news UNIT CORPORATION
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7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136
Telephone 918 493-7700, Fax 918 493-7714
Contact: David T. Merrill
Chief Financial Officer
and Treasurer
(918) 493-7700
For Immediate Release...
October 26, 2005
UNIT CORPORATION REPORTS 2005 THIRD QUARTER
AND FIRST NINE MONTHS RESULTS
Third Quarter Net Income Up 134%
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its
financial and operational results for the third quarter and first nine months of
2005. Consolidated net income for the third quarter was $57.6 million, or $1.25
per diluted share, on revenues of $231.0 million, compared to 2004's net income
of $24.6 million, or 54 cents per diluted share, on revenue of $143.4 million.
Revenues increased 61% while net income increased 134% between the comparative
quarters. Net income, revenues, and earnings per share are all-time quarterly
records for Unit. The dramatic improvement in revenue and net income was
attributable to increases in drilling dayrates and the number of drilling rigs
utilized as well as increases in natural gas production and the prices received
by the Company for its oil and natural gas production.
For the nine-month period, the Company reported consolidated net income of
$128.0 million, or $2.78 per diluted share, on revenues of $592.5 million,
compared to 2004's net income of $60.3 million, or $1.31 per diluted share, on
revenues of $359.0 million. The increases resulted from improvement in oil and
natural gas production and prices, as well as drilling rig utilization and
dayrates.
CONTRACT DRILLING RESULTS
Contract drilling revenues increased 48% between the comparative third
quarters to $119.9 million, primarily due to an increase in dayrates and the
number of rigs being used. Average rig utilization was 102.6 rigs in the third
quarter of 2005, up 12% from 2004's third quarter of 92.0 rigs. Currently, Unit
has 111 operational rigs, 109 of which are operating under contract. Unit's
112th rig is completing construction and should be operational by November 15th.
Unit is in the process of securing major components to build its 113th and 114th
rigs, both 1,500 horsepower SCR rigs It has also ordered two new 1,500
horsepower SCR rigs, which are scheduled to be delivered in the first quarter of
2006. Drilling rig rates for the third quarter averaged $13,117 per day, up 44%
above the comparable quarter of 2004. Operating margins for the third quarter
averaged $5,924 per day (before elimination of intercompany rig profit of $3.2
million) as compared to $2,814 per day (before elimination of intercompany rig
profit of $0.7 million) for 2004. Unit's average dayrate at the end of the third
quarter was $13,347.
Between the comparative first nine months, contract drilling revenues
increased 53% to $322.4 million from $211.2 million for the first nine months of
2004. Rig utilization increased to an average of 100.7 rigs for the first nine
months of 2005 as compared to an average 85.8 rigs operating in the first nine
months of 2004.
EXPLORATION AND PRODUCTION RESULTS
Revenues from Unit's oil and natural gas operations increased 81% to $84.0
million in the third quarter because of higher oil and natural gas prices and
natural gas production. For the third quarter of 2005, natural gas production
was 8,542 million cubic feet (MMcf) and oil production was 251,000 barrels. For
the first nine months of 2005, oil and natural gas revenues were $202.8 million,
an increase of 55% over the same period in 2004. Natural gas production was
24,055 MMcf in the first nine months of 2005, while oil production for the same
period was 788,000 barrels. Equivalent Mcf production was up 18% over the
comparative nine month periods.
The Company's average natural gas prices for the third quarter of 2005
increased 56% to $8.13 per Mcf, compared to $5.21 per Mcf for the third quarter
of 2004, and its average oil price was $54.60 per barrel for the third quarter
of 2005 as compared to $34.46 per barrel in the third quarter of 2004, a 58%
increase. For the first nine months of 2005, average natural gas prices received
increased 29% to $6.74 per Mcf compared to $5.23 per Mcf during the first nine
months of 2004. The average oil price received was $48.16 per barrel in the
first nine months of 2005 compared to $32.17 per barrel in 2004, a 50% increase.
During the first nine months of 2005, Unit completed 135 wells with a success
rate of 90%, compared to 110 wells completed during the first nine months of
2004 with an 85% success rate.
GAS GATHERING AND PROCESSING 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 now
reflected in the gas gathering and processing segment. Before 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
purchasing, gathering, processing and treating of natural gas. The company
operates two natural gas treatment plants, owns four processing plants, 35
active gathering systems and 480 miles of pipeline.
For the third quarter of 2005, Superior Pipeline gathered 159,821 MMBtu's
of natural gas per day and processed 36,061 MMBtu's per day. For the first nine
months of 2005, Superior gathered 129,754 MMBtu's of natural gas per day and
processed 32,709 MMBtu' s per day.
MANAGEMENT COMMENTS
"Our third quarter results reflect the impact of higher commodity prices
and favorable industry conditions," said Larry Pinkston, Chief Executive Officer
and President. "Unit has positioned itself to benefit from current industry
conditions through strategic acquisitions and internal growth. During the third
quarter, Unit announced the closing of its acquisition of all the Texas drilling
operations of Texas Wyoming Drilling, Inc., which included seven drilling rigs
all of which are currently working in the Barnett Shale area of North Texas and
the Gulf Coast. This brings our total fleet to 111 drilling rigs. We have
ordered two new rigs and continue to construct new rigs while searching for
opportunities to acquire rigs to meet the continued increase in customer demand.
Our drilling rig fleet continues to operate at nearly 100% utilization. Our
exploration and production operations have drilled an aggressive 135 wells
during the first nine months. On October 7th, we announced the signing of a
purchase and sale agreement to acquire certain oil and natural gas properties
consisting of 42.5 Bcfe of proved oil and natural gas reserves. The properties
are located in Oklahoma, Arkansas and Texas and currently produce 6.5 MMcfe per
day. The closing is anticipated to be mid-November. We will continue to evaluate
acquisition opportunities during the remainder of the year. Long-term debt
increased by $20.7 million from the second quarter to $115.6 million due
primarily to the recent acquisition. Our debt to capitalization ratio remains at
a conservative 13%."
WEBCAST
Unit will webcast its third quarter earnings conference call live over the
Internet on October 26, 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 productive capabilities of the wells, future demand for oil and
natural gas, future rig utilization and dayrates, the timing of the completion
of rigs currently under construction, 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 Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
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Statement of Income:
Revenues:
Contract drilling $ 119,873 $ 80,887 $ 322,379 $ 211,211
Oil and natural gas 83,979 46,394 202,819 130,718
Gas gathering and
processing 26,561 11,474 65,895 11,562
Other 635 4,595 1,402 5,497
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Total revenues 231,048 143,350 592,495 358,988
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Expenses:
Contract drilling:
Operating costs 67,161 57,816 194,890 152,736
Depreciation 11,019 8,903 31,010 24,121
Oil and natural gas:
Operating costs 15,913 9,746 40,916 29,871
Depreciation, depletion
and amortization 16,355 12,316 45,632 34,028
Gas gathering and
processing:
Operating costs 24,395 10,480 60,616 10,515
Depreciation 902 451 2,267 489
General and administrative 3,324 3,081 10,455 8,955
Interest expense 885 820 2,157 1,751
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Total expenses 139,954 103,613 387,943 262,466
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Income Before Income Taxes 91,094 39,737 204,552 96,522
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Income Tax Expense:
Current 19,628 1,470 41,185 3,597
Deferred 13,828 13,673 35,385 33,187
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Total income taxes 33,456 15,143 76,570 36,784
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Equity in Earnings of
Unconsolidated Investments
Net of Income Tax --- 53 --- 603
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Net Income $ 57,638 $ 24,647 $ 127,982 $ 60,341
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Net Income Per Common Share:
Basic $ 1.25 $ .54 $ 2.79 $ 1.32
Diluted $ 1.25 $ .54 $ 2.78 $ 1.31
Weighted Average Common Shares
Outstanding:
Basic 45,959 45,733 45,873 45,709
Diluted 46,229 45,972 46,108 45,915
September 30, December 31,
2005 2004
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Balance Sheet Data:
Current assets $ 164,802 $ 118,601
Total assets $ 1,252,647 $ 1,023,136
Current liabilities $ 107,804 $ 77,176
Long-term debt $ 115,600 $ 95,500
Other long-term liabilities $ 39,470 $ 37,725
Deferred income taxes $ 239,971 $ 204,466
Shareholders' equity $ 749,802 $ 608,269
Nine Months Ended
September 30,
2005 2004
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Statement of Cash Flows Data:
Cash Flow From Operations before
Changes in Working Capital(1) $ 245,534 $ 149,763
Net Change in Working Capital (55,682) 2,008
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Net Cash Provided by Operating Activities $ 189,852 $ 151,771
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Net Cash Used in Investing Activities $ (222,012) $ (258,576)
Net Cash Provided by Financing Activities $ 32,223 $ 107,747
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
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Contract Drilling Operations Data:
Rigs Utilized 102.6 92.0 100.7 85.8
Operating Margins(2) 44% 29% 40% 28%
Operating Profit Before
Depreciation(2)($MM) $ 52.7 $ 23.1 $ 127.5 $ 58.5
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 251 274 788 767
Natural Gas - MMcf 8,542 6,947 24,055 19,855
Average Prices
Oil -- Bbl $ 54.60 $ 34.46 $ 48.16 $ 32.17
Natural Gas - Mcf $ 8.13 $ 5.21 $ 6.74 $ 5.23
Operating Profit Before
DD&A(2)($MM) $ 68.1 $ 36.6 $ 161.9 $ 100.8
Gas Gathering and Processing
Operations Data:
Gas Gathering - MMBtu/day 159,821 58,436 129,754 35,376
Gas Processing - MMBtu/day 36,061 21,143 32,709 7,141
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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 dividing operating profit by
segment revenue.