SEC Division of Corporation Finance no-action letter: Helmerich & Payne, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
CORPORATION FINANCE
May 13, 2015
Mr. Brian V. Breheny
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, NW
Washington, DC 20005
Re: United States of America v. Helmerich & Payne International Drilling Co.
Helmerich & Payne, Inc. – Waiver Request of Ineligible Issuer Status under Rule 405 of the Securities Act Dear Mr. Breheny:
This is in response to your letter dated September 30, 2014, including the addendum received April 16, 2015, written on behalf of Helmerich & Payne, Inc. (Company) and constituting an application for relief from the Company being considered an “ineligible issuer” under Rule 405(1)(v) of the Securities Act of 1933 (Securities Act). The Company requests relief from being considered an “ineligible issuer” under Rule 405, due to the entry on November 8, 2013, of a Judgment against Helmerich & Payne International Drilling Co. (H&PIDC). The Judgment finds H&PIDC guilty of a misdemeanor violation of Title 18, United States Code, Section 1018 for knowingly making and delivering false writings. Based on the facts and representations in your letter, and assuming H&PIDC complies with the Judgment, the Division of Corporation Finance, acting for the Commission pursuant to delegated authority, has determined that the Company has made a showing of good cause that it will not be considered an ineligible issuer by reason of the entry of the Judgment. Accordingly, the relief requested in the Waiver Letter regarding the Company being an ineligible issuer under Rule 405 by reason of the entry of the Judgment is granted, on the condition that H&PIDC fully complies with the terms of the Judgment. Any different facts from those represented or failure to comply with the terms of the Judgment would require us to revisit our determination that good cause has been shown and could constitute grounds to revoke or further condition the waiver. The Commission reserves the right, in its sole discretion, to revoke or further condition the waiver under those circumstances. Sincerely, /s/ Mary Kosterlitz Chief, Office of Enforcement Liaison Division of Corporation Finance

5KADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE. N.W. F"IRM/AF"F"ILIATE OFFICES WASHINGTON, D.C. 20005-2111 BOSTON CHICAGO TEL: (202) 3 71 -7000 HOUSTON LOS ANGELES FAX: (202) 393-5760 NEW YORK www.skadden.com PALO ALTO WILMINGTON DIRECT DI A L BEI..JING C202J 37 1-7 I 80 BRUSSELS DIRECT FAX FRANKFURT C2 0 2 J 66 1-90 I 0 HONG KONG EMA IL A DD RESS LONDON MOSCOW BRIA N . BREHENY@SKA DDEN .COM MUNICH

PARIS

SAO PAULO

April SEOUL
16, 2015 SHANGHAI

SINGAPORE

SYDNEY

TOKYO

TORONTO

VIA FIRST CLASS MAIL AND EMAIL
Mary J. Kosterlitz, Esq .
Chief, Office of Enforcement Liaison
Division of Corporation Finance
U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

RE : United States v. Helmerich & Payne International Drilling Co.
Dear Ms. Kosterlitz:
We submit this letter on behalf of our client, Helmerich & Payne, Inc . (the "Company"), a reporting company registered under Section 12 ofthe Securities Exchange Act of 1934 and the parent company ofHelmerich & Payne International Drilling Co. ("H&PIDC"), a wholly owned subsidiary and the defendant entity in the above-captioned proceeding. This letter serves as an addendum to our previous letter to you, dated September 30, 2014 (the "Original Waiver Request," attached as Annex A hereto), in which we requested a determination by the Division of Corporation Finance (the "Division") ofthe U.S . Securities and Exchange Commission (the "Commission" ), acting pursuant to the authority delegated by the Commission, that the Company would not be an " ineligible issuer" as defined under Rule 405 promulgated under the Securities Act of 1933 (the "Securities Act") as a result ofthe entry ofthe judgment against H&PIDC related to certain choke manifold testing irregularities that occurred in 2010 at one ofH&PIDC's offshore platform rigs in the Gulf ofMexico (the "Judgment") . The Company remains very interested in obtaining a determination by the Division that it is not an ineligible issuer. The Company appreciates your continued attention to this matter. The Company would also like to provide additional information regarding the impact on the Company if the waiver request is denied . This additional information updates the disclosures contained in Section II, Subsection C of the Original Waiver Request.

Mary J Kosterlitz, Esq.
U.S. Securities and Exchange Commission
April 16, 2015
As an ineligible issuer, the Company is unable to register securities on a shelf registration statement on Form S-3 that is automatically effective ("WKSI Shelf') and does not have the flexibility (i) to offer additional securities ofthe classes covered by a WKSI Shelfwithout filing a new registration statement, (ii) to register additional classes of securities not covered by a WKSI Shelf by filing a post-effective amendment, which becomes immediately effective, (iii) to omit certain information from the prospectus, (iv) to take advantage of the pay-as-you-go fees, or (v) to use a free writing prospectus other than one that contains only a description ofthe terms of the securities in the offering or the offering itself As a direct result, depending on the timing and market conditions the Company may be forced to restrict its capital raising efforts from securities sales to private offerings. For example, in March 2015, the Company relied on Rule 144A ofthe Securities Act for its latest private offering of $500 million aggregate principal amount ofthe Company's senior unsecured notes. As its capital needs continue to increase, the lack of flexibility that is afforded to a WKSI could further limit the Company's ability to raise capital and have negative consequences on the Company and its shareholders. The Company's current estimated capital expenditures for fiscal 2015 is $1.3 billion, a significant increase from $952.9 million incurred in fiscal2014. The Company expects to fund these capital expenditures and other capital requirements through its current cash on hand, cash provided by its operating activities, and borrowed funds . The Company may also need to sell additional securities to fund further capital expenditures or operations. The potential need to sell additional Company securities has recently become more of a possibility because many ofthe Company's customers are oil companies that have announced reductions in their 20 15 capital spending budgets due to significant declines in oil prices. This development could result in decreased demand for the Company's services and a related impact on the Company's cash flows from operations. Given the nature ofthe Company's business and volatile market conditions, the procedural and financial flexibility of a WKSI Shelf would allow the Company to gain access to the widest possible investor base, in the most efficient manner. Furthermore, the Company has already paid a significant price in the form of a $6.4 million monetary penalty levied against H&PIDC. Both the character and circumstances ofthe violation and the institution ofthe resulting Environmental Compliance Plan (as defined in the Original Waiver Request) also make it extremely unlikely that any similar violation will recur in the future. Any continuing regulatory burdens unduly penalize the Company and its shareholders for the actions of its subsidiary by hindering the Company's access to capital markets. The Company believes that
denial ofthe waiver in this case is unnecessary for the protection of investors, is not in the public interest and would constitute a disproportionate hardship in light ofthe nature of the misconduct. Such misconduct does not pertain to activities undertaken by the Company or its subsidiaries in connection with their role as issuers of securities (or any disclosure related thereto) or any oftheir filings with the Commission.

Mary J. Kosterlitz, Esq.
U.S. Securities and Exchange Commission
April 16, 2015
For the reasons set forth above, we respectfully request that the Division, on behalf of the Commission, find that it is not necessary under the circumstances that the Company be considered an "ineligible issuer" under Rule 405 as a result of the Judgment Should the Division disagree with our conclusions, or should any additional information be desired in support of our position, we would appreciate the opportunity to confer with the Division concerning these matters prior to the issuance ofthe Division's response. Please do not hesitate to contact the undersigned at (202) 371-7180. .- ··· Attachment Copy to: Cara M. Hair, Esq . Jonathan M. Cinocca, Esq. Helmerich & Payne, Inc. Pankaj K. Sinha Skadden, Arps, Slate, Meagher & Flom LLP

AnnexA

Original Waiver Request

AnnexA
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ANDREW. BAAOY@SKAODEN .COM
September 30,2014
VIA FIRST CLASS MAIL AND EMAIL
Mary J. Kosterlitz, Esq.
Chief, Office of Enforcement Liaison
Division ofCorporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington. D.C. 20549
RE: United States v. Helmerich & Payne International Drilling Co.
Dear Ms. Kosterlitz:
We submit this letter on behalf of our client, Helmerich & Payne, Inc. (the "Company"), a reporting company registered under Section 12 ofthe Securities Exchange Act of 1934 (the "Exchange Act") and the parent company ofHelmerich & Payne International Drilling Co. ("H&PIDC"), a wholly owned subsidiary and the defendant entity in the above-captioned proceeding. We respectfully request a determination by the Division ofCorporation Finance (the "Division") of the Securities and Exchange Commission (the "Commission"), acting pursuant to the authority delegated by the Commission, that the Company would not be an "ineligible issuer" as defined under Rule 405 promulgated under the Securities Act of 1933 (the "Securities Act") as a result of the entry of the Judgment against H&PIDC (described below).
I. BACKGROUND
H&PIDC is primarily a U.S. land-based drilling contractor. H&PIDC's existing drilling rig fleet as of April24, 2014 includes 324land rigs in the U.S., 31 international land rigs and 9 offshore platform rigs. The Company and H&PIDC employ over 10,000 employees worldwide. H&PIDC is widely recognized as an industry leader in health, safety and environmental performance ("HSE"). H&PIDC's leadership in the oil and gas industry on HSE perfonnance is (i) reflected in industry surveys and numerous national and regional safety awards and accolades,

Mary J. Kosterlitz, Esq.
September 30~ 2014 including those from the offshore oil and gas industry regulator, the MMS (defined below), and (ii) is the product ofa conscious commitment ofthe management of the Company and H&PIDC to make HSE and legal compliance a top corporate priority. H&PIDC demonstrates its commitment to safety and legal compliance, in part~ through (i) robust policies (the Company's policy handbook implements a number ofpolicies designed {a) to communicate the importance of lawful and ethical conduct, (b) to prevent and detect violations of law and company policy, and (c) to encourage employees to report misconduct), and (ii) annual, mandatory in-person training of management and employees. H&PIDC owns and operates platform rigs in the Gulf of Mexico, including Rig 206. Entities holding federal mineral leases in the Gulf of Mexico are subject to regulation and oversight of their drilling and production operations by the U.S. Department of the Interior. The Bureau of Safety and Environmental Enforcement, fonnerly known as the Bureau of Ocean Energy Management Regulation and Enforcement and Minerals Management Service ("MMS'~), is delegated with overseeing and regulating drilling operations in the Gulf ofMexico. Rig 206 was contracted by the lessee of a federal mineral lease to conduct drilling operations in the Gulf of Mexico. Rig 206 is equipped with a safety device known as a blowout preventer. The blowout preventer system consists of multiple components, including a choke manifold designed to direct flow and control pressure from the well. As required by federal regulation) the blowout preventer must be routinely pressure tested, including testing of the choke manifold valves. On six occasions during the period of January 1, 20 l 0 to May 27, 2010, 1 five Rig 206 employees, working the same shift, deliberately chose to not test a number of manifold valves and created false blowout preventer test charts and pressure charts. Falsified test charts were provided to MMS inspectors when inspections were conducted at Rig 206 on March 5, 2010, April2, 2010 and May 19,2010. On May 25,2010, one of the five employees alerted a more senior employee on an outgoing shift of the falsified tests. Within 24 hours ofthat notification, management at both the Company and H&PIDC were alerted to the allegations, and the Company and H&PIDC, led by the Company's General Counsel and later assisted by outside counsel which conducted an additional investigation, diligently investigated the allegations, determined the extent of employee actions, and caused their unlawful behavior to be reported to the MMS. After an internal investigation, H&PIDC tenninated four ofthe involved employees and demoted the one employee involved in the falsification who reported the conduct. The misconduct did not result in any environmental release, damage or personal injury. The conduct of the five employees in the events described above belies the fact that H&PIDC is the standard-bearer in the oil
and gas industry in terms of safety and compliance. The events described above involved five employees out of 10,000, and those employees were
part of one crew, on one hitch, at one drilling rig, and the events occurred over a short period of
time. The five employees involved included a rig manager and four subordinates (two This date range was mutually agreed to by the parties in the Plea Agreement, discussed below.

Mary J. Kosterlitz, Esq.
September 30, 2014 toolpushers and two drillers). Each ofthe five employees acknowledged receiving the Company's policy handbook and certified that he "read and understood'' the handbook section "Ethics and Standards" only months before their conduct came to light. The misconduct was the product of pressure and intimidation brought to bear on members of the rig manager's shift by the rig manager alone. The "rig manager" was not, and is not considered, a member of management of the Company or H&PIDC. Company and H&PIDC management consists ofthe corporate officers who work from the Company's headquarters in Tulsa, Oklahoma. Rig managers occupy a significantly lower position in H&PIDC's organizational structure. A rig manager reports to a drilling superintendent, who in tum reports to a district manager, who in tum reports to a Vice President ofOperations. Rig managers prepare reports for managerial review and generally have no power to unilatera11y hire or fire others. As of April, 20 l 0, there were 375 employees ofH&PIDC with the title of"rig manager". Today there are over 600. In short, a rig manager has supervisory responsibility, but he is the equivalent of a squad leader in the military. On October 30, 2013, H&PIDC entered into a plea agreement (the "Plea Agreement") with the United States Department of Justice, United States Attorney's Office for the Eastern District of Louisiana ("DOJ"), in connection with a DOJ investigation into the choke manifold testing irregularities described above. The Plea Agreement resolved a one-count Bill of Information (the "Information") charging H&PIDC with a misdemeanor violation ofTitle 18, United States Code, Section 1018 for knowingly making and delivering false writings. On November &, 2013, the United States District Court for the Eastern District of Louisiana approved the Plea Agreement and entered a judgment against H&PIDC (the "Judgment'') ordering the remedies set forth in the Plea Agreement. In accordance with the Plea Agreement, H&PIDC consented to pay a criminal monetary penalty of $6.4 million, of which $1 million was paid as an organizational community service payment to the National Academy of Sciences to assist in strengthening offshore industry safety culture. H&PIDC further agreed to put in place an Environmental Compliance Plan (the "ECP"), discussed in detail below, designed to increase and improve inspections, reviews and audits of its offshore rigs, increase training ofpersonnel and develop management and maintenance controls to better manage, detect and prevent environmental violations. The government recognized H&PIDC's response efforts and cooperation by including the following in the Plea Agreement: (i) within 24 hours of receiving notice ofthe falsified testing, H&PIDC executives initiated an investigation and reported the matter to regulatory authorities, (ii) H&PIDC provided timely, full and complete cooperation to both regulatory and prosecuting authorities and H&PIDC accepted
responsibility for its employees' misconduct, (iii) H&PIDC took immediate remedial measures, and (iv) H&PIDC's efforts since commission of the offense to promote well control testing improvements. None ofthe Information, the Plea Agreement or the Judgment alleges any scienter-based

or non-scienter-based violations ofthe Securities Act or the Exchange Act.

Mary J. Kosterlitz, Esq.
September 30, 2014
H. DISCUSSION
Effective on December 1, 2005, the Commission revised the registration, communications and offering processes under the Securities Act.2 As part ofthis offering refonn, the Commission revised Securities Act Rule 405 to create a new category of issuer, the well￾known seasoned issuer ("WKSI"), and a new category ofoffering conummication, the "free writing prospectus." A WKSI is eligible under the new rules, among other things, to register securities for offer and sale under automatically effective "shelf registration statements." A WKSI is also eligible for the benefits ofa streamlined registration process, including the use of free writing prospectuses in registered offerings pursuant to Rules 164 and 433 under the Securities Act. The Commission also created another category of issuer under Rule 405, the "ineligible issuer." "Ineligible issuers" are excluded from the category ofWKSis and are not eligible to make communications by way of free writing prospectuses, except in limited circumstances.3 An issuer is an "ineligible issuer," as defined under Rule 405, if, among other things, "[w]ithin the past three years, the issuer or any entity that at the time was a subsidiary of the issuer was convicted ofany felony or misdemeanor described in paragraphs (i) through (iv) ofsection 15(bX4)(B) of the Securities Exchange Act of 1934.'' Rule 405(1)(v). Notwithstanding the foregoing, paragraph (2) ofthe definition of"ineligible issuer" provides that an issuer "shaJl not be an ineligible issuer if the Conunission determines, upon a showing ofgood cause, that it is not necessary under the circumstances that the issuer be considered an ineligible issuer." The Commission has delegated authority to the Division of Corporation Finance to make such a detennination pursuant to 17 C.F.R. § 200.30-l(aXlO). The offenses listed in paragraph (iv) of section 15(b)(4)(B) of the Exchange Act include, inter alia, violations ofChapter 47 ofTitle 18 ofthe United States Code. Therefore, H&PIDC's plea to a misdemeanor violation of 18 U.S.C.§ 1018 renders the Company an ineligible issuer for a period ofthree years following the date ofthe Judgment. The misdemeanor violation is the sole reason that the Company does not qualify as a WKSI. As set forth above, Rule 405 authorizes the Commission to determine for good cause that an issuer shall not be an "ineligible issuer," notwithstanding that the issuer or a subsidiary thereofbecomes subject to an otherwise disqualifying order. We believe that there is good cause for the Commission to make such a determination in this case based on precedent as well as the Securities Offering Reform, Securities Act Release No. 8591, Exchange Act Release No. 52,065, Investment CQmpany Act Release No. 26,993, 70 Fed. Reg. 44,122,44,790 (Aug. 3, 2005). See Securities Act Rules I64(e), 405 & 433, 17 C.F.R. §§ 230. I64(e), 230.405 & 230-433.

Mary J. Kosterlitz, Esq.
September 30,2014
PageS
Division's Revised Statement4 relating to the granting of such waivers, and that a review of all of the facts and circumstances will lead the Commission to conclude, as set forth in the Division's Revised Statement, ''that granting the waiver would be consistent with the public interest and the protection of investors." None of the conduct described in the Information, the Plea Agreement or the Judgment pertains to activities undertaken by the Company or its subsidiaries in connection with the Company's or its subsidiaries' roles as issuers of securities (or any disclosure related thereto) or any of their filings with the Commission (the "Company Disclosures"). The falsification of test reports described in the Plea Agreement, which occurred on a single offshore rig without the knowledge of any officer of the Company, did not involve misstatements or omissions in the Company Disclosures and is unlikely to cast doubt on the ability ofthe Company to produce reliable disclosure currently and in the future. The DOJ noted in the Plea Agreement that it believed the agreed-upon penalty was appropriate in light of several important mitigating factors. Specifically, that H&PIDC, on learning of the suspected violations, immediately initiated an internal investigation and promptly reported to regulatory authorities, that it provided timely, full and complete cooperation to both regulatory and prosecuting authorities, that it accepted responsibility for its employees' misconduct, that it took immediate remedial measures and that it has made significant efforts since the date of commission of the offense to promote well control testing improvements. Accordingly, based on the three factors set forth in the Division's Revised Statement (responsibility for and duration ofmisconduct, remedial steps taken and impact if the waiver request is denied), we believe that a waiver is warranted in this case. A. Who Was Responsible for and What Was the Duration ofthe Misconduct? The misconduct detailed in the Plea Agreement involved only five employees out of the more than 10,000 employed by the Company and H&PIDC. As discussed above, these employees occupied low-level positions (two toolpushers, two drillers and one rig manager) with significantly limited responsibilities and authority. H&PIDC promptly terminated four of the responsible employees and demoted a fifth employee who participated in the offense but ultimately caused it to be disclosed to H&PlDC executives. No member of either H&PIDC's or the Company's senior management was implicated in any wrongdoing. More importantly, no employee of the Company was involved in the misconduct and the misconduct did not have any effect on the Company Disclosures. As the Division's Revised Statement notes, in considering the potential impact on the issuer's ability to file reliable reports with the Commission, the Division considers whether the individuals responsible for or involved in the misconduct were Division of
Corporation Finance, Revised Statement on Well-Known Seasoned Issuer Waivers (April24, 2014), available at http://www.sec.gov/divisions/corpfin/guidance/wksi-waivers-interp-03l2I4.htm (the "Division's Revised Statement").

Mary J. Kosterlitz, Esq.
September 30,2014 officers or directors of the WKSI parent or, as in this case, "lower level employees in the operation of a subsidiary.~' Moreover, nothing in the Plea Agreement or the internal investigation conducted by both the Company and H&PIDC suggests that any employee of the Company was aware of the misconduct at any time prior to H&PIDC's senior management report ofthe incident to the Company's General Counsel, or that any warning signs or red flags were present but disregarded. There are no facts that would indicate a leadership culture that would be susceptible to or accepting of such conduct in the future. As to duration and scope, the misconduct at issue was neither sustained nor pervasive. The misconduct involved only one rig out ofthe hundreds operated by H&PIDC, and took place over a period ofapproximately five months in 2010. As soon as the violations were brought to light, the Company and H&PJDC took swift corrective action to ensure that they would not continue: within 24 hours of receiving notice of falsification oftest reports, Company and H&PIDC executives, led by the Company's General Counsel, initiated an internal investigation and promptly reported the offences to regulatory authorities. In sum, none of the facts and circumstances relating to the violation should in any way call into question the reliability ofthe Company's future disclosures. As the Division's Revised Statement explains, this factor will be likely to weigh in favor of granting a waiver in cases in which "the conduct was an isolated instance conducted at the subsidiary level and not known or disregarded by the WKSI parent." B. What Remedial Steps Did the Issuer Take? H&PIDC bas been primarily responsible for, and has taken and will continue to take, significant remedial actions to correct the violation set forth in the Plea Agreement, as well as its underlying causes. The Company also has been continually involved in overseeing the remedial action through the General Counsel's office. 5 In accordance with the Plea Agreement, H&PIDC has agreed to institute a wide-ranging ECP, which will be effective for the three years of H&PIDC's probation. The ECP is designed to ensure that H&PIDC personnel comply with an applicable environmental statutes, regulations and permits under applicable federal and state law, and augments the requirements ofexisting law by mandating additional training, oversight and management and maintenance controls. A complete copy ofthe ECP is attached hereto as "Exhibit A". Pursuant to the ECP, H&PIDC has agreed, among other things, to:
i. designate a senior officer as Offshore Compliance Manager ("OCM"), responsible for
coordinating, developing and implementing the procedures required by the ECP, establishing and implementing training and safety culture programs, ensuring that reviews, audits and swveys are carried out as required and ensuring that all documents are properly maintained and all reports to the DOJ are made on a timely basis; The Compar~y's General Counsel is also an Executive Vice President ofH&PJDC.

Mary J. Kosterlitz, Esq.
September 30,2014 n. establish a procedure and reporting system that requires all managers and employees involved in the operation ofoffshore rigs to notify the OCM of all violations of the requirements of the ECP and to cooperate fully with the United States Bureau of Safety and Environmental Enforcement in carrying out its reviewing, auditing and oversight functions, and to make any failure to do so grounds for dismissal; and
iii. develop and implement training and safety culture programs focusing on improving
safety culture, including employees' responsibility to refuse any order to approve any test or report that does not fully comply with applicable regulations, permits and environmental laws. Moreover, as noted above, H&PIDC took timely action to address the misconduct that ultimately resulted in the Judgment, instituting an investigation and terminating or disciplining the responsible employees.
C. Impact Ifthe Waiver Request Is Denied
The Company has already paid a significant price in the form ofa $6.4 million monetary penalty levied against H&PIDC. Moreover, both the character and circumstances ofthe violation and the institution ofthe ECP make it extremely unlikely that any similar violation will recur in the future. Any further regulatory burden would unduly penalize the Company and its shareholders for the actions of its subsidiary by hindering the Company's access to capital markets. While the Company has not availed itself ofthe benefits of WKSI status during the last three years, it may wish to do so in the future, and should retain the flexibility to file shelf registration statements and/or make use of free writing prospectuses if strategic and market considerations warrant. We therefore submit that a loss of WKSI status in this case is unnecessary for the protection of investors, is not in the public interest and would constitute a disproportionate hardship in light ofthe nature of the misconduct.

Mary J. Kosterlitz, Esq.
September 30, 2014
II. CONCLUSION
For the rea~ns set. forth above, we respectfully request that the Division, on behalf ofthe Commission, find that it is not necessary under the circumstances that the Company be considered an "ineligible issuer" under Rule 405 as a result of the Judgment. Should the Division disagree with our conclusions, or should any additional information be desired in support of our position, we would appreciate the opportunity to confer with the Division concerning these matters prior to the issuance ofthe Division's response. Please do not hesitate to contact the undersigned at (202) 371"7344. Vecy truly yours, ~~}~~~(] Andrew J. Brady attachment cc: Steven Mackey, Esq. Jonathan Cinocca, Esq. Helmerich & Payne, Inc. Pankaj K. Sinha

Skadden, Arps, Slate. Meagher & Flom LLP

Exhibit A

Environmental Compliance Plan

ATTACHMENT A
F.nvirOJunental Compliance Plan
PURSUANT TO PLEA AGREE!\1 ENT
United Stat£s v. flelmcrich & Povne International Drll!ing Co.
The following standards and rcquir.:mcnts lor an ENVIRONMENTAL COMPLIANCE PR.OGR.AM {ECP) have been prepared pursuant to the !'len Agr~cmcnt bctu<ecn llclmcrich & Payne Jntcrnutional Drilling Co., (hereinnncr "li&PJDC") and the United States {hereinafter "Government") filed in the Unilcd Stmcs District Court for tlue F.astern Di~trict ofLouisiana. Compliuno;c with all ufthc ~tandartls uml requirements ufthc ECP is an essential tenn of the Plea Agreement. The ECP indudc~ various provision~ tl.l ~1tsurc that ll&PIDC personnel comply with all applicable environmental stntutcs. regulations, and permits under applicable fcdcrnl and slate law, including but not limited to, the Clean Water .-\cl {CWA), the Oil Pollution Act (OPA), Outer Continental Shelf Land.<; Act (OCSI.A). NPDES penn its, and with 1hc rcquirement!l of this agreement itself. The ECP shall be effective for every year of li&PIDC's three years of prubatiun <tml npply to all drilling rigs operated by II&PI DC in ofTshore waters ofthe Gulf of Mexico within a 200 mile contiguous 7.onc of the United States as oft he dale of sentencing or at nny time during the period of probation ("O!Yshore Rigs"). As more fully set forth below.• this F.CP and its requirements will also apply to Off.~horc Rigs that H&P acquires or assumes manngement or operation ofduring the period of probnt ion. A. APPLICABiliTY/PURPOSE II) Thi> ECP shall cover and apply to li&PIDC. it~ operating cntilic~. :;ubsidiarics. 11gen1s and affiliated business entities, controlled by tI&I'IIJC and involved in the operation of it~ O!Tshorc Rigs (cullcctivcly ncrca ftcr "H&PIDC'). It shall also include allll&PIDC employees und employees of its subsidiaries, nffiliatcd business entities. agents con~rollcd by H&PIDC nnd involved in operation of its Offfihorc Rigs, {2) The ECP is not intended to replace H&PIDC"s ubHgations under any permits or regulatory requirements or any other applicable legal requirement or United Stales statu!~ and regulation. The purpose of this ECP is to nugmentthe requirements of .:~isting law by increasing and improving inspections, reviews, and nudils of the Offshore Rig5, increase training of nil ofli&PlDC personnel involved with the uperntion ofOffshore Rigs. develop und implement rnunagcment and maint~nnnc~ controls to beller manage, detect and prevent environmental violations: and rcquir~ r~riodic report~ to the Unitud States Probation Office for the Ea~tcrn District of Luuisiana and the United States Attorney's Office fnr the E~~lcrn Dharkt ufLunisiana ("Report~"). B. OH'SHORE COMPLIANCE MANAGER {I) Within sixty (60) duys uf entry of the PICi! Agreement, II &P!DC shuII designate a senior corporate ofllecr us Offshore Compliance Manager (hereinafter "OCM") who shall report directly to the President, or most senior opcrntin!! officer ofi-I&PIDC. H&PIDC shall provide the name or the OCM to the United St<~tcs Allorncy's Office ror the Eastern District ofLouisiana. The OCM shall be responsible for
coordinating. developing and imph:mcnting oil or the procedures and systems required herein, establishing and implementing training and safety culture programs for the mnnngcrs nnd employees of the Off.>hore Rigs. ensuring that reviews, audits nnd surveys arc carried out as required, if any. by the Bureau of Safety and Environmental Enforcement {"BSSE''), and ensuring that all documents ure properly maintained nnd that Reports arc made on a timely basis. Any Reports required under this BCP shnll be reviewed by the OCM 11nd signed under the penalty of perjury. (2) li&PIDC shull establish 11 procedure and rcportmg system that requires nnd enables all managers and employees involved in the operation ofOffshore Rig.~ to notify the OCM of all violations ofany applicable requirements ofthis ECP nnd 10 coopcr.ue fully with the Bureau of Safety and Environmental Enforcement and the United State~ in carrying oul their reviewing, auditing and ovcr~ight functions required by applicnble lnw and this ECP. II&I'IDC ngrccs to establish a procedure !bat makes failure to notify the OCM ofnny known violations of any applicable well control tcstin~ requirements and failure to cooperate fully with regulatory authorities and the United States in carrying out their auditing and oversight functions required by npplicnble law and this ECP. grounds for dismiRsal. li&PIDC agrees notlo rctalintc against any manager or employee involved in the operation uf Offshore Rigs for making any such report, except thac II&PIDC is pcnnittcd lo take rea~onablc amJ pruportimt<J!c employment action against any such reponing manager or employee who I~ determined to be involved in violations ofcompany policy. (3) Tltc OCM shall be authorit.cd to uccess all records and personnel subject to the ECP for the purpose ofensuring complianeewith the ECP. The OCM shall be nuthurizcd to implement all requirements ofthe ECP on Offshore Rigs. 'The OCM ~hall ensure tho! audits and surveys nrc carried out a.~ reql!ircd. that all documents arc pro!J1!rly maintained and that Reports arc made on a timely basis to the U.S. Probation Office and United Stntcs Attorney's Office for the Eastern District ofLouisinnil. {4) TiteOCM shall abo either personally or through delegates responsible to the OCM:
a) Develop and implement training and s<1fcty -;ullurc pr\lgrams, simltar to a Safety and En¥ironmcntal Management Systems ("SEMS.') ptO!,'l'llln set fonh under 30 CFR Pan 250 Subparts 0 nnd S, only as applicable to platfonu drilling contractor operations

fhr uiii!&I'IDC cmployccs.managcrs, and supcrintcndcnL~ involved in the operation ofOITol!orc Rigs. The ll&PIDC progrnm~ shall focu~ on the fnllowing;
i. improvement ofthe safety culture on Offsnore Rigs specifically regarding each employee's responsibthty to exercise
stop work authority and n:fus<.t uny order from a well silc leader {alkla Cnmpany Mnn), third-party contractor or li&PIDC employee, manager. or superintendent to npprovc nny test or report of well control pollution prevention und safety equipment on Offshore Rigs whieh docs no! fully comply with applicable OSCLA regulntions, permits, or other upplicablc environmental laws. ii training rig-baNcd drilling crew ofO!Tshorc Rigs, as approprintc. in well control techniques, equipment. aud regulations. D~rrick !lands and Floor I lands should ~ccivc Tl well control training. Well control training for Rig Managers, Tool Pusher, Drillers, and Assistant Drillers should comply with 30 CFR 250.1503 and IADC WcliCAP accreditation standards and ~hould include nil aspects of well control including calculating the various pressures, drillers method of well control, volumetric mel hod ofwell control, methods for killing o well and calculations of mud \veight. Training shall include discussions ofH&PIDC's obligations under the ECP and ll&f>IDC's safety culture program und the consequences to II&. PI DC nnd its personnel for failure to comply with ihc requirements of1his ECP ant! nil npplimblc federal regulatory requirements. All training record!;, well control certifications, and offshore skills verifications sllall be retained by H&PIDC for 3 ycors.
iii. Ensuring thatli&.PlDC rig-based driHing crews on Offshore Rigs, Offshore Rig Superintendents, Offshore District
Manager, and the Vice President of Offshore Opcmtiom; arc aware of their well operators' oil spill response plans und emergency procedures, including emergency evacuation procedures. 1l1c training progmm shall also require !hat H&PIDC Offshore Rig employees arc aware of all circum~tances under which they arc required to report sheens to the National Response Center. b) I!ave responsibility for maintaining an adequate inventory of replacement parts and tools for proper maintenance of well control pollution prevention und safety equipment. The OCM shall dcve lop a system thnl promotes a culture ofS11fcty on Offshore Rigs und promotes employees exercising stop work authority lor situations in which rig well control, pollution prevention, or safely equipment is lacking or deficient. c} R~vicw II&!' IDC'~ offshore drilling contracts ns they rcluCc to downtime nnd the costs associated with downtime. The OCM shall, thruugh the trainings progmms described in paragraph B.4.n.cummunicatc to drilling crews on Offshore Rigs that H&PIDC shall not for~go well control pollution prevention and safely testing and reporting to avoid downtime or tlte cost of downtime. d) Continue to implement the well control cquiprm.-nt testing improvement solutions ("Well Control Equipment Testing Solutions ..) adopted by H&I'IDC. whit:h include the following;
i. Employing a Well Conlrol Test Superintendent, who i~ experienced in well control equipment and testing, and who shnll be
responsible for, among other things. training of Offshore Rig employees involved in well control safety testing and well control opcmlions: conducting Offshore Rig visits, as described in paragraph B.4.d.iii; and coordinating third-party inspector rig visits, as described in paragraph B.4.d.iv.
ii. Requiring all Offshore Rig employees involved in well control equipment testing lo certify by signature the complete and
accurate completion of each step of well control equipment testing;
iii. Visits to Offshore Rigs, ut least twice per y~;ar. by H&PJOC's Well Control Test Superintendent (weather and logislics
pcnnitting), for the purpose of witnessing well control safety testing. assessing the knowledge and abilities of Offshore Rig employees in perfomting well control testing operations. and evaluating compliance with npplicablc laws and H&PIDC's policies witn respect to well control testing operations.
iv. Random Offshore Rig visits by a third-party inspcctor(s). [currently Det Norske Vcritas], two times every three months
(weather and logistics penni !ling), for the purpose of witnessing well control testing opcrntions, assessing the knowl~dge and abilities of Offshore Rig employees in pcrfonning well control testing operations. and evaluating compliance with applic;~blc hl\I'S an<.III&PIDC's pol ides with respect to well control testing operations.
C. PERFORMANCE REVIEW
(1} Within sixty (60) days of the entry of the plea agreement, H&PIDC's OCM shall request a meeting with BSEE's Office of Safety

Manag~ment·Ficld Qpcrnlions for BSEE's review ofthe tmining and safety programs referred to in paragraph B(4){a) and (d) above.

{2) II&PIDC shall submit to BSEE for review and evaluation its training nnd safety programs referrt!d in paragr~ph B(4){a} and {d). H&PIDC will submit a plan for BSEE approval to improve uny areas of dcliciency in its training and safety programs identified by BSEE as not meeting best industry practice 3

(''Pcrfunnam:c hnprovcmcot Plan"}. BSEI! mny audit Il&PIDC to determine complianc~:: with the Performance Improvement Plllll and may remove I l&PIDl' Ji·om pcrfonnancc review prior to \he end ofthe three year probationary tr.:nn should 13SEE be sntisticd with li&PIDC's perfhnnancc and irnprovcmcnL~. OthcJWisc, the Pcrfnnnancc lmprovcm~ll Plan requirement oflhis ECP will cx:pim upon the end of II&PIDC's three-year term ofprobntion.
0. NON-COMPUANC£
(l) Thi:; ECI' docs not in any way rclca~~; I·I&PIDC from complying will! uny applit:ublc pennit requirements, environmental statutes or regulations, am.l does not limit imposition of any sanctions, pcnnltic~. or any other actions, available under those permits, State or federal statmcs and rcguh!lions. (2) The ECP shall be pnrt of the fllro Agreement and adherence tn it will be a condition of probation. Failure tn comply with nny part of this ECP !llay be a violation of the Plea Agreement and may be grounU:l for the revocation or modificution of ll&f>!DC'~ probation. E. BOARD OF DIRECTORS li&PII>C shall ~nsur¢ that at kast yearly the !!elm erich & Payne, Inc. Board of Directors or equivalent governing structure r~ecivc and review reports from the OCM and any applicable rep on from BSEE concerning the implementation oflhis ECP, including environmental compliance, safety and tr~iniog progr.lm implcmcntntion. nnd applicable employee training. Copies of those portions of the meeting ngcndas and internal company reports concerning these items shall be included in the Reports to the United States. F. CHANGES IN OWNERSll!P/MANAGEMENT The parties r~~ognizc that during the term of probation. the numbtr am! identity oflhc 0 ffshore Rigs may increase or decreosc and any such increase in Off.~horc Rigs shall b~ subject to the terms and conditions of this ECP. Any Offshore Rigs removed from active opemtion by H&PIOC or sold ortrunsfcrrcd to third partks shall be excluded from the scope of the ECP. !l&PIDC agrees thut it will immcdiatdy (but in no event later than 2! days following a ch~ngc} notify the U.S. Probation Office and the U.S. Attorney's Oflicc fur the Eastern District of Louisiana of any change in n~m~ or ownership of the OIT'shorc R.igs. G. SELF-ENfORCEME:'olT II&PI[)C further agrc~s that it will undertake and implcm~:ntlhc necessary procedures tu ensure that this ECP is diligently complied with by the supervisors and crew of each Offshore Rig, as well as by all other employee:; of H&:l'!DC' engaged wholly or piDtially in operation of the Offshore Rigs on the date ofsentencing or at any time during the period of probation.
II. REVISIONSIMODlFlCATl ONS
The requirements of this ECP, including the dates and time periods mentioned herein, shalt be strictly complied with. Should ll&PIDC be unable to comply with any of the deadlines, II& PI DC shall immediakly notify the United States in writing of the rcason(s) for non-complianc~, and propos~ a revise-d timc!nblc. The United State.~ shall then determine a~ to whether !he revised timetable should be ncccptcd. 4
l. REPORTS
All reports, documents and correspondence required under th1s ECI' tQ be sent to thll Unit~:d Stales shall be senllo the following orticcs:
a) U.S. Attorney's Office

Eastern Distric.:t of Louisiana

Attn: Emily K. Greenfield

650 Poydrus St., Sl~ 1600

NcwOrlcilllS,LA 70130

cmily.grccnficld@usdoj.gov

b) U.S. Probation Department

Eastern Dis! ric! of Lo11isiuna

!laic Boggs f't:dcral Building

500 Poydras Street

New Orleans, LA 70130

c) Bureau of Safely and Environmental Enforcement

SEMSBrnnch

381 Elden Street

MSJIE3314

llcmdon, VA20170

Defendant hus read litis ECP carctully und understands i1 tllorDtlghly. Dcfcndanl enters into this ECP knowingly and voluntarily, and therefore agrees to abide by its tenns. By iL'> signature below. the corporntc rcprcscnl;~live agrees thnt hefshc is duly authorized by the corporation's Buartl ofDirecturs or equivalent go1•erning structure pursuant to the same notarized legal document flied in United States v. ll&P!OC ccr1ifying that the Dcfcadnm is authori:;.cd to enter into and comply with nil of the provisions of this Plea Agreement. DATED: /sf Steven R. Mackey October 30, 2013 STEVEN R. MACKEY, EXECLrnVE VICE PRESIDENT REPRESENTATIVE FOR ll&PIOC As COltn~el for Dclcndan t, we represent that we have discussed with our corporate client and its duly authorized represcntative(s) the terms ofthis ECP and huvc fully explained its requirements. We hnvc no reason to doubt that our client is knowingly und voluntarUy entering into this ECP. DATED: fsl William W. Taylor WILLIAM W. TAYLOR On behnlf ofth.; United Stutes, the following <Jgrcc to 1he terms ofthe ECP:
DATED: lsi Emilv K. Grccnlicld
E:vtU.Y K. GREP.NFIELD
Assislnnl United Stutes Attorney
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