UNITED STATES
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

Total Number of Pages — 23

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

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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. AND SUBSIDIARIES

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

The accompanying notes are an integral part of these statements.

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

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 six months ended March 31, 2005, and March 31, 2004, 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 10-K and 10-K/A.
	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 Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation”.

3.	Cash Dividends
	The $.0825 cash dividend declared December 1, 2004, was paid March 1, 2005. On March 2, 2005, a cash dividend of $.0825 per share was declared for shareholders of record on May 13, 2005, payable June 1, 2005.
4.	Inventories
	Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.

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

5.	Sale of Investment Securities
	Net income includes after-tax gains and losses from the sale of available-for-sale securities and non-monetary investment gains as follows (in thousands, except per share amounts):

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 $6.3 million at March 31, 2005 and $5.6 million at September 30, 2004. The recorded amounts for investments accounted for under the equity method are $44.9 million and $57.8 million at March 31, 2005 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):

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

8.	Notes payable and long-term debt
	At March 31, 2005, 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.
	At March 31, 2005, the Company had a committed unsecured line of credit totaling $50 million. Letters of credit totaling $14.4 million were outstanding against the line, leaving $35.6 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 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. The line of credit matures in July, 2005. The Company intends to renew the existing line of credit or obtain a similar facility at the expiration date.
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 includes 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:

10.	Income Taxes
	The Company’s effective tax rate was 41.2% in the first six months of fiscal 2005, compared to 42.6% in the first six months of fiscal 2004. The effective rate differs from the U.S. federal statutory rate of 35% primarily due to state and foreign taxes.
11.	Commitments
	The Company, on a regular basis, makes commitments for the purchase of contract drilling equipment. At March 31, 2005, the Company had commitments outstanding of approximately $37.7 million for the purchase of drilling equipment.

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

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 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 is 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 six months ended March 31, 2005, and 2004, is shown in the following tables:

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

Summarized financial information of the Company’s reportable segments for the three months ended March 31, 2005, and 2004, is shown in the following tables:

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

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

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

13.	Pensions and Other Post-retirement Benefits
	The following provides information at March 31, 2005 and 2004 as to the Company’s sponsored 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 with the SEC allowing for implementation at the beginning of the first fiscal year beginning after June 15, 2005. The Company plans to adopt the new standard October 1, 2005, its fiscal 2006 first quarter ending December 31, 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 fiscal 2006 first quarter ending December 31, 2005.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

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

Three Months Ended March 31, 2005 vs. Three Months Ended March 31, 2004

The Company reported net income of $22.4 million ($0.43 per diluted share) from operating revenues of $185.5 million for the second quarter ended March 31, 2005, compared with net income of $6.0 million ($0.12 per diluted share) from revenues of $143.0 million for the second quarter of fiscal year 2004. Net income for the second quarter of fiscal 2004 includes $4.3 million ($0.09 per diluted share) of gains from the sale of available-for-sale securities. There were no material security transactions in the second quarter of fiscal 2005.

The following tables summarize operations by business segment for the three months ended March 31, 2005 and 2004. Operating statistics in the tables exclude the effects of offshore platform and international 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
March 31, 2005

U.S. LAND operating income increased to $35.8 million for the second quarter of fiscal 2005 compared to $5.7 million in the same period of fiscal 2004. Revenues were $122.4 million and $82.5 million in the second quarter of fiscal 2005 and 2004, respectively. Included in land revenues for the three months ended March 31, 2005 and 2004 are reimbursements for “out-of-pocket” expenses of $8.4 million and $6.7 million, respectively. The $30.1 million increase in operating income was primarily the result of increased rig days and higher dayrates.

Average land rig margin per day was $6,944 and $3,186 for the second quarter of fiscal 2005 and 2004, respectively. The significant increase in margins was due to higher dayrates. Land rig utilization was 94% and 86% for the second quarter of fiscal 2005 and 2004, respectively. Land rig revenue days for the second quarter of 2005 were 7,589 compared with 6,758 for the same period of 2004, with an average of 84.3 and 74.3 rigs working during the second quarter of fiscal 2005 and 2004, respectively. Land depreciation expense increased to $15.1 million in the second quarter of fiscal 2005, compared to $13.9 million in the same period of fiscal 2004. The increase is the result of having three additional rigs in the United States during the second quarter of 2005 compared to the second quarter of 2004. The additional rigs are the result of one transferred from Venezuela and one transferred from Chad, both in the first quarter of 2005 and the third rig is the result of a flex rig constructed and placed in service in the third quarter of 2004.

The Company will begin construction of 13 new drilling rigs in the third quarter of 2005. Under terms of an agreement with an operator, the Company will operate 10 new rigs, each under a three-year term contract at a fixed dayrate plus certain conditional incentive payments based upon savings realized by the operator. The first rig is scheduled for completion by November, 2005, with the remaining nine expected to be delivered to the field at the rate of one per month thereafter. The Company currently has a letter of intent with another operator to operate three rigs on three-year term contracts. The Company expects to deliver one new rig per month starting November, 2005. The total capital cost of the construction is estimated at $125 million with approximately $50 million spent in fiscal 2005 and $75 million in fiscal 2006. The construction will be financed primarily by internally generated cash flows.

U.S. OFFSHORE operating income for the second quarter of fiscal 2005 increased 7.5% compared to the second quarter of fiscal 2004. The increase is primarily the result of a lower depreciation expense due to an asset impairment charge recorded in the fourth quarter of fiscal 2004. Additionally, average rig revenue per day increased while activity days remained constant. Included in offshore revenues for the three months ended March 31, 2005 and 2004 are reimbursements for “out-of-pocket” expenses of $1.4 million and $1.6 million, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2005

Five of the Company’s eleven platform rigs are currently contracted and a sixth rig has been contracted to start operations late in the third quarter of 2005. The Company continues to forecast a slow recovery in its offshore segment, but some inquiries for future work are being pursued and the Company is optimistic that one additional rig will be contracted by September, 2005.

INTERNATIONAL DRILLING operating income for the second quarter of fiscal 2005 was $3.6 million, compared to $1.6 million in the same period of 2004. Included in operating income is an exchange loss in Venezuela of $1.6 million in the second quarter of 2005, compared to an exchange loss of $1.4 million for the same period in 2004. Rig utilization for international operations averaged 71% for this year’s second quarter, compared with 51% for the second quarter of fiscal 2004. An average of 19.2 rigs worked during the current quarter, compared to 16.2 rigs in the second quarter of fiscal 2004. International revenues were $41.8 million in the second quarter of fiscal 2005, compared with $39.3 million in the second quarter of fiscal 2004. The increase in revenue is attributable to increased activity days offset by a decrease in average rig revenue per day. Included in International Drilling revenues for the three months ended March 31, 2005 and 2004, respectively, are reimbursements for “out-of-pocket” expenses of $3.8 million and $3.5 million, respectively. Depreciation decreased as compared to the second quarter of 2004 due to transferring five rigs to U.S. Land operations.

Currently in Venezuela, the Company has eight deep rigs operating for PDVSA with a ninth deep rig scheduled to go to work in the third quarter for PDVSA. The Company is bidding on other contracts that offer possibilities for one 3,000 HP deep land rig and two 2,000 HP deep land rigs.

Ecuador’s rig utilization was 100% and 67% for the second quarter of fiscal 2005 and 2004, respectively. In those same comparative quarters, an average of 8.0 rigs and 5.4 rigs worked.

Two deep rigs worked at 96% activity in Colombia during the second quarter of 2005, compared to no activity in the second quarter 2004. The Company anticipates the two working rigs to remain active through the end of the fiscal year. During both second quarters of 2005 and 2004, Argentina had one rig working. Bolivia had no activity during the second quarter 2005 compared to one rig working during the second quarter 2004. Two of the three idle rigs in Bolivia are contracted to begin work in the third quarter 2005. The third rig will be moved to Argentina and is expected to begin work in the fourth quarter 2005. In the second quarter 2004, Chad had one rig working. Chad had no activity in the second quarter 2005, as those operations ceased at the end of fiscal 2004. The rig has been moved to the U.S. Land Operations and is currently under contract.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2005

In the second quarter of 2005 and 2004, there was one rig working in Hungary. The contract in Hungary was completed early in the second quarter of 2005, and the rig arrived in Houston in April, 2005.

OTHER

Interest and dividend income increased to $1.2 million in the second quarter of 2005 compared to $.5 million in the second quarter of 2004. The increase is due to higher earnings from increased cash and cash equivalent balances.

Income from the sale of investment securities in the second quarter of 2004 was $7.1 million. Gains net of tax were $4.3 million ($0.09 per diluted share). The Company sold its entire position of 140,000 shares in ConocoPhillips during the second quarter of 2004. In the second quarter of 2005, the Company had no income from the sale of securities.

Interest expense was $3.2 million in the second quarter of fiscal 2005, compared to $3.1 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 along with capitalized interest of $.2 million in fiscal 2004.

Six Months Ended March 31, 2005 vs. Six Months Ended March 31, 2004

The Company reported net income of $61.7 million ($1.20 per diluted share) from operating revenues of $360.1 million for the six months ended March 31, 2005, compared with net income of $12.6 million ($0.25 per diluted share) from operating revenues of $277.3 million for the first six months of fiscal year 2004. Net income for the first six months of fiscal 2005 includes $16.0 million ($0.31 per diluted share) of after-tax gains from the sale of available-for-sale securities. Net income for the first six months of fiscal 2004 includes $6.2 million ($0.12 per diluted share) of after-tax gains from the sale of available-for-sale securities and a non-monetary investment gain of $1.2 million ($0.02 per diluted share).

The following tables summarize operations by business segment for the six months ended March 31, 2005 and 2004. Operating statistics in the tables exclude the effects of offshore platform and international 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
March 31, 2005

U.S. LAND operating results in the first six months of fiscal 2005 increased significantly from the same period in fiscal 2004. Operating income was $61.4 million and $12.2 million in the first six months of fiscal 2005 and 2004, respectively.

Revenues were $231.6 million in the first six months of fiscal 2005, compared with $157.4 million in the same period of fiscal 2004. Included in land revenues for the six months ended March 31, 2005 and March 31, 2004 are reimbursements for “out-of-pocket” expenses of $16.2 million and $10.9 million, respectively. The $49.2 million increase in operating income was primarily the result of higher land rig margins and increased rig days, partially offset by increased depreciation.

The 90% increase in margins was due to higher dayrates in fiscal 2005. Land rig utilization was 93% and 83% for the six months of fiscal 2005 and 2004, respectively. Land rig revenue days for the first six months of 2005 were 15,177 compared with 13,038 for the same period of 2004, with an average of 83.4 and 71.2 rigs working during the first six months 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 2005 and 2004 and two of the five rigs transferred from the international fleet working. The 11% increase in depreciation is the result of the five additional rigs transferred from the international operations during fiscal 2005.

U.S. OFFSHORE operating revenues and income remained steady. Included in offshore revenues for the six months ended March 31, 2005 and March 31, 2004 are reimbursements for “out-of-pocket” expenses of $2.9 million and $3.2 million, respectively. Operating income increased to $8.3 million in the first six months of fiscal 2005 from $8.1 million in the first six months of 2004. Rig days were 1,013 and 915 for the first six months of fiscal 2005 and 2004, respectively. Rig utilization for the same periods was 51% and 42%, respectively.

Five of the Company’s eleven platform rigs are currently contracted and a sixth rig has been contracted to start operations late in the third quarter of 2005. The Company continues to forecast a slow recovery in its offshore segment, but some inquiries for future work are being pursued and the Company is optimistic that one additional contract will be secured by September, 2005.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2005

INTERNATIONAL DRILLING operating income in the first six months of fiscal 2005 was $9.8 million, compared to $5.2 million in the same period of 2004. The increase in operating income is primarily the result of increased rig activity. Rig utilization for international operations averaged 71% for the first six months of fiscal 2005, compared with 52% for the first six months of fiscal 2004. An average of 19.6 rigs worked during the first six months of fiscal 2005, compared to 16.5 rigs in the first six months of fiscal 2004. International revenues were $84.3 million and $75.3 million in the first six months of fiscal 2005 and 2004, respectively. Included in International Drilling revenues for the six months ended March 31, 2005 and 2004, respectively, are reimbursements for “out-of-pocket” expenses of $6.9 million and $6.8 million, respectively. The overall increase in margin per day was primarily the result of the increase in revenue days in Venezuela at attractive margins and increased rig activity in Venezuela, Colombia and Ecuador.