Unit Corporation (NYSE: UNT) today reported results for the fourth
quarter of 2012. Those results included a previously announced non-cash
ceiling test write down of $167.7 million ($104.5 million after tax, or
$2.17 per diluted share). Because of the ceiling test write down, Unit
incurred a net loss of $56.5 million, or $1.18 per diluted share, for
the fourth quarter of 2012, compared to net income of $51.7 million, or
$1.08 per diluted share for the fourth quarter of 2011. The ceiling test
write down, which reduced the carrying value of the company’s oil and
natural gas properties, resulted from significantly lower commodity
prices during the fourth quarter of 2012. Without the ceiling test write
down, net income for the fourth quarter of 2012 would have been $47.9
million, or $0.99 per diluted share (see Non-GAAP Financial Measures
below). Total revenues for the fourth quarter of 2012 were $331.6
million (50% oil and natural gas, 33% contract drilling, and 17%
mid-stream), compared to $347.3 million (41% oil and natural gas, 41%
contract drilling, and 18% mid-stream) for the fourth quarter of 2011.
For 2012, Unit reported net income of $23.2 million, or $0.48 per
diluted share. For 2011, net income was $195.9 million, or $4.08 per
diluted share. Included in the 2012 results were ceiling test write
downs totaling $283.6 million ($176.6 million after tax, or $3.67 per
diluted share). Excluding these ceiling test write downs, net income for
2012 would have been $199.8 million, or $4.15 per diluted share, a 2%
increase over 2011 (see Non-GAAP Financial Measures below). Total
revenues for 2012 were $1,315.1 million (43% oil and natural gas, 40%
contract drilling, and 17% mid-stream), compared to $1,207.5 million
(43% oil and natural gas, 40% contract drilling, and 17% mid-stream) for
2011.
OIL AND NATURAL GAS SEGMENT INFORMATION
-
During 2012, Unit’s oil and natural gas liquids (NGLs) reserves
increased 9% and 59%, respectively. - Replaced 337% of 2012 production with new reserve additions.
-
Total production for 2012 was 14.2 MMBoe, an increase of 18% over
2011, and included an increase in oil and NGLs production of 28%. -
Production guidance for 2013 is 16.0 to 16.5 MMBoe, an increase of 13%
to 16% over 2012.
The fourth quarter of 2012 marks the 12th consecutive quarter that
liquids (oil and NGLs) production has increased. Unit’s strategy of
drilling oil or NGLs rich wells is evident in its production results.
Liquids production represented 41% of total equivalent production during
the fourth quarter of 2012. Fourth quarter of 2012 total equivalent
production increased 26% over the fourth quarter of 2011 to 4.1 MMBoe,
while total liquids production for the fourth quarter of 2012 increased
25% over the comparable quarter of 2011. Liquids production for the
fourth quarter of 2012 has increased 130% since the first quarter of
2009 when Unit began focusing almost entirely on increasing its liquids
production. Fourth quarter 2012 oil production was 912,000 barrels, in
comparison to 744,000 barrels for the same period of 2011, an increase
of 23%. NGLs production during the fourth quarter of 2012 was 782,000
barrels, an increase of 27% when compared to 616,000 barrels for the
same period of 2011. Fourth quarter 2012 natural gas production
increased 28% to 14.5 billion cubic feet (Bcf) compared to 11.4 Bcf for
the comparable quarter of 2011. Total production for all of 2012 was
14.2 MMBoe, an increase of 18% over the 12.1 MMBoe produced during 2011.
Unit’s average natural gas price for the fourth quarter of 2012
decreased 11% to $3.63 per thousand cubic feet (Mcf) as compared to
$4.09 per Mcf for the fourth quarter of 2011. Unit’s average oil price
for the fourth quarter of 2012 increased 4% to $91.67 per barrel
compared to $88.06 per barrel for the fourth quarter of 2011. Unit’s
average NGLs price for the fourth quarter of 2012 was $33.85 per barrel
compared to $43.47 per barrel for the fourth quarter of 2011, a decrease
of 22%. For 2012, Unit’s average natural gas price decreased 21% to
$3.37 per Mcf as compared to $4.26 per Mcf for 2011. Unit’s average oil
price for 2012 was $92.60 per barrel compared to $87.18 per barrel
during 2011, a 6% increase. Unit’s average NGLs price for 2012 was
$31.58 per barrel compared to $43.64 per barrel during 2011, a 28%
decrease. All prices reflected in this paragraph include the effects of
hedges.
For 2013, Unit has hedged 8,330 Bbls per day of its oil production and
100,000 MMBtu per day of natural gas production. The oil production is
hedged under swap contracts at an average price of $97.94 per barrel. Of
the natural gas production, 80,000 MMBtu per day is hedged with swaps
and 20,000 MMBtu per day is hedged with a collar. The swap transactions
were done at a comparable average NYMEX price of $3.65. The collar
transaction was done at a comparable average NYMEX floor price of $3.25
and ceiling price of $3.72.
The following table illustrates Unit’s production and certain results
for the periods indicated:
| 4th Qtr 12 | 3rd Qtr 12 | 2nd Qtr 12 | 1st Qtr 12 | 4th Qtr 11 | 3rd Qtr 11 | 2nd Qtr 11 | 1st Qtr 11 | 4th Qtr 10 | ||||||||||
| Oil and NGL Production, MBbl |
1,694.1 |
1,545.8 |
1,460.2 |
1,375.2 |
1,359.9 |
1,197.5 |
1,158.6 |
1,034.0 |
925.5 |
|||||||||
|
Natural Gas Production, Bcf |
14.5 |
11.7 |
11.3 |
11.4 |
11.4 |
11.6 |
10.9 |
10.2 |
10.6 |
|||||||||
| Production, MBoe |
4,115 |
3,498 |
3,341 |
3,275 |
3,255 |
3,123 |
2,983 |
2,739 |
2,698 |
|||||||||
| Production, MBoe/day |
44.7 |
38.0 |
36.7 |
36.0 |
35.4 |
33.9 |
32.8 |
30.4 |
29.3 |
|||||||||
|
Realized price,
Boe (1) |
$39.56 |
$37.99 |
$38.49 |
$40.51 |
$42.65 |
$41.75 |
$42.23 |
$40.00 |
$41.58 |
(1) Realized price includes oil, natural gas liquids, natural gas and
associated hedges.
Unit recently acquired approximately 105,000 net acres located primarily
in south central Kansas in the developing Mississippian play. Unit
drilled its first horizontal well in Reno County, Kansas in the second
quarter 2012 to a total measured depth of 8,115 feet including 3,850
feet of lateral. First production occurred in May 2012 with an average
peak 30 day rate of 352 Boe per day consisting of 315 barrels of oil per
day, 12 barrels of NGLs per day, and 150 Mcf of natural gas per day. The
production components were approximately 89% oil, 3% NGLs, and 8%
natural gas. Based on the production profile of this well, the reserve
range estimate for a well in Unit’s Kansas Mississippian play would
range somewhere between 125 MBoe to 180 MBoe. Using this estimated range
and a completed well cost of $3.0 million along with flat pricing of $90
oil, $30 NGLs, and $3.25 natural gas, the typical Mississippian well
would have a calculated rate of return (ROR) of approximately 30% to
66%. In addition to the initial well, Unit drilled three more horizontal
Mississippian wells during 2012. Two of the wells had first sales in
late December 2012, and the third is waiting on pipeline connection. In
the first quarter of 2013, Unit plans to drill three additional wells
before suspending drilling until pipeline infrastructure can be
installed, which is scheduled for mid-year 2013. The estimated
completion date for the pipeline is June 2013. Current plans are to move
one Unit drilling rig back in the Mississippian play starting in July
2013 and possibly adding a second Unit drilling rig in September 2013.
For 2013, Unit anticipates having first sales on approximately 13 gross
wells and spending approximately $40 million for drilling and completion
in its Mississippian play.
During 2012, Unit drilled 32 gross wells with an average working
interest of 84% in its Marmaton horizontal oil play, located in Beaver
County, Oklahoma. Thirty of the wells were short laterals with
approximately 4,500 feet of lateral length and two of the wells were
extended laterals with approximately 9,700 feet of lateral length. The
net production from Unit’s Marmaton play for the fourth quarter of 2012
averaged 3,424 barrels of oil per day, 528 barrels of NGLs per day, and
1,775 Mcf of natural gas per day, an increase of 15% over the third
quarter 2012 and a 61% year-over-year increase between 2012 and 2011.
Included in the year end reserve calculation are adjustments taken for
wellbore communication that some of the wells have experienced. The
company has adjusted its drilling program to address this issue. For
2013, Unit anticipates running a two drilling rig program in this play
that should result in approximately 40 gross wells at an approximate net
cost of $90 million. Due to current well spacing limitations associated
with drilling extended lateral wells, the majority of 2013 wells are
anticipated to be drilled as short lateral wells. Unit currently has
leases on approximately 112,000 net acres in this play with about 44% of
the leasehold held by production.
In its Granite Wash (GW) play located in the Texas Panhandle, Unit
drilled and operated 29 gross horizontal wells during 2012 with an
average working interest of 87%. The net production from Unit’s GW play
for the fourth quarter of 2012 averaged 1,822 barrels of oil per day,
4,988 barrels of NGLs per day and 46.2 MMcf of natural gas per day, or
an equivalent rate of 87.0 MMcfe per day, an increase of 43% over the
third quarter 2012 and a 41% year-over-year increase between 2012 and
2011. Unit expects to work four to six Unit drilling rigs drilling
horizontal wells in both the newly acquired Noble leasehold and Unit’s
existing leasehold in 2013, which equates to approximately 37 operated
gross GW wells at an approximate net cost of $150 million. Unit
currently owns leases on approximately 46,000 net acres with about 80%
of the leasehold held by production.
In Unit’s Wilcox play, located primarily in Polk, Tyler, and Hardin
Counties, Texas, Unit operated and completed 11 gross wells in 2012 with
an average working interest of 88% and a success rate of 82%. Three of
the 11 wells were completed in Unit’s “Gilly” Lower Wilcox field
bringing the total number of wells completed in that field to five at
year end 2012. Approximately 18% or 30 net Bcfe of the anticipated 168
net Bcfe (242 gross Bcfe) potential reserves are booked as proved
producing or proved behind pipe at year end 2012. For 2013, Unit plans
to run one Unit rig which should drill approximately 12 gross wells at
an approximate net cost of $60 million. Seven of the 12 wells are
planned to be drilled in the “Gilly” Lower Wilcox Field and the
remaining five wells will be drilled on other Wilcox prospects.
On September 17, 2012, Unit closed its purchase of certain oil and
natural gas assets from Noble Energy, Inc., with an effective date of
April 1, 2012. The acquisition included various producing oil and gas
properties and approximately 83,000 net acres primarily in the Granite
Wash, Cleveland, and various other plays in western Oklahoma and the
Texas Panhandle. The adjusted purchase price was $592.6 million. The
acquisition adds approximately 24,000 net acres to Unit’s Granite Wash
core area in the Texas Panhandle with significant potential, including
approximately 600 possible horizontal drilling locations. The total
non-Granite Wash acreage acquired in the Texas Panhandle and western
Oklahoma is approximately 59,000 net acres of which 95% is held by
production and is characterized by high working interest and
operatorship. Unit also received four gathering systems as part of the
transaction and other miscellaneous assets.
Also in September 2012, Unit sold its interest in certain Bakken
properties (representing approximately 35% of its total acreage in the
Bakken play). The proceeds, net of related expenses were $226.6 million.
In addition, Unit sold certain oil and natural gas assets in Brazos and
Madison Counties, Texas for approximately $44.1 million.
Larry Pinkston, Unit’s Chief Executive Officer and President, said: “We
are pleased with the results from our exploration operations, and we are
excited about the acquisition from Noble and the growth opportunities
that it provides. This acquisition more than doubled our acreage in our
Granite Wash Texas Panhandle core area. It also provides us with
additional inventory of drilling opportunities that will allow us to
significantly grow our oil and liquids-rich gas production in the
Anadarko Basin. Our recent divestiture of some non-core properties was a
strategic move to enhance our overall liquidity for future growth
opportunities. Unit’s annual production guidance for 2013 is
approximately 16.0 to 16.5 MMBoe, an increase of 13% to 16% over 2012.”
CONTRACT DRILLING SEGMENT INFORMATION
The average number of drilling rigs used in the fourth quarter of 2012
was 64.0, a decrease of 22% from the fourth quarter of 2011, and a
decrease of 13% from the third quarter of 2012. Per day drilling rig
rates for the fourth quarter of 2012 averaged $19,828, an increase of
3%, or $498, from the fourth quarter of 2011, and a 1% decrease, or
$161, from the third quarter of 2012. Average per day operating margin
for the fourth quarter of 2012 was $7,838 (before elimination of
intercompany drilling rig profit of $2.6 million). This compares to
$9,037 (before elimination of intercompany drilling rig profit and bad
debt expense of $4.9 million) for the fourth quarter of 2011, a decrease
of 13%, or $1,199. As compared to the third quarter of 2012 ($9,672
before elimination of intercompany drilling rig profit of $4.0 million),
fourth quarter 2012 operating margin decreased 19% or $1,834 (in each
case regarding the elimination of intercompany drilling rig profit see
Non-GAAP Financial Measures below). Approximately $1,007 per day of the
third quarter 2012 average operating margin resulted from early
termination fees resulting from the cancellation of certain long-term
contracts.
For all of 2012, Unit averaged 73.9 drilling rigs working, a decrease of
3% from 76.1 drilling rigs working during 2011. Average per day
operating margin for all of 2012 was $9,578 (before elimination of
intercompany drilling rig profit of $15.6 million) as compared to $8,496
(before elimination of intercompany drilling rig profit and bad debt
expense totaling $19.9 million) for 2011, an increase of 13% (in each
case regarding the elimination of intercompany drilling rig profit see
Non-GAAP Financial Measures below). Approximately $847 per day of the
2012 average operating margin resulted from early termination fees
resulting from the cancellation of certain long-term contracts.
Larry Pinkston said: “Industry demand for drilling rigs softened
throughout the year and more so during the latter part of the year as
operators reduced their drilling efforts in order to stay within their
2012 budgets. Drilling activity should gradually improve as operators
start with their new budgets for 2013, and as they get more comfortable
with the outlook for NGLs prices. Approximately 99% of our drilling rigs
working today are drilling for oil or NGLs. Currently, we have 127
drilling rigs in our fleet, of which 69 are under contract. Long-term
contracts (contracts with original terms ranging from six months to two
years in length) are in place for 29 of those 69 drilling rigs. Of these
contracts, six are up for renewal during the first quarter of 2013, five
during the second quarter of 2013, eight during the third quarter of
2013, two during the fourth quarter of 2013, and eight in 2014 and
beyond.”
The following table illustrates Unit’s drilling rig count at the end of
each period and average utilization rate during the period:
| 4th Qtr 12 | 3rd Qtr 12 | 2nd Qtr 12 | 1st Qtr 12 | 4th Qtr 11 | 3rd Qtr 11 | 2nd Qtr 11 | 1st Qtr 11 | 4th Qtr 10 | ||||||||||
| Rigs | 127 | 127 | 128 | 127 | 127 | 126 | 123 | 122 | 121 | |||||||||
| Utilization | 50% | 58% | 60% | 64% | 65% | 63% | 60% | 58% | 59% |
MID-STREAM SEGMENT INFORMATION
-
Increased fourth quarter of 2012 processed volumes per day and
gathered volumes per day by 4% and 26%, respectively, over the fourth
quarter of 2011. -
A new gas gathering system and processing plant in Noble and Kay
Counties, Oklahoma, known as the Bellmon system, is completed and
operating. Extensions are underway to connect additional third party
producers, and an additional capacity expansion is anticipated to be
completed in the first quarter of 2013.
Fourth quarter of 2012 per day processed volumes were 163,173 MMBtu
while per day gathered volumes were 325,231 MMBtu, an increase of 4% and
26%, respectively, over the fourth quarter of 2011. Fourth quarter 2012
liquids sold volumes were 441,973 gallons per day, a decrease of 14%
from the fourth quarter of 2011 and a decrease of 23% from third quarter
2012 primarily due to operating in ethane rejection mode in late fourth
quarter of 2012. Operating profit (as defined in the Selected Financial
and Operational Highlights) for the fourth quarter was $6.4 million, a
decrease of 16% from the fourth quarter of 2011 and a decrease of 4%
from the third quarter of 2012. The decrease from the fourth quarter
2011 was primarily due to lower liquids volumes recovered and lower
prices. The decrease from the third quarter of 2012 was primarily due to
lower liquids volumes recovered but somewhat offset by higher prices.
For 2012, processing volumes of 165,511 MMBtu per day, gathering volumes
of 288,799 MMBtu per day, and liquids sold volumes of 542,578 gallons
per day increased 43%, 34% and 32%, respectively, over 2011.
The following table illustrates certain results from this segment’s
operations for the periods indicated:
| 4th Qtr 12 | 3rd Qtr 12 | 2nd Qtr 12 | 1st Qtr 12 | 4th Qtr 11 | 3rd Qtr 11 | 2nd Qtr 11 | 1st Qtr 11 | 4th Qtr 10 | ||||||||||
|
Gas gathered MMBtu/day |
325,231 |
277,806 |
300,602 |
251,276 |
257,398 |
228,247 |
190,921 |
185,730 |
188,252 |
|||||||||
|
Gas processed MMBtu/day |
163,173 |
166,652 |
177,407 |
154,825 |
156,721 |
129,820 |
90,737 |
86,445 |
85,195 |
|||||||||
|
Liquids sold
Gallons/day |
441,973 |
576,889 |
629,350 |
522,829 |
511,410 |
449,604 |
356,484 |
328,333 |
291,186 |
Larry Pinkston said: “During the second quarter of 2012, we completed
the installation of our fifth processing plant at our Hemphill County,
Texas facility. We now can process 160 MMcf per day of our own and third
party Granite Wash natural gas production. Late in the second quarter,
we completed and began operating our Bellmon system, a new gas gathering
system and processing plant in Noble and Kay Counties in the
Mississippian play of north central Oklahoma. This system consists of
approximately 83 miles of pipe with a 20 MMcf per day gas processing
plant. An additional 30 MMcf per day gas processing plant is scheduled
to be installed at this facility in the first quarter of 2013. We have
also connected our existing Remington gathering system to the new
Bellmon system which required installing approximately 26 miles of
pipeline and related compression services. Besides these projects, we
also completed the installation of a natural gas liquids line from our
Bellmon plant to Medford, Oklahoma. This project consists of
approximately 20 miles of 6″ pipe which was completed in the fourth
quarter of 2012.”
“We are continuing to expand operations in the Appalachian region.
Construction was completed on the first phase of our gathering facility
in Allegheny and Butler counties, Pennsylvania, known as the Pittsburgh
Mills system. The first phase of this project comprises approximately
seven miles of gathering pipeline to which we have nine wells connected.
The current gathered volume from these wells is approximately 28 MMcf
per day. Construction activity to expand this gathering system continues
as the producer is maintaining its drilling activity.”
FINANCIAL INFORMATION
Unit ended the year with long-term debt of $716.4 million, and a debt to
capitalization ratio of 27%. On July 24, 2012, Unit completed a private
offering to eligible purchasers of $400 million aggregate principal
amount of senior subordinated notes due 2021, with an interest rate of
6.625% per year. The notes were sold at 98.75% of par plus accrued
interest from May 15, 2012. Unit used the net proceeds to partially
finance the acquisition from Noble. The notes have since been registered
and exchanged and are now treated as a single series of debt securities
with Unit’s previously issued $250 million senior subordinated notes.
Unit now has $645.3 million outstanding under its senior subordinated
notes due 2021. Also with the acquisition, Unit increased commitments
under its existing credit facility from $250 million ($600 million
borrowing base) to $500 million ($800 million borrowing base).
MANAGEMENT COMMENT
Larry Pinkston said: “Weaker commodity prices created headwinds for all
business segments in 2012. In spite of this, we experienced robust
growth in reserves and production. The Noble acquisition will be an
important growth step for Unit going forward. We plan to accelerate the
drilling activity in the acquired properties and our other Granite Wash
acreage over the next 12 to 18 months using up to six rigs from our
contract drilling segment, and we plan to operate the acquired gathering
systems and replace existing third party processing contracts beginning
in 2015. We anticipate this acquisition will immediately be accretive to
cash flow and to earnings beginning in 2013. We are optimistic about the
outlook for 2013. We are well positioned, especially given the recent
financing arrangements and property divestitures we have completed, to
take advantage of growth opportunities that may arise for our business
segments.”
WEBCAST
Unit will webcast its fourth quarter and year-end earnings conference
call live over the Internet on February 19, 2013 at 10:00 a.m. Central
Time (11:00 a.m. Eastern). To listen to the live call, please go to http://www.unitcorp.com/investor/calendar.htm
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 90 days.
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 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. Several 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, and 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, 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
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 because 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 | Twelve Months Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||
| Statement of Operations: | ||||||||||||
| Revenues: | ||||||||||||
| Contract drilling | $ | 108,521 | $ | 142,553 | $ | 529,719 | $ | 484,651 | ||||
| Oil and natural gas | 165,578 | 141,371 | 567,944 | 514,614 | ||||||||
| Gas gathering and processing | 57,483 | 63,418 | 217,460 | 208,238 | ||||||||
| Total revenues | 331,582 | 347,342 | 1,315,123 | 1,207,503 | ||||||||
| Expenses: | ||||||||||||
| Contract drilling: | ||||||||||||
| Operating costs | 65,544 | 79,813 | 289,524 | 269,899 | ||||||||
| Depreciation | 18,347 | 22,334 | 81,007 | 79,667 | ||||||||
| Oil and natural gas: | ||||||||||||
| Operating costs | 45,177 | 37,475 | 150,212 | 131,271 | ||||||||
| DD&A | 57,508 | 51,337 | 211,347 | 183,350 | ||||||||
|
Impairment of oil and natural gas properties |
167,732 |
— |
283,606 |
— | ||||||||
| Gas gathering and processing: | ||||||||||||
| Operating costs | 51,049 | 55,716 | 187,292 | 174,859 | ||||||||
| Depreciation and amortization | 8,058 | 4,474 | 24,388 | 16,101 | ||||||||
| General and administrative | 9,272 | 7,867 | 33,086 | 30,055 | ||||||||
| Total operating expenses | 422,687 | 259,016 | 1,260,462 | 885,202 | ||||||||
| Income (Loss) from Operations | (91,105 | ) | 88,326 | 54,661 | 322,301 | |||||||
| Other Income (Expense): | ||||||||||||
| Interest, net | (2,682 | ) | (2,089 | ) | (14,137 | ) | (4,167 | ) | ||||
| Gain (Loss) on Derivatives | 3,378 | (1,448 | ) | (1,243 | ) | 1,702 | ||||||
| Other | (1,039 | ) | (268 | ) | 121 | (834 | ) | |||||
| Total Other Income (Expense) | (343 | ) | (3,805 | ) | (15,259 | ) | (3,299 | ) | ||||
| Income (Loss) Before Income Taxes | (91,448 | ) | 84,521 | 39,402 | 319,002 | |||||||
| Income Tax Expense (Benefit): | ||||||||||||
| Current | 246 | 1,533 | 696 | (2,416 | ) | |||||||
| Deferred | (35,147 | ) | 31,327 | 15,530 | 125,551 | |||||||
| Total income taxes | (34,901 | ) | 32,860 | 16,226 | 123,135 | |||||||
| Net Income (Loss) | $ | (56,547 | ) | $ | 51,661 | $ | 23,176 | $ | 195,867 | |||
| Net Income (Loss) per Common Share: | ||||||||||||
| Basic | $ | (1.18 | ) | $ | 1.08 | $ | 0.48 | $ | 4.11 | |||
| Diluted | $ | (1.18 | ) | $ | 1.08 | $ | 0.48 | $ | 4.08 | |||
| Weighted Average Common | ||||||||||||
| Shares Outstanding: | ||||||||||||
| Basic | 47,960 | 47,703 | 47,909 | 47,658 | ||||||||
| Diluted | 47,960 | 48,028 | 48,154 | 47,951 | ||||||||
| December 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Balance Sheet Data: | ||||||||
| Current assets | $ | 195,644 | $ | 228,465 | ||||
| Total assets | $ | 3,761,120 | $ | 3,256,720 | ||||
| Current liabilities | $ | 207,139 | $ | 212,750 | ||||
| Long-term debt | $ | 716,359 | $ | 300,000 | ||||
| Other long-term liabilities | $ | 167,545 | $ | 113,830 | ||||
| Deferred income taxes | $ | 695,776 | $ | 683,123 | ||||
| Shareholders’ equity | $ | 1,974,301 | $ | 1,947,017 | ||||
| Twelve Months Ended December 31, | |||||||||
| 2012 | 2011 | ||||||||
| Statement of Cash Flows Data: | |||||||||
| Cash Flow From Operations before Changes | |||||||||
| in Operating Assets and Liabilities (1) | $ | 664,765 | $ | 618,746 | |||||
| Net Change in Operating Assets and Liabilities | (308 | ) | (10,291 | ) | |||||
| Net Cash Provided by Operating Activities | $ | 664,457 | $ | 608,455 | |||||
| Net Cash Used in Investing Activities | $ | (1,079,042 | ) | $ | (768,236 | ) | |||
|
Net Cash Provided by Financing Activities |
$ |
414,724 |
$ |
159,257 | |||||
| Three Months Ended | Twelve Months Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||
| Contract Drilling Operations Data: | |||||||||||
| Rigs Utilized | 64.0 | 82.1 | 73.9 | 76.1 | |||||||
| Operating Margins (2) | 40% | 44% | 45% | 44% | |||||||
| Operating Profit Before Depreciation (2) ($MM) | $ | 43.0 | $ | 62.7 | $ | 240.2 | $ | 214.8 | |||
| Oil and Natural Gas Operations Data: | |||||||||||
| Production: | |||||||||||
| Oil – MBbls | 912 | 744 | 3,279 | 2,511 | |||||||
| Natural Gas Liquids – MBbls | 782 | 616 | 2,796 | 2,239 | |||||||
| Natural Gas – MMcf | 14,527 | 11,374 | 48,930 | 44,104 | |||||||
| Average Prices: | |||||||||||
|
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Oil price per barrel received |
$ | 91.67 | $ | 88.06 | $ | 92.60 | $ | 87.18 | |||
|
Oil price per barrel received, excluding hedges |
$ | 85.67 | $ | 92.88 | $ | 90.19 | $ | 93.49 | |||
| NGLs price per barrel received | $ | 33.85 | $ | 43.47 | $ | 31.58 | $ | 43.64 | |||
|
NGLs price per barrel received, excluding hedges |
$ | 33.39 | $ | 43.85 | $ | 30.70 | $ | 44.44 | |||
| Natural Gas price per Mcf received | $ | 3.63 | $ | 4.09 | $ | 3.37 | $ | 4.26 | |||
|
Natural Gas price per Mcf received, excluding hedges |
$ | 3.09 | $ | 3.29 | $ | 2.53 | $ | 3.78 | |||
|
Operating Profit Before DD&A and impairment (2) ($MM) |
$ |
120.4 |
$ |
103.9 |
$ |
417.7 |
$ |
383.3 |
|||
| Mid-Stream Operations Data: | |||||||||||
| Gas Gathering – MMBtu/day | 325,231 | 257,398 | 288,799 | 215,805 | |||||||
| Gas Processing – MMBtu/day | 163,173 | 156,721 | 165,511 | 116,161 | |||||||
| Liquids Sold – Gallons/day | 441,973 | 511,410 | 542,578 | 412,064 | |||||||
|
Operating Profit Before Depreciation and Amortization (2) ($MM) |
$ | 6.4 | $ | 7.7 | $ | 30.2 | $ | 33.4 | |||
|
(1) The company considers its cash flow from operations before
|
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(2) Operating profit before depreciation is calculated by taking |
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Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted
accounting 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, diluted 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 intercompany drilling rig profit.
Below is a reconciliation of GAAP financial measures to non-GAAP
financial measures for the three and twleve months ended December 31,
2012 and 2011. 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 (Loss) and Diluted Earnings per Excluding the Effect of Impairment of Oil and Natural Gas |
|||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||
| (In thousands) | |||||||||||||
|
|
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|
Net income (loss) excluding impairment of oil and natural gas |
|||||||||||||
| Net income (loss) | $ | (56,547 | ) | $ | 51,661 | $ | 23,176 | $ | 195,867 | ||||
| Add: | |||||||||||||
|
Impairment of oil and natural gas properties (net of income tax) |
104,450 | — | 176,582 | — | |||||||||
|
Net income excluding impairment of oil and natural gas properties |
$ | 47,903 | $ | 51,661 | $ | 199,758 | $ | 195,867 | |||||
|
|
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|
Diluted earnings (loss) per share excluding impairment of oil and |
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|
Diluted earnings (loss) per share |
$ | (1.18 | ) | $ | 1.08 | $ | 0.48 | $ | 4.08 | ||||
|
Add: |
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|
Diluted earnings per share from impairment of oil and natural gas |
2.17 | — | 3.67 | — | |||||||||
|
Diluted earnings per share excluding impairment of oil and natural |
$ | 0.99 | $ | 1.08 | $ | 4.15 | $ | 4.08 | |||||
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 analyst. -
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.
Non-GAAP Financial Measures (continued)
|
Unit Corporation Reconciliation of Cash Flow From Operations Before Changes in |
||||||
| Twelve Months Ended
December 31, |
||||||
| 2012 | 2011 | |||||
| (In thousands) | ||||||
| Net cash provided by operating activities | $ | 664,457 | $ | 608,455 | ||
| Subtract: | ||||||
| Net change in operating assets and liabilities | 308 | 10,291 | ||||
|
Cash flow from operations before changes in operating assets and |
$ | 664,765 | $ | 618,746 | ||
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 Intercompany Rig Profit and Bad Debt Expense |
||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||
| September 30, | December 31, | December 31, | ||||||||||||
| 2012 | 2012 | 2011 | 2012 | 2011 | ||||||||||
| (In thousands except operating days and daily operating margins) | ||||||||||||||
| Contract drilling revenue | $ | 133,420 | $ | 108,521 | $ | 142,553 | $ | 529,719 | $ | 484,651 | ||||
| Contract drilling operating cost | 72,988 | 65,544 | 79,813 | 289,524 | 269,899 | |||||||||
| Operating profit from contract drilling | 60,432 | 42,977 | 62,740 | 240,195 | 214,752 | |||||||||
| Add: | ||||||||||||||
|
Elimination of intercompany rig profit and bad debt expense |
3,983 | 2,647 | 4,945 | 15,583 | 19,900 | |||||||||
|
Operating profit from contract drilling before elimination of |
64,415 | 45,624 | 67,685 | 255,778 | 234,652 | |||||||||
| Contract drilling operating days | 6,660 | 5,821 | 7,490 | 26,704 | 27,619 | |||||||||
|
Average daily operating margin before elimination of intercompany |
$ |
9,672 |
$ |
7,838 |
$ |
9,037 |
$ |
9,578 |
$ |
8,496 |
||||
We have included the average daily operating margin before elimination
of intercompany rig profit and bad debt expense 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
Michael D. Earl, 918-493-7700
Vice President,
Investor Relations
www.unitcorp.com
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