http://www.businesswire.com/news/home/20091103005381/en
TULSA, Okla.--(Business Wire)--
Unit Corporation (NYSE: UNT) announced today net income of $31.4 million, or
$0.66 per diluted share, for the three months ended September 30, 2009, compared
to net income of $92.3 million, or $1.96 per diluted share, for the three months
ended September 30, 2008. Total revenues for the third quarter of 2009 were
$167.4 million (30% contract drilling, 53% oil and natural gas, and 16%
mid-stream), compared to total revenues for the third quarter of 2008 of $375.6
million (45% contract drilling, 41% oil and natural gas, and 14% mid-stream).
For the first nine months of 2009, Unit reported a net loss of $84.0 million, or
$1.79 per diluted share, compared to net income of $263.5 million, or $5.61 per
diluted share, for the nine months ended September 30, 2008. Included in the
2009 results is a $281.2 million ($175.1 million after tax, or $3.71 per diluted
share) noncash ceiling test write down that occurred in the first quarter. The
ceiling test write down was required to reduce the carrying value of the
company`s oil and natural gas properties due to significantly lower commodity
prices at the end of the first quarter 2009. Excluding the ceiling test write
down, net income for the first nine months of 2009 would have been $91.1
million, or $1.92 per diluted share (see Non-GAAP Financial Measures below).
Total revenues for the first nine months of 2009 were $532.6 million (35%
contract drilling, 50% oil and natural gas, and 13% mid-stream), compared to
$1.1 billion (44% contract drilling, 42% oil and natural gas, and 14%
mid-stream) for the first nine months of 2008.
CONTRACT DRILLING SEGMENT INFORMATION
Average drilling rig utilization for the third quarter of 2009 was 34.6 drilling
rigs, or 26%, a decrease of 69% from the third quarter of 2008, and an increase
of 9% from the second quarter of 2009. Contract drilling rig rates for the third
quarter of 2009 averaged $15,360 per day, a decrease of 18%, or $3,284 per day,
from the third quarter of 2008, and a decrease of 11%, or $1,975 per day, from
the second quarter of 2009. Average operating margins for the third quarter of
2009 were $6,433 per day (before elimination of intercompany drilling rig profit
of $0.1 million; see Non-GAAP Financial Measures below) as compared to $9,314
per day (before elimination of intercompany drilling rig profit of $7.6 million;
see Non-GAAP Financial Measures below) for the same quarter in 2008, a decrease
of 31%. Approximately $1,104 per day of the third quarter 2009 average operating
margin was the result of early termination fees associated with the cancellation
of long-term contracts.
For the first nine months of 2009, drilling rig utilization averaged 30% as
compared to 81% for the same period during 2008. Unit averaged 39.6 drilling
rigs working during the first nine months of 2009, a decrease of 62% from the
105.3 drilling rigs working during the first nine months of 2008. Average
operating margins for the first nine months of 2009 were $7,403 per day (before
elimination of intercompany drilling rig profit of $1.2 million; see Non-GAAP
Financial Measures below) as compared to $8,821 per day (before elimination of
intercompany drilling rig profit of $21.5 million for the same period in 2008;
see Non-GAAP Financial Measures below), a decrease of 16%. Approximately $368
per day of the first nine months of 2009 average operating margin was the result
of early termination fees associated with the cancellation of long-term
contracts.
Currently, Unit has 130 drilling rigs of which 40 are under contract. The
following table illustrates this segment`s drilling rig count at the end of each
period and its average utilization rate during the period:
3rd Qtr 09 2nd Qtr 09 1st Qtr 09 4th Qtr 08 3rd Qtr 08 2nd Qtr 08 1st Qtr 08 4th Qtr 07 3rd Qtr 07
Rigs 130 131 131 132 131 131 129 129 128
Utilization 26% 24% 40% 74% 85% 80% 78% 80% 78%
Larry Pinkston, Unit's Chief Executive Officer and President, said: "While low
commodity prices and minimal capital spending by exploration and production
companies continued to negatively impact dayrates during the third quarter, we
did experience a slight increase in demand for our rigs in the spot market.
Additionally, during the third quarter we sold one of our inactive 1,000
horsepower, mechanical drilling rigs, bringing our total fleet to 130 drilling
rigs. We believe that as the supply of natural gas declines due to fewer wells
being drilled, the demand for drilling rigs will grow as long as we see
improvements in the domestic and global economy."
OIL AND NATURAL GAS SEGMENT INFORMATION
* Completed 21 and 58 gross wells during the 2009 third quarter and first nine
months, respectively.
* Curtailed approximately 4.4 MMcf per day of production during the third
quarter of 2009 due to low commodity prices and the shut-in of a third party
plant.
* Approximately 76% of anticipated natural gas production and 71% of anticipated
crude oil production is hedged for the remainder of 2009.
* Revised estimate of gross wells to be drilled from 120 to 100 wells during
2009.
Third quarter 2009 production was 300,000 barrels of oil, in comparison to
316,000 barrels of oil in the third quarter of 2008, a 5% decrease. Natural gas
liquids (NGLs) production during the third quarter of 2009 was 358,000 barrels
in comparison to 306,000 barrels in the third quarter of 2008, a 17% increase.
Third quarter 2009 natural gas production decreased 12% to 10.7 billion cubic
feet (Bcf) from 12.1 Bcf during the comparable quarter of 2008. Third quarter
2009 equivalent production totaled 14.7 Bcfe, an 8% decrease over the third
quarter 2008. Total production for the first nine months of 2009 was 46.4 Bcfe,
a decrease of 0.4% over the 46.6 Bcfe produced during the first nine months of
2008.
Unit`s average natural gas price for the third quarter of 2009 decreased 31% to
$5.67 per thousand cubic feet (Mcf) as compared to $8.20 per Mcf for the third
quarter of 2008. Unit`s average oil price for the third quarter of 2009 was
$59.55 per barrel compared to $101.82 per barrel for the third quarter of 2008,
a 42% decrease, and Unit`s average NGLs price for the third quarter of 2009 was
$22.99 per barrel compared to $61.78 per barrel for the third quarter of 2008, a
63% decrease. For the first nine months of 2009, Unit`s average natural gas
price decreased 34% to $5.53 per Mcf as compared to $8.35 per Mcf during the
first nine months of 2008. Unit`s average oil price for the first nine months of
2009 was $54.77 per barrel compared to $99.33 per barrel during the first nine
months of 2008, a 45% decrease. Unit`s average NGLs price for the first nine
months of 2009 was $21.80 per barrel compared to $56.87 per barrel during the
first nine months of 2008, a 62% decrease.
For 2009, approximately 76% of this segment's anticipated average daily natural
gas production is hedged through NYMEX plus basis at several delivery points and
approximately 71% of its anticipated oil production is hedged. Of the natural
gas hedges, 89% are under swap contracts at a comparable NYMEX average price of
$7.20 and 11% are under a collar contract with a comparable NYMEX floor of $8.22
and a ceiling of $10.80. The average basis differentials for these swaps are
($0.85). Of the oil hedges, 80% are under swap contracts at an average price of
$51.87 and 20% under a collar contract with a floor of $100.00 and a ceiling of
$156.25. For 2010, approximately 68% of the company`s anticipated average daily
natural gas production is hedged and 71% of its anticipated daily oil production
is hedged. The natural gas production is hedged under swap contracts at a
comparable average NYMEX price of $6.95. The average basis differentials for the
swaps are ($0.66). Of the oil hedges, 60% are under swap contracts at an average
price of $61.36 and 40% are under a collar contract with a floor of $67.50 and a
ceiling of $81.53. Additionally, Unit has hedged approximately 73% of its
anticipated average daily NGLs production for the balance of 2009.
The following table illustrates this segment`s production and certain results
for the periods indicated:
3rd Qtr 09 2nd Qtr 09 1st Qtr 09 4th Qtr 08 3rd Qtr 08 2nd Qtr 08 1st Qtr 08 4th Qtr 07 3rd Qtr 07
Production, Bcfe 14.7 15.4 16.3 16.8 15.9 16.0 14.7 14.7 14.0
Realized Price, Mcfe (1) $5.92 $5.75 $5.48 $6.21 $9.49 $10.19 $8.72 $7.66 $6.69
Wells Drilled (gross) 21 16 21 67 82 72 57 81 51
Success Rate 90% 100% 90% 90% 89% 90% 86% 90% 88%
(1) Realized price includes oil, natural gas liquids, natural gas and associated
hedges.
During the third quarter of 2009, Unit participated in the drilling of 21 wells,
of which 19 were completed as producing wells for a success rate of 90% in
comparison to the completion of 82 wells with an 89% success rate during the
third quarter of 2008.
Pinkston said: "During the third quarter of 2009, we increased our level of
drilling activity to take advantage of the reduction in well costs that have
occurred throughout the year. Our drilling efforts continue to be focused in
prospects that have a combination of natural gas and oil or where the natural
gas has a high BTU content, yielding NGLs which are better correlated to crude
pricing. Production for the third quarter of 2009 was reduced by approximately
4.4 MMcf per day that was curtailed due to weak commodity prices or shut-in due
to third party plant issues. We plan to drill approximately 100 wells during
2009, a reduction from our previous estimate of 120 wells, and estimate that our
production for the year will be approximately 62 Bcfe."
MID-STREAM SEGMENT INFORMATION
* Increased third quarter 2009 liquids sold per day volumes 5% over second
quarter of 2009 and 26% over third quarter of 2008.
* Increased third quarter 2009 processed volumes per day 3% over second quarter
2009 and 9% over third quarter of 2008.
* 29 new wells connected to existing systems during the first nine months of
2009.
Third quarter of 2009 processing volumes of 77,923 MMBtu per day and liquids
sold volumes of 251,830 gallons per day increased 9% and 26%, respectively, over
third quarter of 2008. Third quarter 2009 gathering volumes were 179,047 MMBtu
per day, a 9% decrease over third quarter of 2008. Operating profit (as defined
in the Selected Financial and Operational Highlights) for the third quarter was
$6.2 million, an increase of $2.2 million from the second quarter of 2009, due
primarily to increased liquids prices and increases in liquids sold and
processed volumes, which resulted in increased processing margins.
For the first nine months of 2009, processing volumes of 75,371 MMBtu per day
and liquids sold volumes of 236,692 gallons per day increased 14% and 21%,
respectively, from the first nine months of 2008. Gathering volumes for the
first nine months of 2009 were 186,296 MMBtu per day, a 7% decrease from the
first nine months of 2008.
The following table illustrates certain results from this segment`s operations
for the periods indicated:
3rd Qtr 09 2nd Qtr 09 1st Qtr 09 4th Qtr 08 3rd Qtr 08 2nd Qtr 08 1st Qtr 08 4th Qtr 07 3rd Qtr 07
Gas gathered 179,047 187,666 192,320 187,585 195,914 205,397 200,697 212,786 221,508
MMBtu/day
Gas processed 77,923 75,481 72,650 72,491 71,260 67,545 59,797 59,009 55,721
MMBtu/day
Liquids sold 251,830 239,121 218,762 197,428 199,805 202,130 183,924 169,897 137,098
Gallons/day
Unit`s mid-stream segment operates three natural gas treatment plants, owns
eight processing plants, 34 active gathering systems and 835 miles of pipeline.
Pinkston said: "Both our liquids sold volumes per day as well as our gas
processed volumes per day were at record high levels for the company. Despite
the reduced drilling activity by exploration and production companies, we are
pleased with the volume growth that our mid-stream segment has been able to
achieve to date primarily through our efforts to improve liquid recovery rates
at our plants."
FINANCIAL INFORMATION
Unit ended the third quarter of 2009 with long-term debt of $30.0 million and a
debt to capitalization ratio of 2%. Under the company`s credit facility, the
amount available to the company is the lesser of the amount elected by the
company as the commitment amount (currently $325 million) or the value of the
borrowing base as determined by the lenders under the credit facility, but not
to exceed the maximum credit facility amount of $400 million. As of October 1,
2009, Unit`s borrowing base was reaffirmed by its lenders at $475 million. The
company is currently in compliance with all of the covenants contained in its
credit facility.
MANAGEMENT COMMENT
Larry Pinkston said: "We are pleased with the results of our 2009 third quarter
as the challenges to the economy and our industry persist. Unit had borrowings
outstanding of $30.0 million at the end of the third quarter, which is $81.0
million less than the $111 million outstanding at the end of the second quarter.
The reduction in borrowings was primarily funded from lower capital spending
relative to cash flow, supported by a strong commodity hedge position, along
with proceeds from the sale of certain Appalachia acreage and related collection
of third party costs. Sustained improvement in all three of our business
segments will require increases in underlying commodity prices. We believe
initial signs of increased demand for drilling activity by exploration and
production companies have materialized, and we are well positioned with the
personnel, prospects, rig fleet and financial capacity to take advantage of
low-cost growth opportunities for our shareholders."
WEBCAST
Unit will webcast its third quarter earnings conference call live over the
Internet on November 3, 2009 at 10:00 a.m. Central Time (11:00 a.m. Eastern). To
listen to the live call, please go to www.unitcorp.com at least fifteen minutes
prior to the start of the call to download and install any necessary audio
software. For those who are not available to listen to the live webcast, a
replay will be available shortly after the call and will remain on the site for
twelve months.
Unit Corporation is a Tulsa-based, publicly held energy company engaged through
its subsidiaries in oil and gas exploration, production, contract drilling and
gas gathering and processing. Unit`s Common Stock is listed on the New York
Stock Exchange under the symbol UNT. For more information about Unit
Corporation, visit its website at http://www.unitcorp.com.
This news release contains forward-looking statements within the meaning of the
private Securities Litigation Reform Act. All statements, other than statements
of historical facts, included in this release that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future are forward-looking statements. A number of risks and uncertainties could
cause actual results to differ materially from these statements, including the
impact that the current decline in wells being drilled will have on production
and drilling rig utilization, productive capabilities of the Company`s wells,
future demand for oil and natural gas, future drilling rig utilization and
dayrates, projected growth of the Company`s oil and natural gas production, oil
and gas reserve information, as well as the ability to meet its future reserve
replacement goals, anticipated gas gathering and processing rates and throughput
volumes, the prospective capabilities of the reserves associated with the
Company`s inventory of future drilling sites, anticipated oil and natural gas
prices, the number of wells to be drilled by the Company`s oil and natural gas
segment, development, operational, implementation and opportunity risks,
possibility of future growth opportunities, and other factors described from
time to time in the Company`s publicly available SEC reports. The Company
assumes no obligation to update publicly such forward-looking statements,
whether as a result of new information, future events or otherwise.
Unit Corporation
Selected Financial and Operations Highlights
(In thousands except per share and operations data)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Statement of Income:
Revenues:
Contract drilling $ 49,801 $ 169,044 $ 188,383 $ 467,519
Oil and natural gas 88,894 152,343 267,399 446,644
Gas gathering and processing 26,228 54,079 71,604 153,102
Other 2,507 97 5,180 (193 )
Total revenues 167,430 375,563 532,566 1,067,072
Expenses:
Contract drilling:
Operating costs 29,456 81,802 109,565 234,541
Depreciation 10,923 18,968 33,803 51,320
Oil and natural gas:
Operating costs 20,781 32,095 62,846 90,353
Depreciation, depletion and amortization 25,645 40,053 89,800 114,756
Impairment of oil and natural gas properties --- --- 281,241 ---
Gas gathering and processing:
Operating costs 20,012 45,381 59,888 125,617
Depreciation and amortization 3,995 3,788 12,166 10,932
General and administrative 5,506 6,928 17,088 20,179
Interest, net 1 69 539 1,162
Total expenses 116,319 229,084 666,936 648,860
Income (Loss) Before Income Taxes 51,111 146,479 (134,370 ) 418,212
Income Tax Expense (Benefit):
Current 8,571 16,026 9,818 41,161
Deferred 11,091 38,172 (60,175 ) 113,578
Total income taxes 19,662 54,198 (50,357 ) 154,739
Net Income (Loss) $ 31,449 $ 92,281 $ (84,013 ) $ 263,473
Net Income (Loss) per Common Share:
Basic $ 0.67 $ 1.98 $ (1.79 ) $ 5.66
Diluted $ 0.66 $ 1.96 $ (1.79 ) $ 5.61
Weighted Average Common Shares Outstanding:
Basic 47,011 46,634 46,980 46,568
Diluted 47,419 47,043 46,980 46,934
September 30, December 31,
2009 2008
Balance Sheet Data:
Current assets $ 111,858 $ 286,585
Total assets $ 2,163,268 $ 2,581,866
Current liabilities $ 95,434 $ 196,399
Long-term debt $ 30,000 $ 199,500
Other long-term liabilities $ 81,110 $ 75,807
Deferred income taxes $ 415,707 $ 477,061
Shareholders` equity $ 1,541,017 $ 1,633,099
Nine Months Ended September 30,
2009 2008
Statement of Cash Flows Data:
Cash Flow From Operations before Changes in Operating Assets and Liabilities (1) $ 282,260 $ 567,812
Net Change in Operating Assets and Liabilities 140,310 (42,745 )
Net Cash Provided by Operating Activities $ 422,570 $ 525,067
Net Cash Used in Investing Activities $ (204,637 ) $ (578,318 )
Net Cash Provided by (Used in) Financing Activities $ (217,371 ) $ 53,182
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Contract Drilling Operations Data:
Rigs Utilized 34.6 110.7 39.6 105.3
Operating Margins (2) 41 % 52 % 42 % 50 %
Operating Profit Before Depreciation (2) ($MM) $ 20.3 $ 87.2 $ 78.8 $ 233.0
Oil and Natural Gas Operations Data:
Production:
Oil - MBbls 300 316 991 942
Natural Gas Liquids - MBbls 358 306 1,142 961
Natural Gas - MMcf 10,713 12,134 33,575 35,143
Average Prices:
Oil price per barrel received $ 59.55 $ 101.82 $ 54.77 $ 99.33
Oil price per barrel received, excluding hedges $ 64.75 $ 117.56 $ 51.76 $ 112.15
NGLs price per barrel received $ 22.99 $ 61.78 $ 21.80 $ 56.87
NGLs price per barrel received, excluding hedges $ 25.23 $ 61.78 $ 22.51 $ 56.78
Natural Gas price per Mcf received $ 5.67 $ 8.20 $ 5.53 $ 8.35
Natural Gas price per Mcf received, excluding hedges $ 2.96 $ 8.34 $ 3.06 $ 8.58
Operating Profit Before DD&A and impairment (2) ($MM) $ 68.1 $ 120.2 $ 204.6 $ 356.3
Gas Gathering and Processing Operations Data:
Gas Gathering - MMBtu/day 179,047 195,914 186,296 200,652
Gas Processing - MMBtu/day 77,923 71,260 75,371 66,219
Liquids Sold - Gallons/day 251,830 199,805 236,692 195,303
Operating Profit Before Depreciation and Amortization (2) ($MM) $ 6.2 $ 8.7 $ 11.7 $ 27.5
(1) The company considers its cash flow from operations before changes in
operating assets and liabilities an important measure in meeting the performance
goals of the company (see Non-GAAP Financial Measures below).
(2) Operating profit before depreciation is calculated by taking operating
revenues by segment less operating expenses excluding depreciation, depletion,
amortization and impairment, general and administrative and interest expense.
Operating margins are calculated by dividing operating profit by segment
revenue.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted account
principles ("GAAP"). We believe certain non-GAAP performance measures provide
users of our financial information and our management additional meaningful
information to evaluate the performance of our company.
This press release includes net income excluding the effect of the impairment of
our oil and natural gas properties, earnings per share excluding the effect of
the impairment of our oil and natural gas properties, cash flow from operations
before changes in working capital and our drilling segment`s average daily
operating margin before elimination of drilling rig profit.
Below is a reconciliation of GAAP financial measures to non-GAAP financial
measures for the three and nine months ended September 30, 2009 and 2008.
Non-GAAP financial measures should not be considered by themselves or a
substitute for our results reported in accordance with GAAP.
Unit Corporation
Reconciliation of Net Income and Earnings per Share
Excluding the Effect of Impairment of Oil and Natural Gas Properties
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(In thousands)
Net income excluding impairment of oil and natural gas properties:
Net income (loss) $ 31,449 $ 92,281 $ (84,013 ) $ 263,473
Add:
Impairment of oil and natural gas properties (net of income tax) --- --- 175,072 ---
Net income excluding impairment of oil and natural gas properties $ 31,449 $ 92,281 $ 91,059 $ 263,473
Diluted earnings per share excluding impairment of oil and natural gas properties:
Diluted earnings per share $ 0.66 $ 1.96 $ (1.79 ) $ 5.61
Add:
Diluted earnings per share from impairment of oil and natural gas properties --- --- 3.71 ---
Diluted earnings per share excluding impairment of oil and natural gas properties $ 0.66 $ 1.96 $ 1.92 $ 5.61
We have included the net income excluding impairment of oil and natural gas
properties and diluted earnings per share excluding impairment of oil and
natural gas properties because:
* We use the adjusted net income to evaluate the operational performance of the
company.
* The adjusted net income is more comparable to earnings estimates provided by
securities analyst.
* The impairment of oil and natural gas properties does not occur on a recurring
basis and the amount and timing of impairments cannot be reasonably estimated
for budgeting purposes and is therefore typically not included for forecasting
operating results.
Unit Corporation
Reconciliation of Cash Flow From Operations Before Changes in Operating Assets and Liabilities
Nine Months Ended
September 30,
2009 2008
(In thousands)
Net cash provided by operating activities $ 422,570 $ 525,067
Subtract:
Net change in operating assets and liabilities 140,310 (42,745 )
Cash flow from operations before changes in operating assets and liabilities $ 282,260 $ 567,812
We have included the cash flow from operations before changes in operating
assets and liabilities because:
* It is an accepted financial indicator used by our management and companies in
our industry to measure the company`s ability to generate cash which is used to
internally fund our business activities.
* It is used by investors and financial analysts to evaluate the performance of
our company.
Unit Corporation
Reconciliation of Average Daily Operating Margin Before Elimination of Rig Profit
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(In thousands)
Contract drilling revenue $ 49,801 $ 169,044 $ 188,383 $ 467,519
Contract drilling operating cost 29,456 81,802 109,565 234,541
Operating profit from contract drilling 20,345 87,242 78,818 232,978
Add:
Elimination of intercompany rig profit 107 7,596 1,172 21,460
Operating profit from contract drilling before elimination of intercompany rig profit 20,452 94,838 79,990 254,438
Contract drilling operating days 3,179 10,182 10,805 28,846
Average daily operating margin before elimination of rig profit $ 6,433 $ 9,314 $ 7,403 $ 8,821
We have included the average daily operating margin before elimination of rig
profit because:
* Our management uses the measurement to evaluate the cash flow performance or
our contract drilling segment and to evaluate the performance of contract
drilling management.
* It is used by investors and financial analysts to evaluate the performance of
our company.
Unit Corporation
David T. Merrill, 918-493-7700
Chief Financial Officer and Treasurer
www.unitcorp.com
Copyright Business Wire 2009
