of the settlement. In the third quarter of fiscal 2001, the Company accrued $3.25 million to contract drilling expense based on the pending settlement. The total settlement liability is $10 million of which $6.75 million will be paid by the Company's insurer. The Company does not believe that the settlement will have a material adverse affect on its business or financial position.
KANSAS AD VALOREM SETTLEMENT -
In fiscal 1997, the Company was assessed with approximately $6.7 million of Kansas ad valorem taxes which had been reimbursed to the Company for the period from October 1983 through June 1988 by interstate pipelines transporting natural gas to end users. In fiscal 1997, based on the assessment, natural gas revenues were reduced by $2.7 million and interest expense was increased by $4.0 million. In March 1998, approximately $6.1 million of the unpaid assessment was placed in an escrow account pending resolution of this matter. Since March 1998, the escrow account and the related liability continued to accrue interest income and interest expense of approximately $1.0 million.
The Federal Energy Regulatory Commission approved settlements between the Company and three of the pipelines. The last of these settlements was final in May 2001. The Company paid approximately $3.9 million out of its escrow account for the settlement of all three pipeline proceedings. The three settlements were approximately $3.1 million less than the amount the Company accrued for this liability. The impact of these settlements in the third quarter of fiscal 2001 was to increase natural gas revenues by approximately $1.1 million, reduce interest expense by approximately $2.0 million and reduce the liability by $3.1 million. At September 30, 2001, the Company continues to escrow approximately $337,000 to cover reimbursement liability in the remaining two pipeline proceedings. The Company believes this amount will be adequate to cover future reimbursement liability.
COMMITMENTS -
The Company, on a regular basis, makes commitments for the purchase of contract drilling equipment. At September 30, 2001, the Company has commitments of approximately $230 million for the purchase of drilling equipment.
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, 2001, 2000, and 1999 is shown in the following table:
Depreciation Additions
External Inter- Total Operating Depletion & Total to Long-Lived
(in thousands) Sales Segment Sales Profit Amortization Assets Assets
-------------- -------- -------- -------- --------- ------------ ---------- -------------
2001:
CONTRACT DRILLING
Domestic.......................... $332,399 $ 4,487 $336,886 $107,691 $ 25,890 $ 506,173 $144,063
International Services............ 154,890 -- 154,890 28,475 18,838 268,947 38,022
-------- -------- -------- -------- -------- ---------- --------
487,289 4,487 491,776 136,166 44,728 775,120 182,085
-------- -------- -------- -------- -------- ---------- --------
OIL & GAS OPERATIONS
Exploration and Production........ 217,194 -- 217,194 95,579 38,104 190,907 89,733
Natural Gas Marketing............. 100,111 -- 100,111 5,254 170 14,598 269
-------- -------- -------- -------- -------- ---------- --------
317,305 -- 317,305 100,833 38,274 205,505 90,002
-------- -------- -------- -------- -------- ---------- --------
REAL ESTATE......................... 11,018 1,545 12,563 6,315 2,264 22,621 1,190
OTHER............................... 11,242 -- 11,242 -- 2,043 361,261 1,393
ELIMINATIONS........................ -- (6,032) (6,032) -- -- -- --
-------- -------- -------- -------- -------- ---------- --------
TOTAL........................... $826,854 $ -- $826,854 $243,314 $ 87,309 $1,364,507 $274,670
======== ======== ======== ======== ======== ========== ========
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
======== ======== ======== ======== ======== ========== ========
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
======== ======== ======== ======== ======== ========== ========
|
The following table reconciles segment operating profit per the table on page 31 to income before taxes and equity in income of affiliate as reported on the Consolidated Statements of Income (in thousands).
Years Ended September 30, 2001 2000 1999
---------------------------------------- -------- -------- --------
Segment operating profit.................. $243,314 $122,782 $ 81,000
Unallocated amounts:
Income from investments................. 10,592 31,973 7,757
General and administrative expense...... (15,415) (11,578) (14,198)
Interest expense........................ 32 (3,076) (6,481)
Corporate depreciation.................. (2,043) (2,152) (1,565)
Other corporate expense................. (1,378) (1,186) (1,575)
-------- -------- --------
Total unallocated amounts............. (8,212) 13,981 (16,062)
-------- -------- --------
Income before income taxes and equity
in income of affiliates................. $235,102 $136,763 $ 64,938
======== ======== ========
|
The following tables present revenues from external customers and long-lived assets by country based on the location of service provided (in thousands).
Years Ended September 30, 2001 2000 1999
------------------------------------------------- ---------- ---------- ----------
Revenues
United States ............................ $ 671,964 $ 494,546 $ 381,332
Venezuela ................................ 43,409 34,922 59,481
Colombia ................................. 27,045 42,509 60,838
Other Foreign ............................ 84,436 59,118 62,668
---------- ---------- ----------
Total .................................. $ 826,854 $ 631,095 $ 564,319
========== ========== ==========
Long-Lived Assets
United States ............................ $ 616,472 $ 477,593 $ 479,753
Venezuela ................................ 84,856 37,001 62,931
Colombia ................................. 16,195 26,361 46,621
Other Foreign ............................ 100,881 132,650 101,910
---------- ---------- ----------
Total .................................. $ 818,404 $ 673,605 $ 691,215
========== ========== ==========
|
Long-lived assets are comprised of property, plant and equipment.
Revenues from one company doing business with the contract drilling segment accounted for approximately 14.9 percent, 15.2 percent, and 17.5 percent of the total consolidated revenues during the years ended September 30, 2001, 2000 and 1999, respectively. Revenues from another company doing business with the contract drilling segment accounted for approximately 8.0 percent, 7.4 percent, and 12 percent of total consolidated revenues in the years ended September 30, 2001, 2000, and 1999, respectively. Collectively, the receivables from these customers were approximately $32.6 million and $17.4 million at September 30, 2001 and 2000, respectively.
All of the Company's oil and gas producing activities are located in the United States.
Results of Operations from Oil and Gas Producing Activities -
Years Ended September 30, 2001 2000 1999
------------------------------------------------------------ ---------- ---------- ----------
(in thousands)
Revenues .............................................. $ 217,194 $ 157,583 $ 95,953
---------- ---------- ----------
Production costs ...................................... 37,418 26,685 23,058
Exploration expense and valuation provisions .......... 46,093 30,832 22,992
Depreciation, depletion and amortization .............. 38,104 33,462 38,658
Income tax expense .................................... 34,986 23,447 3,437
---------- ---------- ----------
Total cost and expenses .......................... 156,601 114,426 88,145
---------- ---------- ----------
Results of operations (excluding corporate overhead
and interest costs) .............................. $ 60,593 $ 43,157 $ 7,808
========== ========== ==========
|
Capitalized Costs -
September 30, 2001 2000
----------------------------------------------------------------------- ---------- ----------
(in thousands)
Proved properties ................................................ $ 486,772 $ 430,675
Unproved properties .............................................. 34,901 27,050
Total costs ................................................. 521,673 457,725
---------- ----------
Less - Accumulated depreciation, depletion and amortization ...... 357,094 314,091
---------- ----------
Net ......................................................... $ 164,579 $ 143,634
========== ==========
|
Costs Incurred Relating to Oil and Gas Producing Activities -
Years Ended September 30, 2001 2000 1999
-------------------------------------- ---------- ---------- ----------
(in thousands)
Property acquisition:
Proved ...................... $ 738 $ 105 $ 89
Unproved .................... 18,612 11,040 14,385
Exploration ..................... 44,166 43,833 22,292
Development ..................... 41,459 18,843 19,167
---------- ---------- ----------
Total ....................... $ 104,975 $ 73,821 $ 55,933
========== ========== ==========
|
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, 2001 and 2000. Amounts at September 30, 1999 were estimated by the Company and reviewed by independent engineers.
OIL (Bbls) GAS (Mmcf)
---------- ----------
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
Revisions of previous estimates.................................................. (700,329) (17,018)
Extensions, discoveries and other additions...................................... 1,144,709 12,748
Production....................................................................... (818,356) (42,387)
Purchases of reserves-in-place................................................... 434 496
Sales of reserves-in-place....................................................... -- --
--------- -------
Proved reserves at September 30, 2001............................................ 5,931,595 216,337
========= =======
Proved developed reserves at
September 30, 1999 ........................................................... 4,828,071 229,765
========= =======
September 30, 2000 ........................................................... 5,847,217 217,334
========= =======
September 30, 2001 ........................................................... 4,865,569 198,103
========= =======
|
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.
At September 30, 2001 2000
------------------------------------------------------------------ ----------- -----------
(in thousands)
Future cash inflows .............................................. $ 467,886 $ 1,377,922
Future costs -
Future production and development costs ...................... (174,703) (317,898)
Future income tax expense .................................... (81,253) (331,672)
----------- -----------
Future net cash flows ............................................ 211,930 728,352
10% annual discount for estimated timing of cash flows ........... (67,891) (240,281)
----------- -----------
Standardized Measure of discounted future net cash flows ......... $ 144,039 $ (488,071)
=========== ===========
|
Changes in Standardized Measure Relating to Proved Oil and Gas Reserves
(Unaudited)
Years Ended September 30, 2001 2000 1999
--------------------------------------------------------------- --------- --------- ---------
(in thousands)
Standardized Measure - Beginning of year ...................... $ 488,071 $ 232,618 $ 125,927
Increases (decreases) -
Sales, net of production costs .............................. (179,776) (130,898) (72,895)
Net change in sales prices, net of production costs ......... (400,679) 261,926 142,970
Discoveries and extensions, net of related future
development and production costs ........................ 29,387 156,840 38,164
Changes in estimated future development costs ............... 10,667 (36,994) (11,095)
Development costs incurred .................................. 17,311 13,587 16,558
Revisions of previous quantity estimates .................... (15,298) 57,730 17,713
Accretion of discount ....................................... 68,021 30,951 16,700
Net change in income taxes .................................. 160,776 (114,762) (40,671)
Purchases of reserves-in-place .............................. 619 542 96
Sales of reserves-in-place .................................. -- (700) (1,390)
Changes in production rates and other ....................... (35,060) 17,231 541
--------- --------- ---------
Standardized Measure - End of year ............................ $(144,039 $ 488,071 $ 232,618
========= ========= =========
|
NOTE 16 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share amounts)
1st 2nd 3rd 4th
2001 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
Revenues ............................. $192,550 $221,569 $217,222 $195,513
Gross profit ......................... 59,614 72,939 67,607 50,325
Net income ........................... 33,840 41,749 40,437 28,228
Basic net income per share ........... .68 .83 .80 .56
Diluted net income per share ......... .67 .82 .79 .56
|
1st 2nd 3rd 4th
2000 Quarter Quarter Quarter Quarter
---- ------- ------- ------- -------
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
|
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 second quarter of 2001 includes an after-tax charge of $2.4 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 third quarter of 2001 includes an after-tax gain of approximately $1.9 million ($0.04 per share, on a diluted basis) related to a 1997 Kansas ad valorem assessment that was settled at less than the original liability. The after-tax gain increased natural gas revenues by approximately $.7 million and decreased interest expense by approximately $1.2 million.
Net income in the fourth quarter of 2001 includes an after-tax charge of $2.8 million ($0.06 per share, on a diluted basis) related to the write-down of producing properties in accordance with SAFS No. 121.
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.
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, 2001 and 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended September 30, 2001. 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, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Tulsa, Oklahoma
November 19, 2001
|
STOCK PRICE INFORMATION
Closing Market Price Per Share
------------------------------
2001 2000
---- ----
QUARTERS HIGH LOW HIGH LOW
-------- ---- --- ---- ---
First............................... $ 44.19 $ 28.94 $ 27.44 $ 19.13
Second.............................. 58.51 39.63 31.00 20.00
Third............................... 51.23 30.82 37.75 29.06
Fourth.............................. 32.77 23.74 38.31 30.06
|
DIVIDEND INFORMATION
Paid Per Share Total Payment
-------------- -------------
2001 2000 2001 2000
---- ---- ---- ----
QUARTERS
--------
First............................... $.075 $.070 $3,748,896 $3,474,612
Second............................... .075 .070 3,776,612 3,475,623
Third............................... .075 .070 3,796,489 3,484,189
Fourth............................... .075 .075 3,765,488 3,740,863
|
STOCKHOLDERS' MEETING
The annual meeting of stockholders will be held on March 6, 2002. A formal notice of the meeting, together with a proxy statement and form of proxy, will be mailed to shareholders on or about January 25, 2002.
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 14, 2001, there were 1,090 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.
ADDITIONAL INFORMATION
In a continuing effort to find timely and cost effective communications solutions to serve the needs of our shareholders, we are discontinuing the printing and distribution of our traditional quarterly shareholder reports. Effective the first quarter ending December 31, 2001, quarterly reports on Form 10-Q, earnings releases and financial statements will be made available on the investor relations section of the Company's Web site. Quarterly reports on Form 10-Q, earnings releases and financial statements will also be available free of charge upon written request.
DIRECT INQUIRIES TO:
Investor Relations
Helmerich & Payne, Inc.
Utica at Twenty-First
Tulsa, Oklahoma 74114
Telephone: (918) 742-5531
Internet Address: http://www.hpinc.com
ELEVEN-YEAR FINANCIAL REVIEW
HELMERICH & PAYNE, INC.
Years Ended September 30, 2001 2000 1999
--------------------------------------------------------------------------- -------- --------- ---------
REVENUES AND INCOME*(2)
Contract Drilling Revenues....................................... 484,927 349,992 394,715
Crude Oil Sales.................................................. 22,815 24,601 9,479
Natural Gas Sales................................................ 192,962 131,056 81,533
Gas Marketing Revenues........................................... 99,140 78,921 54,263
Real Estate Revenues............................................. 9,066 8,991 8,663
Dividend Income.................................................. 3,909 14,482 3,569
Other Revenues................................................... 14,035 23,052 12,097
Total Revenues+.................................................. 826,854 631,095 564,319
Net Cash Provided by Continuing Operations+...................... 278,856 201,836 158,694
Income from Continuing Operations................................ 144,254 82,300 42,788
Net Income....................................................... 144,254 82,300 42,788
--------- --------- ---------
PER SHARE DATA
Income from Continuing Operations(1):
Basic........................................................ 2.88 1.66 .87
Diluted...................................................... 2.84 1.64 .86
Net Income(1):
Basic........................................................ 2.88 1.66 .87
Diluted...................................................... 2.84 1.64 .86
Cash Dividends................................................... .30 .285 .28
Shares Outstanding*.............................................. 49,853 49,980 49,626
--------- --------- ---------
FINANCIAL POSITION
Net Working Capital*............................................. 210,191 186,250 88,720
Ratio of Current Assets to Current Liabilities................... 2.73 3.36 2.23
Investments*..................................................... 200,286 304,326 238,475
Total Assets*.................................................... 1,364,507 1,259,492 1,109,699
Long-Term Debt*.................................................. 50,000 50,000 50,000
Shareholders' Equity*............................................ 1,026,477 955,703 848,109
--------- --------- ---------
CAPITAL EXPENDITURES*
Contract Drilling Equipment...................................... 173,856 49,774 68,639
Wells and Equipment.............................................. 74,580 54,764 29,947
Real Estate...................................................... 1,144 2,880 1,435
Other Assets (includes undeveloped leases)....................... 28,904 24,514 22,930
Discontinued Operations.......................................... -- -- --
Total Capital Outlays............................................ 278,484 131,932 122,951
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment...................................... 1,028,015 891,749 881,269
Producing Properties............................................. 486,772 430,674 421,552
Undeveloped Leases............................................... 34,901 27,050 25,337
Real Estate...................................................... 50,579 50,649 49,065
Other............................................................ 86,300 80,268 71,139
Discontinued Operations.......................................... -- -- --
Total Property, Plant and Equipment.............................. 1,686,567 1,480,390 1,448,362
--------- --------- ---------
|
* 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 14 for segment presentation of revenues.
Years Ended September 30, 1998 1997 1996 1995
--------------------------------------------------------------------------- --------- --------- --------- ---------
REVENUES AND INCOME*(2)
Contract Drilling Revenues....................................... 427,713 315,327 244,338 203,325
Crude Oil Sales.................................................. 10,333 20,475 15,378 13,227
Natural Gas Sales................................................ 87,646 87,737 60,500 33,851
Gas Marketing Revenues........................................... 52,469 66,306 57,817 34,729
Real Estate Revenues............................................. 8,587 8,224 8,076 7,560
Dividend Income.................................................. 4,117 5,268 3,650 3,389
Other Revenues................................................... 45,775 14,522 3,496 10,640
Total Revenues+.................................................. 636,640 517,859 393,255 306,721
Net Cash Provided by Continuing Operations+...................... 113,533 165,568 121,420 84,010
Income from Continuing Operations................................ 101,154 84,186 45,426 5,788
Net Income....................................................... 101,154 84,186 72,566 9,751
--------- --------- --------- ---------
PER SHARE DATA
Income from Continuing Operations(1):
Basic........................................................ 2.03 1.69 .92 .12
Diluted...................................................... 2.00 1.67 .91 .12
Net Income(1):
Basic........................................................ 2.03 1.69 1.47 .20
Diluted...................................................... 2.00 1.67 1.46 .20
Cash Dividends................................................... .275 .26 .2525 .25
Shares Outstanding*.............................................. 49,383 50,028 49,771 49,529
--------- --------- --------- ---------
FINANCIAL POSITION
Net Working Capital*............................................. 58,861 62,837 51,803 50,038
Ratio of Current Assets to Current Liabilities................... 1.47 1.66 1.83 1.74
Investments*..................................................... 200,400 323,510 229,809 156,908
Total Assets*.................................................... 1,090,430 1,033,595 821,914 707,061
Long-Term Debt*.................................................. 50,000 -- -- --
Shareholders' Equity*............................................ 793,148 780,580 645,970 562,435
--------- --------- --------- ---------
CAPITAL EXPENDITURES*
Contract Drilling Equipment...................................... 206,794 109,036 79,269 80,943
Wells and Equipment.............................................. 38,970 35,024 21,142 19,384
Real Estate...................................................... 854 1,095 752 873
Other Assets (includes undeveloped leases)....................... 19,681 16,022 7,003 9,717
Discontinued Operations.......................................... -- -- 1,581 859
Total Capital Outlays............................................ 266,299 161,177 109,747 111,776
--------- --------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment...................................... 829,217 643,619 568,110 501,682
Producing Properties............................................. 414,770 395,812 392,562 384,755
Undeveloped Leases............................................... 20,977 14,109 9,242 8,051
Real Estate...................................................... 48,451 47,682 46,970 46,642
Other............................................................ 65,120 59,659 53,547 55,655
Discontinued Operations.......................................... -- -- -- 13,937
Total Property, Plant and Equipment.............................. 1,378,535 1,160,881 1,070,431 1,010,722
--------- --------- --------- ---------
Years Ended September 30, 1994 1993 1992 1991
--------------------------------------------------------------------------- --------- --------- --------- ---------
REVENUES AND INCOME*(2)
Contract Drilling Revenues....................................... 182,781 149,661 112,833 105,364
Crude Oil Sales.................................................. 13,161 15,392 16,369 17,374
Natural Gas Sales................................................ 45,261 52,446 38,370 35,628
Gas Marketing Revenues........................................... 51,874 63,786 40,410 10,055
Real Estate Revenues............................................. 7,396 7,620 7,541 7,542
Dividend Income.................................................. 3,621 3,535 4,050 5,285
Other Revenues................................................... 6,058 8,283 6,646 20,020
Total Revenues+.................................................. 310,152 300,723 226,219 201,268
Net Cash Provided by Continuing Operations+...................... 74,463 72,493 60,414 50,006
Income from Continuing Operations................................ 17,108 22,158 8,973 19,608
Net Income....................................................... 24,971 24,550 10,849 21,241
--------- --------- --------- ---------
PER SHARE DATA
Income from Continuing Operations(1):
Basic........................................................ .35 .46 .19 .41
Diluted...................................................... .35 .45 .19 .41
Net Income(1):
Basic........................................................ .51 .51 .22 .44
Diluted...................................................... .51 .50 .22 .44
Cash Dividends................................................... .2425 .24 .2325 .23
Shares Outstanding*.............................................. 49,420 49,275 49,152 48,976
--------- --------- --------- ---------
FINANCIAL POSITION
Net Working Capital*............................................. 76,238 104,085 82,800 108,212
Ratio of Current Assets to Current Liabilities................... 2.63 3.24 3.31 4.19
Investments*..................................................... 87,414 84,945 87,780 96,471
Total Assets*.................................................... 621,689 610,504 585,504 575,168
Long-Term Debt*.................................................. -- 3,600 8,339 5,693
Shareholders' Equity*............................................ 524,334 508,927 493,286 491,133
--------- --------- --------- ---------
CAPITAL EXPENDITURES*
Contract Drilling Equipment...................................... 53,752 24,101 43,049 56,297
Wells and Equipment.............................................. 40,916 23,142 21,617 34,741
Real Estate...................................................... 902 436 690 2,104
Other Assets (includes undeveloped leases)....................... 9,695 5,901 16,984 6,793
Discontinued Operations.......................................... 618 629 158 2,594
Total Capital Outlays............................................ 105,883 54,209 82,498 102,529
--------- --------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT AT COST*
Contract Drilling Equipment...................................... 444,432 418,004 404,155 370,494
Producing Properties............................................. 377,371 340,176 329,264 312,438
Undeveloped Leases............................................... 11,729 10,010 12,973 5,552
Real Estate...................................................... 47,827 47,502 47,286 46,671
Other............................................................ 48,612 45,085 43,153 36,423
Discontinued Operations.......................................... 13,131 12,545 11,962 11,838
Total Property, Plant and Equipment.............................. 943,102 873,322 848,793 783,416
--------- --------- --------- ---------
|
Years Ended September 30, 2001 2000 1999
------------------------------------------------------- ---------- ---------- ----------
CONTRACT DRILLING
Drilling Rigs, United States .................. 59 48 46
Drilling Rigs, International .................. 32 40 44
Contract Wells Drilled, United States ......... 346 335 242
Total Footage Drilled, United States* ......... 4,415 4,058 2,938
Average Depth per Well, United States ......... 12,761 12,115 12,142
Percentage Rig Utilization, United States ..... 97 87 75
Percentage Rig Utilization, International ..... 56 47 53
---------- ---------- ----------
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed ......................... 123 81 49
Net Wells Completed ........................... 69.5 42.7 23.9
Net Dry Holes ................................. 17.0 9.1 7.1
---------- ---------- ----------
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily) .................... 2,242 2,405 1,779
Net Oil Wells Owned-- Primary Recovery ........ 113 107.1 124
Net Oil Wells Owned-- Secondary Recovery ...... 55 55.5 54
Secondary Oil Recovery Projects ............... 4 3 5
Net Natural Gas Produced
(thousands of cubic feet daily) ............. 116,128 128,204 121,206
Net Gas Wells Owned ........................... 493 453 439
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REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)* ............ 1,652 1,652 1,652
Percentage Occupancy .......................... 93 91 95
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TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries ...... 4,245 3,606 3,440
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000's omitted.
Years Ended September 30, 1998 1997 1996 1995 1994
------------------------------------------------------- -------- -------- -------- -------- --------
CONTRACT DRILLING
Drilling Rigs, United States .................. 46 38 41 41 47
Drilling Rigs, International .................. 44 39 36 35 29
Contract Wells Drilled, United States ......... 242 246 233 212 162
Total Footage Drilled, United States* ......... 2,938 2,753 2,499 1,933 1,842
Average Depth per Well, United States ......... 12,142 11,192 10,724 9,119 11,367
Percentage Rig Utilization, United States ..... 95 88 82 71 69
Percentage Rig Utilization, International ..... 88 91 85 84 88
-------- -------- -------- -------- --------
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed ......................... 62 100 63 59 44
Net Wells Completed ........................... 35.7 49.3 35.3 27.4 15
Net Dry Holes ................................. 4.2 9.6 7.3 5.9 1.7
-------- -------- -------- -------- --------
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily) .................... 1,921 2,700 2,212 2,214 2,431
Net Oil Wells Owned-- Primary Recovery ........ 124 133 176.9 186 202
Net Oil Wells Owned-- Secondary Recovery ...... 53 49 63.8 64 71
Secondary Oil Recovery Projects ............... 5 5 12 12 14
Net Natural Gas Produced
(thousands of cubic feet daily) ............. 117,431 110,859 94,358 72,387 72,953
Net Gas Wells Owned ........................... 436 410 378 354 341
-------- -------- -------- -------- --------
REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)* ............ 1,652 1,652 1,654 1,652 1,652
Percentage Occupancy .......................... 97 95 94 87 83
-------- -------- -------- -------- --------
TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries ...... 3,340 3,627 3,309 3,245 2,787
-------- -------- -------- -------- --------
Years Ended September 30, 1993 1992 1991
------------------------------------------------------- -------- -------- --------
CONTRACT DRILLING
Drilling Rigs, United States .................. 42 39 46
Drilling Rigs, International .................. 29 30 25
Contract Wells Drilled, United States ......... 128 100 106
Total Footage Drilled, United States* ......... 1,504 1,085 1,301
Average Depth per Well, United States ......... 11,746 10,853 12,274
Percentage Rig Utilization, United States ..... 53 42 47
Percentage Rig Utilization, International ..... 68 69 69
-------- -------- --------
PETROLEUM EXPLORATION AND DEVELOPMENT
Gross Wells Completed ......................... 42 54 45
Net Wells Completed ........................... 15.9 17.8 20.2
Net Dry Holes ................................. 4.3 4.3 4.3
-------- -------- --------
PETROLEUM PRODUCTION
Net Crude Oil and Natural Gas Liquids
Produced (barrels daily) .................... 2,399 2,334 2,152
Net Oil Wells Owned-- Primary Recovery ........ 202 220 227
Net Oil Wells Owned-- Secondary Recovery ...... 71 74 55
Secondary Oil Recovery Projects ............... 14 14 12
Net Natural Gas Produced
(thousands of cubic feet daily) ............. 78,023 75,470 66,617
Net Gas Wells Owned ........................... 307 289 278
-------- -------- --------
REAL ESTATE MANAGEMENT
Gross Leasable Area (square feet)* ............ 1,656 1,656 1,664
Percentage Occupancy .......................... 86 87 86
-------- -------- --------
TOTAL NUMBER OF EMPLOYEES
Helmerich & Payne, Inc. and Subsidiaries ...... 2,389 1,928 1,758
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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**
Chairman and Chief Executive Officer
AT&T Wireless Services
Basking Ridge, New Jersey
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* Member, Audit Committee
** Member, Human Resources Committee
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