UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For quarterly period ended: June 30, 2004

OR

For the transition period from _____________ to ______________

Commission File Number: 1-4221

HELMERICH & PAYNE, INC.

1437 South Boulder Avenue, Tulsa, Oklahoma,74119
(Address of principal executive office)(Zip Code)

(918) 742-5531
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year,
if changed since last report)

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     o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes     x     No     o

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION
HELMERICH & PAYNE, INC. AND SUBSIDIARIES

     The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

	1.		Basis of Presentation -
			In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly the results of the periods presented. The results of operations for the three and nine months ended June 30, 2004, and June 30, 2003, are not necessarily indicative of the results to be expected for the full year. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s 2003 Annual Report on Form 10-K.
	2.		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 interpretations. Fixed plan common stock options generally do not result in compensation expense, because the exercise price of the options issued by the Company equals the market price of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”.

	3.		Cash Dividends -
			The $.08 cash dividend declared in March, 2004, was paid June 1, 2004. On June 2, 2004, a cash dividend of $.0825 per share was declared for shareholders of record on August 13, 2004, payable September 1, 2004.
	4.		Inventories -
			Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.
	5.		Sale of Investments -
			Net income for the first nine months of fiscal 2004 includes after-tax gains from the sale of available-for-sale securities of $6,435,000 ($0.13 per diluted share). There were no security sales in the third quarter of fiscal 2004. Net income for the three and nine months ended June 30, 2003 include no material gain or loss from the sale of portfolio securities.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

	6.		Summary of Available-for-Sale Securities -
			The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting. The recorded amounts for investments accounted for under the equity method are $57.5 million and $56.7 million at June 30, 2004 and September 30, 2003, respectively.

	7.		Comprehensive Income -
			Comprehensive income, net of related tax, is as follows (in thousands):

The components of accumulated other comprehensive income, net of related taxes, are as follows (in thousands):

	8.		Notes payable and long-term debt –
			At June 30, 2004, the Company had $200 million in long-term debt outstanding at fixed rates and maturities as summarized in the following table.

The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization. The proceeds of the debt issuances were used to repay $50 million of outstanding debt, fund the Company’s rig construction program and for other general corporate purposes.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

			At June 30, 2004, the Company had a committed unsecured line of credit totaling $50 million. Short-term loans totaling $3 million and letters of credit totaling $13 million were outstanding against the line, leaving $34 million available to borrow. The weighted-average interest rate on short-term loans at June 30, 2004 was 2.5 percent. Under terms of the line of credit, the Company must maintain certain financial ratios including debt to total capitalization and debt to earnings before interest, taxes, depreciation, and amortization, and maintain a minimum level of tangible net worth. The interest rate varies based on LIBOR plus .875 to 1.125 percent or prime minus 1.75 percent to prime minus 1.50 percent depending on the ratios described above, as well as, the maturity selected by the Company. The line of credit matures in July, 2005.
	9.		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:

			At June 30, 2004, options to purchase 1,032,180 shares of common stock at a weighted-average price of $27.84 were outstanding but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be antidilutive.
	10.		Income Taxes –
			The Company’s effective tax rate was 42.7% in the first nine months of fiscal 2004, compared to 43.3% in the first nine months of fiscal 2003. For the quarters ended June 30, 2004 and 2003, the effective tax rate was 42% and 43.4%, respectively.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – Continued
(Unaudited)

	11.		Segment information –
			The Company operates principally in the contract drilling industry. The Company’s contract drilling business includes the following operating segments: U.S. Land, U.S. Offshore Platform, and International. The contract drilling operations consist primarily 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. 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. Other includes investments and corporate operations.
			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; direct operating costs; depreciation; and allocated general and administrative costs; but excludes corporate costs for other depreciation and other income and expense. General and administrative costs are allocated to the segments based primarily on specific identification, and to the extent that such identification was not practical, on other methods which the Company believes to be a reasonable reflection of the utilization of services provided.
			Summarized financial information of the Company’s reportable segments for the nine months ended June 30, 2004, and 2003, is shown in the following tables:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

RESULTS OF OPERATIONS

Three Months Ended June 30, 2004 vs Three Months Ended June 30, 2003

The Company reported net income of $4,347,000 ($0.09 per diluted share) from revenues of $147,874,000 for the third quarter ended June 30, 2004, compared with net income of $8,162,000 ($0.16 per diluted share) from revenues of $137,025,000 for the third quarter of fiscal year 2003.

The following tables summarize operations by business segment for the three months ended June 30, 2004 and 2003. Operating statistics in the tables exclude the effects of offshore platform management contracts, and do not include reimbursements of “out-of-pocket” expenses in revenue, expense and margin per day calculations. Per day calculations for international operations also exclude gains and losses from translation of foreign currency transactions.

NOTE: Included in land revenues for the three months ended June 30, 2004 and 2003 are reimbursements for “out-of-pocket” expenses of $7.0 million and $4.6 million, respectively.

U.S. LAND operating profit was $9.6 million for the third quarter of fiscal 2004 compared to $7.7 million in the same period of fiscal 2003. Revenues were $88.6 million and $74.0 million in the third quarter of fiscal 2004 and 2003, respectively. The $1.9 million increase in operating profit was primarily the result of increased rig days, partially offset by increased depreciation.

Average land rig margin per day was $3,657 and $3,672 for the third quarter of fiscal 2004 and 2003, respectively. Land rig utilization was 89% and 82% for the third quarter of fiscal 2004 and 2003, respectively. Land rig revenue days for the third quarter of 2004 were 7,071 compared with 5,912 for the same period of 2003, with an average of 77.7 and 65.0 rigs working during the third quarter of fiscal 2004 and 2003, respectively. The increase in rig days and average rigs working is attributable to additional FlexRig3s being added to the Company’s land fleet in 2003 and 2004. Land depreciation expense increased to $14.4 million in the third quarter of fiscal 2004, compared to $11.9 million in the same period of fiscal 2003. The increase is the result of additional rigs added during fiscal 2003 and five new rigs in 2004.

The outlook for the Company’s land operations in the fourth quarter of fiscal 2004 is continued strong demand for rigs and an increase in rig dayrates. The timing and extent of future dayrate increases is difficult to project.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

NOTE: Included in offshore revenues for the three months ended June 30, 2004 and 2003 are reimbursements for “out-of-pocket” expenses of $1.2 million and $1.2 million, respectively.

U.S. OFFSHORE revenues and operating profit for the third quarter of fiscal 2004 declined as compared to the third quarter of fiscal 2003. The decline is primarily the result of a 49% decrease in margins per day. The margin per day decrease is the result of one rig (that was working last year at a very high margin per day) being stacked, and three rigs going from a full dayrate to standby status.

Six of the Company’s 12 platform rigs were contracted during the quarter and a seventh rig has been contracted in July 2004. All of the Company’s working platform rigs are currently under short-term contracts.

NOTE: Included in International Drilling revenues for the three months ended June 30, 2004 and 2003, respectively, are reimbursements for “out-of-pocket” expenses of $2.5 million and $2.0 million, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

INTERNATIONAL DRILLING’S operating profit for the third quarter of fiscal 2004 was $1.8 million, compared to $3.9 million in the same period of 2003. Revenues from International Drilling operations were $35.5 million in the third quarter of fiscal 2004 compared with $30.0 million in the same period of fiscal 2003. Direct operating expenses increased $7.9 million in the third quarter of fiscal 2004, compared with the third quarter of fiscal 2003. The increase in revenues and direct operating expenses in the third quarter of fiscal 2004 is primarily the result of increased rig activity days in Venezuela, Argentina, and Bolivia and new operations in Hungary and Chad, partially offset by decreased rig activity in Ecuador and Colombia.

Operating profit and average rig margin per day both decreased in the third quarter of fiscal 2004, compared to the same period of fiscal 2003, as the result of lower margins in Venezuela and lower margins and rig activity in Ecuador and Colombia.

In Venezuela, there are currently eight deep rigs operating for PDVSA, and a ninth rig operating for an international operator. The Company is discussing additional opportunities to put other deep rigs to work in Venezuela. The Company has six rigs currently working in Ecuador with a seventh rig contracted to begin working in early August. One of the two rigs currently in Colombia returned to work in mid July, with the second rig possibly returning to work in the second quarter of fiscal 2005.

Operations in Hungary began during the fourth quarter of fiscal 2003. The FlexRig in Hungary should work through the first quarter of fiscal 2005. Operations in Chad began in the second quarter of 2004. The FlexRig in Chad has finished its contract and is demobilizing to Houston with an expected arrival in September.

OTHER

General and administrative expenses increased to $9.5 million in the third quarter of fiscal 2004 from $9.4 million in the third quarter of fiscal 2003. The $0.1 million increase is primarily related to a decrease of $0.9 million in pension expense, offset by an increase of $0.4 million in corporate liability insurance premiums, $0.3 million of costs associated with a supply chain management project and $0.3 million increase in employee benefit costs.

Interest expense was $3.1 million in the third quarter of fiscal 2004, compared to $3.2 million in the same period of fiscal 2003. Capitalized interest was $0.1 million and $0.4 million for the same periods, respectively.

Nine Months Ended June 30, 2004 vs Nine Months Ended June 30, 2003

The Company reported net income of $16,024,000 ($0.32 per diluted share) from revenues of $437,954,000 for the nine months ended June 30, 2004, compared with net income of $11,343,000 ($0.22 per diluted share) from revenues of $376,658,000 for the first nine months of fiscal year 2003. Net income for the first nine months of fiscal 2004 includes $6,435,000 ($0.13 per diluted share) of gains from the sale of available-for-sale securities. There were no material security gains in the first nine months of fiscal 2003.

The following tables summarize operations by business segment for the nine months ended June 30, 2004 and 2003. Operating statistics in the tables exclude the effects of offshore platform management contracts, and do not include reimbursements of “out-of-pocket” expenses in revenue, expense and margin per day calculations. Per day calculations for international operations also exclude gains and losses from translation of foreign currency transactions.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

NOTE: Included in land revenues for the nine months ended June 30, 2004 and June 30, 2003 are reimbursements for “out-of-pocket” expenses of $17.9 million and $11.0 million, respectively.

U.S. LAND operating results in the first nine months of fiscal 2004 increased significantly from the same period in fiscal 2003. Operating profit was $22.9 million and $12.2 million in the first nine months of fiscal 2004 and 2003, respectively.

Revenues were $247.2 million in the first nine months of fiscal 2004, compared with $198.5 million in the same period of fiscal 2003. The $10.7 million increase in operating profit was primarily the result of higher land rig margins and increased rig days, partially offset by increased depreciation.

The 11% increase in margins was due to reduced rig expense per day in fiscal 2004, as the result of a reduction in workers’ compensation expense and in labor and other costs associated with efficiencies gained in our FlexRig program during 2003 and 2004. Land rig utilization was 85% and 80% for the nine months of fiscal 2004 and 2003, respectively. Land rig revenue days for the first nine months of 2004 were 20,109 compared with 16,284 for the same period of 2003, with an average of 73.4 and 59.6 rigs working during the first nine months of fiscal 2004 and 2003, respectively. The increase in rig days and average rigs working is attributable to additional FlexRig3s being added to the Company’s land fleet in calendar 2003 and 2004. The 32% increase in depreciation is the result of additional rigs added during fiscal 2003 and five new rigs in 2004.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

NOTE: Included in offshore revenues for the nine months ended June 30, 2004 and June 30, 2003 are reimbursements for “out-of-pocket” expenses of $4.3 million and $5.8 million, respectively.

U.S. OFFSHORE operating revenues and profit declined in the first nine months of fiscal 2004, compared to the same period of fiscal 2003, primarily as the result of one rig (that was working at high margins in fiscal 2003) being stacked in fiscal 2004, and three rigs going from full dayrate to standby status. Operating profit decreased to $12.3 million in the first nine months of fiscal 2004 from $27.4 million in the first nine months of 2003. Rig days were 1,487 and 1,704 for the first nine months of fiscal 2004 and 2003, respectively. Rig utilization for the same periods was 45% and 52%, respectively.

Six of the Company’s 12 platform rigs were working at June 30, 2004 and a seventh rig began a new contract in July 2004.

NOTE: Included in International Drilling revenues for the nine months ended June 30, 2004 and 2003, respectively, are reimbursements for “out-of-pocket” expenses of $9.3 million and $6.5 million, respectively.

INTERNATIONAL DRILLING’S operating profit for the first nine months of fiscal 2004 was $7.1 million, compared to $4.5 million in the same period of 2003. The increase in operating profit is primarily the result of increased rig activity in Venezuela, Argentina, Bolivia and Hungary. Average rig margin per day decreased slightly as margins in Venezuela and Ecuador were lower in the first nine months of fiscal 2004. Rig utilization for international operations averaged 52% for the first nine months of fiscal 2004, compared with 39% for the first nine months of fiscal 2003. An average of 16.7 rigs worked during the first nine months of fiscal 2004, compared to 12.5 rigs in the first nine months of fiscal 2003. International revenues were $110.9 million and $83.0 million for the first nine months of fiscal 2004 and 2003, respectively. Direct operating expenses increased approximately 42% for the first nine months of fiscal 2004, compared with the same period of fiscal 2003. The increase is primarily the result of an increase in rig activity days (34%), including new operations in Hungary and Chad in fiscal 2004, and rig mobilization expense in Chad and Hungary.

Also included in direct operating expenses for the nine months ended June 30, 2004 is a $1.4 million exchange loss related to currency devaluation. Effective February 5, 2004, the Central Bank of Venezuela authorized the devaluation of the bolivar from 1600 to 1920.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)

The increase in revenues is primarily the result of increased rig activity in Venezuela and Argentina, new operations in Hungary and Chad and $4.1 million of mobilization revenues at very low margins.

OTHER

Income from investments increased to $12.1 million in the first nine months of fiscal 2004, compared to $2.1 million in the same period of fiscal 2003. The increase is related to gains from the sale of available-for-sale securities of $10.4 million, $6.4 million after-tax ($0.13 per diluted share) in the first nine months of 2004.

General and administrative expenses decreased from $31.9 million in the first nine months of fiscal 2003 to $28.4 million in the first nine months of fiscal 2004. The $3.5 million decrease is primarily related to a decrease in training costs associated with the FlexRig3 construction project of $1.7 million, a decrease of $2.5 million in pension expense and a decrease in bonuses of $1.9 million, partially offset by an increase in corporate insurance premiums of $1.3 million, an increase in office rent of $0.6 million, and an increase in employee benefits of $0.8 million.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $74,240,000 for the first nine months of fiscal 2004, compared with $65,805,000 for the same period in 2003. Capital expenditures were $70,536,000 and $201,381,000 for the first nine months of fiscal 2004 and 2003, respectively. The significant decrease in capital expenditures from 2003 is the result of the Company’s FlexRig3 construction project winding down in fiscal 2004. The Company has completed its FlexRig3 construction project and has suspended construction activities and is reviewing future plans for the FlexRig program.

The Company anticipates capital expenditures to be approximately $90 million for fiscal 2004. Included in the $90 million is approximately $25 million to complete the FlexRig3 program, most of which was spent by June 30, 2004. Capital expenditures will be financed primarily by internally generated cash flows. A total of five new rigs were completed during the nine months ended June 30, 2004. Internally generated cash flows are projected to be approximately $110 million for fiscal 2004 and cash balances were $24.4 million at June 30, 2004. The Company’s indebtedness totaled $203 million at June 30, 2004, as described in Note 8 to the Consolidated Condensed Financial Statements.

Total proceeds from the sale of available-for-sale securities in the nine months ended June 30, 2004 was $14.0 million. The value of the Company’s remaining portfolio was approximately $235 million at June 30, 2004. The after-tax value was approximately $159 million.

There were no other significant changes in the Company’s financial position since September 30, 2003.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2004
(continued)