CONSOLIDATED CONDENSED BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | ||
In Thousands | Dec. 31, 2009
| Sep. 30, 2009
|
Current assets: | ||
Cash and cash equivalents | $153,053 | $141,486 |
Short-term investments | 12,516 | 12,500 |
Accounts receivable, less reserve of $658 at December 31, 2009 and $659 at September 30, 2009 | 270,509 | 246,790 |
Inventories | 46,370 | 44,723 |
Deferred income taxes | 20,560 | 12,861 |
Assets held for sale | 1,023 | |
Prepaid expenses and other | 77,488 | 63,549 |
Total current assets | 580,496 | 522,932 |
Investments | 366,672 | 356,404 |
Property, plant and equipment, net | 3,273,643 | 3,265,907 |
Other assets | 14,803 | 15,781 |
Total assets | 4,235,614 | 4,161,024 |
Current liabilities: | ||
Accounts payable | 58,981 | 70,218 |
Accrued liabilities | 156,366 | 126,688 |
Short-term debt | 105,000 | 105,000 |
Total current liabilities | 320,347 | 301,906 |
Noncurrent liabilities: | ||
Long-term debt | 380,000 | 420,000 |
Deferred income taxes | 701,257 | 681,542 |
Other | 78,028 | 74,567 |
Total noncurrent liabilities | 1,159,285 | 1,176,109 |
Shareholders' equity: | ||
Common stock, $.10 par value, 160,000,000 shares authorized, 107,057,904 shares issued as of December 31 and September 30, 2009 and 105,673,378 and 105,486,218 shares outstanding as of December 31 and September 30, 2009, respectively | 10,706 | 10,706 |
Preferred stock, no par value, 1,000,000 shares authorized, no shares issued | 0 | 0 |
Additional paid-in capital | 182,121 | 176,039 |
Retained earnings | 2,472,875 | 2,414,942 |
Accumulated other comprehensive income | 119,005 | 112,451 |
Treasury stock, at cost | (28,725) | (31,129) |
Total shareholders' equity | 2,755,982 | 2,683,009 |
Total liabilities and shareholders' equity | $4,235,614 | $4,161,024 |
1_CONSOLIDATED CONDENSED BALANC
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | ||
In Thousands, except Share data | Dec. 31, 2009
| Sep. 30, 2009
|
CONSOLIDATED CONDENSED BALANCE SHEETS | ||
Accounts receivable, reserve (in dollars) | $658 | $659 |
Common stock, par value (in dollars per share) | 0.1 | 0.1 |
Common stock, shares authorized | 160,000,000 | 160,000,000 |
Common stock, shares issued | 107,057,904 | 107,057,904 |
Common stock, shares outstanding | 105,673,378 | 105,486,218 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
CONSOLIDATED CONDENSED STATEMEN
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Dec. 31, 2009 | 3 Months Ended
Dec. 31, 2008 |
Operating revenues: | ||
Drilling - U.S. Land | $285,069 | $475,204 |
Drilling - Offshore | 52,290 | 50,488 |
Drilling - International Land | 59,398 | 95,178 |
Other | 3,086 | 2,884 |
Total operating revenues | 399,843 | 623,754 |
Operating costs and other: | ||
Operating costs, excluding depreciation | 212,693 | 330,928 |
Depreciation | 62,803 | 54,772 |
General and administrative | 20,844 | 15,148 |
Research and development | 1,815 | 1,677 |
Gain from involuntary conversion of long-lived assets | (277) | |
Income from asset sales | (698) | (914) |
Total operating costs and other | 297,457 | 401,334 |
Operating income | 102,386 | 222,420 |
Other income (expense): | ||
Interest and dividend income | 439 | 1,786 |
Interest expense | (4,694) | (3,700) |
Other | 15 | 128 |
Total other income (expense) | (4,240) | (1,786) |
Income before income taxes and equity in income of affiliate | 98,146 | 220,634 |
Income tax provision | 34,911 | 81,248 |
Equity in income of affiliate net of income taxes | 5,889 | |
NET INCOME | $63,235 | $145,275 |
Earnings per common share: | ||
Basic (in dollars per share) | 0.6 | 1.38 |
Diluted (in dollars per share) | 0.59 | 1.36 |
Weighted average shares outstanding: | ||
Basic (in shares) | 105,575 | 105,249 |
Diluted (in shares) | 107,238 | 106,310 |
Dividends declared per common share (in dollars per share) | 0.05 | 0.05 |
2_CONSOLIDATED CONDENSED STATEM
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | ||
In Thousands | 3 Months Ended
Dec. 31, 2009 | 3 Months Ended
Dec. 31, 2008 |
OPERATING ACTIVITIES: | ||
Net income | $63,235 | $145,275 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 62,803 | 54,772 |
Provision for bad debt | 2 | 8 |
Equity in income of affiliate before income taxes | (9,500) | |
Stock-based compensation | 7,008 | 2,200 |
Gain from involuntary conversion of long-lived assets | (277) | |
Income from asset sales | (698) | (914) |
Deferred income tax expense | 8,235 | 28,141 |
Other | 1 | |
Change in assets and liabilities- | ||
Accounts receivable | (23,721) | 2,259 |
Inventories | (1,647) | (8,896) |
Prepaid expenses and other | (12,978) | (5,675) |
Accounts payable | (15,747) | 20,611 |
Accrued liabilities | 29,999 | 21,834 |
Deferred income taxes | (22) | 3,884 |
Other noncurrent liabilities | 3,681 | 856 |
Net cash provided by operating activities | 120,150 | 254,579 |
INVESTING ACTIVITIES: | ||
Capital expenditures | (64,754) | (250,381) |
Insurance proceeds from involuntary conversion | 277 | |
Proceeds from asset sales | 2,486 | 1,411 |
Purchase of short-term investments | (16) | |
Other | (16) | |
Net cash used in investing activities | (62,284) | (248,709) |
FINANCING ACTIVITIES: | ||
Decrease in notes payable | (1,733) | |
Proceeds from lines of credit | 435,000 | 920,000 |
Payments on lines of credit | (475,000) | (905,000) |
Increase (decrease) in bank overdraft | (2,038) | 2,330 |
Dividends paid | (5,287) | (5,273) |
Exercise of stock options | (623) | 300 |
Excess tax benefit from stock-based compensation | 1,649 | 17 |
Net cash provided by (used in) financing activities | (46,299) | 10,641 |
Net increase in cash and cash equivalents | 11,567 | 16,511 |
Cash and cash equivalents, beginning of period | 141,486 | 121,513 |
Cash and cash equivalents, end of period | $153,053 | $138,024 |
3_CONSOLIDATED CONDENSED STATEM
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (USD $) | ||||||
In Thousands | Common Stock
| Additional Paid-In Capital
| Retained Earnings
| Accumulated Other Comprehensive Income
| Treasury Stock
| Total
|
Balance (in shares) at Sep. 30, 2009 | 107,058 | 1,572 | ||||
Balance at Sep. 30, 2009 | $10,706 | $176,039 | $2,414,942 | $112,451 | ($31,129) | $2,683,009 |
Comprehensive Income: | ||||||
Net income | 63,235 | 63,235 | ||||
Other comprehensive income, | ||||||
Unrealized gains on available-for-sale securities | 6,220 | 6,220 | ||||
Amortization of net periodic benefit costs - net of actuarial gain | 334 | 334 | ||||
Total comprehensive income | 69,789 | |||||
Cash dividends ($.05 per share) | (5,302) | (5,302) | ||||
Exercise of stock options | (1,582) | 959 | (623) | |||
Exercise of stock options (in shares) | (117) | |||||
Tax benefit of stock-based awards, including excess tax benefits of $1.7 million | 2,101 | 2,101 | ||||
Treasury stock issued for vested restricted stock | (1,445) | 1,445 | ||||
Treasury stock issued for vested restricted stock (in shares) | (70) | |||||
Stock-based compensation | 7,008 | 7,008 | ||||
Balance at Dec. 31, 2009 | $10,706 | $182,121 | $2,472,875 | $119,005 | ($28,725) | $2,755,982 |
Balance (in shares) at Dec. 31, 2009 | 107,058 | 1,385 |
4_CONSOLIDATED CONDENSED STATEM
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $) | |
In Millions, except Per Share data | 10/1/2009 - 12/31/2009
|
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY | |
Cash dividends, per share (in dollars per share) | 0.05 |
Tax benefit of stock-based awards, excess tax benefits | 1.7 |
Basis of Presentation
Basis of Presentation | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Basis of Presentation | 1. Basis of Presentation Unless the context otherwise requires, the use of the terms the Company, we, us and our in these Notes to Consolidated Condensed Financial Statements refers to Helmerich Payne,Inc. and its consolidated subsidiaries. The accompanying unaudited Consolidated Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable rulesand 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 our 2009 Annual Report on Form10-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. The adoption of the guidance contained in Accounting Standards Codification (ASC) 260-10-45, Earnings per Share, discussed below in Note 2 changed the calculation of basic earnings per share requiring restricted stock grants that have previously been included in our diluted weighted-average shares to be included in basic weighted-average shares. Earnings per share for the quarter ended December31, 2008 has been recalculated to conform to the current year presentation. As more fully described in our 2009 Annual Report on Form10-K, our 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 us. Revenues from early terminated contracts are recognized when all contractual requirements have been met. |
Earnings per Share
Earnings per Share | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Earnings per Share | 2. Earnings per Share Effective October1, 2009, we adopted the guidance contained in ASC 260-10-45, Earnings per Share. ASC 260-10-45 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in ASC 260-10-45. ASC 260-10-45 requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per share. We have granted and expect to continue to grant restricted stock grants to employees and non-employee directors that contain non-forfeitable rights to dividend. Such grants are considered participating securities under ASC 260-10-45. As such, we are required to include these grants in the calculation of our basic earnings per share and will need to calculate basic earnings per share using the two-class method. Restricted stock grants have previously been included in our dilutive earnings per share calculation using the treasury stock method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Since the adoption of ASC 260-10-45 is to be applied retrospectively, the earnings per share for the prior period have been recalculated to conform to the current year presentation. As a result, the number of shares used to compute earnings per share changed; however, the adoption did not change the basic and diluted earnings per share amounts previously reported for the three months ended December31, 2008. Basic net income per share is computed utilizing the two-class method and is calculated based on weighted-average number of common shares outstanding during the periods presented. Diluted net income per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options and nonvested restricted stock. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts): Three Months Ended December31, 2009 2008 Numerator: Net income $ 63,235 $ 145,275 Earnings allocated to unvested shareholders (134 ) (285 ) Numerator for basic earnings per share 63,101 144,990 Effect of reallocating undistributed earnings of unvested shareholders 2 3 Numerator for diluted earnings per share $ 63,103 $ 144,993 Denominator: Denominator for basic earnings per share weighted-average shares 105,575 105,249 Effect of dilutive shares from stock options and restricted stock 1,663 1,061 Denominator for diluted earnings per share adjusted weighted-average shares 107,238 106,310 Earnings per common share: Basic $ 0.60 $ |
Operations and Risks in Venezue
Operations and Risks in Venezuela | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Operations and Risks in Venezuela | 3. Operations and Risks in Venezuela We continue to record revenue in Venezuela as cash is collected from Petroleos de Venezuela, S.A. (PDVSA) as more fully described in Note 14 of the Consolidated Financial Statements in our Annual Report on Form10-K for fiscal year ended September30, 2009. As adjusted for the January2010 currency devaluation discussed below, the amount of revenue that has not been recognized since the end of the first quarter of fiscal 2009 and will be recognized upon collection is approximately $41.9 million. During the first quarter of fiscal 2010, we received approximately $20.8 million (U.S. dollars and U.S. currency equivalent). Approximately 73 percent of this amount corresponded to accounts receivable at the end of the first quarter of fiscal 2009 and the remainder to invoices issued for work performed after the first quarter of fiscal 2009. At December31, 2009, the Consolidated Condensed Balance Sheet includes accounts receivable from PDVSA of $13.0 million, $10.6 million adjusted for the January2010 currency devaluation discussed below. We do not have enough information to conclude that this remaining receivable balance is not probable of collection. However, there continues to be 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. We proactively continue efforts to collect unpaid invoice amounts. Subsequent to December 31, 2009, we received approximately $5.1 million (U.S. currency equivalent) from PDVSA of which approximately $2.2 million will be recognized in revenues during the second quarter of fiscal 2010. At December31, 2009, all eleven rigs that formerly worked for PDVSA in Venezuela were idle. We continue to pursue future drilling opportunities for these eleven rigs but we do not expect to commit to new contracts until additional progress is made on pending receivable collections and on conversion of local currency to U.S. dollars. In addition to the outstanding accounts receivable above, PDVSA has unilaterally paid U.S. dollar invoices in bolivar fuerte (Bsf) which increases our exposure to foreign currency devaluation. We have provided all supporting documentation to PDVSA and await approval from them to exchange those payments to U.S. dollars. The approval and subsequent payment would result in reducing the foreign currency exposure. We are unable to determine when payment will be received. On January8, 2010, the Venezuelan government devalued its currency and established a two tier exchange structure. The official exchange rate has been devalued from 2.15 Bsf to each U.S. dollar to 4.30 for non-essential goods and services and to 2.60 for essential goods. We expect our drilling services to fall into the non-essential classification. As a result of the devaluation, we expect to record an exchange loss of approximately $20.0 million in the second quarter of fiscal 2010. We have, since July22, 2008, had an outstanding application with the Venezuelan government requesting ap |
Inventories
Inventories | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Inventories | 4. Inventories Inventories consist primarily of replacement parts and supplies held for use in our drilling operations. |
Financial Instruments and Fair
Financial Instruments and Fair Value Measurement | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Financial Instruments and Fair Value Measurement | 5. Financial Instruments and Fair Value Measurement The estimated fair value of our available-for-sale securities is primarily based on market quotes. The following is a summary of available-for-sale securities, which excludes 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 12/31/09 $ 129,183 $ 220,592 $ $ 349,775 Equity securities 09/30/09 $ 129,183 $ 210,640 $ $ 339,823 On an on-going basis, we evaluate the marketable equity securities to determine if a decline in fair market is other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. We review several factors to determine whether a loss is other-than-temporary. These factors include, but are not limited to, (i)the length of time a security is in an unrealized loss position, (ii)the extent to which fair value is less than cost, (iii)the financial condition and near term prospects of the issuer, and (iv)our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. The cost of securities used in determining realized gains and losses is based on the average cost basis of the security sold. We had no sales of marketable equity available-for-sale securities during the first quarter of fiscal 2010 and 2009. Investments in limited partnerships carried at cost were approximately $12.4 million at December31, 2009 and September30, 2009. The estimated fair value of the limited partnerships was $20.6 million and $19.7 million at December31, 2009 and September30, 2009, respectively. The estimated fair value exceeded the cost of investments at December31, 2009 and September30, 2009 and, as such, the investments were not impaired. Assets held in the Non-qualified Supplemental Savings Plan are carried at fair market value which totaled $4.5 million at December31, 2009 and $4.2 million at September30, 2009, respectively. The majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments. At December31, 2009, our 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. The carrying amount of the certificate of deposit approximates fair value. The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at December31, 2009 and September30, 2009. On October1, 2009, we implemented the previously deferred provisions of ASC 820, Fair Value Measurements and Disclosures, for nonfinancial assets and liabilities recorded at fair value, as required. Additionally, we adopted Accounting Standards |
Comprehensive Income
Comprehensive Income | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Comprehensive Income | 6. Comprehensive Income Comprehensive income, net of related income taxes, is as follows (in thousands): Three Months Ended December31, 2009 2008 Net Income $ 63,235 $ 145,275 Other comprehensive income: Unrealized appreciation (depreciation) on securities 9,952 (34,598 ) Income taxes (3,732 ) 13,147 6,220 (21,451 ) Minimum pension liability adjustments 536 Income taxes (202 ) 334 Total comprehensive income $ 69,789 $ 123,824 The components of accumulated other comprehensive income, net of related income taxes, are as follows (in thousands): December31, September30, 2009 2009 Unrealized appreciation on securities $ 136,817 $ 130,597 Unrecognized actuarial gain (loss) and prior service cost (17,812 ) (18,146 ) Accumulated other comprehensive income $ 119,005 $ 112,451 |
Derivative Financial Instrument
Derivative Financial Instruments | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Derivative Financial Instruments | 7. Derivative Financial Instruments We are 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. ASC 815, Derivatives and Hedging, 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. We have not historically entered into derivative financial instruments for trading purposes or for speculation. For further information regarding the derivative instruments including our disclosures of our interest rate swap, refer to Note 10, Debt, and Note 5, Financial Instruments and Fair Value Measurement, of these Consolidated Condensed Financial Statements. |
Cash Dividends
Cash Dividends | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Cash Dividends | 8. Cash Dividends The $0.05 cash dividend declared September2, 2009, was paid December1, 2009. On December1, 2009, a cash dividend of $0.05 per share was declared for shareholders of record on February15, 2010, payable March1, 2010. The dividend payable is included in accounts payable in the Consolidated Condensed Balance Sheet. |
Stock-Based Compensation
Stock-Based Compensation | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Stock-Based Compensation | 9. Stock-Based Compensation We have 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. 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 the 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 our Board of Directors. Readers should refer to Note 5 of the Consolidated Financial Statements in our Annual Report on Form10-K for the fiscal year ended September30, 2009 for additional information related to stock-based compensation. We use 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. We have the right to satisfy option exercises from treasury shares and from authorized but unissued shares. On December1, 2009, the plan was amended to provide for continued vesting (and accelerated vesting upon death) of restricted stock and stock options effective upon a participant becoming retirement eligible. A participant meets the definition of retirement eligible if the participant attains age 55 and has 15 or more years of continuous service as a full-time employee. The plan amendments apply retroactively. As a result of the continued vesting provisions, we incurred additional compensation cost of approximately $4.4 million for the three months ended December31, 2009. A summary of compensation cost for stock-based payment arrangements recognized in general and administrative expense is as follows (in thousands): Three Months Ended December31, 2009 2008 Compensation expense Stock options $ 5,676 $ 1,837 Restricted stock 1,332 363 $ 7,008 $ 2,200 STOCK OPTIONS The following summarizes the weighted-average assumptions utilized in determining the fair value of options granted during the three months ended December31, 2009 and 2008: 2009 2008 Risk-free interest rate 2.3 % 1.7 % Expected stock volatility 49.9 % 43.4 % Dividend yield .5 % .9 % Expected term (in years) 5.8 5.8 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 our 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 our current dividend yield. Expected Term. The expected term of the options granted represents the period of time that they are expected to be outstanding. We estimate the expected term of options granted based on historical experience with grants and exercises. A summary |
Debt
Debt | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Debt | 10. Debt At December31, 2009, we had the following unsecured long-term debt outstanding (in thousands): Unsecured intermediate debt issued August15, 2002: SeriesC, due August15, 2012, 6.46% $ 75,000 SeriesD, due August15, 2014, 6.56% 75,000 Unsecured senior notes issued July21, 2009: Due July21, 2012, 6.10% 40,000 Due July21, 2013, 6.10% 40,000 Due July21, 2014, 6.10% 40,000 Due July21, 2015, 6.10% 40,000 Due July21, 2016, 6.10% 40,000 Unsecured senior credit facility due December18, 2011, .59% 30,000 $ 380,000 Less long-term debt due within one year Long-term debt $ 380,000 The terms of the fixed rate debt obligations require that we maintain a minimum ratio of debt to total capitalization. We have $200 million senior unsecured fixed-rate notes that will mature July2016. Interest on the notes will be paid semi-annually based on an annual rate of 6.10 percent. We will make five equal annual principal repayments of $40 million starting on the third anniversary of the closing date. Financial covenants require us to maintain a funded leverage ratio of less than 55 percent and an interest coverage ratio (as defined) of not less than 2.50 to 1.00. The note purchase agreement also contains additional terms, conditions, and restrictions that we believe are usual and customary in unsecured debt arrangements for companies that are similar in size and credit quality. We have an agreement with a multi-bank syndicate for a $400 million senior unsecured credit facility maturing December2011. While we have the option to borrow at the prime rate for maturities of less than 30 days, we anticipate 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). We pay 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 our total debt to total capitalization. The LIBOR spread ranges from .30 percent to .45 percent over LIBOR depending on the ratios. At December31, 2009, the LIBOR spread on borrowings was .35 percent and the commitment fee was .075 percent per annum. At December31, 2009, we had two letters of credit totaling $21.9 million under the facility and had $30 million borrowed against the facility with $348.1 million available to borrow. The advances bear an interest rate of 0.59 percent at December31, 2009. On January 19, 2010, we borrowed $75 million that was used to pay the $105 million unsecured line discussed below. Subsequently, we repaid $10 million and currently have $283.1 million available to borrow. At December31, 2009, we had an agreement with a multi-bank syndicate for a $105 million unsecured line of credit that matured January2010. We fully funded this facility for the entire term at a spread over 30 day LIBOR. The spread over LIBOR was determined according to the same scale of debt to total capitalization used in our $400 million facility which is described in the preceding paragraph. At December31, 2009, the spread on the borrowi |
Income Taxes
Income Taxes | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Income Taxes | 11. Income Taxes Our effective tax rate for the three months ended December31, 2009 and 2008 was 35.6 percent and 36.8 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, we do not expect the change to have a material effect on results of operations or financial position. |
Contingent Liabilities and Comm
Contingent Liabilities and Commitments | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Contingent Liabilities and Commitments | 12. Contingent Liabilities and Commitments In conjunction with our current drilling rig construction program, purchase commitments for equipment, parts and supplies of approximately $14.9 million are outstanding at December31, 2009. Various legal actions, the majority of which arise in the ordinary course of business, are pending. We maintain insurance against certain business risks subject to certain deductibles. None of these legal actions are expected to have a material adverse effect on our financial condition, cash flows or results of operations. We are contingently liable to sureties in respect of bonds issued by the sureties in connection with certain commitments entered into by us in the normal course of business. We have agreed to indemnify the sureties for any payments made by them in respect of such bonds. |
Segment Information
Segment Information | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Segment Information | 13. Segment Information We operate principally in the contract drilling industry. Our 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 large oil and gas exploration companies. Our primary international areas of operation include Colombia, Ecuador, Argentina, Mexico, Venezuela, Tunisia 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, we have aggregated our 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. We evaluate 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 we believe to be a reasonable reflection of the utilization of services provided. Segment operating income is a non-GAAP financial measure of our performance, as it excludes general and administrative expenses, corporate depreciation, income from asset sales and other corporate income and expense. We consider segment operating income to be an important supplemental measure of operating performance by presenting trends in our core businesses. We use this measure to facilitate period-to-period comparisons in operating performance of our reportable segments in the aggregate by eliminating items that affect comparability between periods. We believe that segment operating income is useful to investors because it provides a means to evaluate the operating performance of the segments 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 costs that may affect our operating performance in future periods. Summarized financial information of our reportable segments for the three months ended December31, 2009, and 2008, is shown in the following tables: Segment External Inter- Total Operating (in thousands) Sales Segment Sales Income (Loss) December31, 2009 Contract Drilling: U.S. Land $ 285,069 $ $ 285,069 $ 91,523 Offshore 52,290 52,290 15,106 International Land 59,398 |
Pensions and Other Post-retirem
Pensions and Other Post-retirement Benefits | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Pensions and Other Post-retirement Benefits | 14. Pensions and Other Post-retirement Benefits The following provides information at December31, 2009 and 2008 related to the Company-sponsored domestic defined benefit pension plan. Components of Net Periodic Benefit Cost Three Months Ended December31, 2009 2008 (in thousands) Interest cost $ 1,194 $ 1,217 Expected return on plan assets (1,107 ) (1,147 ) Recognized net actuarial loss 536 Net pension expense $ 623 $ 70 Employer Contributions We contributed $1.0 million to the Pension Plan during the three months ended December31, 2009 to fund distributions. We estimate contributing at least $3.0 million in fiscal 2010 to meet the minimum contribution required by law and expect to make additional contributions to continue funding distributions. Foreign Plan We maintain an unfunded pension plan in one of the international subsidiaries. Pension expense was approximately $145,000 and $90,000 for the three months ended December31, 2009 and 2008, respectively. |
Risk Factors
Risk Factors | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Risk Factors | 15. Risk Factors International operations are subject to certain political, economic and other uncertainties not encountered in U.S. operations, including increased risks of terrorism, kidnapping of employees, expropriation of equipment as well as expropriation of a particular oil company operators property and drilling rights, taxation policies, foreign exchange restrictions, currency rate fluctuations and general hazards associated with foreign sovereignty over certain areas in which operations are conducted. There can be no assurance that there will not be changes in local laws, regulations and administrative requirements or the interpretation thereof which could have a material adverse effect on the profitability of our operations or on our ability to continue operations in certain areas. For additional information regarding risks in Venezuela, refer to Note 3 of these Consolidated Condensed Financial Statements. Effective January1, 2010, Venezuela was designated hyper-inflationary, which is defined as cumulative inflation rates exceeding 100 percent in the most recent three-year period. All of our foreign subsidiaries use the U.S. dollar as the functional currency and local currency monetary assets are remeasured into U.S. dollars with gains and losses resulting from foreign currency transactions included in current results of operations. As such, the designation of Venezuela as hyper-inflationary will have no impact on our Consolidated Financial Statements. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Recently Issued Accounting Standards | 16. Recently Issued Accounting Standards ASC 715-20-65, Transition related to SFAS 132R-1, Employers Disclosures about Postretirement Benefit Plan Assets, was issued by the Financial Accounting Standards Board (FASB) in December2008. The new guidance requires employers of public and nonpublic companies to disclose more information about how investment allocation decisions are made, more information about major categories of plan assets, including concentration of risk and fair-value measurements, and the fair-value techniques and inputs used to measure plan assets. The disclosure requirements are effective for annual financial statements for years ending after December15, 2009. The disclosure requirements will be adopted for our annual financial statements for the year ended September30, 2010, on a prospective basis. We do not expect the adoption to have a material impact on the Consolidated Financial Statements. On January21, 2010, the FASB issued ASU No.2010-06, Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements. Reporting entities will have to provide information about movements of assets among Levels 1 and 2 of the three-tier fair value hierarchy established by ASC 820, Fair Value Measurements. Also required will be a reconciliation of purchases, sales, issuance, and settlements of financial instruments valued with a Level 3 method, which is used to price the hardest to value instruments. Entities will have to provide fair value measurement disclosures for each class of financial assets and liabilities. The guidance will be effective for fiscal years beginning after December15, 2010. We are currently evaluating the impact, if any, the adoption will have on the Consolidated Financial Statements. |
Subsequent Events
Subsequent Events | |
3 Months Ended
Dec. 31, 2009 USD / shares | |
Notes to Consolidated Condensed Financial Statements | |
Subsequent Events | 17. Subsequent Events In evaluating events and transactions through the time of our filing on February3, 2010, we determined we have no recognized subsequent events and three nonrecognized subsequent events. On January8, 2010, the Venezuelan government devalued its currency and we expect to record an exchange loss of approximately $20.0 million in the second quarter of fiscal 2010. See Note 3 for further details on the devaluation. Our $105 million unsecured line of credit matured January20, 2010 and we paid the amount in full. We used operating cash flow and borrowed $75 million from our senior unsecured credit facility to fund the payment. On January 29, 2010, we paid $10 million on our $400 million senior unsecured credit facility. See Note 10 for further details on debt. |
Document and Entity Information
Document and Entity Information (USD $) | ||
3 Months Ended
Dec. 31, 2009 | Jan. 31, 2010
| |
Document and Entity Information | ||
Entity Registrant Name | HELMERICH & PAYNE INC | |
Entity Central Index Key | 0000046765 | |
Document Type | 10-Q | |
Document Period End Date | 2009-12-31 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --09-30 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 105,714,528 |