SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

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 þ No o

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

HELMERICH & PAYNE, INC.

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC.

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 months ended December 31, 2004, and December 31, 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 2004 Annual Report on Form 10K.
	Certain reclassifications have been made to the prior period amounts to conform to the current period presentation.
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 SFAS No. 123, “Accounting for Stock-Based Compensation”.

3.	Cash Dividends
	The $.0825 cash dividend declared in September, 2004, was paid December 1, 2004. On December 1, 2004, a cash dividend of $.0825 per share was declared for shareholders of record on February 11, 2005, payable March 1, 2005.
4.	Inventories
	Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.
5.	Sale of Investment Securities
	Net income includes after-tax gains from the sales of securities of $16.0 million ($0.31 per diluted share) and $1.9 million ($0.04 per diluted share) for the three months ended December 31, 2004 and 2003, respectively. The activity

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

	in the first quarter of 2005 was comprised primarily of the sale of shares in our equity investee, Atwood Oceanics (“Atwood”), in conjunction with an equity offering by Atwood. As a result of Atwood’s capital transaction, our equity investment and paid-in-capital increased by $4.3 million. Also, included in net income for the first quarter of fiscal 2004 is a non-monetary investment gain of $1.2 million ($0.02 per diluted share).
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 and assets held in a Non-qualified Supplemental Savings Plan. The assets held in the Non-qualified Supplemental Savings Plan are valued at fair market which totaled $6.2 million at December 31, 2004 and $5.6 million at September 30, 2004. The recorded amounts for investments accounted for under the equity method are $43.9 million and $57.8 million at December 31, 2004 and September 30, 2004, 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 December 31, 2004, the Company had $200 million in long-term debt outstanding at fixed rates and maturities as summarized in the following table.

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

	The terms of the debt obligations require the Company to maintain a minimum ratio of debt to total capitalization.
	At December 31, 2004, the Company had a committed unsecured line of credit totaling $50 million. Letters of credit totaling $14.9 million were outstanding against the line, leaving $35.1 million available to borrow. 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 certain 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 ratios described above. 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:

	Options to purchase 463,000 and 1,049,186 shares of common stock at a weighted average price of $32.02 and $27.84 were outstanding at December 31, 2004 and 2003, respectively, but were not included in the computation of diluted earnings per common share. Inclusion of these shares would be anti-dilutive.
10.	Income Taxes
	The Company’s effective tax rate was 41.0% in the first quarter of fiscal 2005, compared to 42.0% in the first quarter of fiscal 2004.
11.	Commitments
	The Company, on a regular basis, makes commitments for the purchase of contract drilling equipment. At December 31, 2004, the Company had commitments outstanding of approximately $9 million for the purchase of drilling equipment.
12.	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

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

	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 income 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 quarters ended December 31, 2004, and 2003, is shown in the following tables:

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

The following table reconciles operating income per the table above to income before income taxes and equity in income (loss) of affiliate as reported on the Consolidated Condensed Statements of Income.

The following table presents operating revenues from external customers by country based on the location of service provided.

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

13.	Pensions and Other Post-retirement Benefits
	The following provides information at December 31, 2004 and 2003 as to the Company’s domestic defined benefit pension plan.
	Components of Net Periodic Benefit Cost

	Plan Assets
	The weighted-average asset allocations for the pension plan by asset category follow:

	Employer Contributions
	The Company anticipates that no funding of the pension plan will be required in fiscal 2005.
14.	Recently Issued Accounting Standards
	In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004), “Share-Based Payment”, which is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation”. Statement 123(R) supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and amends FASB Statement No. 95, “Statement of Cash Flows”. The Statement requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair value. The Statement is effective at the beginning of the first interim or annual period beginning after June 15, 2005. The Company plans to adopt the new standard July 1, 2005, its fourth quarter ending September 30, 2005, under the modified-prospective-transition method. The Company will recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. Measurement and attribution of compensation cost for awards that were granted but not vested prior to the date the Company adopts will be based on the same estimate of the grant-date fair value and the same attribution method used previously under Statement 123 for pro forma disclosure. For those awards that are granted, modified or settled after the Company adopts the Statement, compensation cost will be measured and recognized in the financial statements in accordance with the provisions of Statement 123(R). The Company expects to incur additional compensation expense of approximately $1 million in the fourth quarter ending September 30, 2005.

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     Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004

Risk Factors and Forward-Looking Statements

The following discussion should be read in conjunction with the consolidated condensed financial statements and related notes included elsewhere herein and the consolidated financial statements and notes thereto included in the Company’s 2004 Annual Report on Form 10-K. 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 and political 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 Financial Condition and Results of Operations 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

The Company reported net income of $39.3 million ($0.77 per diluted share) from operating revenues of $174.7 million for the first quarter of fiscal 2005 ended December 31, 2004, compared with net income of $6.6 million ($0.13 per diluted share) from operating revenues of $134.3 million for the first quarter of fiscal year 2004. Net income for this year’s first quarter includes $16.0 million ($0.31 per diluted share) of gains from the sale securities. Net income for the first quarter of fiscal 2004 includes $1.9 million ($0.04 per diluted share) of gains from the sale of available-for-sale securities and a non-monetary investment gain of $1.1 million ($0.02 per diluted share). Also included in net income in the first quarter 2005 is approximately $5.5 million (0.11 per diluted share) from the sale of two drilling rigs. Operating income increased $21.8 million for the first quarter of fiscal 2005 compared to the first quarter of fiscal 2004 due to increased U.S. land rig dayrates and cash margins and increased International rig utilization.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004
(continued)

The following tables summarize operations by business segment for the three months ended December 31, 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.

U.S. LAND operating income totaled $25.6 million and $6.5 million in the first quarter of fiscal 2005 and 2004, respectively. Revenues were $109.2 million in the first quarter of fiscal 2005, compared with $74.9 million in last year’s first quarter. Increases in land rig dayrates and activity days accounted for the increase in revenue. Included in land revenues for the three months ended December 31, 2004, and December 31, 2003 are reimbursements for “out-of-pocket” expenses of $7.8 million and $4.3 million, respectively. The $19.1 million increase in operating income was primarily the result of higher land rig margins and increased rig days.

During the quarter, the Company returned five rigs to its U.S. land fleet from its international land fleet. Two of these rigs are presently under contract and three of the rigs will require additional investment and term contracts before returning to work. Also in the first quarter of 2005, two land rigs were sold. One additional international land rig will be returned to the U.S. in the Company’s second quarter of fiscal 2005.

Average land rig margin per day was $5,563 and $3,414 for the first quarter of fiscal 2005 and 2004, respectively. The 63% increase in margins was due to higher dayrates in the first quarter of 2005. Land rig utilization was 92% and 81% for the first quarter of fiscal 2005 and 2004, respectively. Land rig revenue days for the first quarter of 2005 were 7,588 compared with 6,280 for the same period of 2004, with an average of 82.5 and 68.3 rigs working during the first quarter of fiscal 2005 and 2004, respectively. The increase in rig days and average rigs working is attributable to increased activity days for the same rigs working in the comparable quarters, the addition of two rigs during the first quarter of 2005 and the addition of two rigs during fiscal 2004 subsequent to the first quarter of 2004. Land depreciation expense increased to $14.7 million in the first quarter of fiscal 2005, compared to $13.0 million in the same period of fiscal 2004. The increase is the result of two new rigs added during fiscal 2004 and five additional rigs transferred from International operations in the first quarter of 2005.

In late December 2004 and into January 2005, average dayrates have increased indicating strong margins for the U.S. land segment in the second quarter of 2005.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004
(continued)

U.S. OFFSHORE operating revenues and income declined slightly when compared to the first quarter of 2004. While rig days increased to 563 for the first quarter of fiscal 2005 as compared to 460 in the first quarter of 2004, average revenue per day declined. Rig utilization for the same periods was 56% and 42%, respectively. Revenues were $20.4 million in the first quarter of fiscal 2005, compared with $20.7 million in last year’s first quarter. Included in offshore revenues for the three months ended December 31, 2004 and December 31, 2003 are reimbursements for “out-of-pocket” expenses of $1.5 million and $1.6 million, respectively.

Five of the Company’s eleven platform rigs are contracted and no significant change in offshore platform results is anticipated for the second quarter of fiscal 2005. The Company continues to forecast a slow recovery in our platform rig activity, but is encouraged by inquiries for future possibilities.

INTERNATIONAL DRILLING’S operating income for the first quarter of fiscal 2005 was $6.2 million, compared to $3.6 million in the same period of 2004. Rig utilization for international operations averaged 71% for this year’s first quarter, compared with 53% for the first quarter of fiscal 2004. An average of 20.0 rigs worked during the current quarter, compared to 16.9 rigs in the first quarter of fiscal 2004. International revenues were $42.5 million and $36.0 million for the first quarter of fiscal 2005 and 2004, respectively. The increase in revenue is attributable to increased activity days.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004
(continued)

In Venezuela, there are currently eight deep rigs operating for PDVSA, with a ninth deep rig to begin work in mid-February. During the first quarter of 2005, a rig was returned to the U.S. land fleet from Venezuela. The Company is also bidding on other contracts that offer possibilities for idle rigs in Venezuela and Bolivia.

Colombia had one rig working during the first quarter of 2005 and a second rig will commence work in early February 2005. The Company moved three rigs to the U.S. from Bolivia and two of the remaining three rigs in Bolivia worked during the first quarter of 2005. At the end of the quarter, Bolivia had no rigs working or contracted. Argentina and Hungary each had one rig working during the quarter. Operations ceased in Hungary in early December 2004. The rig has been contracted and will be moved to the U.S. in late February 2005. The rig in Chad, which ceased operations at the end of fiscal 2004, was moved during the first quarter of 2005 to the U.S. land fleet.

OTHER

Dividend and interest income increased to $.9 million in the first quarter of 2005 compared to $.6 million in the first quarter of 2004. The increase is due to higher earnings from increased cash and cash equivalent balances.

Income from the sale of investment securities increased to $26.3 million in the first quarter of 2005, compared to $4.9 million in the first quarter of 2004. The first quarter of 2005 includes gains from the sale of securities of $26.3 million, $16.0 million after-tax ($0.31 per diluted share), primarily from the sale of 1,000,000 shares of Atwood Oceanics, Inc. The first quarter of 2004 includes gains from the sale of available-for-sale securities of $3.0 million, $1.9 million after-tax ($0.04 per diluted share) and a non-monetary investment gain of $1.9 million, $1.1 million after-tax ($0.02 per diluted share).

The fair value of the Company’s remaining portfolio, including our investment in Atwood Oceanics, Inc. which is accounted for on the equity method, was approximately $204.2 million at December 31, 2004. The after-tax value was approximately $137.2 million.

Income from asset sales increased to $10.8 million in the first quarter of 2005 compared to $.8 million in the first quarter of 2004. The increase of $10 million is primarily due to the sale of two deep domestic land rigs.

Interest expense was $3.3 million in the first quarter of fiscal 2005, compared to $3.2 million in the same period of fiscal 2004. Interest expense is primarily attributable to the $200 million long-term debt for both comparable quarters and short-term borrowings in fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalent balances increased to $177.5 million at December 31, 2004 from $65.3 million at September 30, 2004. Cash equivalents are made up of short-term investment grade money market securities. The increase in cash and cash equivalents is a result of proceeds from sales of securities of $62.4 million, proceeds from asset sales of $25.1 million and net cash provided by operating activities of $33.7 million. In the first quarter of 2004, net cash provided by operating activities was $25.7 million.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004
(continued)

Capital expenditures were $9.4 million and $29.7 million for the first quarter of fiscal 2005 and 2004, respectively. The significant decrease in capital expenditures from 2004 is the result of the Company’s FlexRig3 construction project completing in fiscal 2004. The Company anticipates capital expenditures to be approximately $55 million for fiscal 2005. Capital expenditures will be financed primarily by internally generated cash flows.

Our current cash, investments in short-term money market securities and cash generated from projected operating activities are expected to meet our estimated capital expenditures and other expected cash requirements for fiscal 2005. The Company’s indebtedness totaled $200 million at December 31, 2004, as described in note 8 to the Consolidated Condensed Financial Statements.

There were no other significant changes in the Company’s financial position since September 30, 2004.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For a description of the Company’s market risks, see “Item 7 (a). Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2004, and Note 8 to the Consolidated Condensed Financial Statements contained in Part I Item I hereof with regard to interest rate risk.

Item 4. CONTROLS AND PROCEDURES

a)

Evaluation of disclosure controls and procedures. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe that:

	•	the Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and
	•	the Company’s disclosure controls and procedures operate such that important information flows to appropriate collection and disclosure points in a timely manner and are effective to ensure that such information is accumulated and communicated to the Company’s management, and made known to the Company’s Chief Executive Officer and Chief Financial Officer, particularly during the period when this Quarterly Report on Form 10-Q was prepared, as appropriate to allow timely decision regarding the required disclosure.

b)

Changes in internal control over financial reporting. There have been no changes in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DECEMBER 31, 2004
(continued)

	c)	Section 404 of the Sarbanes-Oxley Act of 2002 will require the Company to include an internal control report of management with our annual report on Form 10-K for the fiscal year ending September 30, 2005. The internal control report must contain (1) a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the Company, (2) a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of our internal control over financial reporting, (3) management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of the end of our most recent fiscal year, including a statement as to whether or not the Company’s internal control over financial reporting is effective, and (4) a statement that our independent auditors have issued an attestation report on management’s assessment of the Company’s internal control over financial reporting.
		In order to comply with Section 404 of the Sarbanes-Oxley Act of 2002, we have been undergoing a comprehensive effort to assess the adequacy of our internal control over financial reporting and to test that controls are functioning as documented. We anticipate being able to comply with Section 404 of the Sarbanes-Oxley Act.

PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits
31.1	Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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.

Exhibit Index

31.1		Certification of Chief Executive Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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