UNIT CORPORATION REPORTS 2007 SECOND QUARTER RESULTS;
PRODUCTION GROWTH RESTORED; COMPANY ON TARGET WITH 2007 DRILLING PROGRAM WITH 67 NEW WELLS; RIG UTILIZATION AND PROFIT MARGINS REMAIN STRONG AND RIG FLEET EXPANDS
TULSA, Okla., Aug. 2 /PRNewswire-FirstCall/ -- Unit Corporation (NYSE: UNT - News) announced today its financial and operational results for the three and six months ended June 30, 2007. Total revenues for the second quarter were $286.6 million (54% contract drilling, 34% oil and natural gas, and 12% gathering and processing) compared to total revenues of $280.3 million (63% contract drilling, 29% oil and natural gas, and 8% gathering and processing). Net income for the second quarter of 2007 was $65.6 million, or $1.41 per diluted share. Second quarter 2006 net income was $74.8 million, or $1.61 per diluted share.
During the first half of 2007, Unit's total revenue was $563.9 million (56% contract drilling, 32% oil and natural gas, and 12% gathering and processing), up from $563.2 million (60% contract drilling, 31% oil and natural gas, and 9% gathering and processing) posted during the same period in 2006. Net income was $130.0 million, a decrease of 13% compared to year-ago 2006 net income of $149.7 million.
"We believe the production constraints experienced by our oil and natural gas segment during the first six months of the year have been addressed," said Larry D. Pinkston, President and Chief Executive Officer. "At the end of the second quarter our average daily rate of production was 154.3 million cubic feet equivalent (MMcfe), a rate that is 8% and 6% higher than the average daily rate for the first and second quarter of 2007, respectively. For the first six months, we successfully drilled and completed 121 wells with an 84% success rate. I'm pleased how our employees positively responded to the challenges presented by a number of factors beyond our control. Our drilling pace is quickening; we anticipate this segment will drill approximately 150 more wells over the last half of 2007, setting a new operating milestone."
Pinkston said: "In our drilling segment, profit margins and utilization remained strong and within our expectations. Our average dayrate for the second quarter of 2007, when compared to our fourth quarter of 2006 average dayrate which was our historical high, only realized a 5% decrease."
CONTRACT DRILLING RESULTS
* Closed acquisition of nine new rigs and other equipment from a private
company in June.
* Rig utilization and profit margins are strong.
* 107 drilling rigs currently under contract (84% of drilling rig
fleet).
* 74% of drilling rigs currently under contract are with public
companies and major private independents.
Second quarter 2007 drilling utilization of 81% was a slight decrease of 2% from the previous quarter and a 16% decrease from the second quarter of 2006. Contract drilling rig rates for the second quarter averaged $18,710 per day, an increase of 1% from the second quarter of 2006 and a decrease of 4% from the first quarter of 2007. Average operating margins for the second quarter were $9,544 per day (before elimination of intercompany drilling rig profit of $5.4 million) as compared to $10,182 per day during the second quarter of 2006 (before elimination of intercompany drilling rig profit of $5.4 million), a decrease of 6%.
For the first six months of 2007, utilization decreased 16% to 82% as compared to 98% during the first six months of 2006. Average operating margins for the first six months of 2007 were $9,849 per day (before elimination of intercompany drilling rig profit of $9.9 million) as compared to $9,414 per day (before elimination of intercompany drilling rig profit of $8.6 million for the same period in 2006), an increase of 5%.
Currently, Unit has 128 drilling rigs of which 107 are under contract. The following table illustrates Unit's drilling rig count at the end of each period and its average utilization rate during the period:
2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
07 07 06 06 06 06 05 05 05
Rigs 128 118 117 116 115 111 112 111 103
Utilization 81% 83% 92% 96% 97% 98% 96% 98% 98%
The decline in drilling rig utilization was primarily due to rigs mobilizing to new drilling locations and drilling activity not fully rebounding to last year's record pace as a result of weakened commodity prices that began in mid-2006. Of the nine drilling rigs acquired in the second quarter of 2007, five are currently drilling under contract. One of the drilling rigs is being refurbished and is expected to be ready for work in the third quarter.
EXPLORATION AND PRODUCTION RESULTS
* Completed 67 gross wells (121 total year to date out of 270 planned
for 2007) at an 82% success rate.
* Restored production previously constrained by a fire at the Valero
refinery, pipeline and compression restrictions as well as inclement
weather.
* Exited second quarter with a daily average production rate of
154.3 MMcfe.
* Increased production over second quarter 2006 and sequentially over
the first quarter of 2007.
Second quarter production for Unit's oil and natural gas operations was 433,000 barrels of oil and 10.6 billion cubic feet (Bcf) of natural gas, or 13.2 billion cubic feet equivalent (Bcfe), representing sequential growth of 3% over the previous quarter and an increase of 5% over the second quarter of 2006. Revenues for the second quarter were $96.3 million, or 18% higher than 2006's second quarter. During the second quarter of 2007, oil production, including liquids, composed 20% of total production compared to 17% in the second quarter of 2006. Total production for the first six months of 2007 was 26.0 Bcfe, an increase of 3% over the 25.3 Bcfe produced in the first six months of 2006.
Unit's average natural gas price for the second quarter of 2007 increased 18% to $6.78 per thousand cubic feet (Mcf) as compared to $5.76 per Mcf for the second quarter of 2006. Unit's average oil price for the second quarter of 2007 was $53.18 per barrel compared to $57.11 per barrel for the second quarter of 2006, a 7% decrease. For the first six months of 2007, Unit's natural gas prices increased 3% to $6.58 per Mcf as compared to $6.41 per Mcf during the first six months of 2006. Unit's average oil price for the first six months of 2007 was $50.66 per barrel compared to $55.88 per barrel during the first six months of 2006, a 9% decrease.
The following table illustrates Unit's production and certain results for the periods indicated:
2nd 1st 4th 3rd 2nd 1st 4th 3rd 2nd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
07 07 06 06 06 06 05 05 05
Production,
Bcfe 13.2 12.8 14.2 13.5 12.6 12.7 11.8 10.0 9.4
Realized
Price,
Mcfe $7.19 $6.63 $6.26 $6.68 $6.41 $7.36 $9.71 $8.28 $6.49
Wells
Drilled 67 54 66 75 62 41 57 52 57
Success
Rate 82% 87% 89% 88% 85% 88% 100% 90% 89%
During the second quarter of 2007, Unit began drilling operations on 69 wells of which 22 were still in progress at the end of the quarter. Sixty- seven wells were completed for a success rate of 82%.
Unit's 2007 production expectation of 56 to 58 Bcfe remains unchanged from previous guidance and is an increase of 6% to 10% from 2006 production.
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
07 07 06 06 06 06
Gas gathered
MMBtu/day 218,290 226,081 253,776 276,888 243,399 215,341
Gas processed
MMBtu/day 42,645 43,327 44,781 35,124 31,000 30,668
Liquids sold
Gallons/day 113,829 95,964 93,792 71,790 50,169 51,337
4th Qtr 05 3rd Qtr 05 2nd Qtr 05
Gas gathered
MMBtu/day 180,098 159,821 121,611
Gas processed
MMBtu/day 24,391 36,061 31,670
Liquids sold
Gallons/day 53,269 54,609 71,693
Second quarter of 2007 processing volumes of 42,465 MMBtu per day and liquids sold volumes of 113,829 gallons per day increased 38% and 127%, respectively, from the second quarter of 2006. Second quarter 2007 gathering volumes were 218,290 MMBtu per day, a 10% decrease from the second quarter of 2006. Operating profit (as defined below in the financial tables) for the second quarter was $4.4 million or 46% higher than 2006's second quarter, driven primarily by the increase in liquids sold. Liquid recoveries at several of Unit's processing facilities have improved as the result of recent upgrades to the facilities.
For the first six months of 2007, processing volumes of 42,984 MMBtu per day and liquids sold volumes of 104,946 gallons per day increased 39% and 107%, respectively, from the first six months of 2006. Gathering volumes for the first six months of 2007 were 222,164 MMBtu per day, a 3% decrease from the first six months of 2006.
The following table illustrates certain results from Unit's mid-stream operations at the end of each period:
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
07 07 06 06 06 06
Gas gathered
MMBtu/day 218,290 226,081 253,776 276,888 243,399 215,341
Gas processed
MMBtu/day 42,645 43,327 44,781 35,124 31,000 30,668
Liquids sold
Gallons/day 113,829 95,964 93,792 71,790 50,169 51,337
4th Qtr 05 3rd Qtr 05 2nd Qtr 05
Gas gathered
MMBtu/day 180,098 159,821 121,611
Gas processed
MMBtu/day 24,391 36,061 31,670
Liquids sold
Gallons/day 53,269 54,609 71,693
Unit's mid-stream segment operates four natural gas treatment plants, owns seven processing plants, 37 active gathering systems and 641 miles of pipeline.
STRONG BALANCE SHEET AND RESOURCES TO FUND CAPITAL PLAN
* Debt to capitalization of 14%, as of June 30, 2007.
* Ample cash flow and credit availability to fund capital expenditures
for drilling an estimated 270 new gross wells for the year, placing
two new drilling rigs into service and growing capacity of mid-stream
business.
Unit ended the quarter with working capital of $87.3 million, long-term debt of $209.8 million and a debt-to-capitalization ratio of 14%. During the second quarter, Unit entered into a $400.0 million Amended and Restated Senior Credit Agreement. At June 30, 2007, Unit had $190.2 million of borrowing capacity under the credit agreement. Unit has adequate cash flow and credit to fully fund its capital plan.
MANAGEMENT COMMENT
Larry Pinkston, President and Chief Executive Officer, said: "We are pleased with the outcome of our 2007 second quarter results. Our oil and natural gas segment has overcome the issues leading to its production constraints in time to focus on what we believe will be an active latter half of the year. Our contract drilling segment has quickly assimilated its newly acquired Texas Panhandle drilling rigs and equipment into its existing fleet and we're pleased with the efficiency of these new operations. And, our mid- stream segment performed well, particularly with the impact of the increase in liquids sold."
WEBCAST
Unit will webcast its second quarter earnings conference call live over the Internet on August 2, 2007 at 11:00 Central Time (noon 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 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. 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Statement of Income:
Revenues:
Contract drilling $ 154,349 $ 175,908 $ 314,634 $ 337,338
Oil and natural gas 96,343 81,954 182,449 176,280
Gas gathering and
processing 35,769 21,720 66,537 47,202
Other 179 767 291 2,337
Total revenues 286,640 280,349 563,911 563,157
Expenses:
Contract drilling:
Operating costs 74,729 79,117 151,016 159,426
Depreciation 13,682 12,845 26,399 24,686
Oil and natural gas:
Operating costs 24,461 18,988 46,600 37,294
Depreciation,
depletion and
amortization 30,723 25,041 60,070 49,223
Gas gathering and
processing:
Operating costs 31,395 18,717 58,896 41,518
Depreciation and
amortization 2,555 1,232 4,894 2,382
General and
administrative 5,247 4,402 10,429 8,368
Interest 1,729 1,017 3,370 2,007
Total expenses 184,521 161,359 361,674 324,904
Income Before Income
Taxes 102,119 118,990 202,237 238,253
Income Tax Expense:
Current 19,649 33,141 42,346 63,299
Deferred 16,904 11,032 29,843 25,224
Total income taxes 36,553 44,173 72,189 88,523
Net Income $ 65,566 $ 74,817 $ 130,048 $ 149,730
Net Income per Common
Share:
Basic $ 1.41 $ 1.62 $ 2.81 $ 3.24
Diluted $ 1.41 $ 1.61 $ 2.79 $ 3.23
Weighted Average
Common Shares
Outstanding:
Basic 46,371 46,228 46,350 46,214
Diluted 46,603 46,443 46,573 46,418
June 30, December 31,
2007 2006
Balance Sheet Data:
Current assets $ 237,381 $ 232,940
Total assets $ 2,081,596 $ 1,874,096
Current liabilities $ 150,070 $ 160,942
Long-term debt $ 209,800 $ 174,300
Other long-term liabilities $ 55,428 $ 55,741
Deferred income taxes $ 373,258 $ 325,077
Shareholders' equity $ 1,293,040 $ 1,158,036
Six Months Ended June 30,
2007 2006
Statement of Cash Flows Data:
Cash Flow From Operations
before Changes
in Working Capital (1) $ 256,778 $ 255,160
Net Change in Working Capital (37,426) (31,675)
Net Cash Provided by
Operating Activities $ 219,352 $ 223,485
Net Cash Used in Investing
Activities $ (258,753) $ (210,407)
Net Cash Provided by (Used in)
Financing Activities $ 39,390 $ (13,224)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Contract Drilling Operations
Data:
Rigs Utilized 97.9 110.3 97.4 109.5
Operating Margins (2) 52% 55% 52% 53%
Operating Profit Before
Depreciation (2) ($MM) $ 79.6 $ 96.8 $ 163.6 $ 177.9
Oil and Natural Gas
Operations
Data:
Production:
Oil - MBbls 433 359 789 685
Natural Gas - MMcf 10,628 10,438 21,301 21,150
Average Prices:
Oil - MBbls $ 53.18 $ 57.11 $ 50.66 $ 55.88
Natural Gas - MMcf $ 6.78 $ 5.76 $ 6.58 $ 6.41
Operating Profit Before
DD&A (2) ($MM) $ 71.9 $ 63.0 $ 135.8 $ 139.0
Gas Gathering and Processing
Operations Data:
Gas Gathering - MMBtu/day 218,290 243,399 222,164 229,448
Gas Processing - MMBtu/day 42,645 31,000 42,984 30,835
Liquids Sold - Gallons/day 113,829 50,169 104,946 50,749
Operating Profit Before
Depreciation (2) ($MM) $ 4.4 $ 3.0 $ 7.6 $ 5.7
(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 by segment less operating expenses by segment
excluding depreciation, depletion, amortization and impairment,
general and administrative and interest expense. Operating margins
are calculated by dividing operating profit by segment revenue.
