Unit Corporation (NYSE:UNT) reported net income of $34.5 million, or
$0.73 per diluted share, for the three months ended September 30, 2010.
For the same period in 2009, net income was $31.4 million, or $0.66 per
diluted share. Total revenues for the third quarter of 2010 were $218.1
million (39% contract drilling, 44% oil and natural gas, and 17%
mid-stream), compared to $167.4 million (30% contract drilling, 53% oil
and natural gas, and 16% mid-stream) for the third quarter of 2009.
For the first nine months of 2010, Unit reported net income of $102.8
million, or $2.17 per diluted share. For the same period in 2009 it
reported a net loss of $84.0 million, or $1.79 per diluted share. The
2009 results included a noncash ceiling test write down of $281.2
million ($175.1 million after tax, or $3.72 per diluted share). The
ceiling test write down reduced the carrying value of Unit’s oil and
natural gas properties and was required because of significantly lower
commodity prices existing at the end of the first quarter 2009. Without
the ceiling test write down, net income for the first nine months of
2009 would have been $91.1 million, or $1.93 per diluted share (see
Non-GAAP Financial Measures below).
Total revenues for the first nine months of 2010 were $629.3 million
(35% contract drilling, 46% oil and natural gas, and 18% mid-stream),
compared to $532.6 million (35% contract drilling, 50% oil and natural
gas, and 13% mid-stream) for the same period in 2009.
CONTRACT DRILLING SEGMENT INFORMATION
The average number of drilling rigs used in the third quarter of 2010
was 65.4, an increase of 89% over the third quarter of 2009, and an
increase of 13% over the second quarter of 2010.
Per day drilling rig rates for the third quarter of 2010 averaged
$15,814, up 3% (or $454) from the third quarter of 2009, and up 6% (or
$899) from the second quarter of 2010.
Average per day operating margin for the third quarter of 2010 was
$7,056 (before elimination of intercompany drilling rig profit of $2.9
million). This compares to $6,433 (before elimination of intercompany
drilling rig profit of $0.1 million) for the third quarter of 2009, an
increase of 10%, or $623. As compared to the second quarter of 2010
($5,101 before elimination of intercompany drilling rig profit of $1.5
million) third quarter 2010 margin increased 38% or $1,955 – in each
case with regard to the elimination of intercompany drilling rig profit
see Non-GAAP Financial Measures below. Included in the average operating
margin amount for the third quarter of 2009 was an approximated per day
amount of $1,104 for early termination fees resulting from the
cancellation of long-term contracts. No early termination fees were
included in the third quarter 2010 results.
For the first nine months of 2010, Unit averaged 58.2 working drilling
rigs, up 47% from 39.6 during the first nine months of 2009.
Average per day operating margin for the first nine months of 2010 was
$5,649 (before elimination of intercompany drilling rig profit of $4.7
million) as compared to $7,403 (before elimination of intercompany
drilling rig profit of $1.2 million) for the first nine months of 2009,
a decrease of 24% (in each case with regard to the elimination of
intercompany drilling rig profit see Non-GAAP Financial Measures below).
Included in the average operating margin amount for the first nine
months of 2010 and 2009 was an approximated per day amount of $9 and
$368, respectively, for early termination fees resulting from the
cancellation of long-term contracts. Excluding early termination fees,
average operating margins for the first nine months of 2010 were $5,640
per day, a decrease of $1,395 per day or 20% as compared to $7,035 per
day for the first nine months of 2009.
The following table illustrates Unit’s drilling rig count at the end of
each period and average utilization rate during the period:
3rd Qtr 10 | 2nd Qtr 10 | 1st Qtr 10 | 4th Qtr 09 | 3rd Qtr 09 | 2nd Qtr 09 | 1st Qtr 09 | 4th Qtr 08 | 3rd Qtr 08 | ||||||||||
Rigs | 123 | 123 | 125 | 130 | 130 | 131 | 131 | 132 | 131 | |||||||||
Utilization | 54% | 47% | 40% | 28% | 26% | 24% | 40% | 74% | 85% | |||||||||
Larry Pinkston, Unit’s Chief Executive Officer and President, said: “The
third quarter of 2010 was the fourth consecutive quarter in which we
increased the average number of our working drilling rigs over the
previous quarter. These increases are primarily the result of increases
in drilling of oil related horizontal or directional wells.
Approximately 67% of our drilling rigs working today are drilling for
oil or natural gas liquids and approximately 88% are drilling horizontal
or directional wells. Because of the increases in demand for drilling
rigs capable of drilling horizontal wells, we are building four new
drilling rigs. Two of the drilling rigs we anticipate completing during
the first quarter of 2011 and the remaining two sometime during the
third quarter of 2011. All four of these drilling rigs are 1,500
horsepower, diesel-electric, and will be operating under long-term
contracts in the Bakken play.
“During the quarter, we entered into a contract with an unaffiliated
third-party under which we conveyed three of our idle mechanical
drilling rigs and, in exchange, we received a 1,200 horsepower electric
drilling rig and $5.3 million. The three sold drilling rigs ranged in
horsepower from 650 to 1,000. The transaction closed in October and
resulted in an estimated gain of $3.5 million. Because of this
transaction, our drilling rig fleet now totals 121. Currently, 74 of our
drilling rigs are under contract. Long-term contracts (contracts with
original terms ranging from six months to two years in length) are in
place for 43 of the 74 contracted drilling rigs. Of these contracts,
eight are up for renewals at various times during the remainder of 2010,
34 are up for renewals during 2011 and one is up for renewal in 2012. We
have increased our 2010 anticipated capital expenditures for this
segment from $76 million to $130 million.”
OIL AND NATURAL GAS SEGMENT INFORMATION
-
Drilled 39 and 105 gross wells during the third quarter and first nine
months of 2010, respectively. -
Approximately 383 MMcfe of production from its Segno field was shut-in
during July of 2010 because of operational issues at a third-party
processing facility. -
Secured the necessary fracing services needed to overcome by year-end
the backlog of its wells waiting on completions in the Granite Wash
and Marmaton plays. -
Currently anticipates it will drill 160 wells during 2010 with a
revised production estimate of 59.0 to 60.0 Bcfe.
Third quarter 2010 oil production was 379,000 barrels, in comparison to
300,000 barrels for the same period of 2009, up 26%. Natural gas liquids
(NGLs) production during the third quarter of 2010 was 378,000 barrels,
an increase of 6% when compared to 358,000 barrels for the same period
of 2009. Third quarter 2010 natural gas production was down 3% to 10.4
billion cubic feet (Bcf) compared to 10.7 Bcf for the comparable quarter
of 2009. Third quarter 2010 equivalent production totaled 14.9 Bcfe, up
2% from the third quarter of 2009 and up 7% from the second quarter of
2010. The unexpected shut-in of production due to operational issues at
a third-party facility that processes Unit’s Segno field production
negatively impacted production during the third quarter of 2010.
Excluding the impact of the shut-in, third quarter 2010 production would
have increased 8% over the second quarter of 2010 and 4% over the third
quarter of 2009. Total production for the first nine months of 2010 was
43.0 Bcfe, down 7% over the 46.4 Bcfe produced during the same period in
2009.
Unit’s average natural gas price, including the effects of hedges, for
the third quarter of 2010 decreased 2% to $5.55 per thousand cubic feet
(Mcf) as compared to $5.67 per Mcf for the third quarter of 2009. Unit’s
average oil price, including the effects of hedges, for the third
quarter of 2010 was $66.94 per barrel compared to $59.55 per barrel for
the third quarter of 2009. Unit’s average NGLs price, including the
effects of hedges, for the third quarter of 2010 was $31.67 per barrel
compared to $22.99 per barrel for the third quarter of 2009, up 38%.
For the first nine months of 2010, Unit’s average natural gas price,
including the effects of hedges, increased 3% to $5.71 per Mcf as
compared to $5.53 per Mcf for the first nine months of 2009. Unit’s
average oil price, including the effects of hedges, for the first nine
months of 2010 was $67.05 per barrel compared to $54.77 per barrel
during the first nine months of 2009, a 22% increase. Unit’s average
NGLs price, including the effects of hedges, for the first nine months
of 2010 was $35.91 per barrel compared to $21.80 per barrel during the
first nine months of 2009, a 65% increase.
For the fourth quarter of 2010, approximately 63% of Unit’s anticipated
average daily natural gas production is hedged, 49% of its anticipated
daily oil production is hedged, and 11% of its anticipated daily NGLs
production is hedged. The natural gas production is hedged under swap
contracts at a comparable average NYMEX price of $6.95. The average
basis differential for the swaps is ($0.66). Of the oil hedges, 60% are
under swap contracts at an average price of $61.36 per barrel and 40%
are under a collar contract with a floor of $67.50 per barrel and a
ceiling of $81.53 per barrel. The NGLs production is hedged under swap
contracts at an average price of $41.12 per barrel.
For 2011, Unit has hedged 15,000 MMBtu per day of its natural gas
production, 2,500 Bbls per day of its oil production and 504 Bbls per
day of its NGLs production. The natural gas production is hedged under
swap contracts at a comparable average NYMEX price of $5.56. The average
basis differential for the swaps is ($0.14). The oil production is
hedged under swap contracts at an average price of $80.32 per barrel.
The NGLs production is hedged under swap contracts at an average price
of $40.74 per barrel.
For 2012, Unit has hedged approximately 15,000 MMBtu per day of its
natural gas production and 1,500 Bbls per day of its oil production. The
natural gas production is hedged under swap contracts at a comparable
average NYMEX price of $5.90. The average basis differential for the
swaps is ($0.28). The oil production is hedged under swap contracts at
an average price of $82.49 per barrel.
The following table illustrates Unit’s production and certain other
results for the periods indicated:
3rd Qtr 10 | 2nd Qtr 10 | 1st Qtr 10 | 4th Qtr 09 | 3rd Qtr 09 | 2nd Qtr 09 | 1st Qtr 09 | 4th Qtr 08 | 3rd Qtr 08 | ||||||||||
Production, Bcfe |
14.9 |
14.0 |
14.1 |
14.3 |
14.7 |
15.4 |
16.3 |
16.8 |
15.9 |
|||||||||
Production, MMcfe/day |
162.2 |
153.3 |
156.8 |
155.8 |
159.4 |
169.6 |
180.9 |
182.6 |
172.4 |
|||||||||
Realized price, Mcfe (1) |
$6.36 |
$6.37 |
$6.82 |
$6.12 |
$5.92 |
$5.75 |
$5.48 |
$6.21 |
$9.49 |
|||||||||
Wells Drilled |
39 |
39 |
27 |
37 |
21 |
16 |
21 |
67 |
82 |
|||||||||
Success Rate |
85% |
92% |
96% |
92% |
90% |
100% |
90% |
90% |
89% |
|||||||||
(1) Realized price includes oil, natural gas liquids, natural gas and
associated hedges.
In the Marmaton horizontal oil play located in Beaver County, Oklahoma,
Unit added a second company rig in early September and plans to keep two
drilling rigs working during the fourth quarter and throughout 2011. At
the end of the third quarter, Unit was waiting on the completion of ten
horizontal wells. The completion of these wells during the third quarter
was delayed due to the lack of availability of third party completion
services. Unit was able to successfully frac eight of the 10 wells by
the end of October. The first three wells are online and producing at
peak daily rates of 497, 484, and 169 barrels of oil equivalent per day
with an average working interest of 91%. Completion of the remaining
five wells started in the latter part of October. Unit has scheduled two
frac dates in November, three in December and is currently working to
secure about three frac dates per month for 2011 in this play.
In connection with its drilling operations in the Marmaton, Unit has
been able to reduce the average drilling days from 27 to 20 per well.
Unit continues to improve the drilling process, resulting in the last
four wells being drilled in an average of 13 days, which equates to a
cost reduction of approximately $630,000 per well when compared to 27
days to drill.
In the Granite Wash play located in the Texas Panhandle, the company
added a fourth Unit rig in mid September as part of its horizontal well
program in this play. During the third quarter, Unit completed three
horizontal wells, all from the Granite Wash “B” interval. The Webb A-4H
(83% working interest (WI)) was fracture stimulated in late September
with subsequent first gas sales in early October. The well is currently
producing approximately 691 barrels of oil per day, 449 barrels of NGLs
per day, and 4.1 MMcf per day with 1,200 pounds of flowing casing
pressure or an equivalent rate of 10.9 MMcf per day. The rate is
continuing to increase as a result of increasing the choke size and
recovering more of the frac load water. In the same prospect, the Webb
#3H (83% WI) was also fracture stimulated in late September, but due to
a down-hole restriction the well does not appear to be producing at full
capacity. The peak daily rate for this well is currently approximately
165 barrels of oil per day, 240 barrels of NGLs per day and 2.2 MMcf per
day or an equivalent rate of 4.6 MMcf per day. Plans are to drill out
the packer ports in the wellbore lateral in the next couple of weeks
with the anticipation that rates from this well will increase to a
similar rate currently being produced from the Webb A-4H. The Temple “A”
1H (48% WI) had first sales in late August at a peak daily rate of
approximately 182 barrels of oil per day, 105 barrels of NGLs per day
and 0.96 MMcf per day or an equivalent rate of 2.8 MMcf per day. The
lower rate is attributable to a shorter lateral length of only 2,000
feet and higher water cut due to communication during the fracture
treatment with a wet sand located beneath the pay sand. A submersible
pump was recently installed to help lift the water in an attempt to
increase the production rate of the well. In late October, Unit frac’d
two additional horizontal Granite Wash “A” wells. Both are currently
flowing back the frac water load. In addition, Unit secured two frac
dates in both November and December to complete wells currently being
drilled. In total, Unit anticipates completing six Granite Wash
horizontal wells during the fourth quarter 2010 as compared to one
during the first quarter, one in the second quarter and three in the
third quarter. We plan to run a three to four rig horizontal Granite
Wash program in 2011 which should result in two to three wells coming
online per month.
In the Segno play located in Southeast Texas, Unit is running two Unit
rigs with plans to continue that program through most of 2011. During
the third quarter, Unit completed three new producers from various
Wilcox zones. The Black Stone “G” #1 (100% WI) had first sales in late
August at an initial rate of approximately 3.5 MMcf per day, 120 barrels
of oil per day and 250 barrels of NGLs per day with 6,600 pounds of
flowing tubing pressure or an equivalent rate of 5.7 MMcf per day. The
Wildwood #A-3 (100% WI) was dual completed in late October from two
Upper Wilcox zones flowing at a combined rate of approximately 300
barrels of oil per day, 149 barrels of NGLs per day and 2.1 MMcf per day
or an equivalent rate of 5.5 MMcf per day. The Wildwood B #3 (100% WI)
also had first sales in late October flowing approximately 370 barrels
of oil per day, 24 barrels of NGLs per day and 0.34 MMcf per day or an
equivalent rate of 2.7 MMcf per day. In addition, the BP “L” #1 (100%
WI) was completed during the second quarter but has been shut-in pending
a pipeline connection. This well should be online in mid November with
an estimated initial pre frac rate of approximately 2.1 MMcf per day, 90
barrels of oil per day and 149 barrels of NGLs per day.
In Shelby County, Texas, a second horizontal Haynesville well, the KC GU
#1H (59% WI) has drilled 4,000 feet of Haynesville lateral and is
scheduled to be frac’d in early February 2011. In Harrison County,
Texas, the Double K #1H (33% WI) had first gas sales in late September
from the Cotton Valley sand at initial rates of approximately 8.8 MMcf
per day and 127 barrels of oil per day with 2,120 pounds flowing tubing
pressure. The lateral length was 4,000 feet and the well was fracture
stimulated in 10 stages and 2.3 million pounds of sand. An offset is
planned to begin before the end of this year.
In the Bakken play located in North Dakota, the Henderson #4-25H (10%
WI) was completed in early August at an initial rate of approximately
1,313 barrels of oil per day. The Andrecovich #5-16/17H (18% WI) had
first oil sales in mid September at an initial peak rate of
approximately 2,429 barrels of oil per day. The State #1-16/21H (13% WI)
had initial sales in late October at a peak rate of approximately 2,579
barrels of oil per day. Unit anticipates working two to three rigs
drilling on its North Dakota Bakken leasehold during the fourth quarter
and into 2011.
In the Panola prospect, located in Southeast Oklahoma, the Austin #1
(31% WI) had first gas sales in late September from the Spiro sand
formation at an initial rate of approximately 5.1 MMcf per day with
2,645 pounds of flowing tubing pressure.
Pinkston said: “The first nine months of 2010 has been challenging for
us with regard to carrying out the work we had planned for our 2010
drilling program. During the first, second, and third quarters of 2010,
we drilled 27 wells, 39 wells and 39 wells, respectively. Our first
quarter drilling activity was hampered by unusually wet weather,
especially in the Texas Panhandle Granite Wash play, and operational
delays as we shifted to drilling primarily horizontal wells. The delays
in getting wells online are primarily due to delays in securing fracing
services and connections to gathering systems. During the third quarter,
we undertook steps that we now feel will allow us to obtain these
required services so that by the end of the year we should have
eliminated the unusually large backlog of our well completions,
especially in the Granite Wash and Marmaton plays. Additionally, we have
scheduled fracing services for 2011 for all the wells we currently
anticipate we will drill in the Granite Wash play. As a result of timing
issues regarding the completion of wells scheduled to begin production
in the third quarter and early in the fourth quarter, we are revising
our 2010 production guidance to approximately 59.0 to 60.0 Bcfe,
although actual results will continue to be subject to the timing of
third party services. The number of wells we plan to participate in
drilling and the level of capital expenditures for 2010 is 160 wells and
$344 million, respectively.”
MID-STREAM SEGMENT INFORMATION
-
Increased by 3% and 8%, respectively, its third quarter 2010 per day
liquids sold volumes and processing volumes over the same period in
2009. -
Committed to build a 16-mile pipeline and a compressor station in
Preston County, West Virginia and signed an agreement to transport gas
on this system for an unaffiliated third party.
Third quarter of 2010 per day processing volumes were 84,175 MMBtu while
liquids sold volumes were 260,519 gallons per day, an increase of 8% and
3%, respectively, over the third quarter of 2009. Third quarter 2010 per
day gathering volumes were 183,161 MMBtu, up 2% over the third quarter
of 2009. Operating profit (as defined in the Selected Financial and
Operational Highlights) for the third quarter was $6.7 million, an
increase of 8% from the third quarter of 2009, primarily due to
increased processing margins resulting from increased liquids prices.
For the first nine months of 2010, processing volumes were 81,157 MMBtu
per day and liquids sold volumes were 264,679 gallons per day, an
increase of 8% and 12%, respectively, over the first nine months of
2009. Gathering volumes for the first nine months of 2010 were 182,390
MMBtu per day, a 2% decrease over the first nine months of 2009.
The following table illustrates certain results from this segment’s
operations for the periods indicated:
3rd Qtr 10 | 2nd Qtr 10 | 1st Qtr 10 | 4th Qtr 09 | 3rd Qtr 09 | 2nd Qtr 09 | 1st Qtr 09 | 4th Qtr 08 | 3rd Qtr 08 | ||||||||||
Gas gathered MMBtu/day |
183,161 | 183,858 | 180,117 | 177,145 | 179,047 | 187,666 | 192,320 | 187,585 | 195,914 | |||||||||
Gas processed MMBtu/day |
84,175 | 82,699 | 76,513 | 77,501 | 77,923 | 75,481 | 72,650 | 72,491 | 71,260 | |||||||||
Liquids sold
Gallons/day |
260,519 | 279,736 | 253,707 | 263,668 | 251,830 | 239,121 | 218,762 | 197,428 | 199,805 | |||||||||
Unit’s mid-stream segment operates three natural gas treatment plants,
owns and operates eight processing plants, 34 active gathering systems
and approximately 853 miles of pipeline.
Pinkston said: “Gas processed volumes, liquids sold volumes as well as
gas gathered volumes all continued to increase and remained strong in
the third quarter. We are in the final stages of completing a 50 MMcf
per day turbo-expander natural gas processing plant at our Hemphill
facility in Canadian, Texas. This gas processing plant should be
completed and operational in the fourth quarter of 2010. On completion
of this new natural gas processing plant, the total processing
capacity at our Hemphill facility will increase to approximately 100
MMcf per day. In connection with our Appalachian operations, we recently
committed to build a 16-mile, 16″ pipeline and a compressor
station in Preston County, West Virginia, which will have a capacity of
approximately 200 MMcf per day. Preliminary right-of-way and
environmental work is nearing completion and construction is scheduled
to begin during the first quarter of 2011 with the facility
being operational by mid-2011. We have signed an agreement to transport
gas on this system for an unaffiliated third party.”
FINANCIAL INFORMATION
Unit ended the third quarter of 2010 with working capital of $35.5
million, long-term debt of $135.0 million, and a debt to capitalization
ratio of 7%. Under its credit facility, the amount available to be
borrowed is the lesser of the amount the company elects as the
commitment amount (currently $325 million) or the value of the borrowing
base as determined by the lenders (currently $500 million), but, in
either event, not to exceed the maximum credit facility amount of $400
million.
MANAGEMENT COMMENT
Larry Pinkston said: “We are benefitting from increases in oil related
demand for drilling by exploration and production companies as we add to
our existing drilling rig fleet and refurbish and upgrade certain
drilling rigs. Our mid-stream segment continues to grow with new
pipeline projects and the expansion of existing facilities. While our
overall 2010 exploration activities have progressed slower than we would
like, we believe we have overcome many of the obstacles and the focus of
our exploration operations will be on oil and natural gas liquids rich
plays like the Granite Wash and Marmaton.”
WEBCAST
Unit will webcast its third quarter earnings conference call live over
the Internet on November 4, 2010 at 10:00 a.m. Central Time (11:00 a.m.
Eastern). 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.
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 private Securities Litigation Reform Act. All statements, other
than statements of historical facts, included in this release that
address activities, events or developments that the Company expects or
anticipates will or may occur in the future are forward-looking
statements. A number of risks and uncertainties could cause actual
results to differ materially from these statements, including the impact
that the current decline in wells being drilled will have on production
and drilling rig utilization, productive capabilities of the Company’s
wells, future demand for oil and natural gas, future drilling rig
utilization and dayrates, projected growth of the Company’s oil and
natural gas production, oil and gas reserve information, as well as its
ability to meet its future reserve replacement goals, anticipated gas
gathering and processing rates and throughput volumes, the prospective
capabilities of the reserves associated with the Company’s inventory of
future drilling sites, availability and timing of obtaining third party
services used in the drilling or completion of its oil and gas wells,
anticipated oil and natural gas prices, the number of wells to be
drilled by the Company’s exploration segment, development, operational,
implementation and opportunity risks, possible delays caused by limited
availability of third party services needed in the course of its
operations, possibility of future growth opportunities, and other
factors described from time to time in the Company’s publicly available
SEC reports. The Company assumes no obligation to update publicly such
forward-looking statements, whether as a result of new information,
future events or otherwise.
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, | ||||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||||
Statement of Operations: | |||||||||||||||||
Revenues: | |||||||||||||||||
Contract drilling | $ | 85,004 | $ | 49,801 | $ | 217,919 | $ | 188,383 | |||||||||
Oil and natural gas | 96,562 | 88,894 | 286,751 | 267,399 | |||||||||||||
Gas gathering and processing | 37,429 | 26,228 | 114,908 | 71,604 | |||||||||||||
Other, net | (879 | ) | 2,507 | 9,691 | 5,180 | ||||||||||||
Total revenues | 218,116 | 167,430 | 629,269 | 532,566 | |||||||||||||
Expenses: | |||||||||||||||||
Contract drilling: | |||||||||||||||||
Operating costs | 45,406 | 29,456 | 132,847 | 109,565 | |||||||||||||
Depreciation | 18,469 | 10,923 | 48,700 | 33,803 | |||||||||||||
Oil and natural gas: | |||||||||||||||||
Operating costs | 27,092 | 20,781 | 75,943 | 62,846 | |||||||||||||
Depreciation, depletion | |||||||||||||||||
and amortization | 30,091 | 25,645 | 81,746 | 89,800 | |||||||||||||
Impairment of oil and natural |
— |
— |
— |
281,241 |
|||||||||||||
Gas gathering and processing: | |||||||||||||||||
Operating costs | 30,743 | 20,012 | 92,407 | 59,888 | |||||||||||||
Depreciation | |||||||||||||||||
and amortization | 3,823 | 3,995 | 11,746 | 12,166 | |||||||||||||
General and administrative | 6,637 | 5,506 | 19,372 | 17,088 | |||||||||||||
Interest, net | — | 1 | — | 539 | |||||||||||||
Total expenses | 162,261 | 116,319 | 462,761 | 666,936 | |||||||||||||
Income (Loss) Before Income Taxes | 55,855 | 51,111 | 166,508 | (134,370 | ) | ||||||||||||
Income Tax Expense (Benefit): | |||||||||||||||||
Current | (8,553 | ) | 8,571 | (2,488 | ) | 9,818 | |||||||||||
Deferred | 29,917 | 11,091 | 66,177 | (60,175 | ) | ||||||||||||
Total income taxes | 21,364 | 19,662 | 63,689 | (50,357 | ) | ||||||||||||
Net Income (Loss) | $ | 34,491 | $ | 31,449 | $ | 102,819 | $ | (84,013 | ) | ||||||||
Net Income (Loss) per Common Share: |
|||||||||||||||||
Basic | $ | 0.73 | $ | 0.67 | $ | 2.18 | $ | (1.79 | ) | ||||||||
Diluted | $ | 0.73 | $ | 0.66 | $ | 2.17 | $ | (1.79 | ) | ||||||||
Weighted Average Common | |||||||||||||||||
Shares Outstanding: | |||||||||||||||||
Basic | 47,358 | 47,011 | 47,217 | 46,980 | |||||||||||||
Diluted | 47,495 | 47,419 | 47,384 | 46,980 | |||||||||||||
September 30, | December 31, | |||||||
2010 | 2009 | |||||||
Balance Sheet Data: | ||||||||
Current assets | $ | 158,160 | $ | 128,095 | ||||
Total assets | $ | 2,544,885 | $ | 2,228,399 | ||||
Current liabilities | $ | 122,680 | $ | 105,147 | ||||
Long-term debt | $ | 135,000 | $ | 30,000 | ||||
Other long-term liabilities | $ | 90,774 | $ | 81,126 | ||||
Deferred income taxes | $ | 513,563 | $ | 446,316 | ||||
Shareholders’ equity | $ | 1,682,868 | $ | 1,565,810 | ||||
Nine Months Ended September 30, | |||||||||
2010 | 2009 | ||||||||
Statement of Cash Flows Data: | |||||||||
Cash Flow From Operations before Changes | |||||||||
in Operating Assets and Liabilities (1) | $ | 309,861 | $ | 282,260 | |||||
Net Change in Operating Assets and Liabilities | (25,965 | ) | 140,310 | ||||||
Net Cash Provided by Operating Activities | $ | 283,896 | $ | 422,570 | |||||
Net Cash Used in Investing Activities | $ | (393,804 | ) | $ | (204,637 | ) | |||
Net Cash Provided by (Used in) Financing Activities |
$ |
109,901 |
$ |
(217,371 | ) | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
Contract Drilling Operations Data: | ||||||||||||||||||||
Rigs Utilized | 65.4 | 34.6 | 58.2 | 39.6 | ||||||||||||||||
Operating Margins (2) | 47 | % | 41 | % | 39 | % | 42 | % | ||||||||||||
Operating Profit Before Depreciation (2) ($MM) | $ | 39.6 | $ | 20.3 | $ | 85.1 | $ | 78.8 | ||||||||||||
Oil and Natural Gas Operations Data: | ||||||||||||||||||||
Production: | ||||||||||||||||||||
Oil – MBbls | 379 | 300 | 1,002 | 991 | ||||||||||||||||
Natural Gas Liquids – MBbls | 378 | 358 | 1,143 | 1,142 | ||||||||||||||||
Natural Gas – MMcf | 10,385 | 10,713 | 30,121 | 33,575 | ||||||||||||||||
Average Prices: | ||||||||||||||||||||
Oil price per barrel received | $ | 66.94 | $ | 59.55 | $ | 67.05 | $ | 54.77 | ||||||||||||
Oil price per barrel received, excluding hedges | $ | 72.52 | $ | 64.75 | $ | 74.11 | $ | 51.76 | ||||||||||||
NGLs price per barrel received | $ | 31.67 | $ | 22.99 | $ | 35.91 | $ | 21.80 | ||||||||||||
NGLs price per barrel received, excluding hedges | $ | 31.27 | $ | 25.23 | $ | 35.70 | $ | 22.51 | ||||||||||||
Natural Gas price per Mcf received | $ | 5.55 | $ | 5.67 | $ | 5.71 | $ | 5.53 | ||||||||||||
Natural Gas price per Mcf received, excluding hedges | $ | 3.94 | $ | 2.96 | $ | 4.27 | $ | 3.06 | ||||||||||||
Operating Profit Before DD&A and | ||||||||||||||||||||
Impairment (2) ($MM) | $ | 69.5 | $ | 68.1 | $ | 210.8 | $ | 204.6 | ||||||||||||
Mid-Stream Operations Data: | ||||||||||||||||||||
Gas Gathering – MMBtu/day | 183,161 | 179,047 | 182,390 | 186,296 | ||||||||||||||||
Gas Processing – MMBtu/day | 84,175 | 77,923 | 81,157 | 75,371 | ||||||||||||||||
Liquids Sold – Gallons/day | 260,519 | 251,830 | 264,679 | 236,692 | ||||||||||||||||
Operating Profit Before Depreciation | ||||||||||||||||||||
and Amortization (2) ($MM) | $ | 6.7 | $ | 6.2 | $ | 22.5 | $ | 11.7 |
_____________
(1) The company considers its cash flow from operations before changes
in operating assets and liabilities an important measure in meeting the
performance goals of the company (see Non-GAAP Financial Measures below).
(2) Operating profit before depreciation is calculated by taking
operating revenues by segment less operating expenses excluding
depreciation, depletion, amortization and impairment, general and
administrative and interest expense. Operating margins are calculated by
dividing operating profit by segment revenue.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted
account principles (“GAAP”). We believe certain non-GAAP performance
measures provide users of our financial information and our management
additional meaningful information to evaluate the performance of our
company.
This press release includes net income excluding the effect of the
impairment of our oil and natural gas properties, earnings per share
excluding the effect of the impairment of our oil and natural gas
properties, cash flow from operations before changes in operating assets
and liabilities and our drilling segment’s average daily operating
margin before elimination of drilling rig profit.
Below is a reconciliation of GAAP financial measures to non-GAAP
financial measures for the three and nine months ended September 30,
2010 and 2009. Non-GAAP financial measures should not be considered by
themselves or a substitute for our results reported in accordance with
GAAP.
Unit Corporation Reconciliation of Net Income and Earnings per Share Excluding the Effect of Impairment of Oil and Natural Gas |
|||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||||
(In thousands except per share amounts) | |||||||||||||||||
Net income excluding impairment of oil and | |||||||||||||||||
natural gas properties: | |||||||||||||||||
Net income (loss) | $ | 34,491 | $ | 31,449 | $ | 102,819 | $ | (84,013 | ) | ||||||||
Add: | |||||||||||||||||
Impairment of oil and natural gas properties | |||||||||||||||||
(net of income tax) | — | — | — | 175,072 | |||||||||||||
Net income excluding impairment of oil and | |||||||||||||||||
natural gas properties | $ | 34,491 | $ | 31,449 | $ | 102,819 | $ | 91,059 | |||||||||
Diluted earnings per share excluding | |||||||||||||||||
impairment of oil and natural gas properties: | |||||||||||||||||
Diluted earnings per share | |||||||||||||||||
Add: | |||||||||||||||||
Diluted earnings per share from impairment |
$ | 0.73 | $ | 0.67 | $ | 2.17 | $ | (1.79 | ) | ||||||||
of oil and natural gas properties | — | (0.01 | ) | — | 3.72 | ||||||||||||
Diluted earnings per share excluding | |||||||||||||||||
impairment of oil and natural gas properties | $ | 0.73 | $ | 0.66 | $ | 2.17 | $ | 1.93 |
________________
We have included the net income excluding impairment of oil and natural
gas properties and diluted earnings per share excluding impairment of
oil and natural gas properties because:
-
We use the adjusted net income to evaluate the operational performance
of the company. -
The adjusted net income is more comparable to earnings estimates
provided by securities analysts. -
The impairment of oil and natural gas properties does not occur on a
recurring basis and the amount and timing of impairments cannot be
reasonably estimated for budgeting purposes and is therefore typically
not included for forecasting operating results.
Unit Corporation Reconciliation of Cash Flow From Operations Before Changes in |
||||||||
Nine Months Ended September 30, |
||||||||
2010 | 2009 | |||||||
(In thousands) | ||||||||
Net cash provided by operating activities | $ | 283,896 | $ | 422,570 | ||||
Subtract: | ||||||||
Net change in operating assets and liabilities | (25,965 | ) | 140,310 | |||||
Cash flow from operations before changes | ||||||||
in operating assets and liabilities | $ | 309,861 | $ | 282,260 |
________________
We have included the cash flow from operations before changes in
operating assets and liabilities because:
-
It is an accepted financial indicator used by our management and
companies in our industry to measure the company’s ability to generate
cash which is used to internally fund our business activities. -
It is used by investors and financial analysts to evaluate the
performance of our company.
Unit Corporation Reconciliation of Average Daily Operating Margin Before |
|||||||||||||||||||
Three Months | Three Months Ended | Nine Months Ended | |||||||||||||||||
Ended June 30, | September 30, | September 30, | |||||||||||||||||
2010 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||
(In thousands except day and daily data) | |||||||||||||||||||
Contract drilling revenue | $ | 72,061 | $ | 85,004 | $ | 49,801 | $ | 217,919 | $ | 188,383 | |||||||||
Contract drilling operating cost | 46,541 | 45,406 | 29,456 | 132,847 | 109,565 | ||||||||||||||
Operating profit from contract drilling | 25,520 | 39,598 | 20,345 | 85,072 | 78,818 | ||||||||||||||
Add: | |||||||||||||||||||
Elimination of intercompany rig profit | |||||||||||||||||||
and bad debt expense | 1,453 | 2,888 | 107 | 4,718 | 1,172 | ||||||||||||||
Operating profit from contract drilling | |||||||||||||||||||
before elimination of intercompany | |||||||||||||||||||
rig profit | 26,973 | 42,486 | 20,452 | 89,790 | 79,990 | ||||||||||||||
Contract drilling operating days | 5,288 | 6,021 | 3,179 | 15,894 | 10,805 | ||||||||||||||
Average daily operating margin before | |||||||||||||||||||
elimination of rig profit | $ | 5,101 | $ | 7,056 | $ | 6,433 | $ | 5,649 | $ | 7,403 |
________________
We have included the average daily operating margin before elimination
of rig profit because:
-
Our management uses the measurement to evaluate the cash flow
performance of our contract drilling segment and to evaluate the
performance of contract drilling management. -
It is used by investors and financial analysts to evaluate the
performance of our company.
Unit Corporation
David T. Merrill, 918-493-7700
Chief
Financial Officer and Treasurer
www.unitcorp.com
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