news UNIT CORPORATION
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7130 South Lewis Avenue, Tulsa, Oklahoma 74136
Telephone 918 493-7700, Fax 918 493-7711
Contact: David T. Merrill
Chief Financial Officer
and Treasurer
(918) 493-7700
For Immediate Release...
October 27, 2004
UNIT CORPORATION REPORTS 2004 THIRD QUARTER
AND FIRST NINE MONTHS RESULTS
Third Quarter Net Income Increases 93%
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its
financial and operational results for the third quarter and first nine months of
2004. Consolidated net income for the third quarter was $24.6 million, or 54
cents per diluted share, on revenues of $143.4 million, compared to 2003's net
income of $12.8 million, or 29 cents per diluted share, on revenue of $77.8
million. Revenues increased 84% while net income increased 93% between the
comparative quarters. The dramatic improvement in net income was due to
significant increases in oil and natural gas production and prices, an increased
number of contract drilling rigs being utilized, increased dayrates, and a $3.8
million pre-tax gain on the sale of the Company's investment in a natural gas
marketing limited partnership. In June 2003, Unit purchased a 16.7% interest in
this limited partnership and in August 2004 sold its interest for $6.2 million.
The investment was carried at cost and therefore the sale of this investment has
no impact on the ongoing operations of Unit.
For the nine-month period, the Company reported consolidated net income of
$60.3 million, or $1.31 per diluted share, on revenues of $359.0 million,
compared to 2003's net income of $38.4 million, or 88 cents per diluted share,
on revenues of $218.8 million. The increases were due to an improvement in oil
and natural gas production and prices, rig utilization and dayrates, the
acquisition of the 60% of Superior Pipeline Company L.L.C. that Unit did not
already own, and a gain on the sale of the Company's investment in the natural
gas marketing limited partnership.
UNIT DRILLING RESULTS
Contract drilling revenues increased 62% between the comparative third
quarters to $80.9 million due to increases in both dayrates and the number of
rigs utilized. The average rig utilization was 92.0 rigs in the third quarter of
2004, up 35% from 2003's third quarter. Currently, Unit has 98 of its 100 rigs
operating under contract. Daywork rates for the third quarter averaged $9,103
per day, which was 14% above the comparable quarter of 2003. Contract drilling
operating margins (per drilling rig) averaged $2,727 per day during the third
quarter of 2004, compared to $2,294 for the same period in 2003. Unit is in the
process of constructing its 101st rig, a 1,000 horsepower drilling rig, which is
expected to be placed into service the first of December.
On August 2, 2004, Unit announced the completion of the acquisition of
Sauer Drilling Company. The acquisition included 9 drilling rigs, a fleet of
trucks, and an equipment and repair yard with associated inventory, located in
Casper, Wyoming. Currently, 8 of the 9 rigs are operating under contract in
Unit's Rocky Mountain division.
Between the comparative first nine months, contract drilling revenues
increased 63% to $211.2 million with rig utilization increasing to an average of
85.8 rigs operating during the first nine months of 2004 as compared to an
average 60.6 rigs operating in the first nine months of 2003. Contract drilling
operating margins (per drilling rig) averaged $2,487 per day during the first
nine months of 2004, compared to $1,977 for the same period in 2003.
UNIT PETROLEUM RESULTS
Revenues from Unit's oil and natural gas operations increased 69% in the
third quarter to $46.4 million due to significantly higher oil and natural gas
production and prices. During the first nine months of 2004, oil and natural gas
revenues were $130.7 million, an increase of 49% over the same period in 2003.
Natural gas production was 6,947 million cubic feet (MMcf) in the third quarter
of 2004, while oil production for the same period was 274,000 barrels. Natural
gas production was 19,855 MMcf in the first nine months of 2004, while oil
production for the same period was 767,000 barrels. For the first nine months,
equivalent barrel production was up 42% on a year-over-year basis. Excluding the
acquisition of PetroCorp Incorporated in February 2004, the first nine months
equivalent barrel production for 2004 increased 17%.
Average natural gas prices received during the third quarter of 2004
increased 16% to $5.21 per Mcf compared to $4.50 per Mcf during the third
quarter of 2003. The average oil price received was $34.46 per barrel in the
third quarter of 2004 and $25.51 per barrel in the 2003 comparative quarter, a
35% increase. For the first nine months of 2004, average natural gas prices
received increased 4% to $5.23 per Mcf compared to $5.05 per Mcf during the
first nine months of 2003. The average oil price received was $32.17 per barrel
in the first nine months of 2004 compared to $27.02 per barrel in 2003, a 19%
increase. During the first nine months of 2004, Unit completed 110 wells with a
success rate of 85%, compared to 98 wells completed during the first nine months
of 2003 with an 85% success rate.
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. Prior to 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
gathering, processing and treating of natural gas. The company owns one natural
gas treatment plant, two processing plants, 12 active gathering systems and 400
miles of pipeline.
For the third quarter of 2004, Superior Pipeline gathered 28,356 MMBtu's of
natural gas per day and processed 26,669 MMBtu's per day. For the nine months of
2004, Superior Pipeline gathered 26,090 MMBtu's per day and processed 26,669
MMBtu's per day.
MANAGEMENT COMMENTS
"Our third quarter results reflect the impact of a higher commodity pricing
environment and favorable industry conditions," said John Nikkel, Chairman and
Chief Executive Officer. "With the help of strategic acquisitions, Unit has
positioned itself to benefit from current industry conditions. During the third
quarter of 2004, we completed three significant transactions with the
acquisition of Sauer Drilling Company, the acquisition of the 60% of Superior
Pipeline Company LLC that we did not already own, and the sale of our investment
in a natural gas limited partnership. With 110 wells completed during the first
nine months of 2004, our exploration and production segment is on track to drill
165 to 175 wells by year-end. Our contract drilling segment is benefiting from
higher commodity prices. We have seen a 4% rise in average dayrates from the
previous quarter and all of our rigs are currently contracted. Long-term debt
has increased to $107.5 million due to strong acquisition activity during the
first nine months of the year, which still leaves us with a conservative 16%
debt to capitalization ratio. We are pleased with Unit's growth and will
continue along that path as the year comes to a close."
WEBCAST
Unit will webcast its third quarter earnings conference call live over the
Internet on October 27, 2004 at 11:00 a.m. Eastern Time. 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.
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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 closing of the pending acquisitions, 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 data)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2004 2003 2004
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Statement of Income:
Revenues:
Contract drilling $ 50,052 $ 80,887 $ 129,839 $ 211,211
Oil and natural gas 27,402 46,394 87,521 130,718
Gas gathering and
processing 148 11,474 566 11,562
Other 198 4,595 832 5,497
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Total revenues 77,800 143,350 218,758 358,988
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Expenses:
Contract drilling:
Operating costs 35,653 57,816 97,105 152,736
Depreciation and
amortization 6,318 8,903 17,111 24,121
Oil and natural gas:
Operating costs 6,207 9,746 18,655 29,871
Depreciation,
depletion and
amortization 6,972 12,316 19,464 34,028
Gas gathering and
processing:
Operating costs 50 10,480 307 10,515
Depreciation and
amortization 58 451 125 489
General and administrative 2,246 3,081 6,766 8,955
Interest expense 154 820 540 1,751
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Total expenses 57,658 103,613 160,073 262,466
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Income Before Income Taxes 20,142 39,737 58,685 96,522
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Income Tax Expense:
Current 157 1,470 456 3,597
Deferred 7,506 13,673 21,856 33,187
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Total income taxes 7,663 15,143 22,312 36,784
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Equity in Earnings of
Unconsolidated Investments
Net of Income Tax 284 53 740 603
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Income Before Change in
Accounting Principle 12,763 24,647 37,113 60,341
Cumulative Effect of Change
in Accounting
Principle --- --- 1,325 ---
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Net Income $ 12,763 $ 24,647 $ 38,438 $ 60,341
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Income Before Change in
Accounting Principle
Per Common Share:
Basic $ .29 $ .54 $ .85 $ 1.32
Diluted $ .29 $ .54 $ .85 $ 1.31
Net Income Per Common Share:
Basic $ .29 $ .54 $ .88 $ 1.32
Diluted $ .29 $ .54 $ .88 $ 1.31
Weighted Average Common
Shares Outstanding:
Basic 43,556 45,733 43,503 45,709
Diluted 43,736 45,972 43,677 45,915
December 31, September 30,
2003 2004
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Balance Sheet Data:
Current assets $ 72,742 $ 109,173
Total assets $ 712,925 $ 983,430
Current liabilities $ 51,811 $ 87,599
Long-term debt $ 400 $ 107,500
Other long-term liabilities $ 17,893 $ 24,727
Deferred income taxes $ 127,053 $ 186,742
Shareholders' equity $ 515,768 $ 576,862
Nine Months Ended
September 30,
2003 2004
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Statement of Cash Flows Data:
Cash Flow From Operations
before Changes in Working
Capital (1) $ 98,114 $ 149,763
Net Change in Working Capital (9,702) 2,008
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Net Cash Provided by Operating
Activities $ 88,412 $ 151,771
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Net Cash Used in Investing
Activities $ (67,375) $ (258,576)
Net Cash Provided by (Used in)
Financing Activities $ (19,769) $ 107,747
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2004 2003 2004
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Contract Drilling Operations Data:
Rigs Utilized 68.2 92.0 60.6 85.8
Operating Margins (2) 29% 29% 25% 28%
Operating Profit Before
Depreciation (2) ($MM) $ 14.4 $ 23.1 $ 32.7 $ 58.5
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 134 274 372 767
Natural Gas - MMcf 5,233 6,947 15,043 19,855
Average Prices
Oil -- Bbl $ 25.51 $ 34.46 $ 27.02 $ 32.17
Natural Gas - Mcf $ 4.50 $ 5.21 $ 5.05 $ 5.23
Operating Profit Before
DD&A (2) ($MM) $ 21.2 $ 36.6 $ 68.9 $ 100.8
Gas Gathering and Processing
Operations Data:
Gas gathered - MMBtu/day 14,758 28,356 11,200 26,090
Gas processed - MMBtu/day --- 26,669 --- 26,669
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(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 taking operating
profit divided by segment revenue.
End of Filing