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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, 1996
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 16, 1996, the aggregate market value of the voting stock held
by non-affiliates was $1,215,990,753.
Number of shares of common stock outstanding at December 16, 1996:
24,914,891.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
1996 -- Parts I, II, and IV.
(2) Proxy Statement for Annual Meeting of Security Holders to be held March 5,
1997 -- 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, 1996
PART I
Item 1. BUSINESS
Helmerich & Payne, Inc. (the "Registrant"), 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 ownership, development, and
operation of commercial real estate and was until August 30, 1996, engaged in
the manufacture and distribution of odorants for use in the gas transmission
and distribution industry.
The Registrant is organized into three separate autonomous operating
divisions being contract drilling; oil and gas exploration, production and
natural gas marketing; 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
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decentralization is balanced by a centralized finance division, which handles
all accounting, data processing, budgeting, insurance, cash management, and
related activities.
Most of the Registrant's current exploration efforts are 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, Michigan, and Mississippi. Substantially all of the
Registrant's gas production is sold to and resold by its marketing subsidiary.
This subsidiary also purchases gas from unaffiliated third parties for resale.
The Registrant's domestic contract drilling is conducted primarily 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 1996 in five international locations: Venezuela,
Ecuador, Colombia, Trinidad and Tobago, and Bolivia.
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 international areas. 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. The Registrant also
drills for its own
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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 1996 accounted for approximately 19% 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 land drilling rig may be moved from location to location without modification
to the rig. Conversely, a platform rig is specifically designed to perform
drilling operations upon a particular platform. While a platform rig may be
moved from its original platform, significant expense is incurred to modify a
platform rig to each subsequent platform. 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.
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The Registrant's workover rigs are equipped with engines, drawworks, a
mast, pumps, and blowout preventers. 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.
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
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adequately compensate contractors for the added risks. Contracts for use of
the Registrant's drilling equipment are "well-to-well" or for a fixed term.
"Well-to-well" contracts are cancelable at the option of either party upon the
completion of drilling at any one site. 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-9.
Domestic Drilling
The Registrant believes it is a major land and offshore platform
drilling contractor in the domestic market. At the end of September, 1996, the
Registrant had 33 (27 land rigs and 6 platform rigs) of a total of 41 available
rigs operating in the United States and had management contracts for three
operator owned rigs in offshore California.
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The Registrant believes that it is competitively strongest in deep
drilling rigs. Twenty-four of its existing rigs are capable of drilling to
depths in excess of 20,000 feet.
In March of 1995, the Registrant was awarded a three-year term drilling
contract by a major oil company to construct and operate a new generation rig
upon a tension leg platform ("TLP") located in the Gulf of Mexico. This is the
first rig that the Registrant has operated on a TLP. The TLP concept allows
drilling operations to be conducted in water depths of up to approximately
5,000 feet using current technology. Drilling operations on traditional fixed
platforms have been limited to depths of no more than approximately 1,400 feet.
Registrant commenced drilling operations on the TLP in May of 1996.
During fiscal 1996 the same major oil company awarded the Registrant
three additional term contracts for construction and operation of a self-moving
minimum space fixed platform rig and two TLP rigs. These rigs are to be
located in the Gulf of Mexico.
The self-moving minimum space rig is designed to be moved without the
use of expensive derrick barges. This rig is expected to commence drilling
operations in March, 1997, under an 18-month term drilling contract.
The second TLP rig is expected to commence drilling in May of 1997,
under a three-year term drilling contract. The third TLP rig is scheduled to
commence drilling in September of 1998, and it, too, will be under a three-year
term drilling contract.
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
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& 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 21
drilling rigs in Venezuela. The Registrant had a utilization rate of 94% for
these rigs during fiscal 1996. The Registrant worked for all three government
owned producing companies in Venezuela (Corpoven, Maraven and Lagoven) during
the fiscal year ended September 30, 1996. Collectively, revenues from the
three producing companies accounted for approximately 13% of the Registrant's
consolidated revenues during fiscal 1996. Although the Registrant believes its
relationship with such producing companies is good, the loss of this business
could have an adverse effect on Registrant.
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. Any
such nationalization could result in Registrant's loss of all or a portion of
its assets and business in Venezuela.
The Registrant presently owns and operates ten drilling rigs in
Colombia. The Registrant's utilization rate for such rigs was 90% during
fiscal 1996. During fiscal 1996 the revenue generated by Colombian drilling
operations contributed approximately 17% of the Registrant's consolidated
revenues.
In addition to its operations in Venezuela and Colombia, the Registrant
in fiscal 1996 owned and operated four rigs in Ecuador, one rig in Trinidad and
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Tobago, and two rigs in Bolivia. During 1996, the rig located in Trinidad and
Tobago was moved to Venezuela and one rig operated in Ecuador was retired. In
Ecuador, Trinidad and Tobago, and Bolivia, the contracts are with large
international oil companies.
In August of 1994, a venture owned 50% by the Registrant and 50% by
Atwood Oceanics, Inc., was awarded a term contract in Australia for the design,
construction and operation of a new generation offshore platform rig. The rig,
which incorporates some of the latest technology in instrumentation and remote
control mechanization of drilling equipment, has been shipped to Australia and
is in the process of being mobilized to its location. It is expected that
drilling operations will commence in January of 1997.
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. Land 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
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services based upon its engineering design expertise, operational efficiency,
safety and environmental awareness.
The Registrant specializes in deep drilling for natural gas. During the
past several years, it appears that 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.
The Registrant believes that it has adequate insurance coverage for
comprehensive general liability, public liability, property damage (including
insurance against loss by fire and storm, blowout, and cratering risks),
workers compensation and employer's liability. No insurance is carried
against loss of earnings or business interruption. The Registrant is unable to
obtain significant amounts of insurance to cover risks of underground reservoir
damage; however, the Registrant is generally indemnified under its drilling
contracts from this risk. The Registrant's present insurance coverage has
been contracted through fiscal 1997. 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 1997 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
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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
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 1996, approximately 34% of the Registrant's consolidated
revenues were generated from international contract drilling operations. Over
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95% 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 invoice billings are
in U.S. dollars and the other 35% are in the local currency, the bolivar. The
Registrant is exposed to 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. In April of 1996, the bolivar
was again devalued when the government decided to abolish its fixed rate policy
and to allow a floating market exchange rate. During fiscal 1996, the
Registrant experienced losses of approximately US$2 million as a result of the
devaluation of the bolivar. These losses were more than offset by gains
realized from the purchase of local currency through a government approved
mechanism ("Brady Bonds") which permitted the Registrant to purchase local
currency at favorable market exchange rates. The exchange rate has only
increased by approximately 2% from April of 1996 to November of 1996, and the
Registrant is unable to predict future devaluation. If the bolivar is devalued
significantly during the balance of fiscal 1997, the Registrant could
experience material devaluation losses.
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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.
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.
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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.
The Registrant's exploration and production division includes
geographical exploitation teams comprised of geological, engineering, and land
personnel who 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
allows each team to gain greater expertise in its respective geographical area
and reduces risk in the development of prospects. Registrant has recently
hired two geologists and two geophysicists to supplement its exploration
activities.
The Registrant's Rocky East prospect located in Washita County,
Oklahoma, contained the Registrant's most significant wildcat discovery during
fiscal 1996. The Registrant owns a 100% working interest in the discovery well
and possesses a working interest ranging from 81% to 100% in each of the five
development wells that have been drilled in this prospect. During fiscal 1996
the Rocky East prospect produced approximately 3.3 bcf (gross) of gas with
current daily natural gas production of approximately 20,000 mcf.
During fiscal 1996 the Registrant owned an interest in several wells
drilled in the Masters Creek area of the Austin Chalk in Louisiana. The
Registrant possessed an overriding royalty interest in three wells drilled by a
major oil company, and possessed a carried working interest in one well drilled
by the same major oil company and one well drilled by a large independent.
Positive outcomes have resulted in the participation by the
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Registrant with a 16% working interest in two additional wells in the Masters
Creek area. The Registrant will evaluate the results of these wells and
determine the amount of its participation, if any, in additional drilling in
the area and the extent of its continued payment of annual rentals covering its
approximate 2,300-acre net leasehold interest in the Masters Creek area. Just
west of this area, the Registrant owns 13,000 acres in the Artillery Range
prospect. The Registrant possesses a carried working interest in two wells
drilled in this prospect during fiscal 1996. A third well has been proposed,
and if such well is drilled, the Registrant intends to participate with a
carried working interest. During fiscal 1996, the Registrant spent $1,182,000
in drilling and completion costs in the Austin Chalk area. Depending on the
Registrant's continued analysis of the Austin Chalk area, fiscal year 1997
exploration expenditures could range from $6 to $11 million.
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 1996, the Registrant participated in 41
development and/or wildcat wells, which resulted in new discoveries of
approximately 21.3 bcf of gas and 298,986 barrels of oil and condensate. The
Registrant participated in 22 additional development wells, which resulted in
the development of approximately 5.7 bcf of gas and 12,370 barrels of oil and
condensate which was previously classified as proved undeveloped or proved
developed nonproducing reserves. A total of $24,005,000 was spent in the
Registrant's exploration and development program during fiscal 1996. This
figure is exclusive of expenditures for acreage and acquisitions of proved oil
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and gas reserves. The Registrant's total company-wide acquisition cost for
acreage in fiscal 1996 was $3,178,214.
The Registrant spent $255,598 for the acquisition of proved oil and gas
reserves during fiscal 1996. Reserves from such acquisitions totaled
approximately 0.6 bcf of natural gas and 21,912 barrels of crude oil and
condensate. In addition, the Registrant sold 10 properties for $403,198. The
reserves associated with these sales were approximately 266,000 mcf of natural
gas and 1,477 barrels of crude oil.
The Registrant's fiscal 1997 exploration and production budget of
approximately $32,800,000 is 38% greater than its actual exploration and
production expenditures in fiscal 1996.
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 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
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is moving towards a state of equilibrium. As demonstrated by the winter of
1995-1996, 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
utilization 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 subsequent pipeline
expansions) 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 believes that it should prepare for increased exploration
activity without committing to a definite drilling timetable involving large
expenditures. The Registrant also believes that the competition for the
acquisition of gas producing properties will continue. Due to the recent
increase in oil and gas prices and considering the Registrant's conservative
acquisition strategy, the Registrant believes that it may be unable to acquire
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significant proved developed producing reserves. However, the Registrant
intends to continue its review of properties in areas where the Registrant has
expertise. 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. The effect of these competitive factors on the Registrant cannot
be predicted with certainty.
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
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
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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 compliance with existing federal, state and local laws, rules and
regulations will not have a material adverse effect upon its capital
expenditures, earnings or competitive position.
Regulatory Controls
The Registrant is subject to regulation by the Federal Energy Regulatory
Commission ("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.
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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. Order No. 636 and certain
related proceedings were the subject of an appeal to the United States Court of
Appeals for the District of Columbia Circuit. That court recently issued its
decision in the appeal of Order No. 636 and largely upheld the fundamental
tenets of the order. Rehearing has since been denied, however, the court's
decision is still subject to potential applications for a writ of certiorari to
the United States Supreme Court. In addition, several appeals in individual
pipeline proceedings and related dockets remain pending. It is therefore not
possible for the Registrant to predict what effect, if any, the ultimate
outcome of these regulatory and judicial review proceedings will have on the
FERC's open-access regulations or the Registrant's operations. Assuming that
Order 636
I - 19
21
is upheld in its entirety, the Registrant believes that it will benefit from
the provisions of such Order.
The FERC has 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.
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. A number of states have either enacted new
laws or are considering the adequacy of existing laws affecting gathering rates
and/or services. Thus, natural gas gathering may receive greater regulatory
scrutiny by state agencies. In addition, the FERC has approved several
I - 20
22
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. An appellate court
recently upheld, in large part, several of the initial FERC orders delineating
its gathering policy. It is not possible at this time to predict the ultimate
effect of the 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, at the federal level, in October of
1996, the President signed the Accountable Pipeline Safety and Partnership Act
of 1996, which, among other things, gives the public an opportunity to comment
on pipeline risk management programs, promotes communication regarding safety
issues to residents along pipeline right-of-ways, and encourages the
examination of remote control valves along pipelines. 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 - 21
23
assigned a larger allowable than those units without infill wells. As a
consequence of this order, the Registrant has drilled 80 infill wells and
believes that it will be necessary in the next two fiscal years to drill an
additional 58 wells with the total costs to the Registrant ranging from $5 to
$6 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 does not anticipate that
there will be no material impact on its liquidity, capital expenditures, or
international operations.
I - 22
24
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 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
eighth 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 1996, HPESI's sales of third-party gas constituted
approximately 14.9% 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. The remainder of the Registrant's gas is sold under spot market
contracts having a duration of 30 days or less. For fiscal 1997, HPESI's term
gas sales contracts provide for the sale of approximately 6 bcf of gas. HPESI
presently
I - 23
25
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-15 through I-24 regarding the market, competition, and regulation
of natural gas.
CHEMICAL OPERATIONS
On August 23, 1996, the Registrant and its wholly-owned subsidiary,
Natural Gas Odorizing, Inc. ("NGO"), together with Occidental Petroleum
Corporation ("Buyer"), and its wholly-owned subsidiary, OPC Acquisition Corp.
("OPC"), entered into an Agreement and Plan of Merger pursuant to which Buyer
agreed to purchase all of the Registrant's chemical business located in
Baytown, Texas (the "Business") pursuant to a tax-free merger between NGO and
OPC. On August 30, 1996 ("Closing"), the sale of the Business was consummated
such that OPC was merged with and into NGO with NGO being the surviving
corporation. In consideration of such disposition, the Registrant received
2,018,928 shares of Buyer's common stock which equaled approximately $48
million as of Closing.
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
I - 24
26
an eight-story medical office building which provides approximately 76,379
square feet of net leasable medical office space (77% 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.
At the end of the 1996 fiscal year the Registrant owned 18 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. Fourteen 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 1996.
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 95%. 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
I - 25
27
containing approximately 112,500 square feet. Occupancy has remained at 100%.
The Registrant believes that a high quality office park, with peripheral
commercial, office/warehouse, and hotel sites, is the best development use for
the remaining land.
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 68% to 79% during
fiscal 1996 due primarily to the addition of several new tenants. 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 is currently at 92%.
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 1996,
occupancy increased from 65% to 88% primarily due to the addition of one new
tenant. 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 1996, occupancy remained at 81%.
FINANCIAL
Information relating to Revenue and Income by Business Segments may be
found on page 10 of the Registrant's Annual Report to Shareholders for fiscal
1996, which is incorporated herein by reference.
I - 26
28
EMPLOYEES
The Registrant had 1,697 employees within the United States (6 of which
were part-time employees) and 1,612 employees in international operations as of
September 30, 1996.
Item 2. PROPERTIES
CONTRACT DRILLING
The following table sets forth certain information concerning the
Registrant's domestic drilling rigs as of September 30, 1996:
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
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
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
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
100 Deep 26,000 * Gulf of Mexico
106 Deep 26,000 * Gulf of Mexico
107 Deep 26,000 * Gulf of Mexico
201 Deep 26,000 * Gulf of Mexico
155 Medium Depth 14,000 Texas
161 Very Deep 30,000 Louisiana
162 Deep 20,000 Texas
163 Very Deep 30,000 Oklahoma
* 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,
-------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Number of rigs owned at end of
period 39 42 47 41 41
Average rig utilization rate
during period (1) 42% 53% 69% 71% 82%
(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 as of September 30, 1996:
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
- ----------- -------------- --------------- --------
14 Workover/drilling 6,000 Venezuela
18 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
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 Venezuela
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
127 Very Deep 30,000 Venezuela
I - 29
31
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
- ----------- -------------- --------------- --------
156 Medium Depth 14,000 Venezuela
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,
-------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Number of rigs owned at end of
period 30 29 29 35 36
Average rig utilization rate
during period (1) 69% 68% 88% 84% 85%
(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 1994 through 1996 are shown below:
Average Sales Average Lifting
Year Net Barrels Price per barrel Cost per Barrel
---- ----------- ---------------- ---------------
1994 887,455 $14.83 $7.74
1995 808,058 $16.37 $7.86
1996 809,571 $19.00 $7.90
I - 30
32
Natural Gas Sales
The Registrant's net sales of natural and casinghead gas for the three
fiscal years 1994 through 1996 are as follows:
Average Sales Average Lifting
Year Net Mcf Price per Mcf Cost per Mcf
---- ------- ------------- ---------------
1994 26,627,776 $1.72 $0.3760
1995 26,421,434 $1.27 $0.3640
1996 34,535,184 $1.75 $0.3292
Following is a summary of the net wells drilled by the Registrant for
the fiscal years ended September 30, 1994, 1995, and 1996:
Exploratory Wells Development Wells
----------------- -----------------
1994 1995 1996 1994 1995 1996
---- ---- ---- ---- ---- ----
Productive 1.021 0.7 4.448 12.334 20.7695 23.625
Dry 1.436 2.596 5.250 0.233 3.2867 2.000
On September 30, 1996, the Registrant was in the process of drilling or
completing six gross or 1.778 net wells.
I - 31
33
Acreage Holdings
The Registrant's holdings of acreage under oil and gas leases, as of
September 30, 1996, were as follows:
Developed Acreage Undeveloped Acreage
----------------- -------------------
Gross Net Gross Net
----- --- ----- ---
Alabama 480.00 112.21 146.00 18.12
Arkansas 3,068.23 1,725.11 -0- -0-
Kansas 122,861.88 85,446.35 15,561.60 12,407.10
Louisiana 10,046.29 2,898.34 162,888.10 88,301.46
Michigan -0- -0- 14,915.93 14,862.32
Mississippi -0- -0- 0.83 0.10
Montana 2,037.19 381.54 4,668.95 1,476.17
Nebraska 480.00 168.00 -0- -0-
Nevada -0- -0- 38,665.68 29,987.71
New Mexico 960.00 54.86 161.88 38.85
North Dakota 279.96 11.52 178.16 61.60
Oklahoma 138,424.27 51,114.65 40,948.55 22,952.43
Texas 88,443.43 41,874.04 10,220.43 5,143.51
Wyoming -0- -0- 1,667.94 316.43
---------- ---------- ---------- ----------
Total 367,081.25 183,786.62 290,024.05 175,565.80
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, 1996, were as follows:
Oil Wells Gas Wells
--------- ---------
Gross Net Gross Net
----- --- ----- ---
3,340 241 860 378
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-24 of
I - 32
34
Item 1. BUSINESS, and pages 28 through 30 of the Registrant's Annual Report to
Shareholders for fiscal 1996, "Notes to Consolidated Financial Statements" and
"Note 12 Supplementary Financial Information for Oil and Gas Producing
Activities."
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.
REAL ESTATE OPERATIONS
See Item 1. BUSINESS, pages I-24 through I-26.
STOCK
At the end of fiscal 1996:
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.
The Registrant owned 240,000 shares of the common stock of Phillips
Petroleum Company, Inc.
The Registrant owned 2,018,928 shares of the common stock of Occidental
Petroleum Corporation, Inc.
I - 33
35
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, 73 Director since 1949; Chairman of the Board
Chairman of the Board since December 1, 1960
Hans Helmerich, 38 Director since March 4, 1987; President
President and Chief Executive Officer since December
6, 1989
George S. Dotson, 55 Director since March 7, 1990; Vice
Vice President President, Drilling, since February 14, 1977
and President and Chief Operating Officer of
Helmerich & Payne International Drilling Co.
since February 14, 1977
Douglas E. Fears, 47 Vice President, Finance, since March 11,
Vice President 1988
Steven R. Mackey, 45 Secretary since March 7, 1990; Vice
Vice President and President and General Counsel since March
Secretary 11, 1988
Steven R. Shaw, 45 Vice President, Production, since
Vice President July 8, 1985; Vice President, Exploration
and Production since March 6, 1996
Gordon K. Helm, 43 Chief Accounting Officer of the Registrant;
Controller appointed Controller effective December 10,
1993; and Manager of Internal Audit from
September 13, 1991
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:
1995 1996
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
First 31 1/4 25 5/8 30 1/8 24 1/2
Second 27 1/2 24 1/2 34 1/2 27
Third 31 26 5/8 38 1/4 33
Fourth 30 27 5/8 43 5/8 34 3/4
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 1995 1996 1995 1996
------- ---- ---- ---- ----
First $0.125 $0.125 $3,089,758 $3,095,578
Second 0.125 0.125 3,087,958 3,100,568
Third 0.125 0.125 3,092,973 3,104,724
Fourth 0.125 0.130 3,094,813 3,229,596
The Registrant paid a cash dividend of $0.13 per share on December 2,
1996, to shareholders of record on November 15, 1996. Payment of future
dividends will depend on earnings and other factors.
As of December 16, 1996, there were 1,514 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
--------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
Sales, operating,
and other revenues $226,219 $300,723 $310,152 $306,721 $393,255
Income from con-
tinuing operations 8,973 22,158 17,108 5,788 45,426
Income from con-
tinuing operations
per common share 0.37 0.91 0.70 0.24 1.84
Total assets 585,504 610,935 624,827 707,061 821,914
Long-term debt 8,339 3,600 -0- -0- -0-
Cash dividends
declared per
common share 0.47 0.48 0.49 0.50 0.51
The Five-year Summary of Selected Financial Data described above
excludes results of NGO operations. See page I-24 "CHEMICAL OPERATIONS" for a
discussion of the NGO transaction.
II - 2
39
The following Five-year Summary of Selected Financial Data includes only
the results of NGO operations.
Five-year Summary of Selected Financial Data for NGO
----------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Sales, operating,
and other revenues $13,481 $14,374 $18,849 $19,055 $19,540
Income from con-
tinuing operations 1,876 2,392 3,863 3,963 3,090
Income from con-
tinuing operations
per common share 0.08 0.10 0.16 0.16 0.13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information required by this item may be found on pages 11 through 16,
Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 1996,
which is incorporated herein by reference.
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 1996, which is
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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 5, 1997, to be filed with
the Commission not later than 120 days after September 30, 1996. 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 5, 1997, to be filed with the Commission not later than 120 days after
September 30, 1996.
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 5, 1997, to be filed with the Commission not later than 120 days after
September 30, 1996.
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 5, 1997, to be filed with the Commission not later than 120 days after
September 30, 1996.
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 1996.
2. 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.
3.2 By-Laws of the Registrant.
4.1 Rights Agreement dated as of January 8, 1996, between the
Registrant and The Liberty National Bank and Trust Company
of Oklahoma City, N.A. is incorporated herein by reference
to the Registrant's Form 8-A, dated January 17, 1996.
* 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.
* 10.2 Form of Incentive Stock Option Plan Stock Option Contract
for the Incentive Stock Option Plan.
* 10.3 Consulting Services Agreement between W. H. Helmerich,
III, and the Registrant effective January 1, 1990, as
amended.
* 10.4 Restricted Stock Plan for Senior Executives of Helmerich &
Payne, Inc.
* 10.5 Form of Restricted Stock Award Agreement for the
Restricted Stock Plan for Senior Executives of Helmerich &
Payne, Inc., together with all amendments thereto.
- ---------------
* Compensatory Plan or Arrangement.
IV-1
42
* 10.6 Supplemental Retirement Income Plan for Salaried Employees
of Helmerich & Payne, Inc.
* 10.7 Helmerich & Payne, Inc. 1990 Stock Option Plan.
* 10.8 Form of Nonqualified Stock Option Agreement for the 1990
Stock Option Plan is incorporated by reference to Exhibit
99.2 to the Registrant's Registration Statement No. 33-
55239 on Form S-8, dated August 24, 1994.
* 10.9 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.
* 10.10 Agreement and Plan of Merger is incorporated herein by
reference from Registrant's Report on Form 8-K filed with
the Securities and Exchange Commission on September 12,
1996.
13. The Registrant's Annual Report to Shareholders for fiscal
1996.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
(b) Report on Form 8-K
Form 8-K with attached Agreement and Plan of Merger and Proforma
Financial Information covering the NGO transaction was filed with the
Securities and Exchange Commission on September 12, 1996.
- ---------------
* Compensatory Plan or Arrangement.
IV-2
43
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, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below 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, 1996 Date: December 18, 1996
By George S. Dotson By Hans Helmerich
-------------------------------- --------------------------------
George S. Dotson, Director Hans Helmerich, Director and CEO
Date: December 18, 1996 Date: December 18, 1996
By W. H. Helmerich, III By L. F. Rooney, III
-------------------------------- --------------------------------
W. H. Helmerich, III, Director L. F. Rooney, III, Director
Date: December 18, 1996 Date: December 18, 1996
By George A. Schaefer By John D. Zeglis
-------------------------------- --------------------------------
George A. Schaefer, Director John D. Zeglis, Director
Date: December 18, 1996 Date: December 18, 1996
By Douglas E. Fears By Gordon K. Helm
-------------------------------- --------------------------------
Douglas E. Fears Gordon K. Helm, Controller
(Principal Financial Officer) (Principal Accounting Officer)
Date: December 18, 1996 Date: December 18, 1996
44
INDEX TO EXHIBITS NOT INCORPORATED BY REFERENCE
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
3.1 Restated Certificate of Incorporation and Amendment to
Restated Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
* 10.2 Form of Incentive Stock Option Plan Stock Option Contract
for the Incentive Stock Option Plan.
* 10.3 Consulting Services Agreement between W. H. Helmerich,
III, and the Registrant effective January 1, 1990, as
amended.
* 10.4 Restricted Stock Plan for Senior Executives of Helmerich &
Payne, Inc.
* 10.5 Form of Restricted Stock Award Agreement for the
Restricted Stock Plan for Senior Executives of Helmerich &
Payne, Inc., together with all amendments thereto.
* 10.6 Supplemental Retirement Income Plan for Salaried Employees
of Helmerich & Payne, Inc.
* 10.7 Helmerich & Payne, Inc. 1990 Stock Option Plan.
13. The Registrant's Annual Report to Shareholders for fiscal
1996.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
- ---------------
* Compensatory Plan or Arrangement.