Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-9260
UNIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1283193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Kensington Tower I, 7130 South Lewis, Tulsa, Oklahoma 74136
(Address of principal executive offices)
(Zip Code)
(918) 493-7700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.20 par value 24,190,234
Class Outstanding at November 1, 1997
UNIT CORPORATION
INDEX
Page
PART I. Financial Information: Number
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
September 30, 1997 and December 31, 1996 2
Consolidated Condensed Statements of Operations
Three and Nine Months
Ended September 30, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 4
Notes to Consolidated Condensed Financial Statements 5
Report of Review by Independent Accountants 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information:
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of
Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
1
Item 1. Financial Statements
UNIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31,
1997 1996
ASSETS ---------- ----------
- ------ (Unaudited)
Current Assets: (In thousands)
Cash and cash equivalents $ 994 $ 547
Accounts receivable 14,795 15,842
Other 5,102 3,766
---------- ----------
Total current assets 20,891 20,155
---------- ----------
Property and Equipment:
Total cost 321,317 293,917
Less accumulated depreciation, depletion,
amortization and impairment 188,090 176,211
---------- ----------
Net property and equipment 133,227 117,706
---------- ----------
Other Assets 369 132
---------- ----------
Total Assets $ 154,487 $ 137,993
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion of natural gas purchaser
prepayments (Note 2) $ 372 $ -
Accounts payable 9,685 6,893
Accrued liabilities 5,678 5,816
---------- ----------
Total current liabilities 15,735 12,709
---------- ----------
Natural Gas Purchaser Prepayments (Note 2) 1,487 2,276
---------- ----------
Long-Term Debt 42,500 40,600
---------- ----------
Deferred Income Taxes 8,609 4,198
---------- ----------
Shareholders' Equity:
Preferred stock, $1.00 par value, 5,000,000
shares authorized, none issued - -
Common stock $.20 par value, 40,000,000
shares authorized, 24,192,597 and
24,157,312 shares issued, respectively 4,839 4,831
Capital in excess of par value 63,198 62,735
Retained earnings 18,178 10,751
Treasury stock, at cost, 9,863 and
28,755 shares, respectively (59) (107)
---------- ----------
Total shareholders' equity 86,156 78,210
---------- ----------
Total Liabilities and Shareholders' Equity $ 154,487 $ 137,993
========== ==========
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
UNIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In thousands except per share amounts)
Revenues:
Contract drilling $ 11,936 $ 7,420 $ 33,250 $ 20,216
Oil and natural gas 9,647 9,682 32,452 29,867
Other 2 184 11 181
---------- ---------- ---------- ----------
Total revenues 21,585 17,286 65,713 50,264
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 8,854 5,999 26,161 17,328
Depreciation 1,122 735 3,037 2,105
Oil and natural gas:
Operating costs 3,295 3,111 9,998 9,937
Depreciation, depletion
and amortization 3,085 2,574 9,148 7,803
General and administrative 1,100 943 3,418 3,072
Interest 720 828 2,024 2,442
---------- ---------- ---------- ----------
Total expenses 18,176 14,190 53,786 42,687
---------- ---------- ---------- ----------
Income Before Income Taxes 3,409 3,096 11,927 7,577
---------- ---------- ---------- ----------
Income Tax Expense:
Current 30 21 89 48
Deferred 1,258 1,176 4,411 2,822
---------- ---------- ---------- ----------
Total income taxes 1,288 1,197 4,500 2,870
---------- ---------- ---------- ----------
Net Income $ 2,121 $ 1,899 $ 7,427 $ 4,707
========== ========== ========== ==========
Net Income Per Common Share:
Primary $ .09 $ .08 $ .30 $ .21
========== ========== ========== ==========
Fully diluted $ .09 $ .08 $ .30 $ .21
========== ========== ========== ==========
Weighted Average Shares
Outstanding:
Primary 24,600 23,708 24,561 22,322
========== ========== ========== ==========
Fully diluted 24,651 23,708 24,647 22,326
========== ========== ========== ==========
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
UNIT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS (UNAUDITED)
Nine Months Ended
September 30,
1997 1996
---------- ----------
Cash Flows From Operating Activities: (In thousands)
Net Income $ 7,427 $ 4,707
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion and amortization 12,436 10,150
Deferred income tax expense 4,548 2,822
Other-net 212 33
Changes in operating assets and liabilities
increasing (decreasing) cash:
Accounts receivable 1,047 (1,605)
Accounts payable 3,506 (2,939)
Natural gas purchaser
prepayments (Note 2) (417) (102)
Other-net (1,474) (203)
---------- ----------
Net cash provided by
operating activities 27,285 12,863
---------- ----------
Cash Flows From (Used In) Investing Activities:
Capital expenditures (29,223) (23,352)
Proceeds from disposition of assets 591 871
Other-net (237) 210
---------- ----------
Net cash used in investing activities (28,869) (22,271)
---------- ----------
Cash Flows From (Used In) Financing Activities:
Net borrowings (payments) under line of credit 1,900 (3,400)
Net payments of notes payable
and long-term debt - (20)
Proceeds from stock options and warrants 172 12,772
Other-net (41) -
---------- ----------
Net cash provided by
financing activities 2,031 9,352
---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents 447 (56)
Cash and Cash Equivalents, Beginning of Year 547 534
---------- ----------
Cash and Cash Equivalents, End of Period $ 994 $ 478
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months ended
September 30, for:
Interest $ 2,066 $ 2,472
Income taxes $ 102 $ 50
The accompanying notes are an integral part of the
consolidated condensed financial statements.
4
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PREPARATION AND PRESENTATION
- ----------------------------------------------
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary (all
adjustments are of a normal recurring nature) to present fairly the financial
position of Unit Corporation as of September 30, 1997 and the results of its
operations for the three and nine month periods ended September 30, 1997 and
1996 and cash flows for the nine months ended September 30, 1997 and 1996.
Results for the three and nine months ended September 30, 1997 are not
necessarily indicative of the results to be realized during the full year. The
year end consolidated condensed balance sheet data was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles. The condensed financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
NOTE 2 - NATURAL GAS PURCHASER PREPAYMENTS
- -------------------------------------------
In March 1988, the Company entered into a settlement agreement with a
natural gas purchaser. During early 1991, the Company and the natural gas
purchaser superseded the original agreement with a new settlement agreement
effective retroactively to January 1, 1991. Under these settlement agreements,
the Company has a prepayment balance of $1.9 million at September 30, 1997
representing proceeds received from the purchaser as prepayment for natural gas.
This amount is net of natural gas recouped and net of certain amounts disbursed
to other owners (such owners, collectively with the Company are referred to as
the "Committed Interest") for their proportionate share of the prepayments. The
September 30, 1997 prepayment balance is subject to recoupment in volumes of
natural gas for a period ending the earlier of recoupment or December 31, 1997
(the "Recoupment Period"). During 1997, the purchaser is obligated to make
monthly payments on behalf of the Committed Interest in an amount calculated as
a percentage of the Committed Interest's share of the deliverability of the
wells subject to the settlement agreement, up to a maximum of $156,000 or a
minimum of $80,000 per month. At December 31, 1997, the Committed Interest's
prepayment balance, if any, that has not been fully recouped in natural gas is
subject to a cash repayment limited to a maximum of $3 million to be made in
equal payments over a five year period, with the first payment due June 1, 1998.
The prepayment amounts subject to recoupment from future production by the
purchaser are being recorded as liabilities and are reflected in revenues as
recoupment occurs. As a result, one fifth of the prepayment balance at
September 30, 1997 is reported as a short-term liability. The gas purchaser
reduced its takes in June 1997 and elected not to take natural gas under the
settlement agreement during the months of July through October 1997. The
purchaser has elected to start taking natural gas under the settlement agreement
in November 1997. Whether the balance in the liability account increases of
decreases before the Recoupment Period ends at December 31, 1997 will depend on
the election of the purchaser during the balance of 1997. At the end of the
Recoupment Period, the terms of the settlement agreement and the natural gas
purchase contracts which are subject to the settlement agreement will terminate.
5
NOTE 3 - NEW ACCOUNTING PRONOUNCEMENTS
- --------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("FAS 128"). FAS
128 will change the computation, presentation and disclosure requirements for
earnings per share. FAS 128 requires the presentation of "basic" and "diluted"
earnings per share, as defined, for all entities with complex capital
structures. FAS 128 is effective for financial statements for periods ending
after December 15, 1997, and requires restatement of all prior period earnings
per share amounts. The Company has not yet determined the impact that FAS 128
will have on its earnings per share when adopted.
6
REPORT OF REVIEW BY INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Unit Corporation
We have reviewed the accompanying consolidated condensed balance sheet of Unit
Corporation and subsidiaries as of September 30, 1997, and the related consoli-
dated condensed statements of operations for the three and nine month periods
ended September 30, 1997 and 1996 and cash flows for the nine month periods
ended September 30, 1997 and 1996. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Unit Corporation and subsidiaries
at December 31, 1996, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the year then ended (not
presented herein); and our report dated February 18, 1997 expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet at December 31, 1996, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L. L. P.
Tulsa, Oklahoma
October 27, 1997
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
FINANCIAL CONDITION
- -------------------
The Company's bank loan agreement (the "Credit Agreement") provides for a
total commitment of $75 million, consisting of a revolving credit facility
through August 1, 1999 and a term loan thereafter, maturing on August 1, 2003.
Borrowings under the revolving credit facility are limited to a borrowing base
which is subject to a semi-annual redetermination. The latest borrowing base
determination indicated $52 million of the commitment is available to the
Company. At September 30, 1997 borrowings under the Credit Agreement totaled
$42.5 million. The average interest rate in the third quarter of 1997 was 7.2
percent compared to the average interest rate of 8.0 percent in the third
quarter of 1996. A 1/2 of 1 percent facility fee is charged for any unused
portion of the borrowing base.
The Company's shareholders' equity at September 30, 1997 was $86.2 million
resulting in a ratio of long-term debt-to-equity of .49 to 1. The Company's
primary source of liquidity and capital resources in the near- and long-term
will consist of cash flow from operating activities and available borrowings
under the Company's Credit Agreement. Net cash provided by operating activities
for the first nine months of 1997 was $27.3 million as compared to $12.9 million
for the first nine months of 1996. The increase in 1997, as compared to 1996,
was primarily due to higher spot market natural gas prices in the first and
third quarters of 1997 along with higher drilling dayrates and drilling
utilization throughout the first nine months of 1997 combined with decreases in
accounts receivable and increases in accounts payable.
During the first nine months of 1997, the Company had capital expenditures
of $28.5 million. Approximately 67 percent of the expenditures were for oil and
natural gas exploration and development drilling and the remainder were for the
Company's contract drilling operations. The Company plans to continue its focus
on development drilling during the remainder of 1997. Depending, in part, on
commodity pricing, the Company anticipates it will spend approximately $28
million on its exploration capital expenditures program in 1997. These
expenditures are anticipated to be within the constraints of available cash to
be provided by operating activities and the Company's existing Credit Agreement.
Since a large portion of the Company's capital expenditures are discretionary
and directed toward increasing reserves and future growth, current operations
are not dependent on the Company's ability to obtain funds outside of the
Company's cash provided by operating activities and its current Credit
Agreement.
On September 16, 1997, the Company announced that it had signed a letter of
intent to acquire Hickman Drilling Company a privately-owned western Oklahoma
and Texas panhandle contract drilling company, for approximately 1,300,000
shares of Unit common stock and $5.0 million in cash, with the cash and
applicable interest based on the Chase Prime Rate being payable over a five-year
period. Included in the acquisition are nine drilling rigs, spare drilling
equipment and approximately $2.0 million in working capital. Consummation of
this proposed acquisition is subject to a number of conditions and requirements.
The closing of this acquisition is anticipated to occur early in November 1997.
8
The Company continued to receive monthly payments on behalf of itself and
other parties (collectively the "Committed Interest") from a natural gas
purchaser pursuant to a settlement agreement, as amended (the "Settlement
Agreement"). As a result of the Settlement Agreement, the September 30, 1997
prepayment balance of $1.9 million paid by the purchaser for natural gas not
taken (the "Prepayment Balance") is subject to recoupment in volumes of natural
gas through a period ending on the earlier of recoupment or December 31, 1997
(the "Recoupment Period"). During 1997, the purchaser is obligated to make
monthly payments on behalf of the Committed Interest based on their share of the
natural gas deliverability of the wells subject to the Settlement Agreement, up
to a maximum of $156,000 or a minimum of $80,000 per month. The monthly
payments will end at the end of 1997. If natural gas is taken during a month,
the value of such natural gas is credited toward the monthly amount the
purchaser is required to pay. In the event the purchaser takes volumes of
natural gas valued in excess of its monthly payment obligations, the value taken
in excess is applied to reduce any then outstanding Prepayment Balance. At the
end of the Recoupment Period, the Settlement Agreement and the natural gas
purchase contracts which are subject to the Settlement Agreement will terminate.
If the Prepayment Balance is not fully recouped in natural gas by December 31,
1997 then the unrecouped portion is subject to cash repayment, limited to a
maximum of $3 million, payable in equal annual installments over a five year
period with the first payment due June 1, 1998. The gas purchaser reduced its
takes in June 1997 and elected not to take natural gas under the settlement
agreement during the months of July through October 1997. The purchaser has
elected to start taking natural gas under the Settlement Contract in November
1997. The price per Mcf under the Settlement Agreement is substantially higher
than current spot market prices. The impact of the higher price received under
the Settlement Agreement increased pre-tax income approximately $414,000 and
$360,000 in the first nine months of 1997 and 1996, respectively.
The average oil price of $17.52 received by the Company in the third quarter
of 1997 was $3.67 per barrel lower than the average oil price received in the
third quarter of 1996 while the average spot market natural gas price of $2.11
was $.11 per Mcf higher than the average spot market natural gas prices received
in the same quarter of 1996. Oil prices within the industry remain largely
dependent upon world market developments for crude oil. Prices for natural gas
are influenced by weather conditions and supply imbalances, particularly in the
domestic market, and by world wide oil price levels. Since natural gas
comprises approximately 82 percent of the Company's reserves, large drops in
spot market natural gas prices have a significant adverse effect on the value of
the Company's reserves . Such declines could cause the Company to reduce the
carrying value of its oil and natural gas properties and also adversely effect
the Company's cash flow due to reduced oil and natural gas revenues and if
continued over an extended period would adversely impact demand for the
Company's contract drilling rigs. Declines in natural gas and oil prices could
also adversely effect the semi-annual borrowing base determination under the
Company's current Credit Agreement since this determination is calculated on the
value of the Company's oil and natural gas reserves.
The Company's ability to utilize its full complement of drilling rigs is
restricted due to the lack of qualified labor and certain supporting equipment
not only within the Company but in the industry as a whole. The Company's
ability to utilize its drilling rigs at any given time is dependent on a number
of factors, including but not limited to, the price of both oil and natural gas,
the availability of labor and the Company's ability to supply the type of
equipment required. The Company's management expects that these factors will
continue to influence the Company's rig utilization throughout 1997 and into
1998.
9
In the third quarter of 1994, the Company's Board of Directors authorized
the Company to purchase up to 1,000,000 shares of the Company's outstanding
common stock on the open market. Since that time, 125,100 shares have been
repurchased at prices ranging from $2.50 to $8.275 per share. During the first
quarter of 1997 and 1996, 23,892 and 44,686 of the purchased shares,
respectively, were used as the Company's matching contribution to its 401(K)
Employee Thrift Plan. At September 30, 1997 9,863 treasury shares were held by
the Company.
SAFE HARBOR STATEMENT
- ---------------------
With the exception of historical information many of the matters discussed
in this report are forward looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve risks and uncertainties
and actual results could differ materially from those discussed. Generally,
these statements relate to projections involving the anticipated revenues to be
received from the Company's oil and natural gas production, the utilization rate
of its drilling rigs, growth of its oil and natural gas reserves and well
performance and the Company's anticipated bank debt. As with any forward looking
statement, these statements are subject to a number of factors that may tend to
influence the accuracy of the statements and the projections upon which the
statements are based. All phases of the Company's operations are subject to a
number of influences outside the control of the Company, any one of which, or a
combination of which, could materially affect the results of the Company's
operations. A more thorough discussion of some of these factors and their
possible impact on the Company is provided in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 filed with the Securities and
Exchange Commission.
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 1997 versus Third Quarter 1996
- ----------------------------------------------
The Company reported net income of $2,121,000 in the third quarter of 1997
as compared to net income of $1,899,000 for the third quarter of 1996.
Increases in contract drilling dayrates and drilling rig utilization were
partially offset by increases in the Company's depreciation depletion and
amortization of oil and natural gas properties combined with decreases in
production of oil and prices received for oil between the comparative quarters.
Oil and natural gas revenues decreased by less than 1 percent in the third
quarter of 1997 as compared to the third quarter of 1996. Natural gas production
increased 4 percent and oil production decreased 10 percent between the two
quarters while average natural gas prices received by the Company increase 5
percent and oil prices received decreased 17 percent. Oil production declines
were due primarily from the Company's focus on drilling natural gas wells during
the first nine months of 1997 and slow growth in natural gas production resulted
primarily from the Company's development drilling program being adversely
affected by the unavailability of service equipment to drill and complete wells
during the first six months of 1997. Since the purchaser, under the Settlement
Agreement which provides for prices higher than current spot market prices,
elected to not take natural gas production from wells covered by the Settlement
Agreement in both the respective third quarters, the increase in natural gas
prices resulted from a rise in the average spot market price received by the
Company,
10
Oil and natural gas operating margins (revenues less operating costs)
decreased from 68 percent to 66 percent between the comparative quarters. Total
operating costs increased 6 percent. Depreciation, depletion and amortization
("DD&A") increased 20 percent as the Company's average DD&A rate for the third
quarter of 1997 was $4.63 compared with $3.90 in the third quarter of 1996.
Contract drilling revenues increased 61 percent for the comparative
quarters due to increases in both rig utilization and dayrates. Rig utilization
averaged 20.1 rigs in the third quarter of 1997 and averaged 14.5 rigs in the
third quarter of 1996. Contract drilling operating margins (revenues less
operating costs) were 26 percent in the third quarter of 1997 as compared to 19
percent in the third quarter of 1996.
General and administrative expense increased 17 percent in the third quarter
of 1997 when compared with the third quarter of 1996 as employee benefit costs,
and certain outside service costs increased. Interest expense decreased 13
percent as the average long-term bank debt outstanding decreased 5 percent
between the comparative quarters. The average interest rate incurred by the
Company dropped from 8.0 to 7.2 percent.
Nine Months 1997 versus Nine Months 1996
- -------------------------------------------------
Net income for the first nine months of 1997 was $7,427,000 as compared to
$4,707,000 for the first nine months of 1996. Higher natural gas prices in the
first and third quarters of 1997 along with increased natural gas production,
contract drilling dayrates and drilling rig utilization throughout the nine
month period all contributed to the increase in net income between the periods.
Oil and natural gas revenues increased 9 percent in the first nine
months of 1997 as compared to the first nine months of 1996. Natural gas
production increased 5 percent while oil production decreased 15 percent between
the comparative periods. Average natural gas prices received by the Company
increased 13 percent during the first nine months while average oil prices
received by the Company decreased less than 1 percent during the first nine
months. The increase in natural gas prices was caused by a $.28 climb in
average spot market prices and by an increase in production from wells covered
by the Settlement Agreement, which provides for prices higher than current spot
market prices, as discussed above. The impact of the higher price received
under the Settlement Agreement increased pre-tax income by approximately
$414,000 and $360,000 in the first nine months of 1997 and 1996, respectively.
Oil and natural gas operating margins (revenues less operating costs)
improved from 67 percent in the first nine months of 1996 to 69 percent in the
first nine months of 1997. Total operating costs increased less than 1 percent.
Depreciation, depletion and amortization ("DD&A") increased 17 percent,
primarily from an increase in the Company's average DD&A rate from $3.81 in the
first nine months of 1996 to $4.44 for the first nine months of 1997.
Contract drilling revenues increased 64 percent for the comparative nine
month periods as rig utilization increased from an average of 14.1 rigs
operating in the first nine months of 1996 to 19.6 rigs in the first nine months
of 1997. Contract drilling operating margins (revenue less operating costs)
were 21 percent in the first nine months of 1997 as compared to 14 percent in
the first nine months of 1996.
11
General and administrative expense increased 11 percent during the
comparative nine month periods as employee benefit costs, certain insurance
expenses and outside service costs increased. Interest expense decreased 17
percent due to a 11 percent decrease in the average long-term bank debt
outstanding in the first nine months of 1997 compared to the first nine months
of 1996. The average interest rate incurred by the Company also dropped from 7.8
to 7.2 percent.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Not applicable
Item 2. Changes in Securities
- ------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
Not applicable
Item 5. Other Information
- --------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
15 Letter re:Unaudited Interim Financial Information
10.2.32 Unit Corporation Separation Benefit Plan for
Senior Management
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIT CORPORATION
Date: November 5, 1997 By: /s/ John G. Nikkel
-------------------------- -------------------------
JOHN G. NIKKEL
President, Chief Operating
Officer and Director
Date: November 5, 1997 By: /s/ Larry D. Pinkston
-------------------------- -------------------------
LARRY D. PINKSTON
Vice President, Chief
Financial Officer
and Treasurer
13