UNIT CORPORATION REPORTS 2007 THIRD QUARTER RESULTS
TULSA, Okla., Nov. 1 /PRNewswire-FirstCall/ -- Unit Corporation (NYSE: UNT - News) today announced net income of $64.1 million, or $1.37 per diluted share, for the three months ended September 30, 2007, compared to net income of $65.6 million, or $1.41 per diluted share for the three months ended June 30, 2007 and net income of $81.3 million, or $1.75 per diluted share, for the three months ended September 30, 2006. Total revenues for the third quarter were $286.3 million (55% contract drilling, 33% oil and natural gas, and 11% gathering and processing), compared to total revenues for the third quarter of 2006 of $299.9 million (61% contract drilling, 30% oil and natural gas, and 9% gathering and processing).
For the first nine months of 2007, Unit had net income of $194.1 million, or $4.16 per diluted share, compared to year-ago 2006 net income of $231.0 million, or $4.98 per diluted share. Through September, Unit's total revenue was $850.2 million (55% contract drilling, 33% oil and natural gas, and 12% gathering and processing), compared to $863.1 million (60% contract drilling, 31% oil and natural gas, and 8% gathering and processing) for the same period in 2006.
"Taking into account all that we've experienced during this year -- weather-related delays, a refinery fire, lower natural gas prices -- I'm encouraged by several significant achievements," said Larry Pinkston, President and Chief Executive Officer. "Quarterly and year-to-date total oil and natural gas revenues were up primarily due to increased production volumes. Year-to-date rig utilization was 81% and average dayrates for the 2007 third quarter are down only 7% from the fourth quarter 2006 historical high. And, our mid-stream segment continues to enhance liquid recoveries through several recent upgrades to its processing facilities."
CONTRACT DRILLING RESULTS
-- Currently, 109 of 129 rigs are contracted, 84% of drilling rig fleet
-- 77% of drilling rigs currently under contract are with public companies
and major private independents
Contract drilling rig rates for the 2007 third quarter averaged $18,470 per day, a 1% decrease from the second quarter of 2007 and a decrease of 6% from the third quarter of 2006. Average operating margins for the third quarter 2007 were $9,465 per day (before elimination of intercompany drilling rig profit of $5.8 million) compared to $9,544 per day (before elimination of intercompany drilling rig profit of $5.4 million) for the second quarter 2007 and $10,994 per day (before elimination of intercompany drilling rig profit of $8.0 million) for the third quarter of 2006.
For the first nine months of 2007, drilling rig utilization was 81% as compared to 97% during the first nine months of 2006. Average operating margins for the first nine months of 2007 were $9,717 (before elimination of intercompany drilling rig profit of $15.7 million) as compared to $9,950 per day (before elimination of intercompany drilling rig profit of $16.6 million) for the same period in 2006.
The following table illustrates Unit's drilling rig count at the end of each period and its average utilization rate during the period:
3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
07 07 07 06 06 06 06 05 05
Rigs 128 128 118 117 116 115 111 112 111
Utilization 78% 81% 83% 92% 96% 97% 98% 96% 98%
"In October, we added our 129th drilling rig to our fleet. The drilling rig is a 1,500 horsepower, SCR drilling rig which was customized to a customer's specifications and is deployed in the Rockies," Pinkston said.
EXPLORATION AND PRODUCTION RESULTS
-- Completed 51 gross wells during the quarter with an 88% success rate,
for a total of 172 gross wells drilled to date out of 270 planned for
2007
-- Increased daily production over second quarter 2007 and over the third
quarter of 2006
Third quarter production for Unit's oil and natural gas operations was 470,000 barrels of oil and 11.2 billion cubic feet (Bcf) of natural gas, or 14.0 billion cubic feet equivalent (Bcfe), representing sequential growth of 6% over the previous quarter and an increase of 4% over the third quarter of 2006. Total production for the first nine months of 2007 was 40.1 Bcfe, compared to 38.7 Bcfe produced in the first nine months of 2006.
Unit's average natural gas price for the third quarter of 2007 was $5.77 per thousand cubic feet (Mcf), compared to $6.02 per Mcf for the third quarter of 2006. Unit's average oil price for the third quarter of 2007 was $62.01 per barrel compared to $59.55 per barrel for the third quarter of 2006. For the first nine months of 2007, the natural gas price received by Unit averaged $6.30 per Mcf, compared to $6.28 per Mcf during the first nine months of 2006. Unit's average oil price for the first nine months of 2007 was $54.90 per barrel compared to $57.18 per barrel during the first nine months of 2006.
The following table illustrates Unit's production and certain results for the periods indicated:
3rd 2nd 1st 4th 3rd 2nd 1st 4th 3rd
Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr
07 07 07 06 06 06 06 05 05
Production,
Bcfe 14.0 13.2 12.8 14.2 13.5 12.6 12.7 11.8 10.0
Realized
Price, Mcfe $6.69 $7.19 $6.63 $6.26 $6.68 $6.41 $7.36 $9.71 $8.28
Wells
Drilled 51 67 54 66 75 62 41 57 52
Success
Rate 88% 82% 87% 89% 88% 85% 88% 100% 90%
During the third quarter of 2007, Unit began drilling operations on 62 wells of which 33 were still in progress at the end of the quarter. For 2007, Unit's production expectation is 55.0 Bcfe to 55.5 Bcfe an increase of 4% to 5% from 2006 production.
MID-STREAM RESULTS
-- 14% gross margin for the quarter
-- Operating profits (not including depreciation) of $4.5 million in the
third quarter, a 3% increase over the second quarter of 2007 and a
32% increase over the third quarter of 2006
Third quarter of 2007 processing volumes of 55,721 MMBtu per day and liquids sold volumes of 137,098 gallons per day increased 59% and 91%, respectively, from the third quarter of 2006. Third quarter 2007 gathering volumes were 221,508 MMBtu per day, a 20% decrease from the third quarter of 2006. Operating profit (as defined in the Selected Financial and Operational Highlights) for the third quarter was $4.5 million or 32% higher than 2006's third quarter, driven primarily by the increase in liquids sold. Liquid recoveries at several of Unit's processing facilities have improved as the result of upgrades to the facilities.
For the first nine months of 2007, processing volumes of 47,432 MMBtu per day and liquids sold volumes of 115,781 gallons per day increased 74% and 100%, respectively, from the first nine months of 2006. Gathering volumes for the first nine months of 2007 were 221,943 MMBtu per day, a 10% decrease from the first nine months of 2006. Revenues for the first nine months of 2007 increased 36% to $99.3 million compared to the first nine months of 2006.
The following table illustrates certain results from Unit's mid-stream operations at the end of each period:
3rd 2nd 1st 4th 3rd 2nd
Qtr Qtr Qtr Qtr Qtr Qtr
07 07 07 06 06 06
Gas
gathered
MMBtu/day 221,508 218,290 226,081 253,776 276,888 243,399
Gas
processed
MMBtu/day 55,721 42,645 43,327 44,781 35,124 31,000
Liquids
sold
Gallons/day 137,098 113,829 95,964 93,792 71,790 50,169
1st 4th 3rd
Qtr Qtr Qtr
06 05 05
Gas
gathered
MMBtu/day 215,348 180,091 159,821
Gas
processed
MMBtu/day 30,668 24,391 36,061
Liquids
sold
Gallons/day 51,337 53,269 54,609
Unit's mid-stream segment operates four natural gas treatment plants, owns seven processing plants, 36 active gathering systems and 651 miles of pipeline.
STRONG BALANCE SHEET AND RESOURCES TO FUND CAPITAL PLAN
-- Ended the quarter with $48.2 million of working capital and another
$246.4 million of borrowing capacity under Unit's credit agreement
-- Reduced debt at June 30, 2007 to September 30, 2007 by $56.2 million,
bringing debt to capitalization to 10%, as of September 30, 2007
MANAGEMENT COMMENT
Larry Pinkston said: "We are pleased with the outcome of our 2007 third quarter results despite the industry impact of high levels of natural gas storage and the softening of the drilling rig market. Our oil and natural gas segment is on track to meet its annual stated goal of replacing at least 150% of production with new reserves, and our contract drilling segment is performing well in this difficult market. Our mid-stream segment is doing an excellent job of enhancing liquids recoveries at its processing facilities."
WEBCAST
Unit will webcast its third quarter earnings conference call live over the Internet on November 1, 2007 at 10:00 Central Time (11:00 Eastern). 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 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 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 Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Statement of Income:
Revenues:
Contract drilling $ 157,769 $ 182,461 $ 472,403 $ 519,799
Oil and natural gas 95,231 91,238 277,680 267,518
Gas gathering and
processing 32,784 25,638 99,321 72,840
Other 551 557 842 2,894
Total revenues 286,335 299,894 850,246 863,051
Expenses:
Contract drilling:
Operating costs 77,951 78,595 228,967 238,021
Depreciation 14,793 13,403 41,192 38,089
Oil and natural gas:
Operating costs 23,101 21,560 69,701 58,854
Depreciation,
depletion and
amortization 32,297 27,557 92,367 76,780
Gas gathering and
processing:
Operating costs 28,275 22,216 87,171 63,734
Depreciation
and amortization 2,858 1,637 7,752 4,019
General and
administrative 5,355 4,630 15,784 12,998
Interest 1,797 1,228 5,167 3,235
Total expenses 186,427 170,826 548,101 495,730
Income Before Income
Taxes 99,908 129,068 302,145 367,321
Income Tax Expense:
Current 11,152 26,442 53,498 89,741
Deferred 24,695 21,361 54,538 46,585
Total income taxes 35,847 47,803 108,036 136,326
Net Income $ 64,061 $ 81,265 $ 194,109 $ 230,995
Net Income per Common
Share:
Basic $ 1.38 $ 1.76 $ 4.19 $ 5.00
Diluted $ 1.37 $ 1.75 $ 4.16 $ 4.98
Weighted Average
Common
Shares Outstanding:
Basic 46,382 46,241 46,361 46,223
Diluted 46,631 46,444 46,620 46,429
September 30, December 31,
2007 2006
Balance Sheet Data:
Current assets $ 199,584 $ 232,940
Total assets $ 2,113,461 $ 1,874,096
Current liabilities $ 151,425 $ 160,942
Long-term debt $ 153,600 $ 174,300
Other long-term liabilities $ 52,135 $ 55,741
Deferred income taxes $ 397,690 $ 325,077
Shareholders' equity $ 1,358,611 $ 1,158,036
Nine Months Ended September 30,
2007 2006
Statement of Cash Flows Data:
Cash Flow From Operations
before Changes
in Working Capital (1) $ 394,407 $ 402,845
Net Change in Working
Capital (5,028) (53,246)
Net Cash Provided by
Operating Activities $ 389,379 $ 349,599
Net Cash Used in Investing
Activities $ (379,546) $ (347,508)
Net Cash Used in Financing
Activities $ (9,569) $ (2,432)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Contract Drilling Operations
Data:
Rigs Utilized 100.3 110.6 98.4 109.8
Operating Margins (2) 51% 57% 52% 54%
Operating Profit Before
Depreciation (2) ($MM) $ 79.8 $ 103.9 $ 243.4 $ 281.8
Oil and Natural Gas
Operations Data:
Production:
Oil -- MBbls 470 376 1,260 1,062
Natural Gas -- MMcf 11,206 11,200 32,507 32,350
Average Prices:
Oil -- MBbls $ 62.01 $ 59.55 $ 54.90 $ 57.18
Natural Gas -- MMcf $ 5.77 $ 6.02 $ 6.30 $ 6.28
Operating Profit Before
DD&A (2) ($MM) $ 72.1 $ 69.7 $ 208.0 $ 208.7
Gas Gathering and Processing
Operations Data:
Gas Gathering --
MMBtu/day 221,508 276,888 221,943 245,435
Gas Processing --
MMBtu/day 55,721 35,124 47,432 27,226
Liquids Sold --
Gallons/day 137,098 71,790 115,781 57,840
Operating Profit Before
Depreciation (2) ($MM) $ 4.5 $ 3.4 $ 12.2 $ 9.1
(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.
