SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 8-K/A
AMENDMENT TO CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1999
UNIT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Oklahoma 1-9260 73-1283193
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
1000 Kensington Tower, Suite 1000
Tulsa, Oklahoma 74136
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
918/493-7700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(Not Applicable)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
The undersigned hereby amends its Form 8-K dated September 30, 1999 to
include the historical financial statements of the Lower - 48 Division - A
Division of Parker Drilling Company North America, Inc. and the related pro
forma financial information.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Business Acquired
Set forth below are the financial statements appearing in
this report:
Lower - 48 Division - A Division of Parker Page in
Drilling Company North America, Inc. This Report
------------------------------------------ -----------
Report of Independent Accountants. . . . . . . . .F-1
Balance Sheet for the Lower -
48 Division - A Division of Parker Drilling
Company North America, Inc. as of August 31,
1998 and June 30, 1999 (unaudited) . . . . . . .F-2
Statement of Operations of the Lower -
48 Division - A Division of Parker Drilling
Company North America, Inc. for the Year Ended
August 31, 1998 and the Ten Months Ended
June 30, 1999 and 1998 (unaudited) . . . . . . .F-3
Statement of Cash Flows of the Lower -
48 Division - A Division of Parker Drilling
Company North America, Inc. for the Year Ended
August 31, 1998 and the Ten Months Ended
June 30, 1999 and 1998 (unaudited) . . . . . . .F-4
Notes to the Lower - 48 Division -
A Division of Parker Drilling Company
North America, Inc. Financial Statemtents. . . .F-5
(b) Pro Forma Financial Information
Set forth below is the pro forma financial
Information appearing in this report:
Unaudited Pro Forma Consolidated Condensed
Balance Sheet as of June 30, 1999. . . . . . . .P-1
Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the Year Ended
December 31, 1998. . . . . . . . . . . . . . . .P-3
Unaudited Pro Forma Consolidated Condensed
Statement of Operations for the Six
Months Ended June 30, 1999 . . . . . . . . . . .P-4
Notes to Unaudited Pro Forma Consolidated
Condensed Financial Statements . . . . . . . . .P-5
Signatures . . . . . . . . . . . . . . . . . . . .P-9
(c) Exhibits
23.1 Consent of Independent Accountants.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
UNIT CORPORATION
In our opinion, the accompanying balance sheet and the related statements
of operations and cash flows present fairly, in all material respects, the
financial position of Lower - 48 Division (the "Division"), a division of Parker
Drilling Company North America, Inc. ("PDCNA") at August 31, 1998, and the
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the PDCNA management; our responsibility is
to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statements presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers L L P
PricewaterhouseCoopers L L P
Tulsa, Oklahoma
August 27, 1999
F-1
UNIT CORPORATION AND SUBSIDIARIES
LOWER - 48 DIVISION
A DIVISION OF PARKER DRILLING COMPANY NORTH AMERICA, INC.
BALANCE SHEETS
August 31, June 30,
1998 1999
---------- ----------
ASSETS (Unaudited)
------ (In thousands)
Current Assets:
Accounts and notes receivable $ 6,643 $ 3,144
Other current assets 9 -
---------- ----------
Total current assets 6,652 3,144
---------- ----------
Property, Plant and Equipment, at cost:
Drilling equipment 92,732 88,675
Building, land and improvements 1,351 1,351
Other assets 538 539
Construction in progress 165 27
---------- ----------
94,786 90,592
Less accumulated depreciation 79,218 76,815
---------- ----------
Net property, plant and equipment 15,568 13,777
---------- ----------
Other Assets 3 2
---------- ----------
Total Assets $ 22,223 $ 16,923
========== ==========
LIABILITIES AND DIVISION EQUITY
-------------------------------
Current Liabilities:
Accounts payable $ 1,161 $ 647
Accrued payroll and related employee benefits 3,251 2,862
Other accrued liabilities (Note 4) 278 650
---------- ----------
Total current liabilities 4,690 4,159
---------- ----------
Division Equity 17,533 12,764
---------- ----------
Total Liabilities and Division Equity $ 22,223 $ 16,923
========== ==========
The accompanying notes are an integral part of the
financial statements.
F-2
UNIT CORPORATION AND SUBSIDIARIES
LOWER - 48 DIVISION
A DIVISION OF PARKER DRILLING COMPANY NORTH AMERICA, INC.
STATEMENTS OF OPERATIONS
Year Ten Months Ten Months
Ended Ended Ended
August 31, June 30, June 30,
1998 1999 1998
---------- ---------- ----------
(Unaudited)
(In thousands)
Revenues $ 36,350 $ 17,822 $ 30,176
---------- ---------- ----------
Operating Expenses:
Drilling (Note 4) 26,981 14,705 22,156
Depreciation 2,817 2,330 2,308
General and administrative (Note 2) 5,907 3,807 4,923
---------- ---------- ----------
Total expenses 35,705 20,842 29,387
---------- ---------- ----------
Operating Income (Loss) 645 (3,020) 789
Other Income (Expense):
Gain on disposition of property,
plant and equipment 435 675 433
Other (72) (14) (72)
---------- ---------- ----------
Income (Loss) Before Income Taxes 1,008 (2,359) 1,150
---------- ---------- ----------
Income Tax Expense (Benefit) (Note 3) 383 (896) 437
---------- ---------- ----------
Net Income (Loss) $ 625 $ (1,463) $ 713
========== ========== ==========
The accompanying notes are an integral part of the
financial statements.
F-3
UNIT CORPORATION AND SUBSIDIARIES
LOWER - 48 DIVISION
A DIVISION OF PARKER DRILLING COMPANY NORTH AMERICA, INC.
STATEMENTS OF CASH FLOWS
Year Ten Months Ten Months
Ended Ended Ended
August 31, June 30, June 30,
1998 1999 1998
---------- ---------- ----------
(Unaudited)
(In thousands)
Cash Flows From Operating Activities:
Net Income (Loss) $ 625 $ (1,463) $ 713
Adjustments to reconcile net income
(loss)to net cash provided by
(used in) operating activities:
Depreciation 2,817 2,330 2,308
Gain on disposition of property,
plant and equipment (435) (675) (433)
Changes in assets and liabilities
increasing (decreasing) cash:
Accounts and notes receivable 1,819 3,499 2,191
Other assets 5 10 (18)
Accounts payable and accrued
liabilities 572 (531) 194
---------- ---------- ----------
Net cash provided by
operating activities 5,403 3,170 4,955
---------- ---------- ----------
Cash Flows From (Used In) Investing
Activities:
Proceeds from the sale of property
plant and equipment 473 1,173 470
Capital expenditures (5,354) (1,037) (4,944)
---------- ---------- ----------
Net cash (used in) provided by
investing activities (4,881) 136 (4,474)
---------- ---------- ----------
Cash Flows Used In Financing Activities:
Decrease in division equity (524) (3,306) (483)
---------- ---------- ----------
Net cash used in financing
Activities (524) (3,306) (483)
---------- ---------- ----------
Net Change in Cash and Cash Equivalents (2) - (2)
Cash and Cash Equivalents, Beginning of
Period (2) - (2)
---------- ---------- ----------
Cash and Cash Equivalents, End of Period $ - $ - $ -
========== ========== ==========
The accompanying notes are an integral part of the
financial statements.
F-4
UNIT CORPORATION AND SUBSIDIARIES
LOWER - 48 DIVISION
A DIVISION OF PARKER DRILLING COMPANY NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Organization - The Lower-48 Division ("Division") is a division of Parker
Drilling Company North America, Inc. ("PDCNA"). Stockholders of PDCNA are
Parker USA Drilling, Inc. (50%), Parker Drilling USA, Ltd. (40%) and Universal
Rig (10%). The subsidiaries who own PDCNA are wholly owned subsidiaries of
Parker Drilling Company ("Parent Company").
Basis of Presentation - The accompanying financial statements have been
prepared to present the assets and liabilities and related revenues and direct
operating expenses of the Division and also include allocated general and
administrative expenses (Note 2) and income taxes (Note 3). The financial
information included herein may not necessarily reflect the financial position,
results of operation or cash flows of the Division if it had been a separate
stand alone company.
Division Equity - Division equity is comprised of intercompany accounts
and historical retained earnings. The intercompany accounts include
transactions related to capital assets transferred in or out of the Division,
cash receipts and cash disbursements and allocated general and administrative
expenses. The Division does not maintain a separate cash account, all cash
transactions are received or disbursed by the Parent.
Changes in division equity were as follows:
Year Ten Months Ten Months
Ended Ended Ended
August 31, June 30, June 30,
1998 1999 1998
---------- ---------- ----------
(Unaudited)
(In thousands)
Division Equity - Beginning of Period $ 17,461 $ 17,533 $ 17,461
Net Income (Loss) 625 (1,463) 713
Change in Intercompany Accounts (553) (3,306) (483)
---------- ---------- ----------
Division equity - end of period $ 17,533 $ 12,764 $ 17,691
========== ========== ==========
Drilling Contracts - The Division recognizes revenue and expenses on
dayrate contracts as the drilling progresses (percentage-of-completion method)
because the Division does not bear the risk of completion of the well. For
meterage contracts, the Division recognizes the revenue and expenses upon
completion of the well (completed-contract method).
F-5
Note 1 - Summary of Significant Accounting Policies (continued)
- ---------------------------------------------------------------
Property, Plant and Equipment - The Division provides for depreciation of
property, plant and equipment primarily on the straight-line method over the
estimated useful lives of the assets after provision for salvage value. In the
third quarter of fiscal 1998, the Parent Company reviewed the estimated useful
life of its land drilling fleet used for financial depreciation purposes. As a
result, the estimated life was extended from 10 to 15 years with a five percent
salvage value for most of the major rig components, resulting in a reduction in
the Division's fiscal 1998 depreciation expense of approximately $103,000. The
Parent Company's historical experience and a comparison with other firms in the
industry indicate that its land drilling equipment has a useful life of at least
15 years. The depreciable lives for certain other equipment, ranging from
three to seven years, including drill pipe, were not extended. When properties
are retired of otherwise disposed of, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations. Management periodically evaluates the Division's assets to
determine if they are not in excess of their net realizable value. Management
considers a number of factors such as estimated future cash flows, appraisals
and current market valued analysis in determining net realizable value. Assets
are written down to reflect any decrease in net realizable value below their net
carrying value. Substantially all of the Division's property, plant and
equipment is pledged as collateral on the Parent Company debt.
Concentrations of Credit Risk - Financial instruments which
potentially subject the Division to concentrations of credit risk consist
primarily of trade receivables with a variety of national and international oil
and natural gas companies. The Division generally does not require collateral
on its trade receivables. Such credit risk is considered by management to be
limited, due to the larger number of customers comprising the Division's
customer base. In fiscal year 1998, three customers accounted for 50% of
revenues. At August 31, 1998, accounts receivable from one of these customers
was $1,394,000.
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-6
Note 2 - Transactions with Related Parties
- -------------------------------------------
The Parent Company provides management and administrative services to the
Division and charges that part of its administrative overhead allocable to such
activities to the Division. During the year ended August 31, 1998 and the ten
months ended June 30, 1999 and 1998, the Parent Company allocated administrative
overhead to the Division of $5,907,000, $3,807,000 and $4,923,000, respectively.
The overhead allocation is based on the number of rig operating days of the
Division multiplied by the overhead cost per day, which is derived by dividing
the total allocable overhead by the total rig operating days. In addition,
substantially all accounts receivable and accounts payable are processed and
collected or paid by the Parent Company. When the Parent Company records a
trade account payable on behalf of the Division, a corresponding account
receivable is recorded in the intercompany (division equity) account. Due to
the difficulty in determining the specific amount of trade accounts payable and
accrued liabilities attributable to the Division included in division equity,
management has reclassified $756,000 and $2,851,000 from Division equity to
accounts payable and accrued payroll and related employee benefits as an
estimate, based on the Parent Company's normal vendor payment policy and workers
compensation and health care cost allocable to the Division. Management
considers the methods used to make such allocations to be reasonable. The
Division's accounts receivable are pledged as collateral on the Parent Company's
revolving credit facility.
Note 3 - Income Taxes
- ----------------------
The Division's taxable income or loss is included in PDCNA's results
of operations, which are included in the Parent Company's consolidated
income tax returns. For purposes of the statement of operations the Division's
federal and state income taxes have been calculated at the combined statutory
rate of 38 percent.
Note 4 - Contingent Liability
- -----------------------------
During April 1997 a well in Louisiana for which PDCNA was the drilling
contractor erupted and blew out. Numerous lawsuits have been filed against
PDCNA and other parties by individuals living in and around the drilling site
alleging damage to property and personal injury. PDCNA anticipates that
$250,000 will be paid to satisfy outstanding claims. This amount has been
recognized in the financial statements.
Note 5 - Subsequent Event
- -------------------------
On August 12, 1999, the Parent Company signed a definitive agreement
to sell its thirteen domestic Lower-48 land drilling rigs and related equipment
and other assets to Unit Corporation for $40 million cash plus one million
shares of Unit Corporation common stock. These thirteen land drilling rigs
represent all of the drilling rigs owned by the Division. Closing of the
transaction is subject to several conditions including securing required
governmental approvals, third party consents and Unit Corporation obtaining
financing for the cash portion of the purchase price.
F-7
Note 6 - Interim Financial Information (Unaudited)
- --------------------------------------------------
The interim consolidated financial statements and footnote information
presented herein are unaudited, but reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary for fair
presentation of the results for such periods. On September 30, 1999, Parker
Drilling Company completed the sale of its thirteen lower - 48 land rigs to Unit
Corporation for $40 million cash plus one million shares
of Unit Corporation common stock.
F-8
UNIT CORPORATION AND SUBSIDIARIES
(B) Pro Forma Financial Information
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of June 30, 1999
Pro Forma
Unit Adjustments
Corporation Division (Note 3) Pro Forma
----------- ---------- ---------- ----------
(In thousands)
Assets:
- -------
Current Assets:
Cash and cash $ 455 $ - $ - $ 455
equivalents
Accounts receivable 12,526 3,144 (3,144)(a) 12,526
Other 5,208 - - 5,208
---------- ---------- ---------- ----------
Total current
assets 18,189 3,144 (3,144) 18,189
---------- ---------- ---------- ----------
Property and Equipment:
Total cost 413,977 90,592 (42,454)(b) 462,115
Less accumulated
depreciation,
depletion,
amortization and
impairment 218,046 76,815 (76,815)(b) 218,046
---------- ---------- ---------- ----------
Net property and
equipment 195,931 13,777 34,361 244,069
---------- ---------- ---------- ----------
Other Assets 6,305 2 (2)(a) 6,305
---------- ---------- ---------- ----------
Total Assets $ 220,425 $ 16,923 $ 31,215 $ 268,563
========== ========== ========== ==========
The accompanying notes are an integral part of the
pro forma consolidated condensed financial statements.
P-1
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET - CONTINUED
As of June 30, 1999
Pro Forma
Unit Adjustments
Corporation Division (Note 3) Pro Forma
----------- ---------- ---------- ----------
(In thousands)
LIABILITIES AND SHAREHOLDER'S
EQUITY
- -----------------------------
Current Liabilities:
Current portion of
long-term debt $ 1,735 $ - $ - $ 1,735
Accounts payable 9,044 647 (647)(a) 9,044
Accrued liabilities 7,274 3,512 (3,512)(a)
300 (c) 7,574
---------- ---------- ---------- ----------
Total current
liabilities 18,053 4,159 (3,859) 18,353
---------- ---------- ---------- ----------
Long-Term Debt 72,900 - (10,435)(d) 62,465
---------- ---------- ---------- ----------
Other Long-Term Liabilities 2,069 - - 2,069
---------- ---------- ---------- ----------
Deferred Income Taxes 17,415 - - 17,415
---------- ---------- ---------- ----------
Shareholder's Equity:
Preferred stock, $1.00 par
value, 5,000,000 shares
authorized, none issued - - - -
Common stock $.20 par
value, 40,000,000 shares
authorized, 25,740,160
and 33,740,160 (pro
forma) shares issued
and outstanding,
respectively 5,148 - 1,600 (e) 6,748
Capital in excess of par
value 82,867 - 56,673 (e) 139,540
Retained earnings 21,973 12,764 (12,764)(a) 21,973
---------- ---------- ---------- ----------
Total shareholder's
equity 109,988 12,764 45,509 168,261
---------- ---------- ---------- ----------
Total Liabilities and
Shareholder's Equity $ 220,425 $ 16,923 $ 31,215 $ 268,563
========== ========== ========== ==========
The accompanying notes are an integral part of the
pro forma consolidated condensed financial statements.
P-2
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
Pro Forma
Unit Adjustments
Corporation Division (Note 3) Pro Forma
----------- ---------- ---------- ----------
(In thousands except per share amounts)
Revenues:
Contract drilling $ 53,528 $ 32,637 $ - $ 86,165
Oil and natural gas 39,703 - - 39,703
Other 106 350 - 456
---------- ---------- ---------- ----------
Total revenues 93,337 32,987 - 126,324
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 43,729 24,926 - 68,655
Depreciation and
amortization 5,766 3,005 248 (f) 9,019
Oil and natural gas:
Operating costs 14,328 - - 14,328
Depreciation, depletion
and amortization 16,069 - - 16,069
General and administrative 4,891 5,496 (5,446)(g) 4,941
Interest 4,815 - (730)(h) 4,085
---------- ---------- ---------- ----------
Total expenses 89,598 33,427 (5,928) 117,097
---------- ---------- ---------- ----------
Income (Loss) Before
Income Taxes 3,739 (440) 5,928 9,227
---------- ---------- ---------- ----------
Income Tax Expense (Benefit):
Current 139 (167) 361 (i) 333
Deferred 1,354 - 1,891 (i) 3,245
---------- ---------- ---------- ----------
Total income taxes 1,493 (167) 2,252 3,578
---------- ---------- ---------- ----------
Net Income (Loss) $ 2,246 $ (273) $ 3,676 $ 5,649
========== ========== ========== ==========
Net Income Per Common Share
(Note 4):
Basic $ .09 $ .17
========== ==========
Diluted $ .09 $ .17
========== ==========
The accompanying notes are an integral part of the
pro forma consolidated condensed financial statements.
P-3
UNIT CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
Pro Forma
Unit Adjustments
Corporation Division (Note 3) Pro Forma
----------- ---------- ---------- ----------
(In thousands except per share amounts)
Revenues:
Contract drilling $ 22,370 $ 8,707 - 31,077
Oil and natural gas 16,436 - - 16,436
Other 370 515 - 885
---------- ---------- ---------- ----------
Total revenues 39,176 9,222 - 48,398
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 20,252 7,344 - 27,596
Depreciation and
amortization 2,811 1,342 (380)(f) 3,773
Oil and natural gas:
Operating costs 6,595 - - 6,595
Depreciation, depletion
and amortization 7,943 - - 7,943
General and administrative 2,474 1,757 (1,732)(g) 2,499
Interest 2,432 - (334)(h) 2,098
---------- ---------- ---------- ----------
Total expenses 42,507 10,443 (2,446) 50,504
---------- ---------- ---------- ----------
Income (Loss)Before Income
Taxes (3,331) (1,221) 2,446 (2,106)
---------- ---------- ---------- ----------
Income Tax Expense (Benefit):
Current (17) (464) 470 (i) (11)
Deferred (1,166) - 460 (i) (706)
---------- ---------- ---------- ----------
Total income taxes (1,183) (464) 930 (717)
---------- ---------- ---------- ----------
Net Income (Loss) $ (2,148) $ (757) $ 1,516 $ (1,389)
========== ========== ========== ==========
Net Income (Loss) Per
Common Share (Note 4):
Basic $ (.08) $ (.04)
========== ==========
Diluted $ (.08) $ (.04)
========== ==========
The accompanying notes are an integral part of the
pro forma consolidated condensed financial statements.
P-4
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. THE ACQUISITION
- ------------------
On September 30, 1999, the Company completed the acquisition of 13 land
contract drilling rigs and related equipment (the "Parker Acquisition") from
Parker Drilling Company and Parker Drilling Company North America, Inc. (the
"Sellers"). Under the terms of the Parker Acquisition, the Sellers received
1,000,000 shares of the Company's common stock valued at $8,138,000 and
$40,000,000 in cash. The cash portion of the consideration paid was funded
through an offering of 7,000,000 shares of the Company's common stock which
closed on September 29, 1999. The net proceeds received by the Company from the
offering were $50,435,000.
2. BASIS OF PRESENTATION
- ------------------------
The accompanying unaudited Pro Forma Consolidated Condensed Financial
Statements are presented to reflect the equity offering and the consummation of
the Parker Acquisition. The unaudited Pro Forma Consolidated Condensed Balance
Sheet is presented as if the acquisition, accounted for under the purchase
method, occurred as of June 30, 1999. The unaudited Pro Forma Consolidated
Condensed Statements of Operations are presented as if the acquisition occurred
on January 1, 1998 and may not be indicative of the results that would have
occurred if the acquisition had been effective on the dates indicated or of the
results that may be obtained in the future. The accompanying pro forma
financial statements should be read in conjunction with the historical financial
statements and notes to financial statements of both Unit Corporation and the
Lower - 48 Division ("Division").
3. PRO FORMA ADJUSTMENTS
- ------------------------
The accompanying unaudited Pro Forma Consolidated Condensed Financial
Statements include the following adjustments:
(a) Adjustments to remove certain assets, liabilities and shareholder's
equity of the Division at June 30, 1999 which were not acquired by Unit
Corporation.
(b) Adjustments to property, plant and equipment yields the purchase price
of the acquired assets of $48,138,000.
(c) Adjustment records the accrued liabilities incurred by Unit Corporation
of $300,000 for its costs incurred during the equity offering.
(d) Adjustment to long-term debt represent the proceeds from the equity
offering in excess of the cash amount needed for the Parker Acquisition,
which proceeds were utilized to reduce the Company's long-term debt.
P-5
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
(e) Adjustments to common stock and additional paid in capital represent the
issuance of 7,000,000 shares of common stock from the equity offering to
finance the cash portion of the Parker Acquisition and the issuance of
1,000,000 shares of common stock to the Sellers for the stock portion of
the Parker Acquisition. The 7,000,000 shares were issued at a price of
$7.625 generating gross proceeds of $53,375,000. Underwriting discounts
and commissions and Unit Corporation's offering costs totaled $2,940,000
and $300,000, respectively, providing net proceeds to Unit Corporation
of $50,135,000. The 1,000,000 shares issued to the Sellers were valued
at $8.1375 per share.
(f) Adjustment provides depreciation expense computed on the $48,138,000
purchase price of the acquired assets. Depreciation and amortization of
drilling equipment was calculated using the units-of-production method
based on a useful life of 15 years for the acquired rigs, including a
minimum provision of 20 percent of the active rate when the equipment is
idle. Depreciation for drill pipe and drill collars was calculated
using the composite method which calculates depreciation by footage
actually drilled compared to total estimated remaining footage.
Depreciation of other property and equipment was computed using the
straight-line method over the estimated useful lives of the assets
ranging from 3 to 10 years.
(g) Historical general and administrative expense from the Division was
reversed since they represent allocated corporate overhead from the
Parent Company and such costs will not be incurred by Unit Corporation.
Unit Corporation's general and administrative expense will increase by
approximately $50,000 annually due to the additional expense associated
with the increase in office employees required to account for the
acquired rigs.
(h) The adjustment to interest expense represents reduced interest on $10.4
million of long-term debt paid from excess proceeds from the equity
offering. The average interest rate paid by Unit Corporation on bank
debt in 1998 and the first six months of 1999 was 7.0 and 6.4 percent,
respectively.
(i) The adjustment to income tax expense represents the increase in taxes
associated with the combined pro forma results of operations based on
the statutory (federal and state) tax rate.
P-6
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
4. NET INCOME PER COMMON SHARE
- ------------------------------
The following data shows the amounts used in computing earnings per share.
For the Year Ended
December 31, 1998
------------------------------------------
WEIGHTED
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------ ------------
Basic Earnings per
Common Share $ 2,246,000 25,544,000 $ 0.09
============
Effect of Pro Forma
Adjustments 3,403,000 8,000,000
------------ -------------
Basic Pro Forma
Earnings per
Common Share 5,649,000 33,544,000 $ 0.17
============
Effect of Dilutive
Stock Options - 340,000
------------ -------------
Diluted Earnings
per Common Share $ 5,649,000 33,884,000 $ 0.17
============ ============= ============
Options to purchase 191,000 shares of common stock at an average price
of $8.60 were excluded from the computation of diluted earnings per share
because the option exercise prices were greater than the average market
price on common shares for the year ended December 31, 1998.
P-7
UNIT CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
CONTINUED
For the Six Months Ended
June 30, 1999
------------------------------------------
WEIGHTED
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------ ------------
Basic Loss per
Common Share $(2,148,000) 25,701,000 $ (0.08)
============
Effect of Pro-Forma
Adjustments 759,000 8,000,000
------------ -------------
Basic Pro-Forma
Loss per Common
Share (1,389,000) 33,701,000 $ (0.04)
============
Effect of Dilutive
Stock Options - -
------------ -------------
Diluted Loss per
Common Share $(1,389,000) 33,701,000 $ (0.04)
============ ============= ============
Options to purchase 844,000 shares of common stock at an average price
of $4.36 were excluded from the computation of diluted earnings per share
due to the net loss for the six months ended June 30, 1999.
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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 hereunto duly authorized.
UNIT CORPORATION
Dated: December 10, 1999 By: /s/ LARRY D. PINKSTON
----------------------------
Larry D. Pinkston
Chief Financial Officer
Treasurer and
Vice President
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