UNIT CORPORATION
REPORTS 2006 THIRD QUARTER RESULS
Quarterly Revenue Up 30%, Net Income Up 41% and Net
Cash From Operations Up 43% With All-time Quarterly Records Set in Revenue,
Operating Margins and Production
TULSA, Okla., Nov. 2 /PRNewswire-FirstCall/ -- Unit Corporation
(NYSE: UNT - News)
announced today its financial and operational results for the third quarter
and first nine months of 2006. Net income for the third quarter of 2006
was $81.3 million, or $1.75 per diluted share, on company-record third
quarter revenues of $299.9 million, compared with net income of $57.6 million,
or $1.25 per diluted share, on revenues of $231.0 million for the third
quarter of 2005.
For the nine month period, Unit reported net income of $231.0 million, or
$4.98 per diluted share, on record revenues for the period of $863.1 million,
compared to 2005's nine month net income of $128.0 million, or $2.78 per
diluted share, on revenues of $592.5 million. Increased oil and natural gas
production, higher oil prices, an increased number of drilling rigs operating
and higher dayrates produced record results for the first nine months of
the year.
Larry Pinkston, Unit Corporation's Chief Executive Officer and President
said: "Despite a downward shift in natural gas prices during the third quarter,
we are pleased with our results and with the quarterly records we have achieved
in company revenues, contract drilling operating margins and oil and natural
gas production. For the remainder of the year, we will stay focused on delivering
improved results in this extremely volatile oil and natural gas commodity
market. Drilling rig dayrates were up 5% from the second quarter of 2006
and 14% from the first quarter of 2006. As we enter the fourth quarter, rig
demand has remained strong as we are keeping our fleet at near 100% utilization,
an accomplishment of which we are proud."
Pinkston continued: "The decline in natural gas prices has not deterred
us from our goal of drilling 235 wells during 2006. We maintain the belief
that our exploration and production segment is on track to achieve record
annual production which we currently estimate to be approximately 53.0 Bcfe,
a rise of 31% from 2005's annual production of 40.6 Bcfe. Our wholly owned
gas gathering and processing subsidiary, Superior Pipeline, is continuing
to expand its asset base and is expected to increase its annual throughput
volumes by approximately 75% in 2006."
CONTRACT DRILLING RESULTS
Contract drilling rig rates for the third quarter averaged a record $19,559
per day, up 49% from the comparable quarter of 2005. Operating margins for
the quarter reached an all-time record averaging $10,994 per day (before
elimination of intercompany drilling rig profit of $8.0 million) as compared
to $5,924 per day (before elimination of intercompany drilling rig profit
of $3.2 million) for 2005, an increase of 86%. Contract drilling revenues
increased 52% between the comparative third quarters to $182.5 million, primarily
due to increases in dayrates and the number of working drilling rigs. Average
drilling rig utilization was 110.6 drilling rigs in the third quarter of
2006, up 8% from 2005's third quarter rate of 102.6 drilling rigs. Currently,
Unit has 116 operational drilling rigs of which 114 are under contract. Unit
is in the process of adding three additional drilling rigs to its fleet.
The 117th rig, a 750 horsepower, SCR drilling rig, should be placed into
service during December and the 118th and 119th drilling rigs are expected
to be placed into service early in 2007. Both of these rigs are 1,500 horsepower,
SCR drilling rigs.
The following table illustrates Unit's rig count at the end of each period
and utilization strength during each period:
3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
06 06 06 05 05 05 04 04 04 04
Rigs 116 115 111 112 111 103 102 100 100 89
Utilization 96% 97% 98% 96% 98% 98% 98% 95% 96% 95%
Between the comparative first nine months, contract drilling revenues increased
61% to $519.8 million with rig utilization increasing to an average of 109.8
drilling rigs operating during the first nine months of 2006 compared to
an average 100.7 drilling rigs operating in the first nine months of 2005.
Commenting on Unit Drilling, Pinkston said: "Demand for our drilling rigs
continues to remain strong as is evident by the continued high utilization
rate of our fleet. However, given the recent softening in natural gas prices
and the uncertainty of the upcoming winter season, dayrates are holding strong
but steady. We will continue to review opportunities to add new rigs to our
fleet to meet our customers' demands as we look to 2007."
EXPLORATION AND PRODUCTION RESULTS
Third quarter production for Unit's oil and natural gas operations was a
record 376,000 barrels of oil and a record 11.2 billion cubic feet (Bcf)
of natural gas, a 34% equivalent thousand cubic feet (Mcfe) increase from
the third quarter of 2005. Exiting the quarter, Unit was producing 150.9
MMcfe per day. Revenues for the third quarter were $91.2 million, 9% higher
than 2005's third quarter. The increase in revenue resulted from a 50% increase
in oil production, as well as a 31% increase in natural gas production and
higher oil prices.
Unit's average natural gas price for the third quarter of 2006 decreased
26% to $6.02 per thousand cubic feet (Mcf) as compared to $8.13 per Mcf for
the third quarter of 2005. Unit's average oil price for the third quarter
of 2006 was $59.55 per barrel compared to $54.60 per barrel for the third
quarter of 2005, a 9% increase. The following table illustrates the results
of Unit's consistent production growth and aggressive internal drilling program:
3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
06 06 06 05 05 05 04 04 04 04
Production,
Bcfe 13.5 12.6 12.7 11.8 10.0 9.4 9.3 9.0 8.6 8.3
Realized
price,
Mcfe $6.68 $6.41 $7.36 $9.71 $8.28 $6.49 $6.00 $5.96 $5.31 $5.49
Wells
Drilled 75 62 41 57 52 57 26 58 37 39
Success
Rate 88% 85% 88% 100% 90% 89% 92% 86% 84% 92%
During the first nine months of 2006, Unit began drilling operations on
194 wells and completed 178 of those wells with a success rate of 87% compared
to the completion of 135 wells with a 90% success rate for the first nine
months of 2005. Unit also had 16 wells in progress at the end of September
2006.
During the first nine months of 2006, oil and natural gas revenues were
$267.5 million, an increase of 32% over the same period in 2005. Natural
gas production was 32.3 Bcf in the first nine months of 2006, while oil production
for the same period was 1,062,000 barrels. Equivalent Mcf production was
up 35% over the comparative nine month periods. The average natural gas price
received decreased 7% to $6.28 per Mcf compared to $6.74 per Mcf during the
first nine months of 2005. The average oil price received was $57.18 per
barrel in the first nine months of 2006 compared to $48.16 per barrel in
2005, a 19% increase.
The Panola and Segno Fields are two core properties that continue to significantly
impact Unit's strong production growth. The Panola field is located in the
Arkoma basin in southeast Oklahoma where Unit announced earlier this year
the completion of its eighth successful natural gas producer from the prolific
Cecil sand, the Lively # 7(29.78% working interest (WI), 24.78% net revenue
interest (NRI)). The Lively # 7 has produced 7.5 Bcfe since first gas sales
on May 2, 2006 and is currently flowing gas at a rate of 40.0 MMcfe per day
gross. Recent activity includes the completion of the Scharff # 7 (12.62
% WI, 9.57% NRI) on August 4, 2006 and the Scharff # 8 (12.62% WI, 9.57%
NRI) on October 18, 2006 at initial flow rates of 16.0 MMcfe and 11.0 MMcfe
per day, respectively. The current natural gas flow rate from the ten producing
wells in this field totals 133.5 MMcfe per day gross and 22.9 MMcfe per day
net. Additional Panola field drilling activity includes the Thornton # 3X
ST (57.58% WI, 46.79% NRI) located on the west end of the field. The well
has penetrated 203 feet of net Lower Atoka potential gas pay and will be
completed in approximately three weeks. The Ivey # 1 (56.91% WI, 45.24% NRI)
located on the north side of the field failed to find the Cecil sand, but
did penetrate gas pay in the deeper Wister and Spiro sands. The Spiro zone
has sold gas at an average rate of 3.0 MMcfe for the first 19 days of production.
The east offset, the Jankowsky Trust # 1(51.49% WI, 39.09% NRI) will spud
in the next couple of weeks. The 3-D survey across the field has been shot
and is currently in processing with an anticipated delivery date for the
data at the end of November.
The Segno field, which is located in Polk County, Texas, was discovered
by Unit in January 2003. The field now has ten producing gas wells and two
additional wells that are being completed. The current natural gas flow rate
from the ten wells is 26.7 MMcfe per day gross and 16.2 MMcfe per day net.
Plans are to drill two or three more field wells in the first quarter of
2007. To the east of Segno in an 80 square mile 3-D area., Unit currently
anticipates that it will drill approximately ten wells during 2007 on both
exploratory and development prospects that have been identified from the
3-D seismic data.
Pinkston said: "In October, we completed the acquisition of Brighton Energy,
LLC, a private company, for approximately $67.0 million. The acquisition
includes approximately 27.0 Bcfe of proved reserves and 5.0 MMcfe per day
of current production. The reserves are 78% natural gas and 67% proved developed.
The majority of the reserves are located in the Anadarko Basin of Oklahoma
and the onshore Gulf Coast basins of Texas and Louisiana, with additional
reserves in Arkansas, Kansas, Montana, North Dakota and Wyoming. This acquisition
fits well within our core area of operations and should have substantial
upside potential."
GAS GATHERING AND PROCESSING RESULTS
Third quarter 2006 gathering volumes for Unit's gas gathering and processing
operations were 276,888 MMBtu per day, a 73% increase from the third quarter
of 2005. The increase in volumes gathered per day is primarily attributable
to one system that gathered 153,883 MMBtu and 86,736 MMBtu per day during
the third quarter of 2006 and 2005, respectively. While gathering volumes
increased, total revenue decreased approximately 3% from the third quarter
of 2005 due to lower natural gas prices. Processing volumes for the first
nine months of 2006 were 27,226 MMBtd per day, a 17% decrease from the first
nine months of 2005. This decrease was due to changing pipeline deliveries,
between comparative periods, to an outlet that accepted unprocessed natural
gas. In August 2006, the construction of a natural gas processing plant was
completed that allowed Superior to resume processing this natural gas. Operating
profit (as defined below in the financial tables) for the third quarter was
$3.4 million or 55% higher than 2005's third quarter.
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
06 06 06 05 05 05 05
Gas
gathered
MMBtu/day 276,888 243,399 215,341 180,098 159,821 121,611 107,254
Gas
processed
MMBtu/day 35,124 22,812 23,616 24,391 36,061 31,670 30,336
Natural gas gathering volumes for the first nine months of 2006 were 245,435
MMBtu per day, an 89% increase from the first nine months of 2005, while
operating profit before depreciation for the nine month period was $9.1 million
for 2006 and $5.3 million for the comparative period of 2005, an increase
of 72%.
Unit's gas gathering and processing operations are conducted through Superior
Pipeline Company LLC and its subsidiaries, which operates three natural gas
treatment plants, owns seven processing plants, 37 active gathering systems
and 600 miles of pipeline.
Pinkston said: "Superior Pipeline closed its acquisition of Berkshire Energy
LLC, a private company, in September for $21.7 million. The assets of that
company are located in an established but highly active field in central
Oklahoma. It includes a natural gas processing plant, a natural gas gathering
system with 15 miles of pipeline, three field compressors and two plant compressors.
The plant's capacity is 15,000 Mcf per day and the through-put at the acquisition
date was approximately 6,500 Mcf per day. This acquisition will help us to
respond to the strong demand for natural gas and natural gas liquids."
FINANCIAL RESULTS
In addition to the results announced above, Unit ended the quarter with
working capital of $96.8 million, long-term debt of $145.1 million, and a
debt to capitalization ratio of 12%. As of September 30, 2006, Unit had $89.9
million of borrowing capacity based on the borrowing base associated with
its credit facility. In October, in conjunction with the Brighton Energy
LLC acquisition, Unit amended its credit facility, increasing the commitment
amount to $275 million from $235 million.
WEBCAST
Unit will webcast its third quarter earnings conference call live over the
Internet on November 2, 2006 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 drilling rig utilization and dayrates, the timing
of the completion of drilling rigs currently under construction, projected
additions and date of service to the company's drilling rig fleet, projected
growth of the company's oil and natural gas production, oil and gas reserve
information, anticipated production rates from company wells, anticipated
gas gathering and processing rates and throughput volumes, the prospective
capabilities of offset acreage, anticipated oil and natural gas prices, the
number of wells to be drilled by the company's exploration segment, 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 Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Statement of Income:
Revenues:
Contract drilling $182,461 $119,873 $519,799 $322,379
Oil and natural gas 91,238 83,979 267,518 202,819
Gas gathering
and processing 25,638 26,561 72,840 65,895
Other 557 635 2,894 1,402
Total revenues 299,894 231,048 863,051 592,495
Expenses:
Contract drilling:
Operating costs 78,595 67,161 238,021 194,890
Depreciation 13,403 11,019 38,089 31,010
Oil and natural gas:
Operating costs 21,560 15,913 58,854 40,916
Depreciation,
depletion
and amortization 27,557 16,355 76,780 45,632
Gas gathering
and processing:
Operating costs 22,216 24,395 63,734 60,616
Depreciation 1,637 902 4,019 2,267
General and
administrative 4,630 3,324 12,998 10,455
Interest 1,228 885 3,235 2,157
Total expenses 170,826 139,954 495,730 387,943
Income Before
Income Taxes 129,068 91,094 367,321 204,552
Income Tax Expense:
Current 26,442 19,628 89,741 41,185
Deferred 21,361 13,828 46,585 35,385
Total income taxes 47,803 33,456 136,326 76,570
Net Income $81,265 $57,638 $230,995 $127,982
Net Income per Common Share:
Basic $1.76 $1.25 $5.00 $2.79
Diluted $1.75 $1.25 $4.98 $2.78
Weighted Average Common
Shares Outstanding:
Basic 46,241 45,959 46,223 45,873
Diluted 46,444 46,229 46,429 46,108
September 30, December 31,
2006 2005
Balance Sheet Data:
Current assets $243,971 $223,685
Total assets $1,726,832 $1,456,195
Current liabilities $147,211 $172,512
Long-term debt $145,100 $145,000
Other long-term liabilities $53,710 $41,981
Deferred income taxes $306,250 $259,740
Shareholders' equity $1,074,561 $836,962
Nine Months Ended September 30,
2006 2005
Statement of Cash Flows Data:
Cash Flow From Operations before Changes
in Working Capital (A) $402,845 $245,534
Net Change in Working Capital (53,246) (55,682)
Net Cash Provided by Operating Activities $349,599 $189,852
Net Cash Used in Investing Activities $(347,508) $(222,012)
Net Cash Provided by (Used in)
Financing Activities $(2,432) $32,223
Three Months Ended Nine Months Ended
September 30, September 30,
2006 2005 2006 2005
Contract Drilling
Operations Data:
Rigs Utilized 110.6 102.6 109.8 100.7
Operating Margins (B) 57% 44% 54% 40%
Operating Profit Before
Depreciation (B) ($MM) $103.9 $52.7 $281.8 $127.5
Oil and Natural
Gas Operations Data:
Production:
Oil - MBbls 376 251 1,062 788
Natural Gas - MMcf 11,200 8,542 32,350 24,055
Average Prices:
Oil - MBbls $59.55 $54.60 $57.18 $48.16
Natural Gas - MMcf $6.02 $8.13 $6.28 $6.74
Operating Profit Before
DD&A (B) ($MM) $69.7 $68.1 $208.7 $161.9
Gas Gathering and Processing
Operations Data:
Gas Gathering
- MMBtu/day 276,888 159,821 245,435 129,754
Gas Processing
- MMBtu/day 35,124 36,061 27,226 32,709
Operating Profit Before
Depreciation (B) ($MM) $3.4 $2.2 $9.1 $5.3
(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 less operating expenses excluding depreciation,
depletion, amortization and impairment, general and administrative
and interest expense. Operating margins are calculated by dividing
operating profit by operating revenue.
