Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For quarterly period ended: March 31, 2009

 

OR

 

 

o

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 I.D. Number)

incorporation or organization)

 

 

 

1437 South Boulder Avenue, Tulsa, Oklahoma,74119

(Address of principal executive office)(Zip Code)

 

(918) 742-5531

(Registrant’s telephone number, including area code)

 

N/A

 (Former name, former address and former fiscal year,

if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer    x

Accelerated filer   o

 

 

Non-accelerated filer   o

Smaller reporting company   o

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

CLASS

 

OUTSTANDING AT April 30, 2009

Common Stock, $0.10 par value

 

105,443,092

 

 

 



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

 

 

 

 

Page No.

 

 

 

 

 

PART  I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Condensed Balance Sheets as of March 31, 2009 and September 30, 2008

 

3

 

 

 

 

 

 

 

Consolidated Condensed Statements of Income for the Three and Six Months Ended March 31, 2009 and 2008

 

4

 

 

 

 

 

 

 

Consolidated Condensed Statements of Cash Flows for the Six Months Ended March 31, 2009 and 2008

 

5

 

 

 

 

 

 

 

Consolidated Condensed Statement of Shareholders’ Equity for the Six Months Ended March 31, 2009

 

6

 

 

 

 

 

 

 

Notes to Consolidated Condensed Financial Statements

 

7-23

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24-35

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

36

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

37

 

 

 

 

 

Item 1A.

 

Risk Factors

 

37-38

 

 

 

 

 

Item 4.

 

Submission of Matters to a Vote of Security Holders

 

38

 

 

 

 

 

Item 6.

 

Exhibits

 

39

 

 

 

 

 

Signatures

 

40

 

2



Table of Contents

 

PART I. FINANCIAL INFORMATION

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share amounts)

 

ITEM 1. FINANCIAL STATEMENTS

 

 

 

March 31,

 

September 30,

 

 

 

2009

 

2008

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

126,378

 

$

121,513

 

Short-term investments

 

12,500

 

 

Accounts receivable, less reserve of $1,331 at March 31, 2009 and September 30, 2008

 

460,999

 

462,833

 

Inventories

 

41,675

 

33,098

 

Deferred income taxes

 

13,985

 

21,939

 

Prepaid expenses and other

 

49,331

 

51,264

 

Total current assets

 

704,868

 

690,647

 

 

 

 

 

 

 

Investments

 

176,156

 

199,266

 

Property, plant and equipment, net

 

3,086,714

 

2,682,251

 

Other assets

 

12,078

 

15,881

 

 

 

 

 

 

 

Total assets

 

$

3,979,816

 

$

3,588,045

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

160,654

 

$

153,851

 

Accrued liabilities

 

137,916

 

128,373

 

Short-term debt

 

105,000

 

 

Notes payable

 

 

1,733

 

Long-term debt due within one year

 

25,000

 

25,000

 

Total current liabilities

 

428,570

 

308,957

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Long-term notes payable

 

430,000

 

475,000

 

Deferred income taxes

 

580,790

 

479,963

 

Other

 

54,399

 

58,651

 

Total noncurrent liabilities

 

1,065,189

 

1,013,614

 

Shareholders’ equity:

 

 

 

 

 

Common stock, $.10 par value, 160,000,000 shares authorized, 107,057,904 shares issued

 

10,706

 

10,706

 

Preferred stock, no par value, 1,000,000 shares authorized, no shares issued

 

 

 

Additional paid-in capital

 

172,213

 

169,497

 

Retained earnings

 

2,320,981

 

2,082,518

 

Accumulated other comprehensive income

 

15,930

 

38,407

 

Treasury stock, at cost

 

(33,773

)

(35,654

)

Total shareholders’ equity

 

2,486,057

 

2,265,474

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

3,979,816

 

$

3,588,045

 

 

The accompanying notes are an integral part of these statements.

 

3



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share data)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Operating revenues:

 

 

 

 

 

 

 

 

 

Drilling – U.S. Land

 

$

414,514

 

$

365,263

 

$

889,718

 

$

712,907

 

Drilling – Offshore

 

51,331

 

29,789

 

101,819

 

57,070

 

Drilling – International Land

 

51,829

 

75,757

 

147,007

 

154,359

 

Other

 

2,626

 

2,835

 

5,510

 

5,971

 

 

 

520,300

 

473,644

 

1,144,054

 

930,307

 

 

 

 

 

 

 

 

 

 

 

Operating costs and other:

 

 

 

 

 

 

 

 

 

Operating costs, excluding depreciation

 

263,294

 

253,958

 

594,222

 

489,753

 

Depreciation

 

57,113

 

51,872

 

111,885

 

95,856

 

General and administrative

 

16,434

 

14,090

 

31,582

 

27,993

 

Research and development

 

2,176

 

 

3,853

 

 

Gain from involuntary conversion of long-lived assets

 

 

 

(277

)

(4,810

)

Income from asset sales

 

(2,055

)

(1,946

)

(2,969

)

(2,788

)

 

 

336,962

 

317,974

 

738,296

 

606,004

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

183,338

 

155,670

 

405,758

 

324,303

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

2,150

 

1,220

 

3,936

 

2,335

 

Interest expense

 

(2,554

)

(4,773

)

(6,254

)

(9,604

)

Gain on sale of investment securities

 

 

5,476

 

 

5,606

 

Other

 

(28

)

180

 

100

 

(436

)

 

 

(432

)

2,103

 

(2,218

)

(2,099

)

Income before income taxes and equity in income of affiliate

 

182,906

 

157,773

 

403,540

 

322,204

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

83,390

 

58,784

 

164,638

 

118,930

 

Equity in income of affiliate net of income taxes

 

4,222

 

3,065

 

10,111

 

6,610

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

103,738

 

$

102,054

 

$

249,013

 

$

209,884

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

.99

 

$

.98

 

$

2.37

 

$

2.02

 

Diluted

 

$

.98

 

$

.96

 

$

2.34

 

$

1.98

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

105,317

 

103,883

 

105,283

 

103,695

 

Diluted

 

106,372

 

106,090

 

106,401

 

105,740

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.050

 

$

0.045

 

$

0.100

 

$

0.090

 

 

The accompanying notes are an integral part of these statements.

 

4



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

March 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

249,013

 

$

209,884

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

111,885

 

95,856

 

Provision for bad debt

 

15

 

688

 

Equity in income of affiliate before income taxes

 

(16,308

)

(10,662

)

Stock-based compensation

 

4,238

 

3,712

 

Gain on sale of investment securities

 

 

(5,476

)

Gain from involuntary conversion of long-lived assets

 

(277

)

(4,810

)

Income from asset sales

 

(2,969

)

(2,788

)

Deferred income tax expense

 

115,237

 

42,029

 

Change in assets and liabilities-

 

 

 

 

 

Accounts receivable

 

1,819

 

(25,809

)

Inventories

 

(8,577

)

(4,354

)

Prepaid expenses and other

 

5,716

 

(11,919

)

Accounts payable

 

15,008

 

(31,994

)

Accrued liabilities

 

9,552

 

(1,195

)

Deferred income taxes

 

6,942

 

4,244

 

Other noncurrent liabilities

 

(806

)

5,849

 

Net cash provided by operating activities

 

490,488

 

263,255

 

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Capital expenditures

 

(525,884

)

(321,711

)

Insurance proceeds from involuntary conversion

 

277

 

8,500

 

Proceeds from sale of investments

 

 

7,769

 

Proceeds from asset sales

 

4,333

 

3,668

 

Purchase of short-term investments

 

(12,500

)

 

Other

 

(16

)

 

Net cash used in investing activities

 

(533,790

)

(301,774

)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Decrease in notes payable

 

(1,733

)

 

Proceeds from line of credit

 

2,030,000

 

1,710,000

 

Payments on line of credit

 

(1,970,000

)

(1,675,000

)

Dividends paid

 

(10,548

)

(9,354

)

Proceeds from exercise of stock options

 

429

 

8,284

 

Excess tax benefit from stock-based compensation

 

19

 

6,110

 

Net cash provided by financing activities

 

48,167

 

40,040

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

4,865

 

1,521

 

Cash and cash equivalents, beginning of period

 

121,513

 

89,215

 

Cash and cash equivalents, end of period

 

$

126,378

 

$

90,736

 

 

The accompanying notes are an integral part of these statements.

 

5



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED MARCH 31, 2009

(Unaudited)

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

Paid-In

 

Retained

 

Comprehensive

 

Treasury Stock

 

Shareholders’

 

 

 

Shares 

 

Amount

 

Capital

 

Earnings

 

Income

 

Shares

 

Amount

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2008

 

107,058

 

$

10,706

 

$

169,497

 

$

2,082,518

 

$

38,407

 

1,835

 

$

(35,654

)

$

2,265,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

249,013

 

 

 

 

 

 

 

249,013

 

Other comprehensive income, Unrealized losses on available- for-sale securities (net of $13,775 income tax)

 

 

 

 

 

 

 

 

 

(22,477

)

 

 

 

 

(22,477

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

226,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital adjustment of equity investee

 

 

 

 

 

174

 

 

 

 

 

 

 

 

 

174

 

Cash dividends ($0.10 per share)

 

 

 

 

 

 

 

(10,550

)

 

 

 

 

 

 

(10,550

)

Exercise of stock options

 

 

 

 

 

(177

)

 

 

 

 

(31

)

606

 

429

 

Tax benefit of stock-based awards, including excess tax benefits of $26

 

 

 

 

 

(244

)

 

 

 

 

 

 

 

 

(244

)

Treasury stock issued for vested restricted stock

 

 

 

 

 

(1,275

)

 

 

 

 

(66

)

1,275

 

 

Stock-based compensation

 

 

 

 

 

4,238

 

 

 

 

 

 

 

 

 

4,238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2009

 

107,058

 

$

10,706

 

$

172,213

 

$

2,320,981

 

$

15,930

 

1,738

 

$

(33,773

)

$

2,486,057

 

 

The accompanying notes are an integral part of these statements.

 

6



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

1.              Basis of Presentation

 

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rules and regulations of the Securities and Exchange Commission (the “Commission”) pertaining to interim financial information.  Accordingly, these interim financial statements do not include all information or footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements and, therefore should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s 2008 Annual Report on Form 10-K and other current filings with the Commission.  In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

 

As more fully described in the Company’s 2008 Annual Report on Form 10-K, the Company’s contract drilling revenues are comprised of daywork drilling contracts for which the related revenues and expenses are recognized as services are performed.  For contracts that are terminated by customers prior to the expirations of their fixed term, contractual provisions customarily require early termination amounts to be paid to the Company.  Revenues from early terminated contracts are recognized when all contractual requirements have been met.

 

Certain amounts in the accompanying consolidated financial statements for prior periods have been reclassified to conform to current year presentation.  Specifically, the Real Estate segment shown separately at March 31, 2008, has been included with all other non-reportable business segments.

 

2.              Earnings per Share

 

Basic earnings per share is based on the weighted-average number of common shares outstanding during the period.  Diluted earnings per share includes the dilutive effect of stock options and restricted stock.

 

A reconciliation of the weighted-average common shares outstanding on a basic and diluted basis is as follows (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares

 

105,317

 

103,883

 

105,283

 

103,695

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

 

Stock options and restricted stock

 

1,055

 

2,207

 

1,118

 

2,045

 

Diluted weighted average shares

 

106,372

 

106,090

 

106,401

 

105,740

 

 

For the three and six months ended March 31, 2009, options to purchase 1,869,424 shares of common stock were outstanding but were not included in the computation of diluted earnings per share.  Inclusion of these shares would be antidilutive.

 

For the three and six months ended March 31, 2008, options to purchase 710,000 shares of common stock were outstanding but were not included in the computation of diluted earnings per share.  Inclusion of these shares would be antidilutive.

 

3.              Operations and Risks in Venezuela

 

Typically, contract drilling revenues are recognized as services are performed.  In U.S. generally accepted accounting principles, one of the basic revenue recognition criteria is that collectability of the revenue is reasonably assured. The Company’s revenue in Venezuela is from providing drilling services to Petroleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned petroleum company.  The Company determined, as of the beginning of the second quarter of fiscal 2009 and forward, the revenue recognition criteria in Venezuela is no longer met as collectability of revenue is not reasonably assured, primarily due to the uncertainty of the timing of collectability as discussed further below.  As a result of this change, $35.6 million of revenue was not recorded in the International Land segment in the second quarter of fiscal 2009.  As of March 31,

 

7



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

2009 and December 31, 2008, the Consolidated Balance Sheet reflected accounts receivable from PDVSA of $73.6 million and $76.0 million, respectively.  During the second quarter of fiscal 2009, $2.4 million was collected from PDVSA.  Additionally, subsequent to the end of the second fiscal quarter, additional payments of approximately $8.1 million were received through April 30, 2009.  The Company does not have enough information to conclude that the remaining receivable balance is not probable of collection.  However, there is uncertainty regarding the timing of the collection due to the current political, economic and social instability in Venezuela, the dependence by Venezuela on oil to largely support its economy and the failure of PDVSA to pay many service companies working in Venezuela.  The collection of receivables from PDVSA has historically been more difficult and slower than that of other customers in international countries in which the Company has drilling operations due to PDVSA policies and procedures.

 

The Company is exposed to risks of currency devaluation in Venezuela primarily as a result of bolivar fuerte (Bsf) receivable and Bsf cash balances.

 

The Company has made applications with the Venezuelan government requesting the approval to convert bolivar fuerte cash balances to U.S. dollars. Upon approval from the Venezuelan government, the Company’s Venezuelan subsidiary may remit approximately $28.4 million as a dividend to its U.S. based parent as cash balances permit.  While the Company has been successful in the past in obtaining government approval for conversion of bolivar fuerte to U.S. dollars, there is no guarantee that future conversion to U.S. dollars will be permitted.  In the event that conversion to U.S. dollars would be prohibited, then bolivar fuerte cash balances would increase and expose the Company to increased risk of devaluation.

 

The Venezuelan subsidiary has received notification from PDVSA that reimbursement of U.S. dollar invoices previously paid in Bsf will be made only when supporting documentation has been approved.  The supporting documentation has been delivered to PDVSA and is awaiting approval.  The approval and subsequent payment would result in reducing the foreign currency exposure by approximately $38.6 million. The Company is unable to determine when payment will be received.

 

Past devaluation losses may not be reflective of the potential for future devaluation losses.  Venezuela continues to operate under exchange controls and the Venezuelan bolivar fuerte exchange rate has remained fixed at Bsf 2.150 to one U.S. dollar since March 2005.  The exact amount and timing of any future devaluations of the Venezuelan bolivar fuerte exchange rate is uncertain.  At March 31, 2009, the Company had the equivalent of $24 million in cash in Bsf’s exposed to the risk of currency devaluation.

 

While the Company is unable to predict the magnitude and timing of future devaluation in Venezuela, if current activity levels continue and if a 10 percent to 30 percent devaluation were to occur, the Company could experience potential currency devaluation losses ranging from approximately $5.0 million to $12.5 million.

 

During the second quarter of fiscal 2009, the Company discontinued work for PDVSA as contracts expired.  All of the Company’s eleven rigs were active in Venezuela during the first quarter of fiscal 2009.  At the end of the second quarter of fiscal 2009, only seven of the rigs were active.  The Company will continue to idle rigs along with other efforts until satisfactory payments for services rendered are received.  If payments are not received, it is likely that the remaining rigs will become idle by the end of August 2009.  At March 31, 2009, the net book value of long-lived assets in Venezuela was $76.2 million.

 

Readers should refer to Note 17 of these Consolidated Condensed Financial Statements for additional information related to risk factors in international operations.

 

8



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

4.              Inventories

 

Inventories consist primarily of replacement parts and supplies held for use in the Company’s drilling operations.

 

5.              Investments

 

The following is a summary of available-for-sale securities, which excludes securities accounted for under the equity method of accounting, investments in limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan.

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Equity securities 03/31/09

 

$

7,685

 

$

31,615

 

$

 

$

39,300

 

Equity securities 09/30/08

 

$

7,685

 

$

67,867

 

$

 

$

75,552

 

 

The investments in limited partnerships carried at cost were $12.4 million at March 31, 2009 and September 30, 2008.  The estimated fair value of the investments carried at cost was $14.6 million and $17.3 million at March 31, 2009 and September 30, 2008, respectively.  The assets held in the Non-qualified Supplemental Savings Plan are carried at fair value which totaled $3.0 million at March 31, 2009 and $6.4 million at September 30, 2008.  The recorded amounts for investments accounted for under the equity method are $121.5 million and $104.9 million at March 31, 2009 and September 30, 2008, respectively.  During the six months ended March 31, 2009, the Company increased the equity investment $0.3 million ($0.2 million, net of tax) to account for capital transactions of Atwood Oceanics, Inc. (Atwood).  At March 31, 2009, the Company owned 8,000,000 shares of Atwood with a fair value of $132.7 million.

 

Effective April 1, 2009, Atwood will be accounted for as an available-for-sale investment, as the Company has determined it no longer exercises significant influence through the Atwood board of director seats and will discontinue accounting for Atwood using the equity method.

 

6.              Comprehensive Income

 

Comprehensive income, net of related income taxes, is as follows (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Net Income

 

$

 103,738

 

$

 102,054

 

$

 249,013

 

$

 209,884

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Unrealized appreciation (depreciation) on securities

 

(1,654

)

(13,719

)

(36,252

)

(22,112

)

Income taxes

 

628

 

5,213

 

13,775

 

8,402

 

 

 

(1,026

)

(8,506

)

(22,477

)

(13,710

)

 

 

 

 

 

 

 

 

 

 

Reclassification of realized gains in net income

 

 

(5,476

)

 

 

(5,606

)

Income taxes

 

 

2,081

 

 

 

2,130

 

 

 

 

(3,395

)

 

 

(3,476

)

 

 

 

 

 

 

 

 

 

 

Minimum pension liability adjustments

 

 

(3

)

 

(6

)

Income taxes

 

 

1

 

 

2

 

 

 

 

(2

)

 

(4

)

Total comprehensive income

 

$

102,712

 

$

90,151

 

$

226,536

 

$

192,694

 

 

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The components of accumulated other comprehensive income, net of related income taxes, are as follows (in thousands):

 

 

 

March 31,

 

September 30,

 

 

 

2009

 

2008

 

Unrealized appreciation on securities, net

 

$

19,601

 

$

42,078

 

Unrecognized actuarial gain (loss) and prior service cost

 

(3,671

)

(3,671

)

Accumulated other comprehensive income

 

$

15,930

 

$

38,407

 

 

 

7.              Financial Instruments

 

At March 31, 2009, the Company’s short-term investments consisted of a bank certificate of deposit with an original maturity greater than three months.  Interest earned is included in interest and dividend income on the Consolidated Condensed Statement of Income.

 

8.              Derivative Financial Instruments

 

In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (SFAS No. 161).  SFAS No. 161 provides companies with requirements for enhanced disclosures about derivative instruments and hedging activities to enable investors to better understand their effects on a company’s financial position, financial performance and cash flows.  In accordance with the effective date of SFAS No. 161, the Company adopted the disclosure provisions of SFAS No. 161 during the three months ended March 31, 2009.

 

The Company is exposed to market risk in the normal course of business operations due to ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings.  SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133), requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value.  The Company has not historically entered into derivative financial instruments for trading purposes or for speculation.

 

In January 2009, the Company executed an interest rate swap agreement to limit the Company’s exposure to changes in interest rates.  The Company has determined that this is not a hedging transaction and the change in the value for the three months ended March 31, 2009 of $0.3 million is included in interest expense in the Consolidated Condensed Statement of Income.  The fair value at March 31, 2009 was $0.2 million and is included in accrued liabilities in the Consolidated Condensed Balance Sheet.  For further information regarding debt, see Note 12.  At March 31, 2009, the Company did not have any other derivative instruments.

 

9.              Fair Value Measurement

 

On September 15, 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157 which addresses standardizing the measurement of fair value for companies who are required to use a fair value measure for recognition or disclosure purposes.  The FASB defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”  The Company’s adoption of the required portions of SFAS 157 as of October 1, 2008 did not have a material impact on the Company’s financial position, results of operations and cash flows.  In February 2008, the FASB issued Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delayed the required adoption of portions of SFAS 157 related to nonfinancial assets and nonfinancial liabilities, except for items recognized or disclosed at fair value on a recurring basis.  Accordingly, the Company will adopt the provisions of SFAS 157 related to nonfinancial assets and nonfinancial liabilities recognized or disclosed at fair value on a nonrecurring basis in fiscal 2010.  The Company is

 

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

currently evaluating the impact, if any, of the adoption of FSP 157-2 on its   financial position, results of operations or cash flows.

 

SFAS 157 establishes a fair value hierarchy to prioritize the inputs used in valuation techniques into three levels as follows:

 

·                  Level 1 — Observable inputs that reflect quoted prices in active markets for identical assets or liabilities in active markets.

 

·                  Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

·                  Level 3 — Valuations based on inputs that are unobservable and not corroborated by market data.

 

At March 31, 2009, the Company’s financial assets utilizing Level 1 inputs include cash equivalents, money market funds the Company has elected to classify as restricted assets and equity securities with active markets.  For these items, quoted current market prices are readily available.

 

During the quarter ended March 31, 2009, the Company entered into an interest rate swap agreement with $105 million of notional value to hedge a portion of the risk of changes in the interest rate associated with amounts outstanding under an unsecured line of credit that expires in January 2010.  The fair value of the swap agreement was determined using Level 2 inputs.  The fair value at March 31, 2009, is based on the present value of expected future cash flows, inclusive of the risk of nonperformance, using a discount rate appropriate for the duration.  Level 2 inputs also include a bank certificate of deposit classified as a short-term investment and restricted cash included in current assets.

 

The Company does not currently have any financial instruments utilizing Level 3 inputs.

 

The following presents information about the Company’s fair value hierarchy for financial assets as of March 31, 2009:

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

Total

 

in Active

 

Significant

 

 

 

 

 

Measure

 

Markets for

 

Other

 

Significant

 

 

 

at

 

Identical

 

Observable

 

Unobservable

 

 

 

Fair

 

Assets

 

Inputs

 

Inputs

 

 

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

93,498

 

$

92,476

 

$

1,022

 

$

 

Equity securities

 

39,300

 

39,300

 

 

 

Certificate of deposit

 

12,500

 

 

12,500

 

 

 

 

 

 

 

 

 

 

 

 

Total assets at fair value

 

$

145,298

 

$

131,776

 

$

13,522

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Interest rate swap

 

$

(209

)

$

 

$

(209

)

$

 

 

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis presented in the Company’s Consolidated Condensed Balance Sheet as of March 31, 2009:

 

 

 

 

 

Quoted Prices

 

 

 

 

 

 

 

Total

 

in Active

 

Significant

 

 

 

 

 

Measure

 

Markets for

 

Other

 

Significant

 

 

 

at

 

Identical

 

Observable

 

Unobservable

 

 

 

Fair

 

Assets

 

Inputs

 

Inputs

 

 

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

81,115

 

$

81,115

 

$

 

$

 

Short-term investments

 

12,500

 

 

12,500

 

 

Investments

 

39,300

 

39,300

 

 

 

Other current assets

 

3,022

 

2,000

 

1,022

 

 

Other assets

 

9,361

 

9,361

 

 

 

Total assets measured at fair value

 

$

145,298

 

$

131,776

 

$

13,522

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Other current liabilities

 

$

(209

)

$

 

$

(209

)

$

 

Total liabilities measured at fair value

 

$

(209

)

$

 

$

(209

)

$

 

 

The following information presents the supplemental fair value information about long-term fixed-rate debt at March 31, 2009 and September 30, 2008.

 

 

 

March 31,

 

September 30,

 

 

 

2009

 

2008

 

 

 

(in thousands)

 

Carrying value of long-term fixed-rate debt

 

$

175.0

 

$

175.0

 

Fair value of long-term fixed-rate debt

 

$

204.7

 

$

198.0

 

 

The fair value of the long-term fixed-rate debt was calculated using discounted future cash flows.

 

In February 2007, the FASB issued SFAS No. 159 which permits companies to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently measured at fair value.  Unrealized gains and losses on items for which the fair value option has been elected would be reported in earnings at each subsequent reporting date.  Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred.  The Company did not elect the fair value option for any of its existing financial instruments other than those already measured at fair value.  Therefore, the Company’s adoption of SFAS No. 159 as of October 1, 2008 did not have an impact on the Company’s financial position, results of operations or cash flows.

 

10.        Cash Dividends

 

The $0.05 cash dividend declared December 2, 2008, was paid March 2, 2009. On March 4, 2009, a cash dividend of $0.05 per share was declared for shareholders of record on May 15, 2009, payable June 1, 2009.

 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

11.        Stock-Based Compensation

 

The Company has one plan providing for common-stock based awards to employees and to non-employee Directors.  The plan permits the granting of various types of awards including stock options and restricted stock awards.  Restricted stock may be granted for no consideration other than prior and future services.  The purchase price per share for stock options may not be less than market price of the underlying stock on the date of grant.  Stock options expire ten years after the grant date.  Vesting requirements are determined by the Human Resources Committee of the Company’s Board of Directors.  Readers should refer to Note 5 of the consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008 for additional information related to stock-based compensation.

 

The Company uses the Black-Scholes formula to estimate the value of stock options granted.  The fair value of the options is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which are generally the vesting periods. The Company has the right to satisfy option exercises from treasury shares and from authorized but unissued shares.

 

A summary of compensation cost for stock-based payment arrangements recognized in general and administrative expense is as follows (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Compensation expense

 

 

 

 

 

 

 

 

 

Stock options

 

$

1,677

 

$

1,468

 

$

3,514

 

$

3,165

 

Restricted stock

 

361

 

185

 

724

 

547

 

 

 

$

2,038

 

$

1,653

 

$

4,238

 

$

3,712

 

 

STOCK OPTIONS

 

The following summarizes the weighted-average assumptions utilized in determining the fair value of options granted during the six months ended March 31, 2009 and 2008:

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Risk-free interest rate

 

1.7

%

3.3

%

Expected stock volatility

 

43.4

%

31.1

%

Dividend yield

 

.9

%

.5

%

Expected term (in years)

 

5.8

 

4.8

 

 

Risk-Free Interest Rate.  The risk-free interest rate is based on U.S. Treasury securities for the expected term of the option.

 

Expected Volatility Rate.  Expected volatility is based on the daily closing price of the Company’s stock based upon historical experience over a period which approximates the expected term of the option.

 

Dividend Yield.  The expected dividend yield is based on the Company’s current dividend yield.

 

Expected Term.  The expected term of the options granted represents the period of time that they are expected to be outstanding.  The Company estimates the expected term of options granted based on historical experience with grants and exercises.

 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

A summary of stock option activity under the Plan for the three and six months ended March 31, 2009 is presented in the following tables:

 

 

 

Three Months Ended March 31, 2009

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Weighted-

 

Average

 

Aggregate

 

 

 

 

 

Average

 

Remaining

 

Intrinsic

 

 

 

Shares

 

Exercise

 

Contractual

 

Value

 

Options

 

(in thousands)

 

Price

 

Term

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2009

 

5,656

 

$

20.02

 

 

 

 

 

Granted

 

 

 

 

 

 

 

Exercised

 

(8

)

16.01

 

 

 

 

 

Forfeited/Expired

 

 

 

 

 

 

 

Outstanding at March 31, 2009

 

5,648

 

$

20.21

 

5.93

 

$

14,484

 

Vested and expected to vest at March 31, 2009

 

5,588

 

$

20.16

 

5.89

 

$

14,594

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2009

 

3,836

 

$

17.08

 

4.57

 

$

21,808

 

 

 

 

Six Months Ended

 

 

 

March 31, 2009

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Shares

 

Exercise

 

Options

 

(in thousands)

 

Price

 

 

 

 

 

 

 

Outstanding at October 1, 2008

 

4,819

 

$

20.02

 

Granted

 

865

 

21.07

 

Exercised

 

(31

)

13.74

 

Forfeited/Expired

 

(5

)

29.12

 

Outstanding at March 31, 2009

 

5,648

 

$

20.21

 

 

The weighted-average fair value of options granted in the first quarter of fiscal 2009 was $8.16.  No options were granted in the second quarter of fiscal 2009.

 

The total intrinsic value of options exercised during the three and six months ended March 31, 2009 was $0.1 million and $0.4 million, respectively.

 

As of March 31, 2009, the unrecognized compensation cost related to the stock options was $14.8 million.  That cost is expected to be recognized over a weighted-average period of 2.7 years.

 

RESTRICTED STOCK

 

Restricted stock awards consist of the Company’s common stock and are time vested over 3-5 years.  The Company recognizes compensation expense on a straight-line basis over the vesting period.  The fair value of restricted stock awards is determined based on the closing trading price of the Company’s shares on the grant date.

 

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

A summary of the status of the Company’s restricted stock awards as of March 31, 2009 and changes during the six months then ended is presented below:

 

 

 

Six Months Ended

 

 

 

March 31, 2009

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Shares

 

Grant-Date

 

Restricted Stock Awards

 

(in thousands)

 

Fair Value

 

 

 

 

 

 

 

Unvested at October 1,

 

243

 

$

29.27

 

Granted

 

 

 

Vested

 

(66

)

29.52

 

Forfeited

 

 

 

Unvested at March 31,

 

177

 

$

30.06

 

 

As of March 31, 2009, there was $2.9 million of total unrecognized compensation cost related to restricted stock options granted under the Plan.  That cost is expected to be recognized over a weighted-average period of 2.0 years.

 

12.        Debt

 

At March 31, 2009, the Company had the following unsecured long-term debt outstanding (in thousands):

 

Maturity Date 

 

Interest Rate

 

 

 

Fixed rate debt:

 

 

 

 

 

August 15, 2009

 

5.91%

 

$

25,000

 

August 15, 2012

 

6.46%

 

75,000

 

August 15, 2014

 

6.56%

 

75,000

 

Senior credit facility:

 

 

 

 

 

December 18, 2011

 

.85%-.92%

 

280,000

 

 

 

 

 

455,000

 

Less long-term debt due within one year

 

 

 

25,000

 

Long-term debt

 

 

 

$

430,000

 

 

The terms of the fixed rate debt obligations require the Company to maintain a minimum ratio of debt to total capitalization.

 

The Company has an agreement with a multi-bank syndicate for a $400 million senior unsecured credit facility which matures December 2011.  While the Company has the option to borrow at the prime rate for maturities of less than 30 days, the Company anticipates that the majority of all of the borrowings over the life of the facility will accrue interest at a spread over the London Interbank Bank Offered Rate (LIBOR).  The Company pays a commitment fee based on the unused balance of the facility.  The spread over LIBOR as well as the commitment fee is determined according to a scale based on a ratio of the Company’s total debt to total capitalization.  The spread ranges from .30 percent to .45 percent over LIBOR depending on the ratios.  At March 31, 2009, the spread on borrowings was .35 percent over LIBOR and the commitment fee was ..075 percent per annum.  At March 31, 2009, the Company had three letters of credit totaling $25.9 million under the facility and had $280 million borrowed against the facility with $94.1 million available to borrow. The advances bear interest ranging from 0.85 percent to 0.92 percent.

 

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HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Short-term debt consists of a $105 million unsecured line of credit that will mature January 2010.  The Company closed on the agreement with a five-bank syndicate January 21, 2009.  The Company anticipates that this loan will remain funded for the entire term and that all borrowings will accrue interest at a spread over 30 day LIBOR. The spread over LIBOR is determined according to the same scale of debt to total capitalization used in the Company’s $400 million facility which is described in the preceding paragraph.  The spread over LIBOR for the new facility has increased to a range of 2 percent to 2.75 percent.  At March 31, 2009, the spread on the borrowing was 2.25 percent over LIBOR.  Simultaneous with the closing of this facility, the Company entered into an interest-rate swap with the same maturity and a notional amount of $105 million. The Company believes that the swap will act to fix the annualized interest rate of the facility at approximately 3.17 percent assuming the spread remains at 2.25 percent over LIBOR.

 

The interest rate swap qualifies as a derivative and was not designated as a hedging instrument and as such, the Company has not applied hedge accounting.  At the end of each period, the interest rate swap is recorded in the Consolidated Condensed Balance Sheet at fair value, either in other current assets or accrued liabilities, and any related gains or losses are recognized on the Company’s Consolidated Condensed Statement of Income within interest expense.  The fair value of the interest rate swap liability at March 31, 2009 was $0.2 million and interest expense of $0.3 million was recorded for the three months ended March 31, 2009.

 

Financial covenants in both facilities require the Company to maintain a funded leverage ratio (as defined) of less than 50 percent and an interest coverage ratio (as defined) of not less than 3.00 to 1.00.  Both facilities contain additional terms, conditions, and restrictions that the Company believes are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality.  At March 31, 2009, the Company was in compliance with all debt covenants.

 

Additionally, as of March 31, 2009, the Company had unsecured letters of credit totaling $6.3 million which were used to obtain surety bonds for the international operations.

 

13.        Income Taxes

 

The Company’s effective tax rate for the first six months of fiscal 2009 and 2008 was 40.8 percent and 36.9 percent, respectively.  The Company’s effective tax rate for the three months ended March 31, 2009 and 2008 was 45.6 percent and 37.3 percent, respectively.  The effective rate differs from the U.S. federal statutory rate of 35.0 percent primarily due to state and foreign taxes.

 

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months; however, the Company does not expect the change to have a material effect on results of operations or financial position.

 

14.        Contingent Liabilities and Commitments

 

In conjunction with the Company’s current drilling rig construction program, purchase commitments for equipment, parts and supplies of approximately $234.6 million are outstanding at March 31, 2009.

 

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Various legal actions, the majority of which arise in the ordinary course of business, are pending.  The Company maintains insurance against certain business risks subject to certain deductibles.  None of these legal actions are expected to have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

 

The Company is contingently liable to sureties in respect of bonds issued by the sureties in connection with certain commitments entered into by the Company in the normal course of business.  The Company has agreed to indemnify the sureties for any payments made by them in respect of such bonds.

 

15.       Segment Information

 

The Company operates principally in the contract drilling industry. The Company’s contract drilling business includes the following reportable operating segments: U.S. Land, Offshore, and International Land.  The contract drilling operations consist mainly of contracting Company-owned drilling equipment primarily to major oil and gas exploration companies.  The Company’s primary international areas of operation include Venezuela, Colombia, Ecuador, Argentina and other South American countries.  The International Land operations have similar services, have similar types of customers, operate in a consistent manner and have similar economic and regulatory characteristics.  Therefore, the Company has aggregated its International Land operations into one reportable segment.  Each reportable segment is a strategic business unit which is managed separately. Other includes non-reportable operating segments.

 

The Company evaluates segment performance based on income or loss from operations (segment operating income) before income taxes which includes:

 

·                  revenues from external and internal customers

·                  direct operating costs

·                  depreciation and

·                  allocated general and administrative costs

 

but excludes corporate costs for other depreciation, income from asset sales and other corporate income and expense.

 

General and administrative costs are allocated to the segments based primarily on specific identification and, to the extent that such identification is not practical, on other methods which the Company believes to be a reasonable reflection of the utilization of services provided.

 

Segment operating income is a non-GAAP financial measure of the Company’s performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense.

 

The Company considers segment operating income to be an important supplemental measure of operating performance by presenting trends in the Company’s core businesses.  This measure is used by the Company to facilitate period-to-period comparisons in operating performance of the Company’s reportable segments in the aggregate.  The Company believes that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments and the Company on an ongoing basis using criteria that are used by our internal decision makers.  Additionally, it highlights operating trends and aids analytical comparisons.  However, segment operating income has limitations and should not be used as an alternative to operating income or loss, a performance measure determined in accordance with GAAP, as it excludes certain

 

17



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

costs that may affect the Company’s operating performance in future periods.

 

Due to the continued growth of the drilling segments over the past few years, the Company re-evaluated its reportable segments.  With the growth of the drilling segments, the Real Estate segment has become a smaller percentage of total segment operating income.  In the evaluation of segment reporting, the Company determined that the total of external revenues reported by the three reportable operating segments, U.S. Land, Offshore and International Land, comprised more than 75 percent of total consolidated revenue. As a result, the Real Estate segment previously shown as a reportable segment has been included with all other non-reportable business segments.  Revenues included in all other consist primarily of rental income.  The three and six months ended March 31, 2008 have been restated to reflect this change.

 

Summarized financial information of the Company’s reportable segments for the six months ended March 31, 2009, and 2008, is shown in the following tables:

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income (Loss)

 

March 31, 2009

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

889,718

 

$

 

$

889,718

 

$

386,978

 

Offshore

 

101,819

 

 

101,819

 

30,547

 

International Land

 

147,007

 

 

147,007

 

7,346

 

 

 

1,138,544

 

 

1,138,544

 

424,871

 

Other

 

5,510

 

441

 

5,951

 

(2,352

)

 

 

1,144,054

 

441

 

1,144,495

 

422,519

 

Eliminations

 

 

(441

)

(441

)

 

Total

 

$

1,144,054  

 

$

 

$

1,144,054

 

$

422,519

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income

 

March 31, 2008

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

712,907

 

$

 

$

712,907

 

$

287,581

 

Offshore

 

57,070

 

 

57,070

 

7,717

 

International Land

 

154,359

 

 

154,359

 

33,908

 

 

 

924,336

 

 

924,336

 

329,206

 

Other

 

5,971

 

437

 

6,408

 

2,825

 

 

 

930,307

 

437

 

930,744

 

332,031

 

Eliminations

 

 

(437

)

(437

)

 

Total

 

$

930,307

 

$

 

$

930,307

 

$

332,031

 

 

18



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Summarized financial information of the Company’s reportable segments for the three months ended March 31, 2009, and 2008, is shown in the following tables:

 

 

 

 

 

 

 

 

 

Segment

 

 

 

 

 

 

 

 

 

Operating

 

 

 

External

 

Inter-

 

Total

 

Income

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

(Loss)

 

March 31, 2009

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

414,514

 

$

 

$

414,514

 

$

192,930

 

Offshore

 

51,331

 

 

51,331

 

15,837

 

International Land

 

51,829

 

 

51,829

 

(15,282

)

 

 

517,674

 

 

517,674

 

193,485

 

Other

 

2,626

 

218

 

2,844

 

(1,491

)

 

 

520,300

 

218

 

520,518

 

191,994

 

Eliminations

 

 

(218

)

(218

)

 

Total

 

$

520,300  

 

$

 

$

520,300

 

$

191,994

 

 

 

 

 

 

 

 

 

 

Segment

 

 

 

External

 

Inter-

 

Total

 

Operating

 

(in thousands)

 

Sales

 

Segment

 

Sales

 

Income

 

March 31, 2008

 

 

 

 

 

 

 

 

 

Contract Drilling:

 

 

 

 

 

 

 

 

 

U.S. Land

 

$

365,263

 

$

 

$

365,263

 

$

143,740

 

Offshore

 

29,789

 

 

29,789

 

3,603

 

International Land

 

75,757

 

 

75,757

 

12,752

 

 

 

470,809

 

 

470,809

 

160,095

 

Other

 

2,835

 

224

 

3,059

 

1,301

 

 

 

473,644

 

224

 

473,868

 

161,396

 

Eliminations

 

 

(224

)

(224

)

 

Total

 

$

473,644

 

$

 

$

473,644

 

$

161,396

 

 

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Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

(in thousands)

 

 

 

Segment operating income

 

$

191,994

 

$

161,396

 

$

422,519

 

$

332,031

 

Gain from involuntary conversion of long-lived assets

 

 

 

277

 

4,810

 

Income from asset sales

 

2,055

 

1,946

 

2,969

 

2,788

 

Corporate general and administrative costs and corporate depreciation

 

(10,711

)

(7,672

)

(20,007

)

(15,326

)

Operating income

 

183,338

 

155,670

 

405,758

 

324,303

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

2,150

 

1,220

 

3,936

 

2,335

 

Interest expense

 

(2,554

)

(4,773

)

(6,254

)

(9,604

)

Gain on sale of investment securities

 

 

5,476

 

 

5,606

 

Other

 

(28

)

180

 

100

 

(436

)

Total other income (expense)

 

(432

)

2,103

 

(2,218

)

(2,099

)

Income before income taxes and equity in income of affiliate

 

$

182,906

 

$

157,773

 

$

403,540

 

$

322,204

 

 

 

 

March 31,

 

September 30,

 

 

 

2009

 

2008

 

 

 

(in thousands)

 

Total Assets

 

 

 

 

 

U.S. Land

 

$

3,011,147

 

$

2,660,232

 

Offshore

 

151,052

 

152,497

 

International Land

 

431,626

 

368,659

 

Other

 

33,380

 

35,285

 

 

 

3,627,205

 

3,216,673

 

Investments and Corporate Operations

 

352,611

 

371,372

 

Total

 

$

3,979,816

 

$

3,588,045

 

 

20



Table of Contents

 

HELMERICH & PAYNE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

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

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

(in thousands)

 

 

 

Operating revenues

 

 

 

 

 

 

 

 

 

United States

 

$

458,319

 

$

396,899

 

$

975,671

 

$

774,451

 

Venezuela