FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 30549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended: DECEMBER 31, 1996
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
(State or other jurisdiction of incorporation or organization)
73-0679879
(I.R.S. Employer I.D. Number)
UTICA AT TWENTY-FIRST STREET, TULSA, OKLAHOMA 74114
(Address of principal executive office) (zip code)
Registrant's telephone number, including area code: (918) 742-5531
Former name, former address and former fiscal year, if changed since last
report: 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
----- ------
CLASS OUTSTANDING AT DECEMBER 31, 1996
Common Stock, .10 par value 24,918,500
AUTHORIZED AT DECEMBER 31, 1996
26,764,476
Total Number of Pages 13
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HELMERICH & PAYNE, INC.
INDEX
PART I FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
December 31, 1996 and September 30, 1996 3
Consolidated Condensed Statements of Income -
Three Months Ended December 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended December 31, 1996 and 1995 5
Consolidated Condensed Statement of Shareholders' Equity -
Three Months Ended December 31, 1996 6
Notes to Consolidated Condensed Financial Statements 7&8
Revenues and Income by Business Segments 9
Management's Discussion and Analysis of Financial 10,11
Condition and Results of Operations & 12
PART II. OTHER INFORMATION 12
Signature Page 13
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
December 31 September 30
1996 1996
----------- ------------
ASSETS
Current Assets
Cash and cash equivalents $ 27,494 $ 16,892
Short-term investments 1,005 1,005
Accounts receivable, net 85,533 75,374
Inventories 16,839 16,915
Prepaid expenses and other 8,781 4,182
-------- --------
Total Current Assets 139,652 114,368
-------- --------
Investments 252,197 229,809
Property, Plant and Equipment, Net 480,766 463,496
Other Assets 13,026 14,241
-------- --------
Total Assets $885,641 $821,914
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 29,544 $ 25,622
Accrued liabilities 39,296 31,943
Notes payable 15,000 5,000
-------- --------
Total Current Liabilities 83,840 62,565
-------- --------
Noncurrent Liabilities
Deferred income taxes 106,679 98,335
Other 17,881 15,044
-------- --------
Total Noncurrent Liabilities 124,560 113,379
-------- --------
Shareholders' Equity
Common stock, par value
$.10 per share 2,677 2,677
Preferred stock, no shares issued -- --
Additional paid-in capital 50,955 50,410
Net unrealized holding gains 69,775 56,550
Retained earnings 574,793 557,543
-------- --------
698,200 667,180
Less treasury stock, at cost 20,959 21,210
-------- --------
Total Shareholders' Equity 677,241 645,970
-------- --------
$885,641 $821,914
======== ========
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See accompanying notes to financial statements.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands except per share data)
Three Months Ended
December 31
1996 1995
-------------------------
REVENUES:
Sales and other operating revenues $116,726 $ 87,260
Income from investments 1,536 1,167
-------- --------
118,262 88,427
-------- --------
COST AND EXPENSES:
Operating costs 63,900 53,263
Depreciation, depletion and amortization 15,472 13,573
Dry holes and abandonments 560 928
Taxes, other than income taxes 4,687 3,692
General and administrative 2,259 2,348
Interest 3 79
-------- --------
86,881 73,883
-------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EQUITY IN
INCOME OF AFFILIATE 31,381 14,544
INCOME TAX EXPENSE 11,756 5,270
EQUITY IN INCOME OF AFFILIATE,
net of income taxes 500 194
-------- --------
INCOME FROM CONTINUING OPERATIONS 20,125 9,468
INCOME FROM DISCONTINUED OPERATIONS -- 1,625
-------- --------
NET INCOME $ 20,125 $ 11,093
======== ========
PER COMMON SHARE:
Income from continuing operations $ .81 $ .38
Income from discontinued operations -- .07
-------- --------
NET INCOME $ .81 $ .45
======== ========
CASH DIVIDENDS (Note 2) $ .13 $ .125
AVERAGE COMMON SHARES OUTSTANDING 24,826 24,603
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See accompanying notes to financial statements.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
December 31
1996 1995
-------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 20,125 $ 11,093
Adjustments to reconcile net income to net
cash provided by operating activities--
Discontinued operations - (1,625)
Depreciation, depletion, and amortization 15,472 13,573
Dry holes and abandonments 560 928
Equity in income of affiliate before
income taxes (806) (313)
Amortization of deferred compensation 368 425
Loss (Gain) on sale of fixed assets, other (438) 427
Change in assets and liabilities--
Accounts receivable (10,159) (5,937)
Inventories 76 (148)
Prepaid expenses and other (3,384) (641)
Accounts payable 6,119 (668)
Accrued liabilities 7,353 5,670
Deferred income taxes 238 213
Other noncurrent liabilities 2,837 1,447
-------- --------
Total adjustments 18,236 13,351
-------- --------
Net cash provided by continuing operations 38,361 24,444
Net cash provided by discontinued operations - 1,453
-------- --------
Net cash provided by operating activities 38,361 25,897
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including dry hole costs,
from continuing operations (36,319) (35,616)
Proceeds from sales of property, plant, and
equipment 1,283 72
Discontinued operations - (458)
Purchase of investments (276) -
-------- --------
Net cash used in investing activities (35,312) (36,002)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 15,000 22,000
Payments made on notes payable (5,000) (20,000)
Dividends paid (3,243) (3,095)
Proceeds from exercise of stock options 796 -
-------- --------
Net cash provided by(used in) financing
activities 7,553 (1,095)
-------- --------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 10,602 (11,200)
CASH AND CASH EQUIVALENTS, beginning of period 16,892 19,543
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 27,494 $ 8,343
======== ========
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Net
Unrlzed Treasury Stock
Common Stock Paid-In Holding Retained ------------------
Shares Amount Capital Gains Earnings Shares Amount
--------------- ------- ------- -------- ------------------
Balance, September 30, 1996 26,764 $2,677 $50,410 $56,550 $557,543 1,879 $(21,210)
Change in net unrealized holding
gains, net of income taxes of
$8,106 - - - 13,225 - - -
Cash dividends ($0.13 per share) - - - - (3,243) - -
Exercise of stock options - - 545 - - (33) 251
Amortization of deferred
compensation - - - - 368 - -
Net income - - - - 20,125 - -
------------------------------------------------------------------------
Balance, December 31, 1996 26,764 $2,677 $50,955 $69,775 $574,793 1,846 $(20,959)
=========================================================================
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See accompanying notes to financial statements.
I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the results of the periods presented. The results of operations for the three months ended December 31, 1996, and December 31, 1995, are not necessarily indicative of the results to be expected for the full year.
2. The $.13 cash dividend declared in September was paid December 2, 1996. On December 4, 1996, a cash dividend of $.13 per share was declared for shareholders of record on February 14, 1997, payable March 3, 1997.
3. Inventories consist of materials and supplies.
4. Income from investments does not include any gains or losses on sales of available-for-sale securities during the first quarter of 1997 or 1996.
5. The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting. The recorded investment in securities accounted for under the equity method is $26,021,000.
Gross Gross Est.
Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
-----------------------------------------
Equity Securities 12/31/96 $113,635 $113,358 $817 $226,176
Equity Securities 09/30/96 $113,384 $ 92,081 $871 $204,594
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6. In May 1996 the Company renewed its line of credit agreement with certain banks. The new agreement provides for maximum borrowing of $50,000,000 at adjustable interest rates based on London Interbank Offered Rates (LIBOR). The borrowings will mature either in May of 1997 or May of 1998. A $40,000,000 portion of the line is for a 364 day term and a $10,000,000 portion is for a two year term. As of December 31, 1996, the Company had borrowed $15,000,000 against the line of credit, at a weighted average interest rate of 5.93%, and had letters of credit outstanding in the amount of $7,671,000, leaving an unused portion of $27,329,000. Under the line of credit agreement, the Company must meet certain requirements regarding levels of debt, net worth and earnings. The Company has an additional $14.0 million line of credit with a bank to be used primarily for letters of credit. As of December 31, 1996, the Company had letters of credit outstanding in the amount of $2,547,222 leaving an unused portion of $11,452,778.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
7. Discontinued Operations
Effective August 30, 1996, the Company exchanged all of the common stock of its wholly-owned subsidiary, Natural Gas Odorizing, Inc. (NGO), to Occidental Petroleum Corporation (OPC) for 2,018,928 shares of OPC common stock with a fair market value at closing of approximately $48 million. NGO comprised all of the Company's chemical operations. Prior period operating results for such operations are reported as discontinued operations. Summary operating results of discontinued operations for the quarter ending December 31, 1995 are as follows (in thousands):
Revenues $6,158 Operating Profit $2,739 Income Taxes $1,114 Net Income $1,625 |
I. FINANCIAL INFORMATION HELMERICH & PAYNE, INC.
REVENUES AND INCOME BY BUSINESS SEGMENTS
(in thousands)
FY 1997 FY 1996
1ST QUARTER 1ST QUARTER
----------- -----------
SALES AND OTHER REVENUES:
Contract Drilling-Domestic $ 29,596 $23,020
Contract Drilling-International 35,630 33,935
-------- -------
Total Contract Drilling Division 65,226 56,955
-------- -------
Exploration and Production 30,014 15,460
Natural Gas Marketing 18,991 12,786
-------- -------
Total Oil & Gas Division 49,005 28,246
-------- -------
Real Estate Division 2,412 2,008
Investment and Other 1,619 1,218
-------- -------
Total Revenues $118,262 $88,427
======== =======
OPERATING PROFIT(LOSS):
Contract Drilling-Domestic $ 4,210 $ 1,915
Contract Drilling-International 6,907 8,309
-------- -------
Total Contract Drilling Division 11,117 10,224
-------- -------
Exploration and Production 18,274 4,075
Natural Gas Marketing 1,381 757
-------- -------
Total Oil & Gas Division 19,655 4,832
-------- -------
Real Estate Division 1,779 1,221
-------- -------
Total Operating Profit 32,551 16,277
-------- -------
OTHER (1,170) (1,733)
-------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EQUITY IN
INCOME OF AFFILIATE $ 31,381 $14,544
======== =======
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See accompanying notes to financial statements.
I. FINANCIAL INFORMATION HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DECEMBER 31, 1996
Business Environment and Risk Factor
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 natural gas prices, expiration or termination of drilling contracts, changes in general economic conditions, rapid or unexpected changes in technologies and uncertain business conditions that affect the Company's businesses. Accordingly, past results and trends should not be used by investors to anticipate future results or trends.
With the exception of historical information, the matters discussed below under the headings "Results of Operations" and "Liquidity and Capital Resources" may include forward-looking statements that involve risks and uncertainties. The Company wishes to caution readers that a number of important factors discussed in this report and in the Company's other reports filed with the Securities and Exchange Commission, could affect the Company's actual results and cause actual results to differ materially from those in the forward- looking statements.
Results of Operations
The Company reported net income of $20,125,000 ($0.81 per share) from revenues of $118,262,000 for the first quarter of fiscal 1997, compared with $11,093,000 ($0.45 per share) net income from revenues of $88,427,000 during the first quarter of 1996.
The Company's Exploration and Production Division reported an operating profit of $18,274,000 for the first quarter of fiscal 1997, compared with an operating profit of $4,075,000 for the same period last year. Oil and gas revenues for the first quarter of 1997 were $30,014,000, a 94% increase from last year's revenues of $15,460,000. Natural gas revenues increased to $24,147,000 in the first quarter of fiscal 1997 from $12,254,000 in the first quarter of fiscal 1996. Oil revenues increased to $5,661,000 in the first quarter of fiscal 1997 from $3,229,000 in the first quarter of fiscal 1996. Increased prices and volumes for both oil and gas contributed to the increased revenues and operating profit.
Natural gas prices for the first quarter of fiscal 1997 averaged $2.46 per mcf, a 64% increase over the $1.50 per mcf received in the first quarter of fiscal 1996. Gas volumes increased nearly 20% to 106.8 mmcf/d for the quarter from 89.3 mmcf/d for the first quarter of fiscal 1996. A substantial
I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1996
(Continued)
portion of the increased natural gas volumes was produced from the Company's Rocky East Prospect which went on production in the third and fourth quarters of fiscal 1996. Although natural gas prices remain relatively strong into the second quarter of fiscal 1997, the Company expects that in the coming months natural gas prices and sales volumes will decrease in response to reduced seasonal demands.
Oil prices for the first quarter of fiscal 1997 averaged $23.98 compared with $16.42 for the same period in 1996. Oil volumes were 2,566 bbls/d and 2,171 bbls/d for the first quarter of 1997 and 1996, respectively. The increased volumes were the result of new wells in the Austin Chalk area in Louisiana going on production in the first quarter of fiscal 1997. Additional Austin Chalk wells are planned for the remainder of the year, but the timing and impact on production are not predictable.
The Contract Drilling Division reported an operating profit of $11,117,000 in the first quarter of fiscal year 1997, compared with $10,224,000 in the same period of 1996. Operating profit from the domestic drilling operations increased to $4,210,000 for the quarter compared with $1,915,000 for the first quarter of fiscal 1996. Increased utilization of land rigs (revenue days increased 20% from first quarter of 1996) and increased day rates for land rigs contributed to the increased operating profit. Also contributing substantially to earnings was the new Mars offshore platform rig which began drilling in the third quarter of fiscal 1996. The Mars rig more than offset the negative impact of two offshore rigs that were released from contract in the fourth quarter of 1996. Two additional rigs will commence operations for Shell Offshore Inc. by the third quarter of fiscal year 1997. The Company expects this will have a positive impact on domestic operating profit for the last six months of fiscal 1997.
Operating profit from international drilling operations decreased to $6,907,000 in the first quarter of fiscal 1997 from $8,309,000 in the same quarter last year. The first quarter of fiscal 1996 included foreign currency transaction gains in Venezuela of $1 million. No such gains were realized in the first quarter of fiscal 1997 because of a more stable currency situation. Additional decreases were due to slightly higher operating expenses in Colombia for the first quarter of 1997, compared with the first quarter of fiscal 1996.
The Company's Real Estate Division increased operating profit to $1,779,000 in the first quarter of fiscal 1997 from $1,221,000 in the same quarter of fiscal 1996. The increase was primarily due to a gain on the sale of a small parcel of land during the quarter.
I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1996
(Continued)
Liquidity and Capital Resources
Net cash provided by continuing operations was $38,361,000 for the first quarter of fiscal 1997, compared with $24,444,000 for the same period in 1996. Capital expenditures were $36,319,000 and $35,616,000 for the first quarter of fiscal 1997 and 1996, respectively.
It is anticipated for fiscal 1997 that capital expenditures could possibly exceed internally generated cash flows and that the Company will borrow under its line of credit agreement or sell a portion of its investment portfolio to fund capital expenditures.
It was recently announced that Atwood Oceanics, Inc. (Atwood) had filed a Registration Statement for the offer and sale of 1.5 million shares of common stock of the company. In order to maintain its existing ownership interest in Atwood of 23.8%, Helmerich & Payne, Inc. (H&P) plans to purchase 25% of the shares to be offered. H&P's new investment would total between $20-$25 million.
There were no significant changes in the Company's financial position since September 30, 1996.
PART II. OTHER INFORMATION
HELMERICH & PAYNE, INC.
Item 1. Legal Proceedings
A lawsuit was filed in an Oklahoma state court in November of 1995 against Helmerich & Payne, Inc., in which five named plaintiffs, on behalf of themselves and other unnamed plaintiffs, are demanding their royalty share of a gas contract settlement. The plaintiffs are attempting to certify a class which would contain certain of the Company's lessors and certain other mineral owners who own an interest in wells covered by such gas contract settlement. If a certified class is awarded a royalty share of the gas contract settlement, then any such award could have a material impact on income from continuing operations for the applicable quarter. Management believes that any such award should not exceed approximately $2.7 million.
Item 6(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended December 31, 1996.
PART II. OTHER INFORMATION
HELMERICH & PAYNE, INC.
SIGNATURES
Pursuant to the requirements 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.
Date: FEBRUARY 14 1997 /S/ DOUGLAS E. FEARS
--------------------------- -----------------------------------------
Douglas E. Fears, Chief Financial Officer
Date: FEBRUARY 14 1997 /S/ HANS C. HELMERICH
--------------------------- -----------------------------------------
Hans C. Helmerich, President
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule |
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | SEP 30 1997 |
| PERIOD START | OCT 01 1996 |
| PERIOD END | SEP 30 1997 |
| CASH | 27,494 |
| SECURITIES | 252,197 |
| RECEIVABLES | 86,214 |
| ALLOWANCES | 681 |
| INVENTORY | 16,839 |
| CURRENT ASSETS | 139,652 |
| PP&E | 1,093,421 |
| DEPRECIATION | 612,655 |
| TOTAL ASSETS | 885,641 |
| CURRENT LIABILITIES | 83,840 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 2,677 |
| OTHER SE | 674,564 |
| TOTAL LIABILITY AND EQUITY | 885,641 |
| SALES | 116,726 |
| TOTAL REVENUES | 118,262 |
| CGS | 84,619 |
| TOTAL COSTS | 84,619 |
| OTHER EXPENSES | 2,259 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 3 |
| INCOME PRETAX | 31,381 |
| INCOME TAX | 11,756 |
| INCOME CONTINUING | 20,125 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 20,125 |
| EPS PRIMARY | .81 |
| EPS DILUTED | .81 |