Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Form 10-K for Fiscal Year End September 30, 2000 44 151K
2: EX-13 Annual Report to Shareholders for Fiscal 2000 40 227K
3: EX-22 Subsidiaries of the Registrant 1 6K
4: EX-23.1 Consent of Independent Auditors 1 6K
5: EX-27 Financial Data Schedule 1 6K
10-K405 — Form 10-K for Fiscal Year End September 30, 2000
Document Table of Contents
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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, 2000
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)
[Download Table]
DELAWARE 73-0679879
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
UTICA AT TWENTY-FIRST STREET, TULSA, OKLAHOMA 74114
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (918) 742-5531
Securities registered pursuant to Section 12(b) of the Act:
[Download Table]
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
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. [X]
At December 15, 2000, the aggregate market value of the voting stock held
by non-affiliates was $1,698,216,449.
Number of shares of common stock outstanding at December 15,
2000: 50,087,254.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the fiscal year ended September 30,
2000 -- Parts I, II, and IV.
(2) Proxy Statement for Annual Meeting of Security Holders to be held March 7,
2001 -- Part III.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS REPORT INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS
INCLUDED IN THIS REPORT, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING
THE REGISTRANT'S FUTURE FINANCIAL POSITION, BUSINESS STRATEGY, BUDGETS,
PROJECTED COSTS AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
ARE FORWARD-LOOKING STATEMENTS. IN ADDITION, FORWARD-LOOKING STATEMENTS
GENERALLY CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY", "WILL", "EXPECT", "INTEND", "ESTIMATE", "ANTICIPATE", "BELIEVE", OR
"CONTINUE" OR THE NEGATIVE THEREOF OR SIMILAR TERMINOLOGY. ALTHOUGH THE
REGISTRANT BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL
PROVE TO BE CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE REGISTRANT'S EXPECTATIONS ARE DISCLOSED IN
MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION ON PAGES 10 THROUGH 17 IN REGISTRANT'S ANNUAL REPORT TO THE
SHAREHOLDERS FOR FISCAL 2000 AND IN THE REMAINDER OF THIS REPORT. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
REGISTRANT, OR PERSONS ACTING ON ITS BEHALF, ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS. THE REGISTRANT ASSUMES NO DUTY TO UPDATE
OR REVISE ITS FORWARD-LOOKING STATEMENTS BASED ON CHANGES IN INTERNAL ESTIMATES
OR EXPECTATIONS OR OTHERWISE.
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, 2000
PART I
Item 1. BUSINESS
Helmerich & Payne, Inc. (the "Registrant"), was incorporated under the
laws of the State of Delaware on February 3, 1940, and is successor to a
business originally organized in 1920. Registrant is primarily engaged 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.
The Registrant is organized into three separate autonomous operating
divisions being contract drilling; oil & gas exploration and production
operations; 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, conducts their respective
business through wholly owned subsidiaries. Operating 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, 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
Oklahoma, Texas, and Louisiana, and offshore from platforms in the Gulf of
Mexico and offshore California. The Registrant has also operated during fiscal
2000 in six international locations: Venezuela, Ecuador, Colombia, Argentina,
Bolivia and Equatorial Guinea.
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 primarily 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 operates certain 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 oil and gas division. In South America, the Registrant's current customers
include the Venezuelan state petroleum company and major international oil
companies.
In fiscal 2000, Registrant received approximately 43% of its
consolidated revenues from the Registrant's ten largest contract drilling
customers. BP and Shell Oil Co., including their affiliates, (respectively, "BP"
and "Shell") are the Registrant's two largest contract drilling customers. The
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Registrant performs drilling services for BP and Shell on a world-wide basis.
Revenues from drilling services performed for BP and Shell in fiscal 2000
accounted for approximately 15% and 7%, respectively, of the Registrant's
consolidated revenues for the same period. While the Registrant believes that
its relationship with all of these customers is good, the loss of BP or Shell
or a simultaneous loss of several of its larger customers would have a material
adverse effect on the drilling subsidiary and the Registrant.
The Registrant provides drilling rigs, equipment, personnel, and camps
on a contract basis. These services are provided so that Registrant's customers
may explore for and develop oil and gas from onshore areas and from fixed and
tension leg platforms in offshore areas. Each of the drilling rigs consists of
engines, drawworks, a mast, pumps, 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 for operation on each
subsequent platform. In addition to traditional platform rigs, Registrant
operates self-moving minimum space platform drilling rigs and drilling rigs to
be used on tension leg platforms. The minimum space rig is designed to be moved
without the use of expensive derrick barges. The tension leg platform rig
allows drilling operations to be conducted in much deeper water than
traditional fixed platforms. A helicopter rig is one that can be disassembled
into component part loads of approximately 4,000-20,000 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.
During fiscal 1998, Registrant put to work a new generation of six
highly mobile/depth flexible new rigs (individually the "FlexRig(TM)"). The
FlexRig(TM) may reduce rig move times by at least 50%. In addition, the
FlexRig(TM)allows a greater depth flexibility of between 8,000 to 18,000 feet
and provides greater operating efficiency. During fiscal 2000, the Registrant
ordered 12 new FlexRigs(TM) at an approximate cost of between $7.5 million and
$8.25 million each. The Registrant expects to take delivery of 11 of the new
FlexRigs(TM) in calendar 2001 with the final FlexRig(TM) to be delivered in the
first calendar quarter of 2002. The FlexRigs(TM) will be available for work in
the Registrant's domestic and international drilling operations.
The Registrant's drilling contracts are obtained through competitive
bidding or as a result of negotiations with customers, and sometimes cover
multi-well and multi-year projects. Each drilling rig operates under a separate
drilling contract. 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. The Registrant has previously performed contracts on a
combination "footage" and "daywork" basis, under which the Registrant charged 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. Also, the
Registrant has previously accepted "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
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normally done on a "footage" basis. "Turnkey" contracts entail varying degrees
of risk greater than the usual "footage" contract. Registrant has not accepted a
"footage" or "turnkey" contract during fiscal 2000. The Registrant believes that
under current market conditions "footage" and "turnkey" contract rates do not
adequately compensate contractors for the added risks. The duration of the
Registrant's drilling contracts 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. However, the contracting parties have
no legal obligation to extend the contracts. Contracts generally contain
renewal or extension provisions exercisable at the option of the customer at
prices mutually agreeable to the Registrant and the customer. In most instances
contracts 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,
government owned petroleum companies are more frequently 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, 2000, the
Registrant had 47 (37 land rigs and 10 platform rigs) of its rigs operating in
the United States and had management contracts for three customer-owned rigs.
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During fiscal 2000, one land rig was relocated from the Registrant's
domestic operations to the Registrant's operations in Venezuela. In addition,
one of the Registrant's older land rigs was sold.
In December of 2000, Registrant signed three-year term contracts for
five (5) of Registrant's rigs to provide drilling services in Wyoming for a
major oil company. Registrant expects that all five rigs will commence drilling
operations during calendar 2001.
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. At the end of fiscal 2000, the Registrant owned and
operated 18 land drilling rigs in Venezuela with a utilization rate of 32% for
such fiscal year. The Registrant worked for the Venezuelan state petroleum
company during fiscal 2000, and revenues from this work accounted for
approximately 3.6% of the Registrant's consolidated revenues during the fiscal
year.
Registrant's rig utilization rate in Venezuela has decreased from
approximately 36% during the 1999 fiscal year to approximately 32% in fiscal
2000. This reduction in utilization is primarily due to curtailed production and
development activities resulting from prior reductions in worldwide oil prices.
While worldwide oil prices have improved, the Venezuelan state petroleum company
production and development activities continue to lag behind the improvement in
oil prices. Even though the Registrant is, at this time, unable to predict
future fluctuations in its utilization rates during
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fiscal 2001, the Registrant believes that the prospects are good for returning
at least three idle rigs back to work during fiscal 2001.
The Venezuelan government, in early 1996, permitted foreign
exploration and production companies to acquire rights to explore for and
produce oil and gas in Venezuela. Registrant has performed contract drilling
services in Venezuela for three independent oil companies during fiscal 2000.
At the end of fiscal 2000, the Registrant owned and operated seven
drilling rigs in Colombia. The Registrant's utilization rate in Colombia was
62% during fiscal 2000. During fiscal 2000 the revenues generated by Colombian
drilling operations contributed approximately 6.7% of the Registrant's
consolidated revenues. During the first and second quarters of fiscal 2001, the
Registrant expects to move three (3) rigs from Colombia to Houston, Texas. The
Registrant expects continued reduction in activity and revenues from Colombia.
In addition to its operations in Venezuela and Colombia, the
Registrant in fiscal 2000 owned and operated six rigs in Ecuador, six rigs in
Bolivia, and three rigs in Argentina. In Ecuador, Bolivia and Argentina, the
contracts are with large international oil companies. During fiscal 2000, the
Registrant commenced operations under a management contract for a
customer-owned platform rig located in offshore Equatorial Guinea.
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.
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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, safety and environmental awareness.
Regulations and Hazards
The drilling operations of the Registrant are subject to the many
hazards inherent in the business, including blowouts and well fires. These
hazards 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
secured through fiscal 2001. 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 2001 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 terrorism, 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
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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 which 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, the Registrant's future operations in
certain areas may 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 nor
pursuant to such arrangements 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 2000, approximately 22% of the Registrant's consolidated
revenues were generated from the international contract drilling business. Over
95% of the international revenues were from operations in South America and 59%
of South American revenues were from Venezuela and Colombia. Exposure to
potential losses from currency devaluation is minimal in the above-mentioned
countries except for Venezuela. 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 60% of the Registrant's invoice billings
are in U.S. dollars and the other 40% 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.
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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 1999, the Registrant
experienced losses of approximately US$712,000 and in fiscal 2000 it experienced
losses of US$687,000 as a result of the devaluation of the bolivar. Registrant
is unable to predict future devaluation in Venezuela. In the event that fiscal
2001 activity levels are similar to fiscal 2000 and if a 25% to 50% devaluation
would occur, the Registrant could experience potential currency valuation losses
ranging from approximately US$600,000 to US$1,000,000.
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.
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 liability arising from
pollution, except in certain cases of surface pollution. However, the
enforceability of indemnification provisions in foreign countries may be
questionable.
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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. Additional legislation or
regulation may reasonably be anticipated, and the effect thereof on operations
cannot be predicted.
OIL & GAS EXPLORATION AND PRODUCTION OPERATIONS
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, Michigan, Mississippi, and
the Rocky Mountain area.
The Registrant's exploration and production division includes six
geographical exploitation teams comprised of geological, engineering, and land
personnel. These personnel primarily develop in-house oil and gas prospects as
well as review 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.
Since fiscal 1998, the Registrant has focused on developing prospects
using 3D seismic technology. Currently, the Registrant is involved in 3D
surveys covering more than 1,050 square
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miles, of which approximately 750 square miles are proprietary. Approximately
900 square miles of land covered by such surveys is located near the Texas and
Louisiana onshore Gulf Coast.
During fiscal 2000, the Registrant drilled 17 wells with a 60% success
rate in Jefferson County, Texas. These are primarily one well fields identified
from the 3-D seismic. Since the beginning of Registrant's activity in Jefferson
County, Registrant has participated in 21 wells with six dry holes, or a 71%
success rate. Registrant's working interest in this area ranges from 33% to
66%, however Registrant has taken less interest in some prospects and greater
interest in other prospects.
Three wells have been drilled in the West Texas Dixieland area during
fiscal 2000. Two of the wells have been successfully completed, and an uphole
completion will be attempted in the third well. A fourth well is currently
being completed. Registrant will evaluate the results of the fourth well in
order to determine the possibility for a fifth well in the area.
Registrant's major increases in new oil reserves came primarily from
the Kansas Hugoton Field area and from condensate production associated with
successful gas wells along the Gulf Coast.
Commodity prices have allowed several low risk infill drilling
projects to become economically viable. These include additional drilling at
the edge of Hugoton field as well as additional drilling for tight gas in
Oklahoma.
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 2000, the Registrant participated in
68 development and/or wildcat wells, which resulted in new discoveries of
approximately 22.3 BCF of gas and 935,013 barrels of oil and condensate. The
Registrant participated in 13 additional development wells, which resulted in
the development of approximately 13.4 BCF of gas and 2,676 barrels of oil which
was previously classified as proved undeveloped or proved developed
nonproducing reserves. In addition, 30.5 BCF of gas and 191,206
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barrels of oil was booked as additional proved undeveloped reserves in 96
locations, primarily in infill locations in Oklahoma and Kansas. This reserve
increase primarily resulted from higher oil and gas prices and development
drilling success. A total of $57,970,195 was spent in the Registrant's
exploration and development program during fiscal 2000. This figure includes
$4,452,626 of geophysical expense, but is exclusive of expenditures for acreage
and acquisition of proved oil and gas reserves. The Registrant's total
company-wide acquisition cost for acreage in fiscal 2000 was approximately $11
million.
The Registrant spent $105,166 for the acquisition of proved oil and
gas reserves during fiscal 2000. The reserves associated with these
acquisitions were 242,149 MCF of gas and 1,502 barrels of oil.
The Registrant's fiscal 2001 exploration and production budget of
approximately $83 million is 26% greater than its actual exploration and
production expenditures in fiscal 2000.
The Registrant, during fiscal 2000, hired the investment banking firm
of Petrie Parkman & Co. to advise the Company regarding strategic alternatives
with regard to the Registrant's oil and gas division. It is contemplated that a
successful transaction could lead, among other things, to the Company's
exploration and production division being established as a separate public
entity. The Registrant is unable to predict if and when such a transaction may
occur.
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, price, 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
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under arrangements that are usual and customary in the industry. The Registrant
and its 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 and development wells.
Substantially all of Registrant's gas production is sold to and resold by
Helmerich & Payne Energy Services, Inc. During fiscal 2000, the price that
Registrant received for the sale of its natural gas has increased. Registrant's
average per MCF natural gas sales price in fiscal 2000 for each of the first
through fourth quarters was $2.28, $2.28, $2.97 and $3.65, respectively.
The Registrant is of the opinion that the natural gas market will
continue to be characterized by high volatility and relatively high prices for
the next 12 to 18 months. The record natural gas prices and high volatility as
evidenced by the dramatic early summer increase in natural gas prices is a
result of ever changing perceptions throughout the industry centered around
supply and demand. Pricing perceptions constantly change as members of the
industry weigh the impacts of decline in deliverability of domestic supply,
increased use of natural gas for electrical generation, continued U.S. economic
growth, the increased usage and better management of natural gas storage,
seasonal usage, fuel switching, usage of gas as a feed stock, and importation of
gas from Canada and Mexico.
The tight supply/demand balance will likely continue until increased
gas drilling activity results in the increased productive capacity. Registrant
presently believes that the natural gas price volatility will continue for the
next three to five years as the natural gas industry reacts to the
supply/demand balance. Long term pricing will obviously react to these short
term factors, as well as other considerations affecting supply/demand.
Historically, the Registrant has had no long-term sales contracts for
its crude oil and condensate production. The Registrant continues its 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
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assure itself of the best price in the area for crude oil production. During
fiscal 2000, the price that Registrant received for the sale of its crude oil
has steadily increased. Registrant's average per barrel crude oil sales price in
fiscal 2000 for each of the first through fourth quarters was $23.52, $27.80,
$27.98 and $31.02, respectively.
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 continue to prepare for increased
exploration activity without committing to a definite drilling timetable. The
Registrant also believes that competition for the acquisition of gas producing
properties will continue. Considering the Registrant's conservative acquisition
strategy, the Registrant believes that it may be unable to acquire significant
proved developed producing reserves from third parties. 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 these competitors 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.
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
I-15
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
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
Historically, the transportation and sale for resale of natural gas in
interstate commerce have been regulated under the Natural Gas Act ("NGA") and
the Natural Gas Policy Act of 1978 ("NGPA") and the regulations promulgated
thereunder.
I-16
The Natural Gas Wellhead Decontrol Act of 1989 amended both the price
and non-price decontrol provisions of the NGPA 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.
Commencing in April, 1992, the Federal Energy Regulatory Commission
("FERC") issued Order 636, Order 636-A, and Order 636-B (collectively, "Order
636") 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. 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 636 and numerous related orders pertaining
to individual pipelines have been upheld by the Courts. However, the FERC
continues to review and modify open access regulations.
In particular, the FERC recently issued new rules and policies
pertaining to interstate pipeline certificates which require notification of
landowners affected by proposed pipeline construction, and which presume
incremental pricing is appropriate for new construction. The FERC also issued
new rules governing transportation which, among other matters, eliminated
cost-based regulation for certain short term transportation, and require
pipelines to design services that facilitate open access operations and
decrease the use by pipelines of emergency operational orders. In addition, the
FERC has requested comments on certain issues related to its regulation of long
term transportation. Implementation of many details of these rules has been
left to individual pipeline proceedings. In addition, court appeals of the new
rules are pending. While this FERC action affects the Registrant only
indirectly, these rules are intended to further enhance competition in the
natural gas markets. They may also increase the cost of transportation.
I-17
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. In recent years, the FERC has slightly narrowed its statutory tests
for establishing gathering status. A number of states have either enacted new
laws or are considering the adequacy of existing laws affecting gathering rates
and/or services. For example, in May, 1997, Kansas enacted new gathering
oversight legislation that, among other matters, requires reporting of gathering
prices and authorizes the Kansas Corporation Commission ("KCC") to oversee open
access on gathering systems to assure it is just, reasonable, and
non-discriminatory. Thus, natural gas gathering may receive 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. 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 materially
affected by modification to the statutory criteria.
In February, 1994, the 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 assigned a larger allowable
than those units without infill wells. As a consequence of this order, the
Registrant has participated in the drilling of 140 infill wells. If current gas
prices continue, Registrant could participate in the drilling of up to 30
additional infill wells along the edge of the Hugoton field.
In September, 1997, the FERC ruled that ad valorem tax levied by the
State of Kansas was not a severance tax within the meaning of Section 110 of
the NGPA. Therefore, to the extent that first sellers collected revenues in
excess of the maximum lawful price as a result of reimbursement of Kansas ad
valorem taxes, then first
I-18
sellers would be required to make refunds with interest for such excess
revenues on tax bills rendered during the period October 4, 1983 through June
28, 1988. Based upon schedules provided to Registrant by certain interstate
pipelines, the total reimbursement obligation of all working interest owners in
Registrant-operated wells approximated $13 million as of November, 1997. During
this period, Registrant estimated that its reimbursement obligation totaled
approximately $6.7 million, being approximately $2.7 million of principal and
$4.0 million of interest. Approximately 12.5% of such amount would be owed by
Registrant's royalty owners.
Neither the FERC nor Congress has provided the first sellers with any
generic relief on this issue. However, the FERC has permitted the filing of
individual adjustment proceedings by each first seller. Registrant has filed
such adjustment proceedings requesting that its ad valorem tax refund
obligation be reduced. The FERC has not ruled in any of Registrant's adjustment
proceedings.
During the period February through July, 1998, Registrant paid, under
protest, approximately $1,379,000 to four interstate pipelines as partial ad
valorem tax reimbursement and escrowed approximately $6,370,000 pending the
FERC's decision in Registrant's adjustment proceedings. The escrowed amount
includes Registrant's share of the amount of reimbursement obligation allegedly
owed by Registrant's royalty owners. During calendar 2000, settlement
negotiations have occurred among the pipelines, first sellers and other
interested parties. Any settlement among such parties must be approved by the
FERC. A settlement agreement in the Colorado Interstate Gas proceeding has
recently been approved by the FERC. Registrant's settlement amount is less than
the amount that Registrant had escrowed in the Colorado Interstate Gas
proceeding. The final outcome of the other settlement negotiations and the
final resolution of these proceedings cannot be predicted at this time.
I-19
However, the Registrant believes that Registrant's aggregate refund liability
in all pipeline proceedings will not exceed the amount that Registrant has
escrowed for such liability.
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. The Registrant has
considered the effects of such federal income tax laws on its operations and
does not anticipate that there will be any material impact on the capital
expenditures, earnings or competitive position of the Registrant.
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
I-20
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 its
emphasis on the purchase of the Registrant's natural gas production. In
addition, HPESI purchases third-party gas for resale and provides compression,
gathering services and processing for a fee. During fiscal year 2000, HPESI's
sales of third-party gas constituted approximately 13% of the Registrant's
consolidated revenues.
HPESI sells natural gas to markets in the Midwest and Rocky Mountain
areas. HPESI's term gas sales contracts are for varied periods ranging from
three months to seven years. However, recent contracts have tended toward
shorter terms. The remainder of HPESI's gas is sold under spot market contracts
having a duration of 30 days or less. For fiscal 2000, HPESI's term gas sales
contracts provided for the sale of approximately 27 BCF of gas at prices which
were indexed to market prices. For fiscal 2001, HPESI currently has
approximately 15 BCF contracted at prices which are indexed to market prices.
The balance of HPESI's gas is selling at spot prices or is not yet contracted.
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-13 through I-20 regarding the market, competition,
and regulation of natural gas.
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
I-21
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 (50% of which is currently leased). Due to increased operating costs and
related business considerations, the Registrant intends to close the Medical
Building in January 2002. All tenant leases in the Medical Building shall have
expired prior to such date. The Registrant has not decided as to the future use
of the area upon which the Medical Building is located. The Registrant has a
two-level parking garage located in the southwest corner of Utica Square that
can accommodate approximately 250 cars.
Registrant has completed a three-phase renovation for three major
existing tenants in Utica Square Shopping Center.
At the end of the 2000 fiscal year the Registrant owned 11 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. One condominium unit was sold during
fiscal 2000. Ten 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 2000. Registrant
leases approximately 29,000 square feet of office space in Tulsa for
Registrant's oil and gas division.
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
I-22
highways. Present occupancy is 100%. The Registrant also owns approximately 1.5
acres of undeveloped land lying adjacent to such warehouses.
Registrant owns approximately 253.5 acres in Southpark consisting of
approximately 240.5 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
increased from 96% to 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. However, no development plans are
currently pending.
Registrant is a party to a condemnation proceeding initiated during
fiscal 2000 by the Oklahoma Department of Transportation which seeks to
purchase approximately 15.14 acres of undeveloped real property adjacent to a
major expressway in Southpark. The parties are presently litigating the fair
market value of such tract. It is expected that this matter will be concluded
during calendar 2001.
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 96% to 100%
during fiscal 2000. 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.
During fiscal 2000, occupancy has decreased from 96% to 93%. However, on
November 1, 2000, Registrant added a new tenant and increased total occupancy
to 94%.
I-23
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 2000, occupancy has
decreased from 100% to 94%. 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 2000, occupancy has remained
at 100%.
Registrant believes that the recent increase in demand for
multi-tenant warehouse space in the Tulsa market will continue. Registrant is
unable to determine how long this increase in demand will continue.
Competition
The Registrant has numerous competitors in the multi-tenant leasing
business. The size and financial capacity of these competitors range from one
property sole proprietors to large international corporations. The primary
competitive factors include price, location and configuration of space.
Registrant's competitive position is enhanced by the location of its
properties, its financial capability and the long-term ownership of its
properties. However, many competitors have financial resources greater than
Registrant and have more contemporary facilities.
FINANCIAL
Information relating to Revenue and Operating Profit by Business
Segments may be found on pages 9 and 31 through 32 of the Registrant's Annual
Report to Shareholders for fiscal 2000, which is incorporated herein by
reference.
EMPLOYEES
The Registrant had 2,312 employees within the United States (9 of
which were part-time employees) and 1,294 employees in international operations
as of September 30, 2000.
I-24
Item 2. PROPERTIES
CONTRACT DRILLING
The following table sets forth certain information concerning the
Registrant's domestic drilling rigs as of September 30, 2000:
[Download Table]
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- --------------- ---------------
158 Medium Depth 10,000 Texas
110 Medium Depth 12,000 Texas
156 Medium Depth 12,000 Texas
159 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
155 Medium Depth 14,000 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
162 Medium Depth 16,000 Texas
164 Medium Depth 16,000 Texas
165 Medium Depth 16,000 Texas
166 Medium Depth 16,000 Texas
167 Medium Depth 16,000 Texas
168 Medium Depth 16,000 Texas
169 Medium Depth 16,000 Texas
108 Medium Depth 18,000 Gulf of Mexico
79 Deep 20,000 Louisiana
80 Deep 20,000 Texas
89 Deep 20,000 Texas
91 Deep 20,000 Gulf of Mexico
92 Deep 20,000 Oklahoma
94 Deep 20,000 Texas
98 Deep 20,000 Oklahoma
122 Deep 20,000 Louisiana
203 Deep 20,000 Gulf of Mexico
97 Deep 26,000 Texas
99 Deep 26,000 Texas
I-25
[Download Table]
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- -------------- --------------- ---------------
137 Deep 26,000 Texas
149 Deep 26,000 Texas
72 Very Deep 30,000 Alabama
73 Very Deep 30,000 Texas
100 Very Deep 30,000 Gulf of Mexico
105 Very Deep 30,000 Gulf of Mexico
106 Very Deep 30,000 Gulf of Mexico
107 Very Deep 30,000 Gulf of Mexico
157 Very Deep 30,000 Texas
161 Very Deep 30,000 Texas
163 Very Deep 30,000 Louisiana
201 Very Deep 30,000 Gulf of Mexico
202 Very Deep 30,000 Gulf of Mexico
204 Very Deep 30,000 Gulf of Mexico
The following table sets forth information with respect to the
utilization of the Registrant's domestic drilling rigs for the periods
indicated:
[Download Table]
Years ended September 30,
----------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Number of rigs owned at end of
period 41 38 46 50 48
Average rig utilization rate
during period (1) 82% 88% 95% 75% 87%
(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, 2000:
[Download Table]
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- ----------------------- --------------- ----------
14 Workover/drilling 6,000 Venezuela
19 Workover/drilling 6,000 Venezuela
20 Workover/drilling 6,000 Venezuela
140 Medium Depth 10,000 Venezuela
171 Medium Depth 16,000 Bolivia
172 Medium Depth 16,000 Bolivia
22 Medium Depth (Heli Rig) 18,000 Ecuador
I-26
[Download Table]
Rig Registrant's Optimum Working Present
Designation Classification Depth in Feet Location
----------- ----------------------- --------------- ----------
23 Medium Depth (Heli Rig) 18,000 Ecuador
132 Medium Depth 18,000 Ecuador
176 Medium Depth 18,000 Ecuador
121 Deep 20,000 Ecuador
173 Deep 20,000 Bolivia
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
170 Deep (Heli Rig) 26,000 Texas
113 Very Deep 30,000 Venezuela
115 Very Deep 30,000 Venezuela
116 Very Deep 30,000 Venezuela
125 Very Deep 30,000 Colombia
127 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
135 Very Deep 30,000 Colombia
136 Very Deep 30,000 Colombia
150 Very Deep 30,000 Venezuela
151 Very Deep 30,000 Bolivia
152 Very Deep 30,000 Colombia
153 Very Deep 30,000 Argentina
174 Very Deep 30,000 Argentina
175 Very Deep 30,000 Bolivia
177 Very Deep 30,000 Argentina
139 Super Deep 30,000+ Colombia
I-27
The following table sets forth information with respect to the
utilization of the Registrant's international drilling rigs for the periods
indicated:
[Download Table]
Years ended September 30,
----------------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
Number of rigs owned at end of
period 36 39 44 39 40
Average rig utilization rate
during period (1) 85% 91% 88% 53% 47%
(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
located within the continental United States.
Crude Oil Sales
The Registrant's net sales of crude oil and condensate for the fiscal
years 1998 through 2000 are shown below:
[Download Table]
Average Sales Average Lifting
Year Net Barrels Price per Barrel Cost per Barrel
---- ----------- ---------------- ---------------
1998 701,180 $14.74 $7.40
1999 649,370 $14.60 $7.02
2000 880,304 $27.95 $6.06
Natural Gas Sales
The Registrant's net sales of natural and casinghead gas for the three
fiscal years 1998 through 2000 are as follows:
[Download Table]
Average Sales Average Lifting
Year Net MCF Price per MCF Cost per MCF
---- ---------- ------------- --------------
1998 42,862,300 $2.04 $0.3110
1999 44,240,332 $1.83 $0.3300
2000 46,922,752 $2.79 $0.3704
I-28
Following is a summary of the net wells drilled by the Registrant for
the fiscal years ended September 30, 1998, 1999, and 2000:
[Download Table]
Exploratory Wells Development Wells
------------------------- --------------------------
1998 1999 2000 1998 1999 2000
----- ----- ------ ------ ------ ------
Productive 1.910 2.917 9.735 29.614 13.846 23.862
Dry 2.900 2.615 5.7017 1.310 4.502 3.403
On September 30, 2000, the Registrant was in the process of drilling
or completing nine gross or 6.237 net wells.
Acreage Holdings
The Registrant's holdings of acreage under oil and gas leases, as of
September 30, 2000, were as follows:
[Download Table]
Developed Acreage Undeveloped Acreage
--------------------------- ---------------------------
Gross Net Gross Net
---------- ---------- ---------- ----------
Arkansas 3,068.23 1,725.11 -0- -0-
Colorado -0- -0- 320.00 160.00
Kansas 125,599.29 86,931.89 11,497.94 9,936.14
Louisiana 3,414.79 1,525.59 12,560.16 4,966.79
Michigan -0- -0- 13,518.76 13,135.42
Montana 1,997.19 392.99 2,708.95 969.73
Nebraska 480.00 168.00 -0- -0-
Nevada -0- -0- 4,864.04 4,864.04
New Mexico 760.00 96.63 121.88 40.22
North Dakota 200.00 11.52 -0- -0-
Oklahoma 125,158.99 50,675.44 8,178.63 4,804.15
Texas 89,290.15 42,949.27 184,108.75 76,230.86
Wyoming -0- -0- 40.00 105.59
---------- ---------- ---------- ----------
Total 349,968.64 184,476.44 238,319.11 115,212.94
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
I-29
rentals. As shown in the above table, the Registrant has a significant portion
of its undeveloped acreage in Texas, with eight major prospects accounting for
63,191 net acres. The average minimum remaining term of leases in these eight
prospects is approximately 23 months.
Productive Wells
The Registrant's total gross and net productive wells as of September
30, 2000, were as follows:
[Download Table]
Oil Wells Gas Wells
------------------ -------------------
Gross Net Gross Net
----- ---- ----- ---
3,415 163 956 453
Additional information required by this item with respect to the
Registrant's oil and gas operations may be found on pages I-11 through I-21 of
Item 1. BUSINESS, and pages 23 through 34 of the Registrant's Annual Report to
Shareholders for fiscal 2000, "Notes to Consolidated Financial Statements" and
"Note 14 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 prepared by Netherland, Sewell & Associates,
Inc., 4950 Three Allen Center, 333 Clay Street, Houston, Texas 77002. 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-21 through I-24.
I-30
STOCK
As of December 15, 2000:
The Registrant owned 312,546 shares of the common stock of SUNOCO,
Inc. and 184,500 shares of Kerr McGee Corporation which the Registrant received
in a stock merger for Registrant's 500,000 shares of Oryx Energy Company, Inc.
The Registrant owned 3,000,000 shares of the common stock of Atwood
Oceanics, Inc., a Houston, Texas based company engaged in offshore contract
drilling. The Registrant owns approximately 22% of Atwood.
The Registrant owned 1,480,000 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 1,000,000 shares of the common stock of
Occidental Petroleum Corporation, Inc.
The Registrant owned 175,000 shares of the common stock of Banc One
Corporation.
The Registrant owned 225,000 shares of the common stock of ONEOK Inc.
The Registrant owned 286,528 shares of the common stock of Transocean
Sedco Forex, Inc., which it received in a merger between Transocean Offshore
and the contract drilling division of Schlumberger.
The Registrant owned 84,175 shares of the common stock of Protein
Design Labs, Inc.
The Registrant also owned lesser holdings in several other publicly
traded corporations.
I-31
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.
W. H. Helmerich, III, 77 Director since 1949; Chairman of the Board
Chairman of the Board since 1960
Hans Helmerich, 42 Director since 1987; President and Chief
President Executive Officer since 1989
George S. Dotson, 59 Director since 1990; Vice President,
Vice President Drilling since 1977 and President and
Chief Operating Officer of Helmerich &
Payne International Drilling Co. since 1977
Douglas E. Fears, 51 Vice President, Finance, since 1988
Vice President
Steven R. Mackey, 49 Secretary since 1990; Vice President and
Vice President and General Counsel since 1988
Secretary
Steven R. Shaw, 49 Vice President, Production, since 1985;
Vice President Vice President, Exploration and Production
since 1996
Gordon K. Helm, 47 Chief Accounting Officer of the Registrant;
Controller Controller since December 10, 1993
I-32
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:
[Download Table]
1999 2000
----------------- -----------------
Quarter High Low High Low
------- ----- ----- ----- -----
First 24.50 16.75 27.44 19.13
Second 23.94 16.06 31.00 20.00
Third 26.75 20.38 37.75 29.06
Fourth 30.19 23.00 38.31 30.06
The Registrant paid quarterly cash dividends during the past two years
as shown in the following table:
[Download Table]
Paid per Share Total Payment
------------------- ----------------------------
Fiscal Fiscal
------------------- ----------------------------
Quarter 1999 2000 1999 2000
------- ------ ------ ---------- -----------
First $0.070 $0.070 $3,457,626 $3,474,612
Second 0.070 0.070 3,459,168 3,475,623
Third 0.070 0.070 3,464,109 3,484,189
Fourth 0.070 0.075 3,468,377 3,740,863
The Registrant paid a cash dividend of $0.075 per share on December 1,
2000, to shareholders of record on November 15, 2000. Payment of future
dividends will depend on earnings and other factors.
As of December 15, 2000, there were 1,170 record holders of the
Registrant's common stock as listed by the transfer agent's records.
II-1
Item 6. SELECTED FINANCIAL DATA
The Five-year Summary of Selected Financial Data described below
excludes results of Natural Gas Odorizing, Inc. ("NGO") operations. Registrant,
on August 30, 1996, sold its wholly-owned subsidiary, NGO, to Occidental
Petroleum Corporation.
[Enlarge/Download Table]
Five-year Summary of Selected Financial Data
-----------------------------------------------------------------------------------
1996 1997 1998 1999 2000
------------ ------------- ---------- ---------- ----------
(in thousands)
Sales, operating,
Sand other revenues $ 393,255 $ 517,859 $ 636,640 $ 564,319 $ 631,095
Income from con-
tinuing operations 45,426 84,186 101,154 42,788 82,300
Income from continuing
operations per common share:
Basic 0.92 1.69 2.03 0.87 1.66
Diluted 0.91 1.67 2.00 0.86 1.64
Total assets 821,914 1,033,595 1,090,430 1,109,699 1,259,492
Long-term debt -0- -0- 50,000 50,000 50,000
Cash dividends declared
per common share 0.255 0.26 0.275 0.28 0.285
II-2
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
----------------------------------------------------
[Download Table]
1996 1997 1998 1999 2000
---------- ---- ---- ---- ----
(in thousands)
Sales, operating,
and other revenues $ 19,540 $ -0- $ -0- $ -0- $ -0-
Income from discontinued
operations 3,090 -0- -0- -0- -0-
Income from discontinued
operations per common share:
Basic 0.06 -0- -0- -0- -0-
Diluted 0.06 -0- -0- -0- -0-
Item 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Information required by this item may be found on pages 10 through 17,
Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 2000,
which is incorporated herein by reference.
II-3
Item 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this item may be found on the following pages
of Management's Discussion & Analysis of Results of Operations and Financial
Condition, in the Registrant's Annual Report to Shareholders for fiscal 2000,
which is incorporated herein by reference:
[Download Table]
Market Risk Page
----------- ----
o Foreign Currency Exchange Rate Risk 13, 23
o Commodity Price Risk 14-15, 30
o Interest Rate Risk 16-17, 24
o Equity Price Risk 17, 23
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item may be found on pages 18 through 34
in the Registrant's Annual Report to Shareholders for fiscal 2000, which is
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
II-4
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this item with respect to Directors and
with respect to any 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 7, 2001, to be filed with
the Commission not later than 120 days after September 30, 2000. See page I-32
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 7, 2001, to be filed with the Commission not later than 120 days after
September 30, 2000.
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 7, 2001, to be filed with the Commission not later than 120 days after
September 30, 2000.
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 7, 2001, to be filed with the Commission not later than 120 days after
September 30, 2000.
III-1
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 2000.
2. Exhibits required by Item 601 of Regulation S-K:
Exhibit Number:
[Download Table]
3.1 Restated Certificate of Incorporation and Amendment
to Restated Certificate of Incorporation of the
Registrant are incorporated herein by reference to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
3.2 By-Laws of the Registrant are incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
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 Consulting Services Agreement between W. H.
Helmerich, III, and the Registrant effective January
1, 1990, as amended is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
* 10.2 Supplemental Retirement Income Plan for Salaried
Employees of Helmerich & Payne, Inc. is incorporated
herein by reference to Registrant's Annual Report on
Form 10-K to the Securities and Exchange Commission
for fiscal 1996.
* 10.3 Helmerich & Payne, Inc. 1990 Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
-----------------------
* Compensatory Plan or Arrangement.
IV-1
[Download Table]
* 10.4 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.
* 10.5 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 1999.
* 10.6 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated herein by reference to Registrant's
Registration Statement No. 333-34939 on Form S-8
dated September 4, 1997.
* 10.7 Form of Nonqualified Stock Option Agreement for
Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement on Form S-8
dated September 4, 1997.
* 10.8 Form of Restricted Stock Agreement for Helmerich &
Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference from Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1997.
* 10.9 Helmerich & Payne, Inc. Non-Employee Directors Stock
Compensation Plan is hereby incorporated by
reference to Exhibit "B" of Registrant's Proxy
Statement dated January 27, 1997.
13. The Registrant's Annual Report to Shareholders for
fiscal 2000.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
(b) Report on Form 8-K
None.
-----------------------
* Compensatory Plan or Arrangement.
IV-2
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 /s/ HANS HELMERICH
--------------------------
Hans Helmerich, President
(Chief Executive Officer)
Date: December 28, 2000
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:
[Download Table]
By /s/ WILLIAM L. ARMSTRONG By /s/ GLENN A. COX
--------------------------------- ---------------------------------
William L. Armstrong, Director Glenn A. Cox, Director
Date: December 28, 2000 Date: December 28, 2000
By /s/ GEORGE S. DOTSON By /s/ HANS HELMERICH
--------------------------------- ---------------------------------
George S. Dotson, Director Hans Helmerich, Director and CEO
Date: December 28, 2000 Date: December 28, 2000
By /s/ W. H. HELMERICH, III By /s/ L. F. ROONEY, III
--------------------------------- ---------------------------------
W. H. Helmerich, III, Director L. F. Rooney, III, Director
Date: December 28, 2000 Date: December 28, 2000
By /s/ EDWARD B. RUST, JR. By /s/ GEORGE A. SCHAEFER
--------------------------------- ---------------------------------
Edward B. Rust, Jr., Director George A. Schaefer, Director
Date: December 28, 2000 Date: December 28, 2000
By /s/ JOHN D. ZEGLIS By /s/ DOUGLAS E. FEARS
--------------------------------- ---------------------------------
John D. Zeglis, Director Douglas E. Fears
Date: December 28, 2000 (Principal Financial Officer)
Date: December 28, 2000
By /s/ GORDON K. HELM
---------------------------------
Gordon K. Helm, Controller
(Principal Accounting Officer)
Date: December 28, 2000
EXHIBIT INDEX
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Restated Certificate of Incorporation and Amendment
to Restated Certificate of Incorporation of the
Registrant are incorporated herein by reference to
Registrant's Annual Report on Form 10-K to the
Securities and Exchange Commission for fiscal 1996.
3.2 By-Laws of the Registrant are incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
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 Consulting Services Agreement between W. H.
Helmerich, III, and the Registrant effective January
1, 1990, as amended is incorporated herein by
reference to Registrant's Annual Report on Form 10-K
to the Securities and Exchange Commission for fiscal
1996.
* 10.2 Supplemental Retirement Income Plan for Salaried
Employees of Helmerich & Payne, Inc. is incorporated
herein by reference to Registrant's Annual Report on
Form 10-K to the Securities and Exchange Commission
for fiscal 1996.
* 10.3 Helmerich & Payne, Inc. 1990 Stock Option Plan is
incorporated herein by reference to Registrant's
Annual Report on Form 10-K to the Securities and
Exchange Commission for fiscal 1996.
--------------------
* Compensatory Plan or Arrangement.
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
* 10.4 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.
* 10.5 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 1999.
* 10.6 Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated herein by reference to Registrant's
Registration Statement No. 333-34939 on Form S-8
dated September 4, 1997.
* 10.7 Form of Nonqualified Stock Option Agreement for
Helmerich & Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to
Registrant's Registration Statement on Form S-8
dated September 4, 1997.
* 10.8 Form of Restricted Stock Agreement for Helmerich &
Payne, Inc. 1996 Stock Incentive Plan is
incorporated by reference from Registrant's Annual
Report on Form 10-K to the Securities and Exchange
Commission for fiscal 1997.
* 10.9 Helmerich & Payne, Inc. Non-Employee Directors Stock
Compensation Plan is hereby incorporated by
reference to Exhibit "B" of Registrant's Proxy
Statement dated January 27, 1997.
13. The Registrant's Annual Report to Shareholders for
fiscal 2000.
22. Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors.
27. Financial Data Schedule.
--------------------
* Compensatory Plan or Arrangement.
Dates Referenced Herein and Documents Incorporated by Reference
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