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news UNIT CORPORATION
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1000 Kensington Tower, 7130 South Lewis Avenue, Tulsa, Oklahoma 74136
Telephone 918 493-7700, Fax 918 493-7714
Contact: Larry D. Pinkston
President, Treasurer
and Chief Financial Officer
(918) 493-7700
For Immediate Release...
October 22, 2003
UNIT CORPORATION REPORTS THIRD QUARTER
& FIRST NINE MONTH RESULTS IN 2003
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its
financial and operational results for the third quarter and first nine months of
2003. Consolidated net income for the third quarter was $12.8 million, or 29
cents per diluted share, on revenues of $78.2 million, compared to 2002's third
quarter net income of $3.7 million, or 9 cents per diluted share, on revenues of
$48.3 million. Revenues increased 62 percent while net income increased 244
percent between the comparative quarters. The dramatic improvement in net income
and revenue was due to a significant increase in natural gas prices and
improvements in drilling rig utilization and dayrates.
For the nine-month period, the Company reported consolidated net income of
$38.4 million, or 88 cents per diluted share. Net income for the first nine
months of 2003 included $1.3 million of income, net of tax for the impact of the
adoption of SFAS 143, "Accounting for Asset Retirement Obligations," which
became effective in the first quarter of 2003. SFAS 143 requires oil and natural
gas operating companies to recognize in current periods the present value of the
estimated future cost for the plugging of its oil and natural gas wells and upon
implementation requires the recalculation of depreciation, depletion and
amortization for prior years. Income before the change in accounting principle
for the first nine months of 2003 was $37.1 million, or 85 cents per diluted
share, on revenues of $219.6 million, compared to 2002's first nine month net
income of $11.5 million, or 30 cents per diluted share, on revenues of $131.8
million.
UNIT PETROLEUM RESULTS
Revenues from Unit's oil and natural gas operations for the third quarter
of 2003 versus the third quarter of 2002 increased 68 percent to $27.4 million
due to higher oil and natural gas prices and an increase in oil and natural gas
production. During the first nine months of 2003, oil and natural gas revenues
were $87.5 million, an increase
of 86 percent over the same period in 2002. Natural gas production was 5,233
million cubic feet (MMcf) in the third quarter of 2003, while oil production for
the same period was 134,000 barrels, which on an equivalent Mcf basis was 11
percent more than the third quarter of 2002. Natural gas production was 15,043
MMcf in the first nine months of 2003, while oil production for the same period
was 372,000 barrels, a 5 percent increase on an equivalent Mcf basis over the
first nine months of 2002. The exit rate production for the first nine months of
2003 was 1,660 barrels of oil per day and 59,039 Mcf of natural gas per day.
Average natural gas prices received during the third quarter of 2003
increased 66 percent to $4.50 per Mcf compared to $2.71 per Mcf during the third
quarter of 2002. The average oil price received was $25.51 per barrel in the
third quarter of 2003 compared to $22.99 per barrel in the 2002 comparative
quarter, an 11 percent increase. For the first nine months of 2003, average
natural gas prices received increased 95 percent to $5.05 per Mcf compared to
$2.59 per Mcf during the first nine months of 2002. The average oil price
received was $27.02 per barrel in the first nine months of 2003 compared to
$20.92 per barrel in 2002, a 29 percent increase. During the first nine months
of 2003, Unit completed 98 wells with a success rate of 85 percent.
UNIT DRILLING RESULTS
Contract drilling revenues increased 58 percent between the comparative
third quarters to $50.1 million, due to increases in both the number of rigs
utilized and dayrates. Average rig utilization in the third quarter of 2003 was
68.2 rigs, up 60 percent from 2002's third quarter. Currently, Unit has 68 rigs
operating under contract. Average dayrates for the third quarter increased to an
average of $8,015 per day, 6 percent higher than the comparable quarter of 2002.
Between the comparative first nine months, contract drilling revenues
increased 54 percent in 2003 to $129.8 million with rig utilization increasing
to an average of 60.6 rigs operating in the first nine months of 2003, compared
to 36.2 rigs in the first nine months of 2002. Contract drilling cash operating
margins per rig averaged $1,977 per day during the first nine months of 2003,
compared to $2,076 for the same period in 2002. The exit rate cash operating
margin for the end of the first nine months of 2003 was $2,350 per day.
MANAGEMENT COMMENTS
"Our third quarter results reflect the impact of a higher commodity pricing
environment," said John Nikkel, Chief Executive Officer and Chairman of the
Board. "Unit has positioned itself to benefit from current industry conditions.
With 98 wells completed during the first nine months of 2003, our exploration
and production segment is on track to drill 140 to 150 wells by year-end. During
August, Unit announced that it signed a merger agreement with PetroCorp
Incorporated for a purchase price of $182 million to be paid in cash. PetroCorp
explores and develops oil and natural gas properties primarily in Texas and
Oklahoma. The acquisition will allow us to economically grow our asset base. We
expect the acquisition to close before year-end. Our contract drilling segment
has seen a 5 percent rise in average dayrates from the previous quarter and our
current rig utilization is 91 percent of 75 total rigs available for service.
Unit's 76th rig has been constructed and will be placed into service in
approximately two weeks. This is a 1,500 horsepower, diesel-electric rig capable
of drilling to 20,000 feet. A 77th
rig is currently under construction and is expected to be completed and
available for service during the first quarter of 2004. "Long-term debt has
decreased by 51 percent since the beginning of 2003. We are pleased with the
opportunities and outcomes that the industry has provided for our operations to
grow. We will continue along that path as the year unwinds."
WEBCAST
Unit will webcast its third quarter earnings conference call live over the
Internet on October 22, 2003 at 11:30 a.m. Eastern Time. 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 12 months.
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Unit Corporation is a Tulsa-based, publicly held energy company engaged
through its subsidiaries in oil and gas exploration, production and contract
drilling. 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 Securities Litigation Reform Act that involve risks and uncertainties,
including the productive capabilities of the wells, future demand for oil and
natural gas, future rig utilization and dayrates, oil and gas reserve
information, anticipated production rates from company wells, the prospective
capabilities of offset acreage, anticipated oil and natural gas prices, the
number of wells to be drilled by the company, the closing of the pending merger
with PetroCorp Incorporated, development, operational, implementation and
opportunity risks, and other factors described from time to time in the
company's publicly available SEC reports, which could cause actual results to
differ materially from those expected.
Unit Corporation
Selected Financial and Operations Highlights
(In thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2003 2002 2003
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Statement of Operations:
Revenues:
Contract drilling $ 31,589 $ 50,052 $ 84,144 $ 129,839
Oil and natural gas 16,357 27,402 46,986 87,521
Other 326 747 625 2,267
---------- ---------- ---------- ----------
Total revenues 48,272 78,201 131,755 219,627
---------- ---------- ---------- ----------
Expenses:
Contract drilling:
Operating costs 24,350 35,653 63,619 97,105
Depreciation and
amortization 4,178 6,318 9,917 17,111
Oil and natural gas:
Operating costs 5,169 6,260 15,278 18,768
Depreciation, depletion
and amortization 6,142 6,972 17,399 19,464
General and administrative 2,180 2,246 6,222 6,766
Interest 231 154 747 540
---------- ---------- ---------- ----------
Total expenses 42,250 57,603 113,182 159,754
---------- ---------- ---------- ----------
Income Before Income Taxes
and Change in Accounting
Principle 6,022 20,598 18,573 59,873
---------- ---------- ---------- ----------
Income Tax Expense:
Current (285) 157 75 456
Deferred 2,599 7,678 7,040 22,304
---------- ---------- ---------- ----------
Total income taxes 2,314 7,835 7,115 22,760
---------- ---------- ---------- ----------
Income Before Change in
Accounting Principle 3,708 12,763 11,458 37,113
Cumulative Effect of Change
in Accounting Principle ---- ---- ---- 1,325
---------- ---------- ---------- ----------
Net Income $ 3,708 $ 12,763 $ 11,458 $ 38,438
========== ========== ========== ==========
Income Before Change in
Accounting Principle
Per Common Share:
Basic $ .09 $ .29 $ .31 $ .85
Diluted $ .09 $ .29 $ .30 $ .85
Net Income Per Common Share:
Basic $ .09 $ .29 $ .31 $ .88
Diluted $ .09 $ .29 $ .30 $ .88
Weighted Average Common
Shares Outstanding:
Basic 39,804 43,556 37,330 43,503
Diluted 40,071 43,736 37,594 43,677
December 31, September 30,
2002 2003
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Balance Sheet Data:
Current assets $ 51,399 $ 67,956
Total assets $ 578,163 $ 644,268
Current liabilities $ 34,532 $ 40,882
Long-term debt $ 30,500 $ 15,000
Other long-term liabilities $ 5,439 $ 17,609
Deferred income taxes $ 86,320 $ 109,436
Shareholders' equity $ 421,372 $ 461,341
Nine Months Ended
September 30,
2002 2003
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Statement of Cash Flows Data:
Cash Flow From Operations before Changes
in Working Capital (1) $ 46,660 $ 98,114
Net Change in Working Capital 7,614 (9,702)
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Net Cash Provided by Operating Activities $ 54,274 $ 88,412
============ ============
Net Cash Used in Investing Activities $ (46,672) $ (67,375)
Net Cash Used in Financing Activities $ (7,413) $ (19,769)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2003 2002 2003
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Contract Drilling Operations Data:
Rigs Utilized 42.5 68.2 36.2 60.6
Operating Margins 23% 29% 24% 25%
Operating Profit Before
Depreciation (2) ($MM) $ 7.2 $ 14.4 $ 20.5 $ 32.7
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 120 134 347 372
Natural Gas - MMcf 4,707 5,233 14,360 15,043
Average Prices
Oil -- Bbl $ 22.99 $ 25.51 $ 20.92 $ 27.02
Natural Gas - Mcf $ 2.71 $ 4.50 $ 2.59 $ 5.05
Operating Profit Before
DD&A (2) ($MM) $ 11.2 $ 21.1 $ 31.7 $ 68.8
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(1) Unit Corporation considers Unit's cash flow from operations before changes
in working capital an important measure in meeting the performance goals of the
company and the amount is used as a performance limit to meet the covenants
contained in our credit facility.
(2) Operating profit before depreciation is calculated by taking operating
revenues by segment less operating expenses by segment excluding depreciation,
depletion, amortization and impairment, general and administrative and interest
expense.