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: JUNE 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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
CLASS OUTSTANDING AT JUNE 30, 2000
Common Stock, .10 par value 49,857,738
TOTAL NUMBER OF PAGES 18
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HELMERICH & PAYNE, INC.
INDEX
PART I. FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
June 30, 2000 and September 30, 1999 ................................ 3
Consolidated Condensed Statements of Income -
Three Months and Nine Months Ended
June 30, 2000 and 1999 .............................................. 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended June 30, 2000 and 1999 ............................ 5
Consolidated Condensed Statement of Shareholders' Equity
Nine Months Ended June 30, 2000 ..................................... 6
Notes to Consolidated Condensed Financial Statements ................ 7 - 12
Revenues and Income by Business Segments ............................ 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................. 14 - 18
PART II. OTHER INFORMATION ................................................ 18
Signature Page ...................................................... 18
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
June 30 September 30
2000 1999
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 88,699 $ 21,758
Accounts receivable, net 99,690 99,598
Inventories 25,006 25,187
Prepaid expenses and other 18,857 14,081
------------ ------------
Total Current Assets 232,252 160,624
------------ ------------
Investments 276,671 238,475
Property, plant and equipment, net 670,141 691,215
Other assets 17,911 19,385
------------ ------------
Total Assets $ 1,196,975 $ 1,109,699
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 27,165 $ 25,704
Accrued liabilities 38,555 41,200
Notes payable -- 5,000
------------ ------------
Total Current Liabilities 65,720 71,904
------------ ------------
Noncurrent Liabilities
Long-term notes payable 50,000 50,000
Deferred income taxes 143,031 116,588
Other 23,023 23,098
------------ ------------
Total Noncurrent Liabilities 216,054 189,686
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, par value, $.10 per
share 5,353 5,353
Preferred stock, no shares issued -- --
Additional paid-in capital 63,151 61,411
Retained earnings 787,264 745,956
Unearned compensation (3,644) (4,487)
Accumulated other comprehensive income 96,534 75,182
------------ ------------
948,658 883,415
Less treasury stock, at cost 33,457 35,306
------------ ------------
Total Shareholders' Equity 915,201 848,109
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,196,975 $ 1,109,699
============ ============
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The accompanying notes are an integral part of these statements.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands except per share data)
Quarter Ended Nine Months Ended
June 30 June 30
2000 1999 2000 1999
---------- ---------- ---------- ----------
REVENUES:
Sales and other operating revenues $ 149,760 $ 129,284 $ 425,195 $ 425,844
Income from investments 2,208 2,515 17,974 5,193
---------- ---------- ---------- ----------
151,968 131,799 443,169 431,037
---------- ---------- ---------- ----------
COST AND EXPENSES:
Operating costs 77,124 73,888 229,536 256,793
Depreciation, depletion and
amortization 26,712 25,341 80,552 82,711
Dry holes and abandonments 7,811 3,063 14,638 6,956
Taxes, other than income taxes 7,716 5,975 21,958 19,050
General and administrative 2,466 3,296 8,621 11,413
Interest 767 1,928 2,389 5,407
---------- ---------- ---------- ----------
122,596 113,491 357,694 382,330
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE 29,372 18,308 85,475 48,707
INCOME TAX EXPENSE 11,648 7,293 35,903 19,190
EQUITY IN INCOME OF AFFILIATE,
net of income taxes 833 1,181 2,378 2,842
---------- ---------- ---------- ----------
NET INCOME $ 18,557 $ 12,196 $ 51,950 $ 32,359
========== ========== ========== ==========
EARNINGS PER COMMON SHARE:
Basic $ 0.37 $ 0.25 $ 1.05 $ 0.66
Diluted $ 0.37 $ 0.24 $ 1.04 $ 0.65
CASH DIVIDENDS (Note 2) $ 0.075 $ 0.07 $ 0.215 $ 0.21
AVERAGE COMMON SHARES OUTSTANDING:
Basic 49,571 49,252 49,480 49,211
Diluted 50,227 49,933 49,940 49,730
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The accompanying notes are an integral part of these statements.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
06/30/00 06/30/99
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 51,950 $ 32,359
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 80,552 82,711
Dry holes and abandonments 14,638 6,956
Equity in income of affiliate before income taxes (3,836) (4,583)
Amortization of deferred compensation 1,148 1,177
Gain on sale of securities (12,576) (1,310)
Gain on sale of property, plant & equipment (1,368) (6,984)
Other, net 588 923
Change in assets and liabilities-
Accounts receivable (92) 21,057
Inventories 181 (1,062)
Prepaid expenses and other (3,318) (6,826)
Account payable 1,461 (17,346)
Accrued liabilities (2,645) (3,776)
Deferred income taxes 13,356 2,511
Other noncurrent liabilities (75) (2,103)
---------- ----------
Total adjustments 88,014 71,345
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 139,964 103,704
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, including dry hole costs (76,676) (93,150)
Proceeds from sales of property, plant and equipment 3,639 9,405
Purchase of investments -- (725)
Proceeds from sale of investments 12,569 1,285
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (60,468) (83,185)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- 99,000
Payments made on notes payable (5,000) (107,800)
Dividends paid (10,699) (10,389)
Purchases of stock for treasury (450) --
Proceeds from exercise of stock options 3,594 1,249
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (12,555) (17,940)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 66,941 2,579
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 21,758 24,476
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 88,699 $ 27,055
========== ==========
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands - except per share data)
Common Stock Additional
---------------------- Paid-In Unearned Retained
Shares Amount Capital Compensation Earnings
--------- --------- ---------- ------------ --------
Balance, September 30, 1999 53,529 $ 5,353 $ 61,411 $ (4,487) $ 745,956
Comprehensive Income:
Net Income 51,950
Other comprehensive income,
net of tax - unrealized gains on
available-for-sale securities
Comprehensive income
Cash dividends ($0.215 per share) (10,699)
Exercise of Stock Options 1,583
Purchase of stock for treasury
Stock issued under Restricted Stock
Award Plan 157 (248)
Amortization of deferred compensation 1,091 57
--------- --------- --------- --------- ---------
Balance, June 30, 2000 53,529 $ 5,353 $ 63,151 $ (3,644) $ 787,264
========= ========= ========= ========= =========
Accumulated
Treasury Stock Other
--------------------- Comprehensive
Shares Amount Income Total
--------- --------- ------------- ---------
Balance, September 30, 1999 3,903 $ (35,306) $ 75,182 $ 848,109
Comprehensive Income:
Net Income 51,950
Other comprehensive income,
net of tax - unrealized gains on
available-for-sale securities 21,352 21,352
---------
Comprehensive income 73,302
---------
Cash dividends ($0.215 per share) (10,699)
Exercise of Stock Options (243) 2,208 3,791
Purchase of stock for treasury 21 (450) (450)
Stock issued under Restricted Stock
Award Plan (10) 91 --
Amortization of deferred compensation 1,148
--------- --------- --------- ---------
Balance, June 30, 2000 3,671 $ (33,457) $ 96,534 $ 915,201
========= ========= ========= =========
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed 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 and nine months ended June 30, 2000, and June 30, 1999, are not necessarily indicative of the results to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's 1999 Annual Report on Form 10-K and the Company's 2000 First and Second Quarter Reports on Form 10-Q.
2. The $.07 cash dividend declared in March, 2000, was paid June 1, 2000. On June 1, 2000, a cash dividend of $.075 per share was declared for shareholders of record on August 15, 2000, payable September 1, 2000.
3. Inventories consist of materials and supplies.
4. Income from investments includes $-0- and $7,750,000 after-tax gains from sales of available-for-sale securities during the third quarter and first nine months of fiscal 2000, respectively. After-tax gains from security sales were $732,000 and $803,000 for the same periods in fiscal 1999.
5. The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting. The Company's investment in securities accounted for under the equity method is $44,993,000.
Gross Gross Est.
Unrealized Unrealized Fair
Cost Gains Losses Value
(in thousands)
------------- ------------- ------------- -------------
Equity Securities 06/30/00 $ 75,979 $ 158,525 $ 2,826 $ 231,678
Equity Securities 09/30/99 $ 76,057 $ 122,369 $ 1,108 $ 197,318
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6. Comprehensive Income -
Comprehensive income, net of related tax, is as follows:
Three Months Ended Nine Months Ended
June 30 June 30
2000 1999 2000 1999
(in thousands)
---------- ---------- ---------- ----------
Net Income $ 18,557 $ 12,196 $ 51,950 $ 32,359
Net unrealized gains(losses)
on available-for-sale
securities (9,936) 11,214 21,352 20,449
---------- ---------- ---------- ----------
Comprehensive Income $ 8,621 $ 23,410 $ 73,302 $ 52,808
========== ========== ========== ==========
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The only component of accumulated comprehensive income is unrealized gains on available-for-sale securities.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
7. Notes payable and Long-term Debt -
At June 30, 2000, the Company had committed bank lines of credit totaling $85 million; $35 million may be borrowed through May 2001, and $50 million may be borrowed through October 2003. Additionally, the Company had uncommitted credit facilities totaling $60 million. Collectively, the Company had $50 million in outstanding borrowings and outstanding letters of credit totaling $8.3 million at June 30, 2000. The average rate on the borrowings at June 30, 2000 was 5.38%, including the estimated effect of an interest rate swap described below.
Concurrent with a $50 million borrowing under one of its committed facilities, the Company has entered into a 5-year, $50 million interest rate swap, which closely correlates with the terms and maturity of the facility. The swap effectively fixes the interest rate on this facility at 5.38% for the entire 5-year term of the note.
8. 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 include the dilutive effect of stock options and restricted stock.
A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows:
Three Months Ended Nine Months Ended
June 30 June 30
(in thousands) 2000 1999 2000 1999
---------- ---------- ---------- ----------
Basic weighted-average shares 49,571 49,252 49,480 49,211
Effect of dilutive shares:
Stock options 644 666 452 506
Restricted stock 12 15 8 13
---------- ---------- ---------- ----------
656 681 460 519
---------- ---------- ---------- ----------
Diluted weighted-average
shares 50,227 49,933 49,940 49,730
========== ========== ========== ==========
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Restricted stock of 180,000 shares at a weighted-average price of $37.73 and options to purchase 538,000 shares of common stock at a weighted-average price of $36.84 were outstanding at June 30, 2000, but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive, as the exercise prices of the options exceed the average market price of the common shares.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
9. New Accounting Pronouncements -
The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", (SFAS 133). SFAS 133 is effective for fiscal years beginning after June 15, 2000. This standard requires that all derivatives be recognized as assets or liabilities in the balance sheet and that those instruments be measured at fair value. The Company has not yet determined what the effect of SFAS 133 will be on the earnings and the financial position of the Company.
10. Restricted Stock Awards -
In the first quarter of fiscal year 2000, the Company issued to certain employees 10,000 shares of treasury stock as restricted stock awards under the 1996 Stock Incentive Plan. The Company recognized unearned compensation of $248,000, which was the fair market value of the stock at the time of issuance. Treasury stock was reduced by the book value of the shares issued ($90,451) with the difference recognized as an increase in paid-in-capital. The unearned compensation is being amortized over a five-year period as compensation expense.
11. Segment Information -
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. Intersegment sales are accounted for in the same manner as sales to unaffiliated customers. Other includes investments in available-for-sale securities, equity owned investments, as well as corporate operations.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
Summarized financial information of the Company's reportable segments for the nine months ended June 30, 2000, and 1999, is shown in the following table:
External Inter- Total Operating
(in thousands) Sales Segment Sales Profit
------------- ------------- ------------- -------------
JUNE 30, 2000
Contract Drilling
Domestic $ 156,686 $ 2,213 $ 158,899 $ 24,719
International 99,345 -- 99,345 5,632
------------- ------------- ------------- -------------
256,031 2,213 258,244 30,351
------------- ------------- ------------- -------------
Oil & Gas Operations
Exploration & Prod. 105,716 -- 105,716 42,054
Natural Gas Marketing 56,159 -- 56,159 3,987
------------- ------------- ------------- -------------
161,875 -- 161,875 46,041
------------- ------------- ------------- -------------
Real Estate 6,684 1,157 7,841 4,017
Other 18,579 -- 18,579 --
Eliminations -- (3,370) (3,370) --
------------- ------------- ------------- -------------
Total $ 443,169 $ -- $ 443,169 $ 80,409
============= ============= ============= =============
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External Inter- Total Operating
(in thousands) Sales Segment Sales Profit
------------- ------------- ------------- -------------
JUNE 30, 1999
Contract Drilling
Domestic $ 165,983 $ 2,433 $ 168,416 $ 25,700
International 147,066 -- 147,066 26,330
------------- ------------- ------------- -------------
313,049 2,433 315,482 52,030
------------- ------------- ------------- -------------
Oil & Gas Operations
Exploration & Prod. 67,641 -- 67,641 3,680
Natural Gas Marketing 38,649 -- 38,649 3,003
------------- ------------- ------------- -------------
106,290 -- 106,290 6,683
------------- ------------- ------------- -------------
Real Estate 6,476 1,147 7,623 3,994
Other 5,222 -- 5,222 --
Eliminations -- (3,580) (3,580) --
------------- ------------- ------------- -------------
Total $ 431,037 $ -- $ 431,037 $ 62,707
============= ============= ============= =============
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
Summarized financial information of the Company's reportable segments for the quarters ended June 30, 2000, and 1999, is shown in the following table:
External Inter- Total Operating
(in thousands) Sales Segment Sales Profit
------------- ------------- ------------- -------------
JUNE 30, 2000
Contract Drilling
Domestic $ 53,050 $ 1,012 $ 54,062 $ 10,047
International 32,977 -- 32,977 1,819
------------- ------------- ------------- -------------
86,027 1,012 87,039 11,866
------------- ------------- ------------- -------------
Oil & Gas Operations
Exploration & Prod 41,458 -- 41,458 16,915
Natural Gas Marketing 20,010 -- 20,010 1,203
------------- ------------- ------------- -------------
61,468 -- 61,468 18,118
------------- ------------- ------------- -------------
Real Estate 2,204 382 2,586 1,289
Other 2,269 -- 2,269 --
Eliminations -- (1,394) (1,394) --
------------- ------------- ------------- -------------
Total $ 151,968 $ -- $ 151,968 $ 31,273
============= ============= ============= =============
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External Inter- Total Operating
(in thousands) Sales Segment Sales Profit
------------- ------------- ------------- -------------
JUNE 30, 1999
Contract Drilling
Domestic $ 47,848 $ 487 $ 48,335 $ 6,332
International 42,528 -- 42,528 7,307
------------- ------------- ------------- -------------
90,376 487 90,863 13,639
------------- ------------- ------------- -------------
Oil & Gas Operations
Exploration & Prod 22,364 -- 22,364 5,445
Natural Gas Marketing 13,993 -- 13,993 1,023
------------- ------------- ------------- -------------
36,357 -- 36,357 6,468
------------- ------------- ------------- -------------
Real Estate 2,188 385 2,573 1,333
Other 2,878 -- 2,878 --
Eliminations -- (872) (872) --
------------- ------------- ------------- -------------
Total $ 131,799 $ -- $ 131,799 $ 21,440
============= ============= ============= =============
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
The following table reconciles segment operating profit per the table above to income before income taxes and equity in income of affiliate as reported on the Consolidated Condensed Statements of Income.
Quarter Ended Nine Months Ended
(in thousands) 06/30/00 06/30/99 06/30/00 06/30/99
------------- ------------- ------------- -------------
Segment operating profit $ 31,273 $ 21,440 $ 80,409 $ 62,707
Unallocated amounts:
Income from investments 2,208 2,515 17,974 5,193
General corporate expense (2,466) (3,296) (8,621) (11,413)
Interest expense (767) (1,928) (2,389) (5,407)
Corporate depreciation (430) (398) (1,234) (1,091)
Other corporate expense (446) (25) (664) (1,282)
------------- ------------- ------------- -------------
Total unallocated amounts (1,901) (3,132) 5,066 (14,000)
------------- ------------- ------------- -------------
Income before income taxes
and equity in income of
affiliate $ 29,372 $ 18,308 $ 85,475 $ 48,707
============= ============= ============= =============
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The following table presents revenues from external customers by country based on the location of service provided.
Quarter Ended Nine Months Ended
(in thousands) 06/30/00 06/30/99 06/30/00 06/30/99
------------- ------------- ------------- -------------
Revenues
United States $ 118,991 $ 89,271 $ 343,824 $ 283,971
Venezuela 8,098 11,413 25,980 49,331
Colombia 9,736 13,972 33,184 48,618
Other Foreign 15,143 17,143 40,181 49,117
------------- ------------- ------------- -------------
Total $ 151,968 $ 131,799 $ 443,169 $ 431,037
============= ============= ============= =============
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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
REVENUES AND INCOME BY BUSINESS SEGMENTS
(UNAUDITED)
(in thousands)
FISCAL YEAR 2000 Nine Mos. Nine Mos.
1st Qtr 2nd Qtr 3rd Qtr 06/30/00 06/30/99
--------- --------- --------- --------- ---------
SALES AND OTHER REVENUES:
Contract Drilling-Domestic $ 50,219 $ 53,417 $ 53,050 $ 156,686 $ 165,983
Contract Drilling-Internat'l 34,201 32,167 32,977 99,345 147,066
--------- --------- --------- --------- ---------
Total Contract Drilling 84,420 85,584 86,027 256,031 313,049
--------- --------- --------- --------- ---------
Exploration and Production 30,118 34,140 41,458 105,716 67,641
Natural Gas Marketing 18,315 17,834 20,010 56,159 38,649
--------- --------- --------- --------- ---------
Total Oil & Gas Operations 48,433 51,974 61,468 161,875 106,290
--------- --------- --------- --------- ---------
Real Estate 2,242 2,238 2,204 6,684 6,476
Other 4,258 12,052 2,269 18,579 5,222
--------- --------- --------- --------- ---------
Total Revenues $ 139,353 $ 151,848 $ 151,968 $ 443,169 $ 431,037
========= ========= ========= ========= =========
OPERATING PROFIT:
Contract Drilling-Domestic $ 6,511 $ 8,161 $ 10,047 $ 24,719 $ 25,700
Contract Drilling-Internat'l 2,510 1,303 1,819 5,632 26,330
--------- --------- --------- --------- ---------
Total Contract Drilling 9,021 9,464 11,866 30,351 52,030
--------- --------- --------- --------- ---------
Exploration and Production 12,694 12,445 16,915 42,054 3,680
Natural Gas Marketing 950 1,834 1,203 3,987 3,003
--------- --------- --------- --------- ---------
Total Oil & Gas Operations 13,644 14,279 18,118 46,041 6,683
--------- --------- --------- --------- ---------
Real Estate 1,385 1,343 1,289 4,017 3,994
--------- --------- --------- --------- ---------
Total Operating Profit 24,050 25,086 31,273 80,409 62,707
--------- --------- --------- --------- ---------
OTHER (68) 7,035 (1,901) 5,066 (14,000)
--------- --------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND
EQUITY IN INCOME OF AFFILIATE $ 23,982 $ 32,121 $ 29,372 $ 85,475 $ 48,707
========= ========= ========= ========= =========
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See accompanying notes to financial statements.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
JUNE 30, 2000
RISK FACTORS AND FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the consolidated financial statements, notes and management's narrative analysis contained in the Company's 1999 Annual Report on Form 10-K and the condensed consolidated financial statements included in the Company's 2000 First and Second Quarter Reports on Form 10-Q 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 and crude oil prices, expiration or termination of drilling contracts, currency exchange losses, changes in general economic conditions, rapid or unexpected changes in technologies and uncertain business conditions that affect the Company's businesses. Accordingly, past results and trends should not be used by investors to anticipate future results or trends.
With the exception of historical information, the matters discussed in Management's Discussion & Analysis of Results of Operations and Financial Condition includes 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
THIRD QUARTER 2000 VS THIRD QUARTER 1999
The Company reported net income of $18,557,000 ($0.37 per share) from revenues of $151,968,000 for the third quarter ended June 30, 2000, compared with net income of $12,196,000 ($0.24 per share) from revenues of $131,799,000 for the third quarter of the prior fiscal year. Net income in the third quarter of fiscal 1999 included $732,000 ($0.01 per share) from the sale of investment securities. There were no sales of investment securities in the third quarter of fiscal 2000.
EXPLORATION & PRODUCTION
Exploration and Production reported operating profit of $16.9 million for the third quarter of fiscal 2000, compared with $5.4 million for the same period of fiscal 1999. Oil and gas revenues increased to $41.5 million, compared with $22.4 million in 1999.
Natural gas revenues increased 72% to $34.5 million from $20.0 million in 1999, due primarily to a 63% increase in the average gas price. Natural gas volumes were up 5%. Oil revenues increased to $6.5 million from $2.5 million in 1999 as the result of higher oil prices and volumes. Natural gas prices averaged $2.95
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
JUNE 30, 2000
(Continued)
per mcf and $1.81 per mcf for the third quarter of fiscal 2000 and 1999, respectively. Natural gas volumes averaged 128.0 mmcf/d and 121.4 mmcf/d, respectively. Crude oil prices averaged $27.93 per bbl and $15.77 per bbl for the third quarter of fiscal 2000 and 1999, respectively. Crude oil volumes averaged 2,410 bbls/d and 1,689 bbls/d, respectively.
Exploration expenses increased in the current quarter as the result of increased dry hole costs, geophysical expense and impairment charges. Dry hole costs were $4.6 million for the quarter compared with $1.0 for the third quarter of 1999, geophysical expense was $1.6 million, compared with $0.2 million and impairment of undeveloped leases was $3.2 million, compared with $2.0 million. Operating expenses increased $1.4 million as production taxes increased with higher oil and gas revenues.
The Company participated in an additional 16 wells during the third quarter, bringing the total wells drilled during the fiscal year to 57. Drilling activity was primarily in South Texas and Oklahoma. Eleven new wells are producing or are in the process of completion, and five were deemed to be dry holes. The Company also sold 69 oil and gas properties, including two waterfloods, at auction in July, 2000, for $1.5 million.
DOMESTIC DRILLING
Domestic contract drilling revenues for the third quarter of 2000 and 1999 were $53.0 million and $47.8 million, respectively. Revenues included rig construction revenues of $0.1 million and $10.4 million for the same periods. Operating profit increased $3.7 million to $10.0 million for the third quarter of fiscal 2000, due primarily to improved results from land operations, as dayrates increased and land rig utilization averaged 89% during the current quarter, compared with 53% for last year's third quarter. Operating profit from offshore operations increased slightly as rig utilization was 90% during the third quarter, compared with 83% utilization in the third quarter of fiscal 1999. Operating profit in the third quarter of fiscal 1999 included $2.3 million from the Company's Jade construction project.
The Company recently announced that it had exercised its option to order four new land rigs and placed a further order for four additional new land rigs. The Company has ordered a total of twelve new land rigs since March 2000. The Company expects the first of the new highly-mobile, medium depth (8-18,000') rigs to commence operations in the first quarter of fiscal 2001, and all should be operational by mid-fiscal 2002. The cost of the first four rigs should be approximately $7.5 million each, with the last rigs costing approximately $8.25 million each.
INTERNATIONAL DRILLING
International Drilling's operating profit decreased to $1.8 million in the third quarter of fiscal 2000, from $7.3 million in the third quarter of fiscal 1999. Revenues in the third quarter of fiscal 2000 decreased to $33.0 million from $42.5 million in the third quarter of fiscal 1999. The decrease in operating profit is due primarily to lower rig utilization in Bolivia and Australia and lower margins
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
JUNE 30, 2000
(Continued)
in Bolivia and Argentina. International rig utilization averaged 47% during the current third quarter and 49% during last year's third quarter. In Venezuela, where the Company's largest international operation is located, the oil service market remained stagnant, clearly affected by the country's uncertain political environment.
OTHER
Other revenues decreased approximately $0.6 million over last year, with a $1.2 million reduction in gains from the sale of available-for-sale securities and a $0.9 million increase in interest income. Interest expense decreased to $0.8 million from $1.9 million because of a substantial reduction in short-term debt. Corporate general and administrative costs decreased to $2.5 million from $3.3 million, due primarily to lower aircraft maintenance expense and increased allocation to domestic drilling operations as a result of increased domestic rig activity.
The Company's effective income tax rate was 39.6% for the quarter, compared to 43% for the first and second quarters of fiscal 2000. The overall reduction in the Company's tax rate from 43% at March 31, 2000, to 42% at June 30, 2000, reduced the effective tax rate for the third quarter accordingly. The lower effective tax rate for the current quarter is the result of increased operating profit in the Company's oil and gas and domestic drilling operations.
NINE MONTHS ENDED JUNE 30, 2000 VS NINE MONTHS ENDED JUNE 30, 1999
The Company reported net income of $51,950,000 ($1.04 per share) from revenues of $443,169,000 for the nine months ended June 30, 2000, compared with net income of $32,359,000 ($0.65 per share) from revenues of $431,037,000 for the first nine months of the prior fiscal year. Net income in the first nine months of fiscal 2000, included $7,750,000 ($0.16 per share) from the sale of investment securities, compared with $803,000 ($0.02 per share) for the same period of fiscal 1999.
EXPLORATION AND PRODUCTION
Exploration and Production reported an operating profit of $42,054,000 for the first nine months of fiscal 2000, compared with an operating profit of $3,680,000 for the same period of fiscal 1999. Oil and gas revenues increased to $105.7 million from $67.6 million.
Natural gas revenues increased $31.7 million, or 56%, due primarily to higher gas prices (48%) and natural gas volumes (6%). Oil revenues increased $10.5 million, or 173%, as oil prices more than doubled, compared to the first nine months of fiscal 1999. Natural gas prices averaged $2.50 per mcf and $1.69 per mcf for the first nine months of fiscal 2000 and 1999, respectively. Natural gas volumes averaged 129.2 mmcf/d and 122.2 mmcf/d, respectively. Crude oil prices averaged $26.65 per bbl and $12.71 per bbl for the first nine months of fiscal 2000 and 1999, respectively. Crude oil volumes averaged 2,259 bbls/d and 1,733 bbls/d, respectively.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
JUNE 30, 2000
(Continued)
Included in revenues for the first nine months of fiscal 1999, were gains from the sale of producing properties of approximately $4.6 million. Fiscal 1999 also included a $9.6 million impairment charge, which is included in depreciation, depletion and amortization expense. Fiscal 2000 exploration expenses were higher, including increases in dry hole costs ($5.7 million), impairment of undeveloped leases ($2.2 million), and depreciation, depletion and amortization expense ($2.0 million). Geophysical expense decreased to $4.0 million from $9.2 million in fiscal 1999.
DOMESTIC DRILLING
Revenues for the first nine months of fiscal 2000 and 1999, were $156.7 million and $166.0 million, respectively. Contract drilling revenues for the nine months of 2000 increased to $152.1 million from $128.5 million in 1999, while rig construction revenues decreased to $4.1 million in 2000 from $36.4 million in 1999.
Domestic Drilling's operating profit decreased $1.0 million, due primarily to lower earnings from the Company's Jade construction project ($0.9 million in fiscal 2000 vs $4.9 million in 1999), which was partially offset by improved results in the Company's land operations. Depreciation expense for the first nine months of fiscal 2000 increased to $26.0 million from $22.9 in fiscal 1999. The increase is the result of additional rigs put in service in the second half of fiscal 1999. Land rig utilization for the first nine months of fiscal 2000 was 82%, compared with 71% in 1999. Offshore rig utilization was 94% for the first nine months of both fiscal 2000 and 1999.
INTERNATIONAL DRILLING
International Drilling's operating profit decreased to $5.6 million from $26.3 million. Revenues decreased to $99.3 million from $147.1 million. The significant decrease in revenues and operating profit is due primarily to lower rig utilization in Venezuela, Colombia and Australia and an overall reduction in dayrates and margins. International rig utilization averaged 46% during the first nine months of fiscal 2000 and 56% during the first nine months of fiscal 1999.
OTHER
Other revenues increased approximately $13 million over last year, with $11.3 million due to gains from the sale of available-for-sale securities and $1.4 million due to an increase in interest income. Interest expense decreased to $2.4 million from $5.4 million because of a substantial reduction in short-term debt. Corporate general and administrative costs decreased to $8.6 million from $11.4 million, due primarily to lower aircraft maintenance expense and increased allocation to domestic drilling operations as the result of increased domestic rig activity.
PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
JUNE 30, 2000
(Continued)
The Company's effective income tax rate increased to 42%, compared to 39% for the first nine months of 1999. The increase is due primarily to a larger proportionate income earned in higher tax-rate jurisdictions in the Company's international drilling operations. The effective tax rate for the year was reduced to 42% at June 30, 2000, from the 43% rate used at March 31, 2000. This decrease in the effective tax rate compared to the March 31, 2000 effective tax rate is the result of increased operating profit from the Company's oil and gas and domestic drilling operations.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $139,964,000 for the first nine months of fiscal 2000, compared with $103,704,000 for the same period in 1999. Capital expenditures were $76,676,000 and $93,150,000 for the first nine months of fiscal 2000 and 1999, respectively.
The Company anticipates capital expenditures to be approximately $125 million for fiscal 2000, which is less than projected for internally generated cash flows. The Company's indebtedness totaled $50,000,000 as of June 30, 2000, as described in note 7 to the Consolidated Condensed Financial Statements.
During the second quarter of fiscal 2000, the Company purchased 20,600 shares of the Company's common stock under the previously approved stock repurchase program that authorizes the purchase of up to an additional 1,000,000 shares of the Company's common stock. No shares were purchased in the third quarter of fiscal 2000.
There were no other significant changes in the Company's financial position since September 30, 1999.
PART II. OTHER INFORMATION
HELMERICH & PAYNE, INC.
Item 6(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K for the three months ended June 30, 2000.
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: AUGUST 8, 2000 /s/ DOUGLAS E. FEARS
--------------- -------------------------------------------
Douglas E. Fears, Chief Financial Officer
Date: AUGUST 8, 2000 /s/ HANS C. HELMERICH
--------------- -------------------------------------------
Hans C. Helmerich, President
|
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule |
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 9 MOS |
| FISCAL YEAR END | SEP 30 2000 |
| PERIOD START | OCT 01 1999 |
| PERIOD END | JUN 30 2000 |
| CASH | 88,699 |
| SECURITIES | 276,671 |
| RECEIVABLES | 102,193 |
| ALLOWANCES | 2,503 |
| INVENTORY | 25,006 |
| CURRENT ASSETS | 232,252 |
| PP&E | 1,493,943 |
| DEPRECIATION | 823,802 |
| TOTAL ASSETS | 1,196,975 |
| CURRENT LIABILITIES | 65,720 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 5,353 |
| OTHER SE | 909,848 |
| TOTAL LIABILITY AND EQUITY | 1,196,975 |
| SALES | 425,195 |
| TOTAL REVENUES | 443,169 |
| CGS | 340,398 |
| TOTAL COSTS | 340,398 |
| OTHER EXPENSES | 6,586 |
| LOSS PROVISION | (300) |
| INTEREST EXPENSE | 2,389 |
| INCOME PRETAX | 85,475 |
| INCOME TAX | 35,903 |
| INCOME CONTINUING | 51,950 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 51,950 |
| EPS BASIC | 1.05 |
| EPS DILUTED | 1.04 |