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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4221
HELMERICH & PAYNE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 73-0679879
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
UTICA AT TWENTY-FIRST STREET, 74114
TULSA, OKLAHOMA (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code (918) 742-5531
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock ($0.10 par value) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
At December 15, 1995, the aggregate market value of the voting stock held
by non-affiliates was $674,214,412.
Number of shares of common stock outstanding at December 15, 1995:
24,764,620.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
1995 -- Parts I, II, and IV.
(2) Proxy Statement for Annual Meeting of Security Holders to be held March 6,
1996 -- Part III.
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HELMERICH & PAYNE, INC. AND SUBSIDIARIES
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1995
PART I
Item 1. BUSINESS
Helmerich & Payne, Inc., incorporated under the laws of the State of
Delaware on February 3, 1940, and successor to a business originally organized
in 1920, is engaged primarily in the exploration, production, and sale of crude
oil and natural gas and in contract drilling of oil and gas wells for others.
These activities account for the major portion of its operating
revenues. The Registrant is also engaged in the manufacture and distribution
of odorants for use in the gas transmission and distribution industry, and in
the ownership, development, and operation of commercial real estate.
The Registrant is organized into four separate autonomous operating
divisions being contract drilling; oil and gas exploration, production and
natural gas marketing; chemicals; and real estate. While there is a limited
amount of intercompany activity, each division operates essentially
independently of the others. Each of the divisions, except exploration and
production, conduct their respective business through wholly owned
subsidiaries. Operating decentralization is balanced by a centralized finance
division, which
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handles all accounting, data processing, budgeting, insurance, cash management,
and related activities.
Most of the Registrant's current exploration effort is concentrated in
Louisiana, Oklahoma, Texas, and the Hugoton Field of western Kansas. The
Registrant also explores from time to time in the Rocky Mountain area, New
Mexico, Alabama, Florida, and Mississippi. Substantially all of the
Registrant's gas production is sold to and resold by a marketing subsidiary.
This subsidiary also purchases gas from unaffiliated third parties for resale.
The Registrant's contract drilling is primarily conducted domestically
in Alabama, Oklahoma, Texas, Mississippi, and Louisiana, and offshore from
platforms in the Gulf of Mexico and offshore California. The Registrant has
also operated during fiscal 1995 in six international locations: Venezuela,
Ecuador, Colombia, Trinidad and Tobago, Yemen, and Bolivia.
The Registrant's odorants are manufactured in its plant in Baytown,
Texas, and the Registrant's real estate investments are located in Tulsa,
Oklahoma, where the Registrant has its executive offices.
CONTRACT DRILLING
The Registrant believes that it is one of the major land and offshore
platform drilling contractors in the western hemisphere. Operating
principally in North and South America, the Registrant specializes in deep
drilling in major gas producing basins of the United States and in drilling for
oil and gas in remote areas of the world. For its international operations,
the Registrant also constructs and operates rigs which are transportable by
helicopter. In the United States, the Registrant draws its customers primarily
from the major oil companies and the larger independents, which are the
companies generally engaged
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in deep drilling. The Registrant also drills for its own oil and gas division.
In South America, the Registrant's current customers include the Venezuelan
state petroleum companies and major international oil companies.
British Petroleum Company, P.L.C., including its affiliates, ("BP") is
the Registrant's largest single customer. The Registrant performs drilling
services for BP, both domestically and internationally. Each drilling rig
operates under a separate contract. The Registrant believes that its
relationship with BP is good. Revenues from drilling services performed for BP
in fiscal 1995 accounted for approximately 18% of the Registrant's consolidated
revenues for the same period.
The Registrant provides drilling equipment, personnel, and camps for
others on a contract basis for exploration and development of onshore areas and
for development from fixed platforms in offshore areas. Each of the drilling
rigs consists of engines, drawworks, a mast, pumps to circulate the drilling
fluid, blowout preventers, a drillstring, and related equipment. The intended
well depth and the drilling site conditions are the principal factors that
determine the size and type of rig most suitable for a particular drilling job.
A helicopter rig is one that can be disassembled into component part loads of
4,000 pounds and transported to remote locations by helicopter, cargo plane, or
other means.
The Registrant's workover rigs are equipped with engines, drawworks, a
mast, pumps, and blowout preventers (on a smaller scale than the drilling
rigs). A workover rig is used to complete a new well after the hole has been
drilled by a drilling rig, and to remedy various downhole problems that occur
in producing wells.
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The Registrant's contracts for drilling are obtained through
competitive bidding or as a result of negotiations with customers, and
sometimes cover multi-well and multi-year projects. Most of the contracts are
performed on a "daywork" basis, under which the Registrant charges a fixed rate
per day, with the price determined by the location, depth, and complexity of
the well to be drilled, operating conditions, the duration of the contract, and
the competitive forces of the market. Current market conditions involve an
oversupply of drilling rigs for the work available. As a consequence, the
Registrant is and will be performing and bidding for contracts on a combination
"footage" and "daywork" basis, under which the Registrant charges a fixed rate
per foot of hole drilled to a stated depth, usually no deeper than 15,000 feet,
and a fixed rate per day for the remainder of the hole. Contracts performed on
a "footage" basis involve a greater element of risk to the contractor than do
contracts performed on a "daywork" basis. Market conditions have also led the
Registrant to accept "turnkey" contracts under which the Registrant charges a
fixed sum to deliver a hole to a stated depth and agrees to furnish services
such as testing, coring, and casing the hole which are not normally done on a
"footage" basis. "Turnkey" contracts entail varying degrees of risk greater
than the usual "footage" contract. The Registrant believes that under current
market conditions "daywork" basis contract rates are too low to adequately
compensate contractors and that "footage" and "turnkey" basis contract rates do
not adequately compensate contractors for the added risks. However, the
Registrant intends to remain in the drilling contracting business in
anticipation of a return to more favorable market conditions. Contracts for
use of the Registrant's drilling equipment are "well-to-well" or for a fixed
term.
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"Well-to-well" contracts are cancelable at the option of either party upon the
completion of drilling at any one site, and fixed-term contracts customarily
provide for termination at the election of the customer, with an "early
termination payment" to be paid to the contractor if a contract is terminated
prior to the expiration of the fixed term.
While current fixed term contracts are for one to three year periods,
some fixed term and well-to-well contracts are expected to be continued for
longer periods than the original terms, although the contracting parties have
no legal obligation to do so. Contracts generally contain renewal or
extension provisions exercisable at the option of the customer at prices
mutually agreeable to the Registrant and the customer, and in most instances
provide for additional payments for mobilization and demobilization. Contracts
for work in foreign countries generally provide for payment in United States
dollars, except for amounts required to meet local expenses; however,
increasingly government owned petroleum companies are requesting that a greater
proportion of these payments be made in local currencies. See Regulations and
Hazards, page I-8.
Domestic Drilling
The Registrant believes it is a major land and offshore platform
drilling contractor in the domestic market. At the end of September, 1995, the
Registrant had 31 of a total of 41 available rigs operating in the United
States and had management contracts for two operator owned rigs in offshore
California.
The Registrant is competitively strongest in deep drilling rigs.
Twenty-three of its existing rigs are capable of drilling to depths in excess
of 20,000 feet.
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International Drilling
The Registrant's international drilling operations began in 1958 with
the acquisition of the Sinclair Oil Company's drilling rigs in Venezuela.
Helmerich & Payne de Venezuela, C.A., a wholly owned subsidiary of the
Registrant, is one of the leading drilling contractors in Venezuela. Beginning
in 1972, with the introduction of its first helicopter rig, the Registrant
expanded into other Latin American countries.
Venezuelan operations continue to be a significant part of the
Registrant's operations. The Registrant presently owns and operates 18
drilling rigs in Venezuela and has labor contracts to operate two
government-owned drilling rigs in Venezuela. The Registrant had a utilization
rate of 89% for these rigs during fiscal 1995. The Registrant worked for all
three government owned producing companies in Venezuela (Corpoven, Maraven and
Lagoven) during the fiscal year ended September 30, 1995. Collectively,
revenues from the three producing companies amounted to approximately 13% of
the Registrant's consolidated revenues during fiscal 1995. The Registrant
believes its relations with such producing companies are good.
During the mid-1970s, the Venezuelan government nationalized the
exploration and production business. At the present time it appears the
Venezuelan government will not nationalize the contract drilling business.
The Registrant's operations in Colombia continue to increase. The
Registrant presently owns and operates ten drilling rigs in Colombia. The
Registrant's utilization rate for such rigs was 87% during fiscal 1995. During
fiscal 1995 the revenue generated by Colombian drilling operations contributed
approximately 16.6% of the Registrant's consolidated revenues.
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In addition to its operations in Venezuela and Colombia, the
Registrant in fiscal 1995 owned and operated four rigs in Ecuador, one rig in
Trinidad and Tobago, one rig in Bolivia, and one rig in Yemen. During 1995,
the rig located in Yemen was moved to Bolivia. In Ecuador, Trinidad and
Tobago, and Bolivia, the contracts are with large international oil companies.
In August of 1994, a newly formed venture owned 50% by the Registrant
and 50% by its affiliate, Atwood Oceanics, Inc., was awarded a term contract in
Australia for the design, construction and operation of a new generation
platform rig. The rig, which incorporates some of the latest technology in
instrumentation and remote control mechanization of drilling equipment, was
recently completed. While the platform operator has postponed commencement of
mobilization to Australia until March of 1997, the operator will pay the
venture a holding rate during the postponement.
The Registrant was recently awarded a three-year term contract to
provide platform drilling services for a major oil company in the Gulf of
Mexico. The Registrant should complete construction in December of 1995 of a
new generation rig for installation upon a tension leg platform. The tension
leg platform concept allows platform drilling operations to be conducted at
significantly greater water depths. Drilling operations are expected to
commence in the spring of 1996. The same major oil company entered into a
letter of intent for the Registrant's construction of a second rig which is to
be installed on a tension leg platform in approximately 3,200 feet of water in
the Gulf of Mexico. A three-year term drilling contract for the second rig is
currently being finalized with rig construction scheduled to be completed and
the contract to commence in December, 1996.
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Competition
The contract drilling business is highly competitive. Competition in
contract drilling involves such factors as price, rig availability,
efficiency, condition of equipment, reputation, and customer relations.
Competition is primarily on a regional basis and may vary significantly by
region at any particular time. Drilling rigs can be readily moved from one
region to another in response to changes in levels of activity, and an
oversupply of rigs in any region may result.
Although many contracts for drilling services are awarded based solely
on price, the Registrant has been successful in establishing long-term
relationships with certain customers which have allowed the Registrant to
secure drilling work even though the Registrant may not have been the lowest
bidder for such work. The Registrant has continued to attempt to differentiate
its services based upon its engineering design expertise, operational
efficiency, and safety and environmental awareness.
The Registrant made a commitment to deep drilling in the early
1970's. During the past several years, there has been what appears to the
Registrant to be an oversupply of unregulated natural gas. As a result, the
demand for deep drilling for gas has decreased.
Regulations and Hazards
The drilling operations of the Registrant are subject to the many
hazards inherent in the business, including blowouts and well fires, which
could cause personal injury, suspend drilling operations, seriously damage or
destroy the equipment involved, and cause substantial damage to producing
formations and the surrounding areas.
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The Registrant believes that it is adequately insured, with coverage
for comprehensive general liability, public liability, property damage
(including insurance against loss by fire and storm, blowout, and cratering
risks), and employer's liability. No insurance is carried against loss of
earnings. The Registrant's present coverage has been contracted through
fiscal 1996. However, in view of conditions generally in the liability
insurance industry, no assurance can be given that the Registrant's present
coverage will not be cancelled during fiscal 1996 nor that insurance coverage
will continue to be available at rates considered reasonable.
International operations are subject to certain political, economic,
and other uncertainties not encountered in domestic operations, including risks
of expropriation of equipment as well as expropriation of a particular oil
company operator's property and drilling rights, taxation policies, foreign
exchange restrictions, currency rate fluctuations, and general hazards
associated with foreign sovereignty over certain areas in which operations are
conducted. There can be no assurance that there will not be changes in local
laws, regulations, and administrative requirements or the interpretation
thereof, any of which changes could have a material adverse effect on the
profitability of the Registrant's operations or on the ability of the
Registrant to continue operations in certain areas. Because of the impact of
local laws, in certain areas the Registrant's operations may, in the future, be
conducted through entities in which local citizens own interests and through
entities (including joint ventures) in which the Registrant holds only a
minority interest, or pursuant to arrangements under which the Registrant
conducts operations under contract to local entities. While the Registrant
believes that neither
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operating through such entities or pursuant to such arrangements nor the
restructuring of existing operations along such lines would have a material
adverse effect on the Registrant's operations or revenues, there can be no
assurance that the Registrant will in all cases be able to structure or
restructure its operations to conform to local law (or the administration
thereof) on terms acceptable to the Registrant. The Registrant further
attempts to minimize the potential impact of such risks by operating in more
than one geographical area and by attempting to obtain indemnification from
operators against expropriation, nationalization, and deprivation.
During fiscal 1995, approximately 33% of the Registrant's consolidated
revenues were generated from international contract drilling operations. Over
90% of the international revenues were from Venezuela, Colombia, and Ecuador.
Exposure to potential losses from currency devaluation is minimal in the
countries of Colombia and Ecuador. In those countries, all receivables and
payments are currently in U.S. dollars. Cash balances are kept at a minimum
which assists in reducing exposure.
In Venezuela, approximately 65% of the Registrant's revenues are in
U.S. dollars and the other 35% are in the local currency, the Bolivar. The
Registrant is exposed to certain risks of currency devaluation in Venezuela as
a result of Bolivar receivable balances and necessary Bolivar cash balances.
In 1994, the Venezuelan government established a fixed exchange rate in hopes
of stemming economic problems caused by a high rate of inflation. During the
first week of December, 1995, the government established a new exchange rate,
resulting in further devaluation of the Bolivar. It is estimated that the
Registrant will not experience a material loss, if any, from such devaluation.
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It is uncertain when the government will again adjust the exchange rate, but
the Registrant does not expect losses from future adjustments in the exchange
rate to be material. The Registrant has been able to offset some of the
devaluation exposure through a government approved mechanism which allows the
purchase of local currency at favorable market exchange rates.
Many aspects of the Registrant's operations are subject to government
regulation, including those relating to drilling practices and methods and the
level of taxation. In addition, various countries (including the United
States) have environmental regulations which affect drilling operations.
Drilling contractors may be liable for damages resulting from pollution. Under
United States regulations, drilling contractors must establish financial
responsibility to cover potential liability for pollution of offshore waters.
Generally, the Registrant is indemnified under drilling contracts from
environmental damages, except in certain cases of surface pollution, but the
enforceability of indemnification provisions in foreign countries may be
questionable.
The Registrant believes that it is in substantial compliance with all
legislation and regulations affecting its operations in the drilling of oil and
gas wells and in controlling the discharge of wastes. To date, compliance has
not materially affected the capital expenditures, earnings, or competitive
position of the Registrant, although these measures may add to the costs of
operating drilling equipment in some instances. Further legislation or
regulation may reasonably be anticipated, and the effect thereof on operations
cannot be predicted.
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OIL AND GAS DIVISION
The Registrant engages in the origination of prospects; the
identification, acquisition, exploration, and development of prospective and
proved oil and gas properties; the production and sale of crude oil,
condensate, and natural gas; and the marketing of natural gas. The Registrant
considers itself a medium-sized independent producer. All of the Registrant's
oil and gas operations are conducted in the United States.
Most of the Registrant's current exploration and drilling effort is
concentrated in Oklahoma, Kansas, Texas, and Louisiana. The Registrant also
explores from time to time in New Mexico, Alabama, Florida, Michigan,
Mississippi, and the Rocky Mountain area.
A reorganization of the Registrant's exploration and production
division was accomplished in September, 1995. This action resulted in the
consolidation or elimination of several management positions, the elimination
of several consulting geologists, and the formation of several geographical
exploitation teams. These teams are comprised of geological, engineering, and
land personnel who will primarily develop in-house oil and gas prospects as
well as review a limited number of outside prospects and acquisitions for their
respective geographical areas. The Registrant believes that this structure
will allow each team to gain greater expertise in its respective geographical
area and will encourage the development of successful prospects.
Most of the current exploration and production employees were retained
in the reorganized division. The Registrant expects that the total number of
employees within the division during fiscal 1996 will remain approximately the
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same. The reorganized division will be managed by the Registrant's Vice
President of Production.
During the past fiscal year, the Registrant has continued to reduce
its expenditures for exploration of fractured Austin Chalk reservoirs in
central Louisiana and has elected to allow certain oil and gas leases covering
approximately 52,663 net acres to expire. The Registrant's present efforts are
concentrated in the western portion of its acreage located primarily in Vernon
and Rapides Parishes, Louisiana. During 1994, OXY USA drilled an Austin Chalk
well, adjacent to a substantial acreage position of the Registrant. A second
well offsetting the original well has been commenced. The Registrant did not
participate as a working interest owner in either of these wells, but retained
an overriding royalty interest. In addition, the Registrant reached an
agreement with another exploration and production company whereby the
Registrant will reduce its interest in certain of its acreage in return for
payment of all of the Registrant's share of drilling and completion costs in a
minimum of two (2) Austin Chalk wells. The first well has been drilled and is
presently being tested. The Registrant will monitor production from these
wells to assist in the determination of the amount of its participation, if
any, in additional drilling in the area and the extent of its continued payment
of annual rentals.
The Registrant's exploration and development program has covered a
range of prospects, from shallow "bread and butter" programs to deep expensive,
high risk/high return wells. During fiscal 1995, the Registrant participated
in 46 development and/or wildcat wells, which resulted in new discoveries of
approximately 8.8 bcf of gas and 328,539 barrels of oil and condensate. The
Registrant participated in 13 additional development wells, which resulted in
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the development of approximately 3.0 bcf of gas and 4,404 barrels of oil and
condensate which was previously classified as proved undeveloped or proved
developed nonproducing reserves. A total of $23,199,430 was spent in the
Registrant's exploration and development program during fiscal 1995. This
figure is exclusive of expenditures for acreage and acquisitions of proved oil
and gas reserves. The Registrant's total company-wide acquisition cost for
acreage in fiscal 1995 was $1,564,986.
The Registrant spent $1,228,071 for the acquisition of proved oil and
gas reserves during fiscal 1995. Reserves from such acquisitions totaled
approximately 1.9 bcf of natural gas and 310 barrels of crude oil and
condensate. In addition, the Registrant sold 47 properties for $325,126. The
reserves associated with these sales were approximately 116,000 mcf of natural
gas and 26,251 barrels of crude oil.
Market for Oil and Gas
The Registrant does not refine any of its production. The
availability of a ready market for such production depends upon a number of
factors, including the availability of other domestic production, crude oil
imports, the proximity and capacity of oil and gas pipelines, and general
fluctuations in supply and demand. The Registrant does not anticipate any
unusual difficulty in contracting to sell its production of crude oil and
natural gas to purchasers and end-users at prevailing market prices and under
arrangements that are usual and customary in the industry. The Registrant and
its wholly owned subsidiary, Helmerich & Payne Energy Services, Inc., have
successfully developed markets with end-users, local distribution companies,
and natural gas brokers for gas produced from successful wildcat wells or
development wells. Although the
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market for natural gas has been in a state of over-supply for the past several
years, the Registrant is of the opinion that the supply/demand for natural gas
is moving towards a state of equilibrium. Winter demand and its effect on gas
storage has a significant effect on natural gas pricing. The stability of
short-term prices for natural gas will largely depend upon the demand during
the heating season and the reduction of storage throughout the United States.
Other causes affecting supply/demand imbalances may be federal regulation of
the market; large quantities of developed gas reserves in Canada and Mexico
available for export by pipelines to the United States; fuel switching between
fuel oil and natural gas; development of coalbed methane; and development of
large quantities of liquefied natural gas in Trinidad and Tobago and Africa
available for export to the United States.
Historically, the Registrant has had no long-term sales contracts for
its crude oil and condensate production. The Registrant continues its recent
practice of contracting for the sale of its Kansas and Oklahoma and portions of
its west Texas crude oil for terms of six to twelve months in an attempt to
assure itself of higher than posted prices for such crude oil production.
Competition
The Registrant competes with numerous other companies and individuals
in the acquisition of oil and gas properties and the marketing of oil and gas.
The Registrant continues to believe that it should prepare for increased
exploration activity without committing to a definite drilling timetable
involving large expenditures. The Registrant also believes that the intense
competition for the acquisition of gas producing properties will continue.
Through its acquisition experience, the Registrant believes it can still remain
competitive and intends
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to continue purchasing quality long-life oil and gas reserves. The
Registrant's competitors include major oil companies, other independent oil
companies, and individuals, many of whom have financial resources, staffs, and
facilities substantially larger than those of the Registrant. In addition,
many of the Registrant's competitors purchase reserves based upon price
forecasts and reserve evaluations, which the Registrant believes are
substantially higher than the Registrant's price forecasts and reserve
evaluations. Many major oil companies have committed much of their resources
to offshore and international acquisitions and exploration. Although the
effect of these competitive factors on the Registrant cannot be predicted with
certainty, it would appear that the withdrawal of major oil companies from
domestic exploration and production will provide increased domestic
opportunities for the Registrant.
The Registrant's fiscal 1996 exploration and production budget of
approximately $28,000,000 is 29.4% greater than its actual exploration and
production expenditures in fiscal 1995.
The Registrant intends to continue to pursue the purchase of proven
producing properties and to avail itself of the opportunities for drilling and
development.
Title to Oil and Gas Properties
The Registrant undertakes title examination and performs curative work
at the time properties are acquired. The Registrant believes that title to its
oil and gas properties is generally good and defensible in accordance with
standards acceptable in the industry.
Oil and gas properties in general are subject to customary royalty
interests contracted for in connection with the acquisitions of title, liens
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incident to operating agreements, liens for current taxes, and other burdens
and minor encumbrances, easements, and restrictions. The Registrant believes
that the existence of such burdens will not materially detract from the general
value of its leasehold interests.
Governmental Regulation in the Oil and Gas Industry
The Registrant's domestic operations are affected from time to time in
varying degrees by political developments and federal and state laws and
regulations. In particular, oil and gas production operations and economics
are affected by price control, tax, and other laws relating to the petroleum
industry; by changes in such laws; and by constantly changing administrative
regulations. Most states in which the Registrant conducts or may conduct oil
and gas activities regulate the production and sale of oil and natural gas,
including regulation of the size of drilling and spacing units or proration
units, the density of wells which may be drilled, and the unitization or
pooling of oil and gas properties. In addition, state conservation laws
establish maximum rates of production from oil and natural gas wells, generally
prohibit the venting or flaring of natural gas, and impose certain requirements
regarding the ratability of production. The effect of these regulations is to
limit the amounts of oil and natural gas the Registrant can produce from its
wells, and to limit the number of wells or locations at which the Registrant
can drill. In addition, legislation affecting the natural gas and oil industry
is under constant review. Inasmuch as such laws and regulations are frequently
expanded, amended, or reinterpreted, the Registrant is unable to predict the
future cost or impact of complying with such regulations. The Registrant
believes that its oil and gas operations currently are not materially affected
by such laws.
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The domestic production and sale of oil and gas are also subject to
regulation by United States federal authorities including the Federal Energy
Regulatory Commission ("FERC").
Regulatory Controls
The Registrant is subject to regulation by the FERC with respect to
various aspects of its domestic natural gas operations under the Natural Gas
Act ("NGA") and the Natural Gas Policy Act of 1978.
The Natural Gas Wellhead Decontrol Act of 1989 amended both the price
and non-price decontrol provisions of the Natural Gas Policy Act of 1978 for
the purpose of providing complete decontrol of first sales of natural gas by
January 1, 1993. The Registrant believes that substantially all of its gas is
decontrolled.
On April 8, 1992; August 3, 1992; and November 27, 1992, the FERC
issued Order 636, Order 636-A, and Order 636- B (collectively, "Order 636"),
respectively, which requires interstate pipelines to provide transportation
unbundled from their sales of gas. Also, such pipelines must provide
open-access transportation on a basis that is equal for all gas supplies.
Order 636 has been implemented through individual interstate pipeline
restructuring proceedings. Although Order 636 has provided the Registrant with
additional market access and more fairly applied transportation service rates,
it has also subjected the Registrant to more restrictive pipeline imbalance
tolerances and greater penalties for violation of those tolerances. Appeals of
Order 636 are currently pending and the Registrant cannot predict the ultimate
outcome of court review. Order 636 may be reversed in whole or in part on
review. Individual restructuring orders may also be reversed in whole or in
part whether
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or not Order 636 is upheld. Assuming that Order 636 is upheld in its entirety,
the Registrant believes that it will benefit from the provisions of such Order.
The FERC has recently announced its intention to re-examine certain of
its transportation-related policies, including the manner in which interstate
pipelines release transportation capacity under Order 636 and the use of
market-based rates for interstate gas transportation. While any resulting FERC
action would affect the Registrant only indirectly, these inquiries are
intended to further enhance competition in the natural gas markets. In
addition, the FERC issued a policy statement on how interstate natural gas
pipelines can recover the cost of new pipeline facilities. While this policy
statement in its present form affects the Registrant only indirectly, the new
policy should enhance competition in natural gas markets and facilitate
construction of gas supply laterals. However, requests for rehearing of this
policy statement are currently pending. The Registrant cannot predict what
action the FERC will take on these requests. However, the Registrant believes
any such action will not have a material impact on the Registrant.
Under the NGA, natural gas gathering facilities are exempt from FERC
jurisdiction. The Registrant believes that its gathering systems meet the
traditional tests that the FERC has used to establish a pipeline's status as a
gatherer. Commencing in May 1994, the FERC has issued a series of orders in
individual cases that delineate its gathering policy. Among other matters, the
FERC slightly narrowed its statutory tests for establishing gathering status
and reaffirmed that it does not have jurisdiction over natural gas gathering
facilities and services and that such facilities and services are properly
regulated by state authorities. As a result, natural gas gathering may receive
I-19
21
greater regulatory scrutiny by state agencies. In addition, the FERC has
approved several transfers by interstate pipelines of gathering facilities to
unregulated gathering companies, including affiliates. This could allow such
companies to compete more effectively with independent gatherers. Several of
the FERC's orders delineating its new gathering policy are subject to pending
court appeals. It is not possible at this time to predict the ultimate effect
of the new policy, although it could affect access to and rates charged for
interstate gathering services. However, the Registrant does not presently
believe the status of its facilities would be affected by modification to the
statutory criteria.
The Registrant's natural gas gathering operations may become subject
to additional safety and operational regulations relating to the design,
installation, testing, construction, operation, replacement, and management of
facilities. Pipeline safety issues have recently become the subject of
increasing focus in various political and administrative arenas at both the
state and federal levels. For example, various federal legislative proposals
addressing pipeline safety issues are currently pending, including a federal
"one call" notification system and certain new construction specifications.
Similar or additional legislation is likely to be proposed in the near future.
The Registrant believes that the adoption of additional pipeline safety
legislation will not materially affect the Registrant in light of its
relatively minor gathering operations.
On February 2, 1994, the Kansas Corporation Commission ("KCC") issued
an order which modified allowables applicable to wells within the Hugoton Gas
Field so that those proration units upon which infill wells had been drilled
would be
I-20
22
assigned a larger allowable than those units without infill wells. Such order
was affirmed by a Kansas district court in September of 1994. An appeal of the
KCC's order is presently pending. As a consequence of this order, the
Registrant has drilled 47 infill wells and believes that it will be necessary
in the near future to drill an additional 65 to 70 wells with the total costs
to the Registrant ranging from $6.5 to $7 million. Several of these wells will
be drilled to a depth of 5,500 feet in search of additional reserve-bearing
formations.
Additional proposals and proceedings that might affect the oil and gas
industry are pending before the Congress, the FERC, and the courts. The
Registrant cannot predict when or whether any such proposals may become
effective. In the past, the natural gas industry has been very heavily
regulated. There is no assurance that the current regulatory approach pursued
by the FERC will continue. Notwithstanding the foregoing, it is anticipated
that compliance with existing federal, state and local laws, rules and
regulations will not have a material adverse effect upon the capital
expenditures, earnings or competitive position of the Registrant.
Federal Income Taxation
The Registrant's oil and gas operations, and the petroleum industry in
general, are affected by certain federal income tax laws, in particular the Tax
Reform Act of 1986, which was amended by the Energy Policy Act of 1992 and the
Revenue Reconciliation Act of 1993. The Registrant has considered the effects
of such federal income tax laws on its operations and has concluded that there
will be no material impact on its liquidity, capital expenditures, or
international operations.
I-21
23
Environmental Laws
The Registrant's activities are subject to existing federal and state
laws and regulations governing environmental quality and pollution control.
Such laws and regulations may substantially increase the costs of exploring,
developing, or producing oil and gas and may prevent or delay the commencement
or continuation of a given operation. In the opinion of the Registrant's
management, its operations substantially comply with applicable environmental
legislation and regulations. The existence of such legislation and
regulations has had no material effect on the Registrant's operations, and the
cost of compliance therewith has not been material to date.
The Registrant believes that compliance with existing federal, state,
and local laws, rules, and regulations regulating the discharge of materials
into the environment or otherwise relating to the protection of the environment
will not have any material effect upon the capital expenditures, earnings, or
competitive position of the Registrant.
Natural Gas Marketing
Helmerich & Payne Energy Services, Inc., ("HPESI") continues into its
seventh year of business with emphasis on the purchase and marketing of the
Registrant's natural gas production. In addition, HPESI purchases third-party
gas for resale and provides compression and gathering services for a fee.
During fiscal year 1995, HPESI's sales of third-party gas constituted
approximately 10.6% of the Registrant's consolidated revenues.
HPESI sells natural gas to markets in the Midwest and Rocky Mountain
areas. Term gas sales contracts are for varied periods ranging from four
months to seven years. However, recent contracts have tended toward shorter
terms.
I-22
24
The remainder of the Registrant's gas is sold under spot market contracts
having a duration of 30 days or less. For fiscal 1996, HPESI's term gas sales
contracts provide for the sale of approximately 13 bcf of gas. HPESI presently
intends to fulfill such term sales contracts with a portion of the gas reserves
purchased from the Registrant as well as from its purchases of third-party gas.
See pages I-14 through I-23 regarding the market, competition, and regulation
of natural gas.
CHEMICAL OPERATIONS
The Registrant owns a chemical plant at Baytown, Texas, where it
manufactures mercaptans and sulfides which are blended for use as warning
agents in natural and liquefied petroleum gases. The Registrant believes that
it is the largest single supplier of gas odorants in North America. Its
odorants are also sold in Korea, Latin America, Australia, and Japan. These
products are marketed by the Registrant using the trade names of "Natural Gas
Odorizing" and "Captan." In addition, the Registrant makes bulk sales of
mercaptans for use as sulfiding agents.
The Registrant is one of only two companies which sells odorants for
liquefied petroleum gases and is one of only three companies which sells
odorants for natural gas within the United States. The Registrant believes
that its market share approximates 40% to 50% of all domestic odorant sales.
Competition for liquefied petroleum odorant sales is primarily based upon
service considerations, while natural gas odorant manufacturers compete for
sales based on price and service considerations.
The manufacturing facility is adjacent to a major refinery and
chemical plant complex of Exxon Corporation, from which the Registrant obtains
most of
I-23
25
its principal raw materials. The Registrant's chemical plant and related
operations are subject to numerous local, state, and federal environmental laws
and regulations. The Registrant believes it is currently in substantial
compliance with all such laws and that compliance with the same will not have
any material effect upon the capital expenditures, earnings or competitive
position of the Registrant.
During the fourth quarter of fiscal 1995, the Registrant retained an
investment banking firm for the purpose of advising the Registrant regarding
the potential sale of its chemical operations. The Registrant has authorized
such firm to solicit indications of interest in the Registrant's chemical
operations from certain prospective purchasers.
REAL ESTATE OPERATIONS
The Registrant's real estate operations are conducted exclusively
within the metropolitan area of Tulsa, Oklahoma. Its major holding is Utica
Square Shopping Center, consisting of fifteen separate buildings, with parking
and other common facilities covering an area of approximately 30 acres.
Fourteen of these buildings provide approximately 405,709 square feet of net
leasable retail sales and storage space (98% of which is currently leased) and
approximately 18,590 square feet of net leasable general office space (99% of
which is currently leased). Approximately 24% of the general office space is
occupied by the Registrant's real estate operations. The fifteenth building is
an eight-story medical office building which provides approximately 76,379
square feet of net leasable medical office space (78% of which is currently
leased). The Registrant has a two-level parking garage located in the
southwest corner of Utica Square that can accommodate approximately 250 cars.
I-24
26
At the end of the 1995 fiscal year the Registrant owned 19 of a total
of 73 units in The Yorktown, a 16-story luxury residential condominium with
approximately 150,940 square feet of living area located on a six-acre tract
adjacent to Utica Square Shopping Center. Eleven of the Registrant's units are
currently leased.
The Registrant owns an eight-story office building located diagonally
across the street from Utica Square Shopping Center, containing approximately
87,000 square feet of net leasable general office and retail space. This
building houses the Registrant's principal executive offices. Approximately
11% of this building was leased to third parties during fiscal 1995.
The Registrant is also engaged in the business of leasing multi-tenant
warehouse space. Three warehouses known as Space Center, each containing
approximately 165,000 square feet of net leasable space, are situated in the
southeast part of Tulsa at the intersection of two major limited-access
highways. Present occupancy is 90%. The Registrant also owns approximately 1
1/2 acres of undeveloped land lying adjacent to such warehouses.
The Registrant also owns a 270 acre tract known as Southpark located
in the high-growth area of southeast Tulsa and consisting of approximately 257
acres of undeveloped real estate and approximately 13 acres of multi-tenant
warehouse area. The warehouse area is known as Space Center East and consists
of two warehouses, one containing approximately 90,000 square feet and the
other containing approximately 112,500 square feet. Occupancy has reached 100%
primarily due to the expansion of several existing tenants. Preliminary
planning has been accomplished to determine the best development uses for the
I-25
27
remaining land. A high quality office park, with peripheral commercial,
office/warehouse, and hotel sites, has been contemplated.
The Registrant also owns a five-building complex called Tandem
Business Park. The project is located adjacent to and east of the Space Center
East facility and contains approximately six acres, with approximately 88,084
square feet of office/warehouse space. Occupancy has increased from 47% during
fiscal 1995 to 68% currently due primarily to the addition of one new tenant.
The Registrant also owns a twelve-building complex, consisting of approximately
204,600 square feet of office/warehouse space, called Tulsa Business Park. The
project is located south of the Space Center facility, separated by a city
street, and contains approximately 12 acres. Occupancy has increased to 94%
due to expansion of existing tenants and additions of new tenants during fiscal
1995.
The Registrant also owns two service center properties located
adjacent to arterial streets in south central Tulsa. The first, called Maxim
Center, consists of one office/warehouse building containing approximately
40,800 square feet and located on approximately 2.5 acres. During fiscal 1995
occupancy increased from 50% to 65% primarily due to one tenant's expansion.
The second, called Maxim Place, consists of one office/warehouse building
containing approximately 33,750 square feet and located on approximately 2.25
acres. During fiscal 1995, occupancy increased from 63% to 81% by the addition
of one new tenant and the expansion of one existing tenant.
I-26
28
FINANCIAL
Information relating to Revenue and Income by Business Segments may be
found on page 11 of the Registrant's Annual Report to Shareholders for fiscal
1995, which is incorporated herein by reference.
EMPLOYEES
The Registrant had 1,716 employees within the United States (11 of
which were part-time employees) and 1,529 employees in international operations
as of September 30, 1995.
Item 2. PROPERTIES
CONTRACT DRILLING
The following table sets forth certain information concerning the
Registrant's existing domestic drilling rigs:
I-27
29
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
- ----------- -------------- --------------- --------
110 Medium Depth 12,000 Texas
141 Medium Depth 14,000 Texas
142 Medium Depth 14,000 Texas
143 Medium Depth 14,000 Texas
145 Medium Depth 14,000 Texas
146 Medium Depth 14,000 Texas
156 Medium Depth 14,000 Texas
157 Medium Depth 14,000 Texas
95 Medium Depth 16,000 Texas
96 Medium Depth 16,000 Oklahoma
118 Medium Depth 16,000 Texas
119 Medium Depth 16,000 Texas
120 Medium Depth 16,000 Texas
147 Medium Depth 16,000 Texas
154 Medium Depth 16,000 Texas
78 Deep 20,000 Texas
79 Deep 20,000 Louisiana
80 Deep 20,000 Oklahoma
89 Deep 20,000 Alabama
92 Deep 20,000 Oklahoma
94 Deep 20,000 Texas
98 Deep 20,000 Oklahoma
122 Deep 26,000 Louisiana
97 Deep 26,000 Texas
99 Deep 26,000 Texas
137 Deep 26,000 Texas
149 Deep 26,000 Texas
72 Very Deep 30,000 Louisiana
73 Very Deep 30,000 Louisiana
127 Very Deep 30,000 Oklahoma
101 Medium Depth 16,000 * Gulf of Mexico
104 Medium Depth 16,000 * Offshore California
108 Medium Depth 16,000 * Gulf of Mexico
91 Deep 20,000 * Gulf of Mexico
102 Deep 20,000 * Offshore California
103 Deep 20,000 * Offshore California
105 Deep 20,000 * Gulf of Mexico
109 Deep 20,000 * Gulf of Mexico
100 Deep 26,000 * Gulf of Mexico
106 Deep 26,000 * Gulf of Mexico
107 Deep 26,000 * Gulf of Mexico
* Offshore platform rig
I-28
30
The following table sets forth information with respect to the
utilization of the Registrant's domestic drilling rigs for the periods
indicated:
Years ended September 30,
-------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Number of rigs owned at end of
period 46 39 42 47 41
Average rig utilization rate
during period (1) 47% 42% 53% 69% 71%
(1) A rig is considered to be utilized when it is operated or being moved,
assembled, or dismantled under contract.
The following table sets forth certain information concerning the
Registrant's international drilling rigs:
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- --------------- --------
3 Workover/drilling 6,000 Venezuela
14 Workover/drilling 6,000 Venezuela
19 Workover/drilling 6,000 Venezuela
20 Workover/drilling 6,000 Venezuela
140 Medium Depth 10,000 Venezuela
158 Medium Depth 10,000 Venezuela
159 Medium Depth 12,000 Venezuela
132 Medium Depth 16,000 Ecuador
12 Deep (helicopter rig) 18,000 Ecuador
22 Deep (helicopter rig) 18,000 Bolivia
23 Deep (helicopter rig) 18,000 Ecuador
121 Deep 20,000 Colombia
45 Deep 26,000 Venezuela
82 Deep 26,000 Venezuela
83 Deep 26,000 Venezuela
117 Deep 26,000 Trinidad & Tobago
123 Deep 26,000 Bolivia
138 Deep 26,000 Ecuador
148 Deep 26,000 Venezuela
160 Deep 26,000 Venezuela
115 Very Deep 30,000 Venezuela
116 Very Deep 30,000 Venezuela
125 Very Deep 30,000 Colombia
113 Very Deep 30,000 Venezuela
128 Very Deep 30,000 Venezuela
129 Very Deep 30,000 Venezuela
133 Very Deep 30,000 Colombia
134 Very Deep 30,000 Colombia
I-29
31
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- --------------- --------
135 Very Deep 30,000 Colombia
136 Very Deep 30,000 Colombia
150 Very Deep 30,000 Venezuela
151 Very Deep 30,000 Colombia
152 Super Deep 30,000+ Colombia
153 Super Deep 30,000+ Colombia
139 Super Deep 30,000+ Colombia
The following table sets forth information with respect to the
utilization of the Registrant's international drilling rigs for the periods
indicated:
Years ended September 30,
-------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Number of rigs owned at end of
period 25 30 29 29 35
Average rig utilization rate
during period (1) 69% 69% 68% 88% 84%
(1) A rig is considered to be utilized when it is operated or being moved,
assembled, or dismantled under contract.
OIL AND GAS DIVISION
All of the Registrant's oil and gas operations and holdings are
domestic.
Crude Oil Sales
The Registrant's net sales of crude oil and condensate for the fiscal
years 1993 through 1995 are shown below:
Average Sales Average Lifting
Year Net Barrels Price per barrel Cost per Barrel
---- ----------- ---------------- ---------------
1993 875,713 $17.58 $8.63
1994 887,455 $14.83 $7.74
1995 808,058 $16.37 $7.86
I-30
32
Natural Gas Sales
The Registrant's net sales of natural and casinghead gas for the three
fiscal years 1993 through 1995 are as follows:
Average Sales Average Lifting
Year Net Mcf Price per Mcf Cost per Mcf
---- ------- ------------- ---------------
1993 28,478,530 $1.84 $0.3460
1994 26,627,776 $1.72 $0.3760
1995 26,421,434 $1.27 $0.3640
Following is a summary of the net wells drilled by the Registrant for
the fiscal years ended September 30, 1993, 1994, and 1995:
Exploratory Wells Development Wells
------------------ --------------------
1993 1994 1995 1993 1994 1995
---- ---- ---- ---- ---- ----
Productive 2.866 1.021 0.7 8.760 12.334 20.7695
Dry 1.393 1.436 2.596 2.858 0.233 3.2867
On September 30, 1995, the Registrant was in the process of drilling
or completing one gross or 0.1633 net wells.
Acreage Holdings
The Registrant's holdings of acreage under oil and gas leases, as of
September 30, 1995, were as follows:
I-31
33
Developed Acreage Undeveloped Acreage
-------------------- ---------------------
Gross Net Gross Net
----- --- ----- ---
Alabama 480.00 112.21 146.00 18.12
Arkansas 3,508.23 1,915.90 -0- -0-
Colorado -0- -0- 1,000.00 260.28
Kansas 122,701.88 85,192.04 4,935.53 2,682.61
Louisiana 9,948.87 2,883.85 181,932.79 97,722.95
Mississippi 168.17 55.77 479.00 117.24
Montana 2,037.19 381.54 4,668.95 1,476.17
Nebraska 480.00 168.00 -0- -0-
Nevada -0- -0- 38,825.87 30,147.71
New Mexico 960.00 54.86 161.88 38.85
North Dakota -0- -0- 4,777.15 575.51
Oklahoma 143,366.70 47,719.39 32,499.74 16,214.27
Texas 90,392.22 42,017.94 12,976.71 6,988.05
wyoming -0- -0- 5,826.02 1,381.07
---------- ---------- ---------- ----------
Total 374,043.26 180,501.50 288,229.64 157,622.83
Acreage is held under leases which expire in the absence of production
at the end of a prescribed primary term, and is, therefore, subject to
fluctuation from year to year as new leases are acquired, old leases expire,
and other leases are allowed to terminate by failure to pay annual delay
rentals.
Productive Wells
The Registrant's total gross and net productive wells as of September
30, 1995, were as follows:
Oil Wells Gas Wells
--------- ---------
Gross Net Gross Net
----- --- ----- ---
3,348 250 834 354
Additional information required by this item with respect to the
Registrant's oil and gas operations may be found on pages I-12 through I-23 of
Item 1. BUSINESS, and pages 28 through 30 of the Registrant's Annual Report to
Shareholders for fiscal 1995, "Notes to Consolidated Financial Statements" and
"Note 12 Supplementary Financial Information for Oil and Gas Producing
Activities."
I-32
34
Estimates of oil and gas reserves, future net revenues, and present
value of future net revenues were audited by Southmayd & Associates, Inc.,
independent consultants, 6450 South Lewis Avenue, Suite 220, Tulsa, Oklahoma,
74136. Total oil and gas reserve estimates do not differ by more than 5% from
the total reserve estimates filed with any other federal authority or agency.
CHEMICAL OPERATIONS
The Registrant owns at Baytown, Texas, a chemical plant which
manufactures mercaptans and sulfides for use primarily as warning odorants in
natural and liquefied petroleum gases. The plant occupies approximately ten
acres of a 30-acre tract which the Registrant owns. It is estimated that the
plant has an annual optimum design production capacity of 20,000,000 pounds of
odorants and other mercaptans; however, current operating permits limit
production to 10,000,000 to 12,000,000 pounds per year.
REAL ESTATE OPERATIONS
See Item 1. BUSINESS, pages I-24 through I-26.
STOCK
At the end of fiscal 1995:
The Registrant owned 466,451 shares of the common stock of Sun
Company, Inc., and 329,053 shares of the Sun Company, Inc. preferred series
"A". The Registrant owned 625,000 shares of Oryx Energy Company, Inc.
The Registrant owned 1,600,000 shares of the common stock of Atwood
Oceanics, Inc., a Houston, Texas based company engaged in offshore contract
drilling. The Registrant's ownership of Atwood is approximately 24%.
The Registrant owned 740,000 shares of the common stock of
Schlumberger, Ltd.
I-33
35
The Registrant owned 240,000 shares of the common stock of Phillips
Petroleum Company, Inc.
The Registrant owned 225,000 shares of the common stock of ONEOK.
The Registrant owned 395,000 shares of the common stock of Liberty
Bancorp, Inc., formerly Banks of Mid-America, Inc. Liberty Bancorp, Inc., is a
bank holding company which owns Liberty Bank and Trust Company of Tulsa, N.A.,
and Liberty Bank and Trust Company of Oklahoma City, N.A. The Registrant's
ownership of Liberty Bancorp, Inc., is approximately 4%.
The Registrant also owned lesser holdings in several other publicly
traded corporations.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Registrant.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of the Registrant's
executive officers, together with all positions and offices held with the
Registrant by such executive officers. Officers are elected to serve until the
meeting of the Board of Directors following the next Annual Meeting of
Stockholders and until their successors have been elected and have qualified or
until their earlier resignation or removal.
I-34
36
W. H. Helmerich, III, 72 Director since 1949; Chairman of the Board
Chairman of the Board since December 1, 1960; Chief Executive
Officer from December 1, 1960 to December 6,
1989; and President from December 1, 1960 to
December 11, 1987
Hans Helmerich, 37 Director since March 4, 1987; appointed
President and Chief Executive Officer on
December 6, 1989; President and Chief
Operating Officer from December 11, 1987;
Executive Vice President from March 13, 1987;
Vice President from June 15, 1985; son
of W. H. Helmerich, III, Chairman
Allen S. Braumiller, 61 Appointed Vice President, Exploration, in 1977
President
George S. Dotson, 54 Director since March 7, 1990; appointed Vice
President, Drilling, in 1977 and appointed
President and Chief Operating Officer of
Helmerich & Payne International Drilling Co.
on February 14, 1977
Douglas E. Fears, 46 Appointed Vice President, Finance, on March
Vice President 11, 1988, prior to which he was Internal
Auditor from June 30, 1986
Steven R. Mackey, 44 Appointed Secretary on March 7, 1990; Vice
Vice President and President on March 11, 1988; and General
Secretary Counsel on January 1, 1988, prior to which he
was Associate General Counsel from January 1,
1986
James L. Payne, 56 Appointed Vice President, Real Estate, on
Vice President September 4, 1991; prior to that date he was
Vice President and General Manager of
Helmerich & Payne Properties, Inc., from May
9, 1985
Steven R. Shaw, 44 Appointed Vice President, Production, on
Vice President July 8, 1985
Gordon K. Helm, 42 Chief Accounting Officer of the Registrant;
Controller appointed Controller effective December 10,
1993; Manager of Internal Audit from September
13, 1991; Regional Controller for Memorex
Telex Corporation from 1989; and Manager of
Planning for Memorex Telex Corporation from
1988
I-35
37
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The principal market on which the Registrant's common stock is traded
is the New York Stock Exchange. The high and low sale prices per share for the
common stock for each quarterly period during the past two fiscal years as
reported in the NYSE - Composite Transaction quotations follow:
1994 1995
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
First 34 1/2 26 1/2 31 1/4 25 5/8
Second 30 26 27 1/2 24 1/2
Third 27 1/8 25 1/8 31 26 5/8
Fourth 28 1/8 25 5/8 30 27 5/8
The Registrant paid quarterly cash dividends during the past two years
as shown in the following table:
Paid per Share Total Payment
-------------- -------------
Fiscal Fiscal
------ ------
Quarter 1994 1995 1994 1995
------- ---- ---- ---- ----
First $0.120 $0.125 $2,956,498 $3,089,758
Second 0.120 0.125 2,960,098 3,087,958
Third 0.120 0.125 2,960,314 3,092,973
Fourth 0.125 0.125 3,087,902 3,094,813
The Registrant paid a cash dividend of $0.125 per share on December 1,
1995, to shareholders of record on November 15, 1995. Payment of future
dividends will depend on earnings and other factors.
As of December 15, 1995, there were 1,656 record holders of the
Registrant's common stock as listed by the transfer agent's records.
II - 1
38
Item 6. SELECTED FINANCIAL DATA
Five-year Summary of Selected Financial Data
--------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
Sales, operating,
and other revenues $213,946 $239,700 $315,097 $329,001 $325,776
Income from con-
tinuing operations 21,241 10,849 24,550 20,971 9,751
Income from con-
tinuing operations
per common share 0.88 0.45 1.01 0.86 0.40
Total assets 575,168 585,504 610,935 624,827 710,165
Long-term debt 5,693 8,339 3,600 -0- -0-
Cash dividends
declared per
common share 0.46 0.47 0.48 0.49 0.50
Registrant adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 121 during the fourth quarter of fiscal 1995
which resulted in an impairment charge of $20,000,000 to Registrant's oil and
gas division and $2,000,000 to its real estate division. These non-cash,
non-recurring charges reduced income from continuing operations for the quarter
and fiscal year by 13.6 million dollars ($0.55 per share).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information required by this item may be found on pages 12 through 16,
Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 1995,
which is incorporated herein by reference.
II - 2
39
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item may be found on pages 17 through 30
in the Registrant's Annual Report to Shareholders for fiscal 1995, which is
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The required information regarding the change in Registrant's
certifying accountant was previously reported in a Current Report on Form 8-K
filed with the Securities and Exchange Commission on April 7, 1994.
II - 3
40
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item with respect to Directors and
with respect to delinquent filers pursuant to Item 405 of Regulation S-K is
incorporated by reference from the Registrant's definitive Proxy Statement for
the Annual Meeting of Stockholders to be held March 6, 1996, to be filed with
the Commission not later than 120 days after September 30, 1995. See pages
I-34 through I-35 for information covering the Registrant's Executive Officers.
Item 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 6, 1996, to be filed with the Commission not later than 120 days after
September 30, 1995.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 6, 1996, to be filed with the Commission not later than 120 days after
September 30, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held
March 6, 1996, to be filed with the Commission not later than 120 days after
September 30, 1995.
III - 1
41
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Document List
1. The financial statements called for by Item 8 are incorporated
herein by reference from the Registrant's Annual Report to
Shareholders for fiscal 1995.
2. The Report of Independent Public Accountants on Financial
Statements and Financial Statement Schedules for the fiscal
year ended September 30, 1993, is filed as a part of this
Form.
3. Exhibits required by Item 601 of Regulation S-K:
Exhibit Number:
--------------
3.1 Restated Certificate of Incorporation and Amendment to Restated Certificate of Incorporation of
the Registrant are incorporated herein by reference from the Registrant's Annual Report on Form
10-K to the Securities and Exchange Commission for fiscal 1987.
3.2 By-Laws of the Registrant are incorporated herein by reference from the Registrant's Annual
Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990.
4.1 Rights Agreement dated as of January 21, 1986, between the Registrant and The First National
Bank of Boston is incorporated herein by reference to the Registrant's Form 8-A dated January
30, 1986.
4.2 Amendment to Rights Agreement dated as of December 5, 1990, between the Registrant and The
Liberty National Bank and Trust Company of Oklahoma City is incorporated herein by reference to
the Registrant's Form 8, Amendment No. 1 to Form 8-A, dated December 11, 1990.
* 10.1 Incentive Stock Option Plan is incorporated herein by reference to Exhibit 4.2 to the
Registrant's Registration Statement No. 33-16771 on Form S-8.
IV-1
42
* 10.2 Consulting Services Agreement between W. H. Helmerich, III, and the Registrant effective
January 1, 1990, as amended, is incorporated herein by reference from the Registrant's Annual
Report on Form 10-K to the Securities and Exchange Commission for fiscal 1990.
* 10.3 Restricted Stock Plan for Senior Executives of Helmerich & Payne, Inc., is incorporated herein
by reference to Exhibit "A" to the Registrant's Proxy Statement dated January 26, 1990.
* 10.4 Form of Restricted Stock Award Agreement for the Restricted Stock Plan for Senior Executives of
Helmerich & Payne, Inc., together with all amendments thereto, is incorporated herein by
reference from the Registrant's Annual Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1990.
* 10.5 Supplemental Retirement Income Plan for Salaried Employees of Helmerich & Payne, Inc., is
incorporated herein by reference from the Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1990.
* 10.6 Helmerich & Payne, Inc. 1990 Stock Option Plan is incorporated herein by reference to Exhibit
"A" to Registrant's Proxy Statement dated January 25, 1991.
* 10.7 Supplemental Savings Plan for Salaried Employees of Helmerich and Payne, Inc., is incorporated
herein by reference from Registrant's Annual Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1993.
13. The Registrant's Annual Report to Shareholders for fiscal 1995.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Public Accountants.
23.2 Consent of Independent Auditors.
27. Financial Data Schedule.
____________________
* Compensatory Plan or Arrangement.
IV-2
43
(b) Report on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended September 30, 1995.
IV-3
44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1993
To the Shareholders and Board of Directors of Helmerich & Payne, Inc.:
We have audited the consolidated balance sheet of Helmerich & Payne, Inc.
(a Delaware corporation) and subsidiaries as of September 30, 1993, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a) are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. The
information in these schedules as of September 30, 1993, and for the year then
ended, have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Helmerich & Payne, Inc. and
subsidiaries as of September 30, 1993, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
November 16, 1993
IV-4
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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:
HELMERICH & PAYNE, INC.
By Hans Helmerich
----------------------------
Hans Helmerich, President
(Chief Executive Officer)
Date: December 18, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By William L. Armstrong By Glenn A. Cox
-------------------------------- ---------------------------------
William L. Armstrong, Director Glenn A. Cox, Director
Date: December 18, 1995 Date: December 18, 1995
By George S. Dotson By C. W. Flint, Jr.
-------------------------------- --------------------------------
George S. Dotson, Director C. W. Flint, Jr., Director
Date: December 18, 1995 Date: December 18, 1995
By Hans Helmerich By W. H. Helmerich, III
-------------------------------- --------------------------------
Hans Helmerich, Director and CEO W. H. Helmerich, III, Director
Date: December 18, 1995 Date: December 18, 1995
By George A. Schaefer By H. W. Todd
-------------------------------- --------------------------------
George A. Schaefer, Director H. W. Todd, Director
Date: December 18, 1995 Date: December 18, 1995
By John D. Zeglis By Douglas E. Fears
-------------------------------- --------------------------------
John D. Zeglis, Director Douglas E. Fears
Date: December 18, 1995 (Principal Financial Officer)
Date: December 18, 1995
By Gordon K. Helm
--------------------------------
Gordon K. Helm, Controller
(Principal Accounting Officer)
Date: December 18, 1995
46
HELMERICH & PAYNE, INC.
Index to Exhibits Not Incorporated by Reference
Exhibit No. Page
- ----------- ----
13. Annual Report to Shareholders for fiscal 1995 48
22. Subsidiaries of the Registrant 84
23.1 Consent of Independent Public Accountants 85
23.2 Consent of Independent Auditors (Ernst & Young LLP) 86
27 Finanical Data Schedule 87