UNT - Earnings call transcript Q4 2017

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Operator

Welcome to the Unit Corporation’s Fourth Quarter 2017 Earnings Call. My name is John, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

the constitute today, similar projections, of make speakers forward-looking course that statements expectations, the conference the call will statements. During beliefs or results any actual or company's results differ from The could projected forward-looking such the in statements. materially anticipated

factors release Additional could results Forward-Looking under the given the cause from available readily that today detailed heading materially the is differ in actual concerning information information important to today's Statements. press

non-GAAP document company the The during be to may certain non-GAAP turn can conference, Larry over measures. be website. press these on the Additionally, financial in reconciliation of you to now begin. company's Pinkston, also discussing will measures I measures is GAAP today's the and will President the Larry, call And found release. available This CEO.

Larry Pinkston

We Bob John. Austin, to joined Les us Elias are Good for joining me everyone. and Officer and morning. Les us is David and November at then Merrill, Senior you, the Brandt the Cromling you to Parks. will Frank the David morning, updates filling on to concerning participate you this these today. segments over John be Each Vice is call. thank of their With I’ll President today as Chief Austin Financial and in unable now Elias, want Brandt for Young, gentlemen questions with of who take will in the call call end providing we turn Merrill. Thank

David Merrill

Good morning.

our for business solid and and was very are The results in by QX successes segments. pleased three report to of We improvements marked XXXX. each year

quarter budget we to in and year. continued in Despite through most balance cash the growth natural in drilling of second oil all XXXX We the which begin in segments headwinds gas activity continue maintaining reduced flow. three on with the production able segment, to capital through while of growing were line our from our focus

XXXX, our and over XXX% increase rig number increase able a had total contract were our In XX% to replace rigs the placed a XXth XX% drilling with in during of XXXX quarter. to operating resulting proved we’ve reserves, production second BOSS in segment reserves. we service XXXX the Additionally, new into of

Our sold turn increased around processed and The to quarter levels the liquids its fourth over in gas in gas posted now achieved midstream profit volumes the midstream in to call activity processing volumes a gathering due also segment XXXX. segment record operating Les Austin. growth I’ll systems. and

Les Austin

$XX.X under the of our December and XXXX to Tax share. Act. amount required $XX.X the million million David. Cut Tax share. of derivative Thanks, reported the net effect Act, million of net diluted effect $XX.X the Adjusted net We per which fourth of excludes for the was non-cash the tax $X.XX revaluation includes liability and deferred income related benefit tax or $X.XX This per for as Jobs quarter income diluted or in quarter, the

in Our non-GAAP release. press financial measure reconciliation is our included

X% quarter, offset volumes. For segment, decreased quarter decrease natural cost gas for of decreased from costs third third commodity XX% XX% an quarter fewer contract the the higher in over the segment, third a decreased in for fourth to day quarter revenue higher fourth drilling because slightly of Operating rigs due the XX% primarily the and rates. the In per from for rigs because drilling operating. the quarter quarter and prices. increased the quarter number the increase fourth of of operating, from average the for by production fourth Operating barrel the because volumes oil equivalent third revenues production quarter increased

fourth and increased of and because ended process fourth XX% third volumes. the prices For because third purchase for the quarter and condensate of higher costs the revenue fourth Operating midstream increased the for prices XX% segment, quarter increased volume. the the over debt quarter issuance credit primarily We of over consists and XXX.X the $XXX long-term liquids of quarter increased million unamortized of quarter million quarter. gas over and $XXX.X end notes of million discounts debt our borrowings net of Long-term of increase costs third with agreements. under XXXX an of $XX.X the debt of total million, senior subordinated

borrowing credit agreement does fleet business, current at and $XXX million. borrowing remains unchanged of Our base include oil properties the consists midstream our rigs. and of our drilling The but base gas not

the times maximum X.X times to ratio no EBITDA of covenant Our is quarter fourth leverage at was the EBITDA. be X.XX greater senior senior end than the leverage and

will be XX% excluding update. XXX will our XXXX million increase I from time, Our our XXXX increase $XXX over segment, call over XX% if segment anticipate over expenditures, anticipated oil this our capital asset capital is will capital and non-core $XX increase segment, XX million, flow At $XXX over gas expenditures be We to million our our XXXX, acquisitions, budget, a and million. segment, proceeds be XXXX. for turn sales, used midstream cash Brandt gas will natural reserved any. will a natural XXXX XX% within oil operating segment expenditures for which a were be Of used the excluding acquisitions, drilling for the for and million and

Brandt Elias

as quarter in well plays Thank a Production program to drilling third I XXXX, gas the we reserves. updates Wilcox In X.X grew morning. was in spent workovers, the to quarter. developing our exploration approximately new you, drilling of or growth field area. we were In of day, executing guidance re-completions the strategy quarter continued third X.X Wilcox, South in $XX will X% high Good as production Unit BOE the per able low-risk XXXX, to our of Granite Les. production fourth and Gilly provide Hoxbar for reward, our with BOE production in during Texas, re-completions replace XXX% In in area Today, Total X,XXX compared XXXX. XXX%. increased and Wash infill of and some million, XX production which quarries XXXX. for the operational in BOE million our and million compared to oil

were two X,XXX At day. were In surface infill return wells our adding area exploration for fourth drill plan in Cherry completed of Creek of X further delineate the per and November, completed higher Creek field and to addition, Gilly field. number BOE more help data the facilities day. per second We Cherry drilled and prospect, quarter, to Trinity provide pipeline a the in this size prospect the rate XXX in year well potential about adding BOE

completed In a we our discovery BOE Brandt addition prospect, well to day drilled Cherry per adding Creek and the exploration successful in December. in X,XXX prospect,

$XX rate. expect a and to million. than production our Drilling to this per horizontal Unit X vertical in continues from Granite is for February program As third take XXXX, year. X day XX-well quarter. area play, a the this production and with rate XXXX XXXX the In quarter rig operations, for we up In exit wells fourth of increase, increased exit this result XX% over capital these Wash XX% drill higher approximately

XXXX, expect Wallow online Buffalo CX fourth first the of In interval type Our flowback, is member Wallow first Production we the our of on drilling lateral targeted field. in well B-interval doing laterals of part Buffalo we the are an February focus is from The of exceed in was for and the the or currently their very Granite B-interval CX in we wells brought Wash. drilling our $XX to will early of meet production Wash curve. Granite estimated but in expectations. wells CX three our curve the X,XXX-foot Wash million. XXXX, the our on the in early quarter. This cost brought Granite field, In type XX exceeding

our the member due two type We BOE quarter XXXX, XX% increased curve. of In are play, exceed gas wells. area, X,XXX Wash. X-XXHXL, the of area extended with these XX-day had in per of liquids. In of with to oil of Schenk the natural production rates core SOHOT new and CX continues Both quarter wells day, the completed third wells the X% the of expectations. the addition for curve Granite from a pleased to initial Marchand above very results our first lateral our the January consisting the produced over SOHOT IPE XX% of Trust fourth type Production we

continue X estimated X of being our with an XXXX, cost X-rig program development area, our with for SOHOT will the laterals, extreme million. wells core For $XX new wells, of we in

the also $XX and Dewey XX,XXX laterals net Total planning in has a testing Unit County, Unit in are gas an position Stack, in For in Osage Custer cost lower to formations million the the drill Stack X County before Stack. the X% to acres program wells window estimated X to over-pressured XXXX, to seen for utilize pleased in to production. XX.X dry In with million we're moving the Meramec rig will call the developments currently wells as for Difficulty]. in these in [Technical for as BOE, in this fourth the over continue western some which the We're year we've between company XXXX. XX.X quarter I'm At John million would Production of assets. in to this we've drilling well and growth now for X% potential our a our will recent XXXX about core also is excited summary, position. Stack turn development to estimated drill play drilling XXXX. and will first seen to be with time, the this out growth production represent over of XXXX start The add to update. with I

John Cromling

average Brandt. average during third revenue an with the utilization Thank $XXX of slightly quarter increase over The of of $XXX $XX,XXX, you, for good for even a declined quarter. was was XXXX fourth day an was daily though quarter. contract the day profit over third rate drilling the Great. our year no total fourth the increase the very quarter. rig elimination per segment, The $XX,XXX, intercompany

primarily some quarter, for quarter over small of daily fourth nine total before as for third to This quarter. increase quarter. direct continued expenses G&A during year expenses. The the to in rig months. The intercompany the margin done increased operating $XX profits, the before fourth $X,XXX, is day the elimination by Our the increase compared as they due eliminations, of per the was to cost, quarter, operating third daily which the improve fourth the average was intercompany have past a end

release. with XX operating XX XX rigs rigs reconciliation in found the have press quarter began we active. Presently, decreased today's and non-GAAP end. quarter's by Our We be to can

industry level. our of the with consistent relatively rigs of X activity remained contracts. has Currently, level with under BOSS term XX all are them activity operating Our

last and walking rigs put X dirt upgraded SCR pumps X hydraulic PSI rigs service into new and/or systems, year, catwalks. X,XXX-horsepower with During BOSS have mud to degrees X,XXX varying the we systems,

rate have and industry the additional for several dictates. rig refurbishment excellent candidates market utilization for declined quarter during Unit. land The We for fourth are rigs, as SCR which the

during increased inquiries first weeks, and similar the slowly for also However, land the the over this is turn rigs XXXX. count few past At rig experiencing Superior Pipeline. call Bob increased results. time, has to quarter of I'll the the has for Unit

Bob Parks

completed X% expenses. improved prices XXXX you, successful which efficient results focus John. operating a improving by was and our commitment results. were reduce XXXX Thank Superior. million, over XXXX was year, profit operations for midstream achieved $XX.X to monitor by operating segment record continued and profit field on operating These a throughout by The our direct

facility now quarter wells systems, Bellmon, gas areas. we by our producers in of were our active gather fourth volumes previous Segno key laterals acreage key dedication the Cashion, has our quarter. main new and will compared process processing and pipeline installed connected will Central that been to and wells. XX% several areas are area. the these continued volumes as we've Oklahoma, in Cashion of and to which producer During in gas processing midstream several in as gas a X% is has drilling of us million allow rapidly These The I a on be from our we project, completed, and our $XX significant business. increased to increases Hemphill, trunk the completing several line focus At liquids expansion such XXXX, to Cashion achieved a

XX system from connected new producers. we've wells Cashion different our XXXX, X to During

and quarter volume Our cubic per averaged fourth feet XX for million in feet total capacity million cubic day. total approximately day the processing our is facility throughput XX.X the per

per facility volumes million XXXX, feet and in for approximately additional As XXX,XXX of we're natural day averaged for produced the of liquids in our quarter Granite approximately to the processing the throughput continued Cashion Wash volume capacity XX.X increase, gallons area, we fourth area. per our Hemphill cubic evaluating the total need gas At day.

During during area, this to connect All XXXX, the new area of are wells were in wells in wells X connected X XXXX. these and Buffalo several we've more system. the scheduled we Wallow to

well volumes. next capacity and order cubic feet our We to total to pipeline million additional at approximately compression facilities we pad, currently With constructing are a the are have facility XXX from processing Appalachian the of we to be our per best Pittsburgh in the handle upgrading the handle our continues system. day, capacity volumes area, for sufficient one to systems cash In flowing expected additional the plant the Superior. Mills gathering expected

average quarter the million environmental to day, Our start the of We XXX completed pad system approximately receive cubic and X pad and XXXX. we expect of this to This total end physical the the from next to for feet pipeline new end permitting it, studies, throughput to the XXXX. of expect all will this and XXXX. XXXX first expect by of pad wells construction to production and issues have in related was we pad next the initial well connect at right-of-way per on

will that received Additionally, infill we've producer from existing X in notice it XXXX. wells drill on the pads

from we to In wells September. there expect be results systems, minimal on achieved were our excess a connect and X in drilled capital effort well mix by see wells wells pads, from direct production operating and as continued these to contracts Also, the existing first our also to on for Since our the record financial year. expect improve increased prices system. with were able new July see ethane X contracts, as efficient exposed receive commodity next summary, in our will With in we to cost production improving was Pipeline. We focus along wells our processing better year can Superior in control margins XXXX our for These be ability gathering propane our to volumes systems, prices to of fee-based operations to results assuming with expenses. commodity-based of the pricing, total our over and XXXX. XX%

propel our our of in another midstream systems. year this connecting for to call time, over We as At his XXXX. as the several factors well to processing Larry will as the continue extending assets These segment new improving to as existing expect key wells well comments. economics turn I'll for successful final back

Larry Pinkston

We the the our XXXX. Bob. execution We commodity for volatile in conditions of us an with XXXX believe year our We economic the you, Thank continuation disciplined backdrop. normal this outlook changing a began approached during despite for in approach optimistic positioned manner. solid industry a

capital of segments have business have to heard grow with the been expenditures cash from we line in you As flow. able X presenters, each our while keeping

with production achieved that pleased have last growth the over the are quarters. We we X

of to with are We also replacement production pleased significant a achieve without since our second highest XXXX rate reserves acquisition. new

able drilling The We areas is have other on growth. basins. compete of wells our is utilization. item seen prospective with have to rig of add Best our well our inventory the as core been gratifying, of the for is we to very in the continued our active returns very a key all continued wells all, success BOSS very improvement which in rigs

we an XXXX, year for now turn our We stronger look grow manner interest over employees. the to customers off our the our placed results contracts fee-based and forward the questions. those of exposure with in continue will Overall, paying our the pleased operating with commodity even and our are Our mix we to would shareholders, for I company for a in and call our assets and profit our midstream XXXX. to business is like best consistent for and wells record well a future. recorded are

Operator

SunTrust. Instructions] from Dingmann question [Operator Neal our first And is from

Neal Dingmann

what seeing It give of I'm color in any wondering, their a that. First, rig they for lot you're quite the sync activities year, bidding is like maybe with be E&Ps to listening putting around to just or budgets talking on sort -- you that just seems of can looking active. side. continue out to

John Cromling

That's Neal, this is John. true.

and also We have begin. the their why and increase decline till December they we're But the to budget through that seen up used in now have same a already a through part large yes, people in because that's of waited January inquiries and we seeing reason had New February of now. saw Year benefits the the

Neal Dingmann

Frank -- moving Maybe the activity little how mentioned could interest half Stack there see you Could we a latter on maybe of in a the on again year. and upstream have then the you Frank, extension. for bit. to certainly acreage, question you talk much just Stack just side, towards And about, some potentially that this

Brandt Elias

Neal. Yes, you. I is for Brandt. This can that answer question

drill we we and And we we test first Stack So position over-pressured to rig will dry dry -- picking that for plan of stated, production this and March as in started quarter wells over will wells third two have the on wells I a two up rig that even be the quarter. first the then currently in our third in and Anticipated later year. window and the spudding two we well come in gas the will gas move will will on there. then western

Operator

Next Raymond question Marshall from James. from is Adkins

Marshall Adkins

Just following last reference up productivities the out give some other curves mind the stuff of of in wells question, be well that this type Brandt. in in of drilling in vicinity frame what I'm in Stack Can just on year? you've terms terms something got sure of us on that of looking you're you'll you for Stack.

Brandt Elias

give that. insight Yes. some more I can on you

and players Stack there active Tapstone are position, Western down some the For others.

there. we're oil oily, a at. going for be million gas, then barrels there. This is what gas a XX a day, be to a XXX rates the lower wells, day a more to For million X XX the a on anticipate and bit it's rates looking maybe Osage, the shallower, barrels day to to we XXX to little X bit IPEs will little oil And XXX a day Meramec, kind the million which anywhere little drier bit X between is lower, million

Marshall Adkins

E&P on on And guidance gave good you're then differentials and after with theme, pretty what all you realized the hedging. staying prices thinking

I our bullish curious Hub probably least on prices much Cushing Just oil to to hedges you on issues? put to I'm frame of how you the to reference because the Henry and side. is very obviously, to that guess, me help reconcile just it from as oil my at all least, outlook -- -- WTI differential in the process, locked than the in more side, the bullish I'm two modeling gas us thought with of crude. how Could we're at much those on help is

David Merrill

Marshall, David. this is

oil On XXXX the of the about we're and third hedged anticipated XX% are swapped production. of Two-thirds low those are side, side the on our the hedging collars and swaps is in ways. mid-XXs. to other And the three

So the oil on that's where we side. are

Marshall Adkins

those And on I room so presume those. there is there to is Correct? upside collars, wiggle

David Merrill

That's correct. $X typically you think WTI. I WTI. They currently, asked run on And -- at you -- our differentials they run about what on were

Marshall Adkins

on And that so Okay. have you gas? How well. then the oil as I you some got hedges. about presume

David Merrill

throughout And swaps a three We about varies do. ways, quarter, can of math We're and are us and course, of XX%. three by right little the swaps. too. the our but upside little collars $X. give around XX% you hedged the bit more XX%, We're around on do the And ways collars and XX% a year, course the averages around

Marshall Adkins

to the And differentials Hub?

David Merrill

$X.XX it delivery all, you points, have but we Overall, blend different differential. about we're whenever a

Marshall Adkins

And last Perfect. right. All me. for question Okay.

do? know, Sorry beefing we upgrades can more far done many just is reactivations, or, how or how for SCRs call rig you doing taken possibility what you many -- you've And more and don't about detail it up. like thinking for the here, you're you them sounds all them if you more the are you've -- mentioned the do so on I side but some

AC. You're to not converting actually

what upgrades you you're a could reactivations? me on little more give just on and/or So the doing detail

John Cromling

what -- are and items would for that probably work probably a more but changing that of another not any I There's to require prime different earlier. do XX marketable people mentioned AC, to We're Marshall. true, candidate that least now. would at those those make That's that XX that adding want those we would more right be be to then

having just order term And to around to we the it, on So in the and right lot in get it's enough a have opportunity we contract justify the most expenditure. of where that's room grow usually, can six making months.

Marshall Adkins

And BOSS relative AC how's the that or rigs, those just the acceptance rig to of so coming?

John Cromling

outputs I'm BOSS BOSS going and it's have. abilities not operator every -- But say those to other preferred, and the rig going walking they the things. rigs such good, not Well, are pretty but a the needs capabilities can't that that just that rigs all pump really. because has not have high

fit rigs. as value, have just of diverse we the quite a the have And to rig fleet we opportunity. part with So of the

just them have of look each to we individually. So one at

Operator

[Operator Instructions] Company. question And and from Charles our next is Cowen from Robertson

Charles Robertson

E&P that, All into is right. to that year thoughts Reflecting it especially Starting guidance little you've exited a the the conservative, seems another strong a Any side, it on like maybe if looks your clip pretty off rig. bit you're me on just on adding XXXX. that? on

Larry Pinkston

wells Charles, good. We out. forecast we of us. good, them year. kind in on early good certain give of of drill being certainly of portion being account we tend you be a to them the don't but depend And all want we know conservative A in a us to how any lot

production? not be out. wells, But we more in about It's drilled, early online. substantial getting the there them difference. range getting on and going a a enough to but put So year them of we is is really potential mean, them there feel but some online and the production on key upside the I getting question good make Sure. our is, of to

Charles Robertson

the sort In in Brandt any than And into maybe rather B change obviously, one the the here. moving design, well of C? for the Granite,

Brandt Elias

going after we've a seen Yes, rates, No. B little no the liquids we've sand. the oil other target most. bit well CX The in the the been what better bit little there's has has in more change and It been that design. the than

basically year continue to wanted and we in into development from CX this next So of out finish the going that kind year. it

Charles Robertson

a there mentioned preference, on the an is thoughts rig that the year, adding during the on possibility? drilling you side, additional then rig BOSS and And obviously,

John Cromling

drilling opportunity do a possibility BOSS company another the budget that's why is for the and capitalized rigs. build is to allow for the certainly it to refurbishments what us That's rig and/or

we'll be evaluating of can decision that soon not. or just process But from making on the So we there. but flow opportunities and it's a begin again, fact whether cash you very that go

Charles Robertson

interest as on seeing, the as private the that on is you're public well built that And the side?

John Cromling

a be it's the companies. we'll private In instance, mixture. the have Yes, good more more that would companies for work and in certain public areas, Rockies, we for so Permian Oklahoma, in

a good it's So mix of both.

Charles Robertson

And do then on the that midstream side, the on challenges executing the What obviously, processing additions and to throughout looking there. year? as see for you

Larry Pinkston

well situated Well, current our plant capacities. we're processing with

improves As recovering forward, pricing for we'll ethane again. going start ethane

So forward the go both excited as and pricing. and pretty upside is our situation today volumes we we're what with about

Operator

Instructions] further I [Operator Larry. no am questions, seeing And

to for remarks. So closing over it I'll back you turn

Larry Pinkston

Thank exciting. XXXX, right. wasn't out quarter. us for joining All a of us coming very everybody for a I year thank want It John. exciting which was you, this very It just morning. to very exciting was

It joining We lined are is morning. future. the should look you much We a year. appreciate forward well be good pretty Thanks. to very up looking with We you some it more everybody. in forward But us this in visiting XXXX. thank -- have to

Operator

concludes you that for gentlemen, now and today's Ladies may conference. participating, you. disconnect. you Thank Thank and

Unit (UNTC) 23 Feb 182017 Q4 Earnings call transcript