Filed by Helmerich & Payne Exploration and Production Co.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Helmerich & Payne Exploration and Production Co.
Commission File No.: 132-02238
April 24, 2002
HELMERICH & PAYNE ANNOUNCES SECOND QUARTER EARNINGS
TULSA, OK., -- Helmerich & Payne, Inc. announced net income of
$10,872,000 ($0.22 per share, on a diluted basis) from revenues of
$155,576,000 for the second quarter ended March 31, 2002, compared with net
income of $41,749,000 ($0.82 per share, on a diluted basis) from revenues
of $221,569,000 for the second quarter of the prior fiscal year. Net income
for the first six months of this fiscal year totaled $26,476,000 ($0.53 per
share, on a diluted basis) from revenues of $329,723,000, compared with net
income of $75,589,000 ($1.49 per share, on a diluted basis) from revenues
of $414,119,000 for the same period last year. This year's second quarter
and year-to-date results include net income from the sale of investment
securities of $324,000 ($0.01 per share). There were no meaningful gains
from security sales during the first six months of last year.
Contract Drilling Division
--------------------------
Total Contract Drilling Division operating profit fell to
$17,949,000, from $31,693,000 recorded for the first quarter of this year,
and $24,449,000 for last year's second quarter. The most significant
decline in division performance occurred in the U.S. where continued
reductions in land rig dayrates drove second quarter operating profit for
U.S. operations to $13,533,000, from the $27,816,000 recorded for this
year's first quarter, and from $20,644,000 reported for last year's second
quarter. Average U.S. land rig revenue per day for the second quarter was
$12,386, down 13% from $14,192 reported in the first quarter of this year,
and down 6% from $13,154 recorded for the second quarter of last year. U.S.
land rig utilization for the quarter was 76%, compared with 89% during the
first quarter of this year, and 95% for the second quarter of last year.
The Company's U.S. land rig utilization for this quarter was impacted by
the inclusion of an additional four rigs that recently became available
after significant modification. Dayrates for the Company's U.S. offshore
platform rigs remained steady, however, utilization in that sector dropped
to 89%, compared with 100% in both the previous quarter and in the second
quarter of last year. The Company anticipates that its newly constructed
platform rigs, 205 and 206, will commence operations in May and June,
respectively.
The Company's international contract drilling operating profit of
$4,416,000 was up slightly over the previous quarter and last year's second
quarter. Improved profitability in Ecuador and Argentina operations helped
to offset reduced operating profit in Venezuela and Bolivia. Venezuela's
second quarter results were negatively impacted by $2,379,000 of currency
devaluation losses resulting from a severe decline in the value of the
Venezuelan bolivar due to a change in its government exchange rate policy.
However, the value of the bolivar has improved relative to the U.S. dollar
during the last 30 days. Rig utilization for international operations
averaged 58% for this year's second quarter, 55% for the first quarter of
this year, and 49% for the second quarter of last year.
During the second quarter, the Company commenced operations on the
two remaining new FlexRigs(TM) (FlexRig(TM) hereinafter referred to as
FlexRig) constructed during its FlexRig2 program. Those rigs, along with
the additional four conventional rigs that completed refurbishment early in
the quarter, brought the total U.S. land rig count to 58. As previously
announced, the Company is currently in its FlexRig3 construction program
wherein a total of 25 new rigs are expected to be built over the next 18
months. It is anticipated that the Company will commence operations on ten
of the 25 rigs prior to the end of fiscal year 2002, and that the remainder
will commence operations during fiscal year 2003. The first rig from the
FlexRig3 project is scheduled to be completed next month.
Oil and Gas Division
--------------------
As announced on February 25, 2002, the Company and Key Production
Company, Inc. (Key) have signed a definitive agreement that provides for
Helmerich & Payne, Inc. to spin off its Oil and Gas Division to its
shareholders and for the newly spun company to combine with Key. The
combined company, named Cimarex Energy Co., will be a new publicly traded
exploration and production company. The boards of directors of H&P and Key
have each unanimously approved the contemplated transaction. The
transaction will close after receipt of necessary Key shareholder and
regulatory approvals, including the receipt of a favorable letter ruling
from the Internal Revenue Service. Closing will likely occur in the third
calendar quarter of 2002. Approval of the transaction by H&P's shareholders
will not be required. Subject to a favorable IRS ruling, it is anticipated
that the transaction will be tax free to H&P and will be tax deferred to
the shareholders of H&P and Key. Application will be made for Cimarex
shares to be listed on the New York Stock Exchange.
During the second quarter, the Company's Exploration and
Production Division recorded improved operating profit over the first
quarter of this year, but significantly lower than recorded for last year's
second quarter. The average price received for the Company's natural gas
production was $2.03 per mcf in this quarter, compared with $2.06 in the
first quarter of this year, and $6.49 per mcf for last year's second
quarter. Oil prices averaged $19.86 per barrel during the second quarter,
compared with $19.60 per barrel during the first quarter, both down
substantially from the $28.09 per barrel received for company's production
during last year's second quarter. Production volumes declined slightly in
both natural gas and oil compared with the first quarter, but were down by
approximately 10% in both categories compared with the second quarter of
last year. Operating profit for this quarter improved over last quarter due
to reductions in dry hole and abandonment expenditures and the absence of
any significant impairment charges.
Outlook
-------
Guidance for Helmerich & Payne, Inc.'s net income for fiscal year
2002 is slightly increased from that provided in the January 23, 2002 First
Quarter Earnings Release. Although average U.S. land rig dayrates are
expected to remain under pricing pressure, natural gas prices have
strengthened in recent weeks and therefore, net income for the year is
anticipated to be in the range of $1.00 to $1.10 per share if commodity
prices remain at or above current levels. This earnings guidance also
assumes a full year of income from the Company's Oil and Gas Division. As
stated earlier, the contemplated spin-off and merging of the Oil and Gas
Division could be completed prior to September 30 and would reduce Company
income accordingly.
Company President and C.E.O., Hans Helmerich commented, "We
believe the spin/merge of the Company's Oil and Gas Division and the
FlexRig construction projects are two exceptional events in the Company's
82 year old history and add significant value for shareholders. Although
industry conditions continue to be soft, the market's response to the
spin/merge announcement and our customers' preference for the FlexRig
technology have been very encouraging."
Helmerich & Payne, Inc. (HP/NYSE) is an energy-oriented company
engaged in contract drilling and oil and gas exploration and production.
Currently, H&P has 58 U.S. land rigs, ten U.S. platform rigs located in the
Gulf of Mexico, and 33 rigs located in South America. Additionally, the
Company has two offshore platform rigs under construction and near
completion, and has begun the construction of 25 FlexRigs to be put in
service over the next 15 to 18 months.
Helmerich & Payne, Inc.'s conference call/webcast is scheduled for
this afternoon at 3:30 EDT (2:30 CDT). To listen, go to
http://www.videonewswire.com/event.asp?id=4487. Due to applicable SEC
regulations, the Company has elected not to archive this conference call on
its website.
Forward-Looking Statements
--------------------------
It should be noted that this announcement contains certain
statements that may be deemed to be "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements include, without limitation, statements
regarding the consummation of the proposed spin-off and merger, its effect
on future earnings, cash flow or other operating results, the expected
closing date of the proposed spin-off and merger, any other effect or
benefit of the proposed spin-off and merger, the tax treatment of the
proposed spin-off and merger and the combined company, market prospects,
and any other statements that are not historical facts. H&P strongly
encourages readers to note that some or all of the assumptions upon which
such forward-looking statements are based are beyond their ability to
control or estimate precisely, and may in some cases be subject to rapid
and material changes. Such assumptions include but are not limited to costs
and difficulties related to the integration of the businesses, costs,
delays and other difficulties related to the proposed spin-off and merger,
closing conditions not being satisfied, general market conditions
prevailing in the exploration for and development and production of oil and
gas (including inflation or lack of availability of goods and services,
environmental risks, drilling risks and regulatory changes), operating
hazards and delays, actions by customers and other third parties, the
future price of oil and gas, and other factors detailed in H&P's filings
with the Securities and Exchange Commission (the "SEC"), which are
available free of charge on the SEC's website at www.sec.gov. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
indicated. H&P undertakes no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Additional Information
----------------------
In connection with the proposed spin-off and merger, Key and
Cimarex will file a proxy statement/prospectus with the SEC. Investors and
security holders are urged to carefully read the proxy statement/prospectus
regarding the proposed transaction when it becomes available, because it
will contain important information. Investors and security holders may
obtain a free copy of the proxy statement/prospectus (when it is available)
and other documents containing information about Key and H&P's oil and gas
division, without charge, at the SEC's web site at www.sec.gov. Copies of
the proxy statement/prospectus and the SEC filings that will be
incorporated by reference in the proxy statement/prospectus may also be
obtained for free by directing a request to: Helmerich & Payne, Inc, Utica
at Twenty-First Street, Tulsa, Oklahoma 74114, Attention: Steven R. Mackey,
Corporate Secretary; telephone 918-742-5531, fax 918-743-2671.
Participants in Solicitation
----------------------------
H&P and Cimarex and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies
from Key's shareholders in connection with the proposed merger. Hans
Helmerich, Douglas E. Fears and Steven R. Mackey are currently directors of
Cimarex, and each of them and Steven R. Shaw are currently officers of
Cimarex (the "Cimarex Participants"). None of the Cimarex Participants
beneficially owns any shares of Cimarex common stock. The Cimarex
Participants are all executive officers of H&P. Information concerning
H&P's participants in the solicitation is set forth in H&P's proxy
statement dated January 25, 2002, which is filed with the SEC. Key's
shareholders may obtain additional information about the interests of all
such participants in the proposed merger by reading the proxy
statement/prospectus when it becomes available. Investors should read the
proxy statement/prospectus carefully when it becomes available before
making any voting or investment decisions
Contact: Doug Fears
(918) 748-5208
HELMERICH & PAYNE, INC.
Unaudited
(in thousands, except per share data)
03/31/02 09/30/01
-------- --------
Consolidated Condensed Balance Sheets
-------------------------------------
ASSETS:
Total current assets $ 223,069 $ 331,412
Investments 231,823 200,286
Net property, plant, and equipment 919,301 818,404
Other assets 15,153 14,405
--------- ----------
TOTAL ASSETS $1,389,346 $1,364,507
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Total current liabilities $ 76,080 $ 121,221
Total noncurrent liabilities 195,232 166,809
Long-term debt 50,000 50,000
Total Shareholders' Equity 1,068,034 1,026,477
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,389,346 $1,364,507
========= ==========
Three Months Ended Six Months Ended
March 31 March 31
2002 2001 2002 2001
-------------------- ------------------
Consolidated Statements of Income
REVENUES:
Sales and other operating revenues $153,959 $218,817 $326,756 $408,565
Income from investments 1,617 2,752 2,967 5,554
------- ------- -------- -------
155,576 221,569 329,723 414,119
======= ======= ======= =======
COST AND EXPENSES:
Operating costs 96,919 107,076 199,250 201,122
Depreciation, depletion and
amortization 21,893 22,784 48,886 40,762
Dry holes and abandonments 4,311 6,704 10,123 18,748
Taxes, other than income taxes 9,154 12,066 18,113 20,934
General and administrative 5,358 4,646 9,926 8,213
Interest 342 68 716 675
------- ------- ------- -------
137,977 153,344 287,014 290,454
------- ------- ------- -------
INCOME BEFORE INCOME TAXES AND EQUITY
IN INCOME OF AFFILIATES 17,599 68,225 42,709 123,665
INCOME TAX EXPENSE 7,497 27,118 18,095 49,153
EQUITY IN INCOME OF AFFILIATES,
net of income taxes 770 642 1,862 1,077
------ ------ ------ -------
NET INCOME $10,872 $ 41,749 $ 26,476 $75,589
======= ======== ======== =======
EARNINGS PER COMMON SHARE:
Basic $ 0.22 $ 0.83 $ 0.53 $ 1.51
Diluted $ 0.22 $ 0.82 $ 0.53 $ 1.49
Average common shares outstanding:
Basic 49,788 50,197 49,762 50,005
Diluted 50,265 51,139 50,171 50,783
HELMERICH & PAYNE, INC.
Unaudited
(in thousands)
Three Months Ended Six Months Ended
March 31 March 31
2002 2001 2002 2001
-------------------- ------------------
Financial Results - Lines of Business
-------------------------------------
SALES AND OTHER REVENUES:
Contract Drilling - Domestic $ 78,670 $ 73,159 $170,793 $135,453
Contract Drilling - International 39,210 35,128 78,263 73,819
Total Contract Drilling --------- -------- -------- --------
117,880 108,287 249,056 209,272
--------- -------- -------- --------
Exploration and Production 23,056 74,835 47,847 132,563
Natural Gas Marketing 11,481 31,474 25,802 60,153
--------- -------- ------- -------
Total Oil and Gas 34,537 106,309 73,649 192,716
--------- -------- ------- -------
Real Estate 1,965 4,245 4,460 6,576
Other 1,194 2,728 2,558 5,555
--------- -------- ------- -------
Total Revenues $155,576 $221,569 $329,723 $414,119
========= ======== ======== ========
OPERATING PROFIT (LOSS):
Contract Drilling - Domestic $ 13,533 $ 20,644 $ 41,349 $ 37,690
Contract Drilling - International 4,416 3,805 8,293 11,353
--------- -------- ------- -------
Total Contract Drilling 17,949 24,449 49,642 49,043
--------- -------- ------- -------
Exploration and Production 3,006 44,095 (953) 71,115
Natural Gas Marketing 979 (33) 1,439 4,666
--------- -------- ------- -------
Total Oil and Gas 3,985 44,062 486 75,781
--------- -------- ------- -------
Real Estate 1,336 2,929 2,733 4,304
--------- -------- ------- -------
Total Operating Profit 23,270 71,440 52,861 129,128
--------- -------- ------- -------
OTHER (5,671) (3,215) (10,152) (5,463)
INCOME BEFORE INCOME TAXES AND
--------- -------- ------- -------
EQUITY IN INCOME OF AFFILIATES: $ 17,599 $ 68,225 $ 42,709 $123,665
========= ======== ======== ========
Average Production and Prices
-----------------------------
Production
----------
Oil - Barrels Per Day 2,018 2,258 2,064 2,345
Natural Gas - Mcf Per Day 4,494 118,401 106,722 17,438
Sales Prices
------------
Oil - $ Per Barrel $ 19.86 $ 28.09 $ 19.72 $ 29.70
Natural Gas - $ Per Mcf $ 2.03 $ 6.49 $ 2.05 $ 5.59