UNIT DRILLING RESULTS
Contract drilling revenues increased 53% between
the comparative quarters to $96.7 million, due to an increase in dayrates
and the number of drilling rigs utilized. Drilling rig rates for the
first quarter averaged $10,253 per day, 24% higher than the comparable
quarter of 2004. Contract drilling operating margins per drilling
rig averaged $3,721 per day in the first quarter of 2005. Operating
margins for the first quarter were favorably impacted by increases
in dayrates and partially offset by increases in labor costs. Average
drilling rig utilization in the first quarter of 2005 was 99.3 drilling
rigs, up 22% from 2004's first quarter. In January 2005, Unit placed
into service its 101st drilling rig and acquired two drilling rigs,
its 102nd and 103rd rigs, as well as spare parts, inventory, drill
pipe and other major components when it acquired a subsidiary of Strata
Drilling LLC. Unit's 103rd and 104th rigs, which are under construction
and committed to a customer, should be fully operational during the
second quarter of 2005. Unit also has a 105th rig under construction
which should be operational by the end of the third quarter. Currently,
Unit has 102 operational drilling rigs, 101 of which are contracted
and 98 are operating.
UNIT PETROLEUM RESULTS
First quarter production for Unit's oil and natural
gas operations was 280,000 barrels of oil and 7,653 million cubic
feet (MMcf) of natural gas, a 23% equivalent Mcf increase over the
first quarter of 2004. Revenues for the first quarter were $56.9 million
or 50% higher than 2004's first quarter. The increase in revenue was
due to higher oil and natural gas prices and production.
Average natural gas prices received during the first
quarter of 2005 increased 16% to $5.69 per thousand cubic feet (Mcf)
compared to $4.90 per Mcf during the first quarter of 2004. The average
oil price received was $44.56 per barrel in the first quarter of 2005
compared to $30.63 per barrel in the first quarter of 2004, a 45%
increase.
During the first quarter of 2005, Unit completed
26 wells with a success rate of 92% compared to completing 34 wells
with a 79% success rate for the first quarter of 2004. Unit also had
11 wells in progress at the end of the first quarter of 2005. Unit
plans to drill approximately 220 to 230 wells during 2005.
On May 2, 2005, Unit signed a letter of intent to
acquire approximately 14.5 Bcfe of proved oil and natural gas reserves.
The properties are located in Oklahoma and currently produce 2.5 MMcfe
per day. The acquisition will have an effective date of April 1, 2005
and is expected to close in June.
SUPERIOR PIPELINE RESULTS
On July 29, 2004, Unit purchased the 60% of Superior
Pipeline Company LLC that it did not already own for $19.8 million.
The operations of Superior Pipeline and Unit's previously existing
gas gathering activities are reflected in the gas gathering and processing
segment. Before this acquisition, Unit's 40% interest in the operations
of Superior Pipeline was shown as equity in earnings of unconsolidated
investments.
Superior Pipeline is a mid-stream company engaged
primarily in the purchasing, gathering, processing and treating of
natural gas. The company operates one natural gas treatment plant,
owns three processing plants, 32 active gathering systems and 440
miles of pipeline.
For the first quarter of 2005, Superior Pipeline
gathered 107,254 MMBtu's of natural gas per day and processed 30,336
MMBtu's per day.
MANAGEMENT COMMENTS
"We are pleased with our results for the first quarter
of 2005," said Larry Pinkston, Chief Executive Officer and President.
"The activity in our contract drilling operations continues to improve
as customer demand continues to increase. Our drilling rig fleet continues
to operate at nearly 100% utilization. We expect this level of demand
to continue during 2005. We plan to aggressively drill 220 to 230
wells in our exploration and production division during 2005, up approximately
30% over 2004. The oil and natural gas properties we are acquiring
will be a good fit with our core areas of production. Long-term debt
decreased to $78.0 million, leaving us with a conservative 11% debt
to capitalization ratio. We are optimistic about the outlook for Unit
Corporation in 2005 and believe this will be a year of continuing
growth for the company."
WEBCAST
Unit will webcast its first quarter earnings conference
call live over the Internet on May 3, 2005 at 11:00 a.m. Eastern Time.
To listen to the live call, please go to http://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 Securities Litigation Reform Act that involve
risks and uncertainties, including the productive capabilities of
the wells, future demand for oil and natural gas, future rig utilization
and dayrates, oil and gas reserve information, anticipated production
rates from company wells, anticipated gas gathering and processing
rates, the prospective capabilities of offset acreage, anticipated
oil and natural gas prices, the number of wells to be drilled by the
company, development, operational, implementation and opportunity
risks, and other factors described from time to time in the company's
publicly available SEC reports, which could cause actual results to
differ materially from those expected.
Unit Corporation
Selected Financial and Operations Highlights
(In thousands except per share and operations data)
Three Months Ended
March 31,
2005 2004
Statement of Income:
Revenues:
Contract drilling $96,681 $63,214
Oil and natural gas 56,864 37,990
Gas gathering and processing 18,230 30
Other (195) 376
Total revenues 171,580 101,610
Expenses:
Contract drilling:
Operating costs 63,431 46,556
Depreciation 9,610 7,464
Oil and natural gas:
Operating costs 12,413 9,632
Depreciation, depletion and amortization 14,432 10,177
Gas gathering and processing:
Operating costs 16,834 15
Depreciation 638 17
General and administrative 3,971 2,771
Interest expense 687 417
Total expenses 122,016 77,049
Income Before Income Taxes 49,564 24,561
Income Tax Expense:
Current 9,417 571
Deferred 9,417 8,763
Total income taxes 18,834 9,334
Equity in Earnings of Unconsolidated
Investments, Net of Income Tax --- 280
Net Income $30,730 $15,507
Net Income Per Common Share:
Basic $0.67 $0.34
Diluted $0.67 $0.34
Weighted Average Common Shares Outstanding:
Basic 45,800 45,671
Diluted 46,050 45,859
March 31, December 31,
2005 2004
Balance Sheet Data:
Current assets $128,716 $118,601
Total assets $1,066,223 $1,023,136
Current liabilities $96,735 $77,176
Long-term debt $78,000 $95,500
Other long-term liabilities $37,555 $37,725
Deferred income taxes $213,965 $204,466
Shareholders' equity $639,968 $608,269
Three Months Ended
March 31,
2005 2004
Statement of Cash Flows Data:
Cash Flow From Operations before Changes
in Working Capital (A) $66,267 $42,311
Net Change in Working Capital (10,373) 301
Net Cash Provided by Operating Activities $55,894 $42,612
Net Cash Used in Investing Activities $(45,000) $(122,951)
Net Cash Provided by (Used in) Financing
Activities $(11,089) $80,118
Three Months Ended
March 31,
2005 2004
Contract Drilling Operations Data:
Rigs Utilized 99.3 81.7
Operating Margins (B) 34% 26%
Operating Profit Before
Depreciation (B) ($MM) $33.3 $16.7
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 280 215
Natural Gas - MMcf 7,653 6,294
Average Prices
Oil - Bbl $44.56 $30.63
Natural Gas - Mcf $5.69 $4.90
Operating Profit Before DD&A (B) ($MM) $44.5 $28.4
Gas Gathering and Processing Operations Data:
Gas gathered - MMBtu/day 107,254 12,637
Gas processed - MMBtu/day 30,336 64
(A) Unit Corporation considers Unit's cash flow from operations before
changes in working capital an important measure in meeting the
performance goals of the company.
(B) Operating profit before depreciation is calculated by taking
operating revenues by segment less operating expenses by segment
excluding depreciation, depletion, amortization and impairment,
general and administrative and interest expense. Operating margins
are calculated by taking operating profit divided by segment
revenue.
