UNIT CORPORATION REPORTS 2006 FOURTH QUARTER & YEAR-END
RESULTS
With All-time Annual Records Set in Revenue, Operating Margins
and Production
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT)
announced today its financial and operational results for the fourth
quarter and year-end 2006. Net income for the three months ended December
31, 2006 was $81.2 million, or $1.75 per diluted share, on fourth quarter
revenues of $299.3 million, compared with net income of $84.5 million,
or $1.82 per diluted share, on revenues of $293.1 million for the fourth
quarter of 2005. Net cash provided by operating activities in the fourth
quarter was $157.1 million compared to $127.9 million reported during
the same time period in 2005. The quarter-over-quarter results were
primarily impacted by a 40% lower natural gas price received for Unit’s
record-setting fourth quarter 2006 production.
For the year ended 2006,
Unit posted a company-record $1,162.4 million total revenues, 31% higher
than the $885.6 million reported for 2005. Net income for 2006 was
$312.2 million, or $6.72 per diluted share, a significant increase
compared to 2005’s
year end net income of $212.4 million, or $4.60 per diluted share.
Net cash provided by operating activities for 2006 was $506.7 million
compared to $317.8 million recorded in 2005. Increased oil and natural
gas production and strong dayrates for Unit’s growing rig fleet,
partially offset by lower natural gas prices and higher operating costs,
all contributed to increases in Unit’s year-end 2006 results.
Larry
Pinkston, Unit Corporation’s Chief Executive Officer and
President said: “Despite
a downward shift in natural gas prices during the last half of the
year, we are pleased with our results and with the records we have
achieved in company revenues, contract drilling operating margins,
and oil and natural gas production. Based on current market conditions,
we believe that in 2007 Unit will set new operating marks in reserves
and production levels for our oil and natural gas operations, Superior
Pipeline, our midstream subsidiary, will gather record-levels of natural
gas and add to its 600-plus mile system, Unit Drilling will expand
its very active and very profitable rig fleet, and that Unit should
report for the 24th consecutive year our replacing more than 150% of
its annual production. I believe our commitment to excellence and consistent
carrying out of our growth strategies will continue to provide good
returns for our shareholders.”
CONTRACT
DRILLING RESULTS
Contract drilling rig rates for the fourth quarter
averaged a record $19,767 per day, up 33% from the comparable quarter
of 2005. Operating margins for the quarter reached an all-time record
averaging $11,149 per day (before elimination of intercompany drilling
rig profit of $5.7 million) as compared to $7,283 per day (before elimination
of intercompany drilling rig profit of $3.0 million) for 2005, an increase
of 53%. Contract drilling revenues increased 29% between the comparative
fourth quarters to $179.6 million, primarily due to increases in dayrates.
Average drilling rig utilization was 106.7 drilling rigs in the fourth
quarter of 2006, which was relatively flat from 2005’s fourth
quarter rate of 106.2 drilling rigs. Currently, Unit has 117 operational
drilling rigs of which 104 are under contract.
The following table illustrates Unit’s rig count at the end
of each quarterly period and utilization for each quarterly period:
4th 3rd 2nd 1st 4th 3rd 2nd 1st 4th
Qtr 06 Qtr 06 Qtr 06 Qtr 06 Qtr 05 Qtr 05 Qtr 05 Qtr 05 Qtr 04
Rigs 117 116 115 111 112 111 103 102 100
Utilization 92% 96% 97% 98% 96% 98% 98% 98% 95%
Year-over-year contract drilling revenues increased
51% to a record $699.4 million with rig utilization increasing to an
average of 109.0 drilling rigs operating during 2006 compared to an average
102.1 drilling rigs operating during 2005. Commenting on Unit Drilling,
Pinkston said: “During
the year, we added six drilling rigs to our fleet, which were all dieselelectric
drilling rigs with horsepower ratings from 750 to 1,500. We have been
able to keep this classification of rig at a high utilization rate meeting
our customers’ need to grow and maintain their production levels.
Current natural gas prices are higher than we saw during the last six
months of 2006, and we believe, based on our customers’ continued
requests for our rigs and market data, that the drop in demand experienced
in the fourth quarter should be short-lived. We’re adding a 118th
rig to our fleet in the first quarter of 2007, which will go directly
to work at a dayrate of approximately $23,000 and we currently plan to
add an additional three rigs during 2007. We will continue to review
opportunities and our customers’ needs to determine any additional
change to our drilling rig fleet during 2007.”
EXPLORATION AND PRODUCTION RESULTS
Fourth quarter production for Unit’s
oil and natural gas operations was a company-record 392,000 barrels of
oil and a company-record 11.8 billion cubic feet (Bcf) of natural gas,
a 20% Mcfe increase from the fourth quarter of 2005. Exiting the quarter,
Unit was producing 152.1 MMcfe per day. Revenues for the fourth quarter
were $90.1 million, 22% lower than 2005’s fourth quarter. The decrease
in revenue resulted from an 11% decrease in the average price Unit received
for its oil, as well as a 40% decrease in the average price of natural
gas. Unit’s average natural gas price for the fourth quarter of
2006 was $5.86 per thousand cubic feet (Mcf) as compared to $9.79 per
Mcf for the fourth quarter of 2005. Unit’s average oil price for
the fourth quarter of 2006 was $49.50 per barrel compared to $55.41 per
barrel for the fourth quarter of 2005. The following table illustrates
the results of Unit’s consistent production growth and aggressive
internal drilling program:
4th 3rd 2nd 1st 4th 3rd 2nd 1st 4th
Qtr 06 Qtr 06 Qtr 06 Qtr 06 Qtr 05 Qtr 05 Qtr 05 Qtr 05 Qtr 04
Production,
Bcfe 14.2 13.5 12.6 12.7 11.8 10.0 9.4 9.3 9.0
Realized
price,
Mcfe $6.26 $6.68 $6.41 $7.36 $9.71 $8.28 $6.49 $6.00 $5.96
Wells
Drilled 66 75 62 41 57 52 57 26 58
Success
Rate 89% 88% 85% 88% 100% 90% 89% 92% 86%
During 2006, Unit participated in the drilling operations on 248 wells
which were started in 2006, of which 233 were completed. In addition, 11 wells
were completed in 2006 that were spud in 2005 for a total of 244 completed
wells. Of the 244 wells, 214 were completed as producing for a success rate
of 88% compared to the completion of 192 wells with a 92% success rate for
2005.
Oil and natural gas revenues were a record $357.6 million during 2006,
an increase of 12% over the same period in 2005. Natural gas production was
a record 44.2 Bcf during 2006, while oil production for the same period was
a record 1,453,000 barrels, or a combined natural gas equivalent of 52.9 Bcfe.
The 2006 figure represents a year-over-year equivalent Mcf increase of more
than 30%. The average natural gas price received decreased 19% to $6.17 per
Mcf compared to $7.64 per Mcf during 2005. The average oil price received was
$55.11 per barrel in 2006 compared to $50.14 per barrel in 2005, a 10% increase.
Operating costs in 2006 were $1.53 per Mcfe, nearly flat to 2005 while the
2006 depreciation, depletion and amortization rate was up 24% to $2.04. Unit’s
all-sources finding and development (F&D) cost in 2006 was $2.95 per Mcfe.
Excluding the negative revision of 11.2 Bcfe primarily due to the 35% decrease
in natural gas prices used to calculate Unit’s year-end 2006 reserves,
the company would have posted an F&D per Mcfe figure of $2.69. In 2006
Unit replaced 221% of its production. Over the last 23 years, Unit has replaced
its production at an average rate of 228%.
Pinkston said: “We recently
announced our record total proved reserves for December 31, 2006 of 475.9 Bcfe
of natural gas. Had it not been for revisions to our reserves due to lower
natural gas prices, Unit would have seen its reserve base climb more than 18%.
Instead, we enjoyed an increase of 15%. Accordingly, we achieved our goal of
replacing 150% of the year’s production with new reserves for the 23rd
consecutive year, an accomplishment of which we are very proud. We have more
than 1,060 drilling sites in
our inventory of proved, probable and possible locations. The probable
and possible locations have an estimated 465 Bcfe of net unrisked potential.
During the past 10 years, Unit has successfully completed more than 85%
of its wells, giving us a high degree of confidence that, subject to future
commodity price variations, we will be able to meet our growth expectations
for our E&P operations.”
MID-STREAM RESULTS
Fourth quarter
2006 gathering volumes for Unit’s mid-stream operations were 253,776
MMBtu per day, a 41% increase from the fourth quarter of 2005. The increase
in volumes gathered per day is primarily attributable to one system that
gathered 139,073 MMBtu and 97,867 MMBtu per day during the fourth quarter
of 2006 and 2005, respectively. While gathering volumes increased, total
revenue decreased 16% from the fourth quarter of 2005 due to lower natural
gas prices. Processing volumes for the fourth quarter of 2006 were 45,504
MMBtu per day, an 87% increase from the fourth quarter of 2005. Operating
profit (as defined below in the financial tables) for the fourth quarter
was $3.9 million or 44% higher than 2005’s fourth quarter.
The following table illustrates the results of the mid-stream operations over
the last two years:
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr 06 Qtr 06 Qtr 06 Qtr 06 Qtr 05 Qtr 05 Qtr 05 Qtr 05
Gas
gathered
MMBtu/
day 253,776 276,888 243,399 215,341 180,098 159,821 121,611 107,254
Gas
processed
MMBtu/
day 45,504 35,124 22,812 23,616 24,391 36,061 31,670 30,336
Natural gas gathering volumes for 2006 were 247,537 MMBtu per day, a 74% increase
over 2005, while operating profit before depreciation for 2006 was $13.0 million
and $8.0 million for 2005, an increase of 63%.
Unit’s mid-stream operations
are conducted through Superior Pipeline Company LLC and its subsidiaries, which
operate three natural gas treatment plants, owns six processing plants, 37
active gathering systems and 600 miles of pipeline.
Pinkston said: “Superior
is continuing to establish a significant operation in the Arkoma and Mid-Continent
basins, two of America’s important regional plays for meeting the growing
need for natural gas. We are actively reviewing opportunities to grow this
side of our operations and look forward to telling this growth story.”
FINANCIAL
RESULTS
In addition to the results announced above, Unit ended the year with
working capital of $72.0 million, long-term debt of $174.3 million, and a debt
to capitalization ratio of 13%. As of December 31, 2006, Unit had $100.7 million
of borrowing capacity based on the borrowing base associated with its current
credit facility.
WEBCAST
Unit will webcast its fourth quarter and year-end
earnings conference call live over the Internet on February 22, 2007 at 11:30
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 Company’s 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, our ability to meet our consecutive quarterly
positive net income goals, oil and gas reserve information, as well as our
ability to meet our 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 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 Year Ended
December 31, December 31,
2006 2005 2006 2005
Statement of Income:
Revenues:
Contract drilling $179,597 $139,762 $699,396 $462,141
Oil and natural
gas 90,081 115,389 357,599 318,208
Gas gathering and
processing 29,023 34,569 101,863 100,464
Other 633 3,393 3,527 4,795
Total revenues 299,334 293,113 1,162,385 885,608
Expenses:
Contract drilling:
Operating costs 75,861 71,582 313,882 266,472
Depreciation 13,870 11,866 51,959 42,876
Oil and natural gas:
Operating costs 22,266 19,863 81,120 60,779
Depreciation,
depletion
and amortization 31,344 21,650 108,124 67,282
Gas gathering and
processing:
Operating costs 25,100 31,851 88,834 92,467
Depreciation and
amortization 2,228 1,012 6,247 3,279
General and
administrative 5,692 3,888 18,690 14,343
Interest 2,038 1,280 5,273 3,437
Total expenses 178,399 162,992 674,129 550,935
Income Before
Income Taxes 120,935 130,121 488,256 334,673
Income Tax Expense:
Current 23,071 23,380 112,812 64,565
Deferred 16,682 22,281 63,267 57,666
Total income
taxes 39,753 45,661 176,079 122,231
Net Income $81,182 $84,460 $312,177 $212,442
Net Income per
Common Share:
Basic $1.76 $1.83 $6.75 $4.62
Diluted $1.75 $1.82 $6.72 $4.60
Weighted Average Common
Shares Outstanding:
Basic 46,243 46,140 46,228 45,940
Diluted 46,462 46,443 46,451 46,189
December 31, December 31,
2006 2005
Balance Sheet Data:
Current assets $232,940 $223,685
Total assets $1,874,096 $1,456,195
Current liabilities $160,942 $172,512
Long-term debt $174,300 $145,000
Other long-term liabilities $55,741 $41,981
Deferred income taxes $325,077 $259,740
Shareholders' equity $1,158,036 $836,962
Year Ended December 31,
2006 2005
Statement of Cash Flows Data:
Cash Flow From Operations
before Changes
in Working Capital(1) $549,542 $386,188
Net Change in Working Capital (42,840) (68,417)
Net Cash Provided by
Operating Activities $506,702 $317,771
Net Cash Used in Investing
Activities $(540,723) $(384,996)
Net Cash Provided by
Financing Activities $33,663 $67,507
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Contract Drilling
Operations Data:
Rigs Utilized 106.7 106.2 109.0 102.1
Operating Margins(2) 58% 49% 55% 42%
Operating Profit
Before
Depreciation(2)($MM) $103.7 $68.2 $385.5 $195.7
Oil and Natural Gas
Operations Data:
Production:
Oil - MBbls 392 296 1,453 1,084
Natural Gas - MMcf 11,820 10,003 44,169 34,058
Average Prices:
Oil - MBbls $49.50 $55.41 $55.11 $50.14
Natural Gas - MMcf $5.86 $9.79 $6.17 $7.64
Operating Profit Before
DD&A (2)($MM) $67.8 $95.5 $276.5 $257.4
Gas Gathering and Processing
Operations Data:
Gas Gathering -
MMBtu/day 253,776 180,098 247,537 142,444
Gas Processing -
MMBtu/day 45,504 24,391 31,833 30,613
Operating Profit
Before Depreciation
and
Amortization(2)($MM) $3.9 $2.7 $13.0 $8.0
(1) 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.
(2) 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.
Source: Unit Corporation
