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...
February 22, 2005
UNIT CORPORATION REPORTS 2004 FOURTH QUARTER
AND YEAR-END RESULTS
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its
financial and operational results for the fourth quarter and year-end 2004. Net
income and earnings per share for 2004 increased 80% to $90.3 million and 71% to
$1.97, respectively, compared to 2003. Total revenue for 2004 was $519.2
million, a 72% improvement over 2003 and an all-time record. The improvement in
revenue and net income was attributable to increases in the number of drilling
rigs utilized and dayrates, as well as increases in the production of oil and
natural gas and the price received for those commodities. Drilling rig
utilization averaged 88.1 rigs operating during 2004 versus 62.9 rigs operating
during 2003. Unit added 12 drilling rigs during the year, bringing its fleet to
a record 100 drilling rigs. Unit's rig fleet currently stands at 102 operational
rigs. Unit replaced 285% of its oil and natural gas production, achieving its
goal of greater than 150% production replacement for the 21st consecutive year.
For the fourth quarter of 2004, consolidated net income was $29.9 million,
or 65 cents per diluted share, on revenues of $160.2 million. In 2003, net
income for the fourth quarter was $11.8 million, or 27 cents per diluted share,
on revenues of $82.6 million.
UNIT DRILLING RESULTS
Contract drilling revenues increased 63% between the comparative fourth
quarters to $87.0 million, due to an increase in dayrates and the number of
drilling rigs utilized. Drilling rig rates for the fourth quarter averaged
$9,529 per day, 17% higher than the comparable quarter of 2003. Contract
drilling operating margins per drilling rig averaged $3,298 per day in the
fourth quarter of 2004. The operating margins for the fourth quarter were
favorably impacted by $150 per day for adjustments primarily associated with a
reduction in accrued health insurance costs. The average drilling rig
utilization was 95.0 rigs in the fourth quarter of 2004, up 36% from 2003's
fourth quarter. During 2004, Unit increased its drilling rig fleet by 12 rigs,
bringing the total fleet to 100 drilling rigs. Currently, Unit has 102
operational rigs, all of which are contracted and 100 are operating.
Between the comparative years, contract drilling revenues increased 63% in
2004 to $298.2 million, while drilling rig utilization increased to an average
of 88.1 rigs operating during 2004, compared to 62.9 rigs operating during 2003.
Contract drilling operating margins increased to 29%, compared to 24% during
2003.
UNIT PETROLEUM RESULTS
Fourth quarter production for Unit's oil and natural gas operations was
281,000 barrels of oil and 7,294 million cubic feet (MMcf) of natural gas, a 39%
equivalent Mcf increase from the fourth quarter of 2003. Revenues for the fourth
quarter were $54.3 million or 87% higher than 2003's fourth quarter. The
increase in revenue was due to higher oil and natural gas prices and production.
Unit's 2004 oil and natural gas production was 1,048,000 barrels of oil and
27,149 MMcf of natural gas, a 41% equivalent Mcf increase over 2003's
production. Excluding production associated with the PetroCorp acquisition,
equivalent Mcf production for 2004 increased 17%. 2004 oil and natural gas
revenues were $185.0 million, a 59% improvement over 2003.
Average natural gas prices received during the fourth quarter of 2004
increased 35% to $5.95 per thousand cubic feet (Mcf) compared to $4.40 per Mcf
during the fourth quarter of 2003. The average oil price received was $36.03 per
barrel in the fourth quarter of 2004 compared to $26.76 per barrel in the fourth
quarter of 2003, a 35% increase. For the year, the average natural gas price
received increased 11% to $5.42 per Mcf compared to $4.87 per Mcf during 2003.
The average oil price received was $33.20 per barrel during 2004 compared to
$26.94 per barrel in 2003, a 23% increase.
During 2004, Unit completed 168 wells, a 13% increase over the number of
wells drilled during 2003. Of the 168 wells, 140 wells, or 83%, were completed
as producing wells. Unit's total oil and natural gas reserves at December 31,
2004, were 346.8 billion cubic feet equivalent (Bcfe), a 22% increase over 2003.
Unit replaced 285% of 2004 production, achieving for the 21st consecutive year
the company's goal of replacing at least 150% of production with new oil and
natural gas reserves. Unit's three-year average finding cost was $1.99 per Mcfe.
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 fourth quarter of 2004, Superior Pipeline gathered 47,778 MMBtu's
of natural gas per day and processed 31,980 MMBtu's per day.
MANAGEMENT COMMENTS
"2004 was a year of growth for Unit as we responded to favorable industry
conditions during the year," said John Nikkel, Chairman and Chief Executive
Officer. "The year was marked by three significant transactions with the
acquisitions of PetroCorp Incorporated, Sauer Drilling Company, and the
outstanding interest of Superior Pipeline Company LLC."
"Unit increased its drilling rig fleet by 12 rigs during 2004, primarily by
the acquisition of 9 rigs with the purchase of Sauer Drilling Company in August.
During January 2005, Unit placed into service its 101st rig, which had
previously been under construction. Also in January 2005, Unit closed its
acquisition of a subsidiary of Strata Drilling LLC, by which Unit acquired two
drilling rigs, its 102nd and 103rd rigs, as well as spare parts, inventory,
drill pipe and other major components. The 103rd rig requires refurbishment, but
should be fully operational within 90 days. Unit also has an additional rig
under construction which is committed to a customer and is expected to be
operational by the third quarter."
"Within our exploration and production operations, we completed our
acquisition of PetroCorp Inc., on January 30, 2004 and benefited from those
operations the remainder of the year. With the inclusion of PetroCorp's oil and
natural gas reserves, Unit's total oil and natural gas reserve base at December
31, 2004 consisted of 8.6 million barrels of oil and 295.4 Bcf of natural gas, a
22% equivalent increase in total reserves over 2003. We plan to drill
aggressively during 2005, with a goal of drilling 220 to 230 wells. Our
acquisition, exploration and development drilling capital expenditure budget for
2005 is $125 million, an increase of 25% over 2004, excluding acquisitions."
"Long-term debt has increased to $95.5 million due to strong acquisition
activity during the year, leaving us with a conservative 14% debt to
capitalization ratio."
WEBCAST
Unit will webcast its fourth quarter and year-end earnings conference call
live over the Internet on February 22, 2005 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 and operations data)
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
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Statement of Income:
Revenues:
Contract drilling $ 86,993 $ 53,307 $ 298,204 $ 183,146
Oil and natural gas 54,299 29,088 185,017 116,609
Gas gathering and processing 18,155 40 29,717 606
Other 768 184 6,265 1,016
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Total revenues 160,215 82,619 519,203 301,377
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Expenses:
Contract drilling:
Operating costs 58,176 41,657 210,912 138,762
Depreciation and
amortization 9,538 6,533 33,659 23,644
Oil and natural gas:
Operating costs 11,432 6,298 41,303 24,953
Depreciation, depletion
and amortization 13,489 7,879 47,517 27,343
Gas gathering and processing:
Operating costs 16,503 42 27,018 349
Depreciation and
amortization 493 51 982 176
General and administrative 3,032 2,456 11,987 9,222
Interest expense 944 153 2,695 693
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Total expenses 113,607 65,069 376,073 225,142
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Income Before Income Taxes 46,608 17,550 143,130 76,235
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Income Tax Expense:
Current 1,269 (456) 4,866 ---
Deferred 15,405 6,468 48,592 28,324
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Total income taxes 16,674 6,012 53,458 28,324
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Equity in Earnings of Unconsolidated
Investments Net of Income Tax --- 213 603 953
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Income Before Change in Accounting
Principle 29,934 11,751 90,275 48,864
Cumulative Effect of Change in
Accounting Principle --- --- --- 1,325
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Net Income $ 29,934 $ 11,751 $ 90,275 $ 50,189
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Income Before Change in Accounting
Principle Per Common Share:
Basic $ .65 $ .27 $ 1.98 $ 1.12
Diluted $ .65 $ .27 $ 1.97 $ 1.12
Net Income Per Common Share:
Basic $ .65 $ .27 $ 1.98 $ 1.15
Diluted $ .65 $ .27 $ 1.97 $ 1.15
Weighted Average Common Shares
Outstanding:
Basic 45,740 43,950 45,717 43,616
Diluted 46,011 44,116 45,936 43,773
December 31, December 31,
2004 2003
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Balance Sheet Data:
Current assets $ 118,601 $ 72,742
Total assets $ 1,023,136 $ 712,925
Current liabilities $ 77,176 $ 51,811
Long-term debt $ 95,500 $ 400
Other long-term liabilities $ 37,725 $ 17,893
Deferred income taxes $ 204,466 $ 127,053
Shareholders' equity $ 608,269 $ 515,768
Year Ended
December 31,
2004 2003
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Statement of Cash Flows Data:
Cash Flow From Operations before Changes
in Working Capital (1) $ 219,683 $ 129,830
Net Change in Working Capital (16,473) (8,118)
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Net Cash Provided by Operating Activities $ 203,210 $ 121,712
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Net Cash Used in Investing Activities $ (301,972) $ (132,099)
Net Cash Provided by Financing Activities $ 98,829 $ 10,488
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003
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Contract Drilling Operations Data:
Rigs Utilized 95.0 69.8 88.1 62.9
Operating Margins (2) 33% 22% 29% 24%
Operating Profit Before
Depreciation (2) ($MM) $ 28.8 $ 11.7 $ 87.3 $ 44.4
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 281 144 1,048 516
Natural Gas - MMcf 7,294 5,606 27,149 20,648
Average Prices
Oil -- Bbl $ 36.03 $ 26.76 $ 33.20 $ 26.94
Natural Gas - Mcf $ 5.95 $ 4.40 $ 5.42 $ 4.87
Operating Profit Before
DD&A (2) ($MM) $ 42.9 $ 22.8 $ 143.7 $ 91.7
Gas Gathering and Processing
Operations Data:
Gas gathered - MMBtu/day 47,778 22,137 33,147 16,413
Gas processed - MMBtu/day 31,980 91 13,412 92
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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.