Unit Corporation (NYSE: UNT) today reported its financial and
operational results for the first quarter of 2019. Operational
highlights include:
Oil and natural gas segment:
- Continues to refocus the drilling
program on prospects considered to provide higher oil content. At
the end of the quarter, its remaining Granite Wash rig was
redeployed to the Penn Sands prospect area. This segment has four
operated drilling rigs in Western Oklahoma.
- In its Penn Sands prospect area in
western Oklahoma, acquired an additional 8,200 net leasehold acres
for approximately $8 million, adding 19 prospective controlled
horizontal drilling locations and 12 non-controlled drilling
locations. The locations are prospective for Marchand or Red Fork
intervals.
- In the Shoal Creek prospect in the
Wilcox area, which was originally developed from the Blackstone G-1
well and reprocessed seismic data, the Blackstone G-2 delineation
well was successfully drilled and completed. Further delineation of
this prospect continues with the Blackstone G-3 well, which is
currently drilling.
- Experienced a third-party gas processor
plant shut-down for 14 days, resulting in lost Wilcox production
200 MBoe (approximately 40% oil and liquids, 60% natural gas). The
shut-down occurred from March 19th through April 2, 2019. The
impact to first quarter production was slightly over 165 MBoe.
Without this shut-down, daily production would have been 47.6 MBoe
per day, a 1% increase over the fourth quarter of 2018.
Contract drilling segment:
- Placed its 12th and 13th BOSS drilling
rigs into service during the quarter.
- Average rig utilization for the quarter
was 31.4 rigs.
Mid-stream segment:
- Natural gas gathered and gas processed
volumes per day increased by 14% and 1%, respectively, over the
fourth quarter of 2018.
- Seven new extended lateral wells were
brought on-line on the Pittsburgh Mills gathering system,
increasing the daily volumes by nearly 115 MMcfe per day.
- The Reeding processing plant, an
addition to the Cashion system, was recently placed into
service.
FIRST QUARTER 2019 FINANCIAL RESULTS
Net loss attributable to Unit for the quarter was $3.5 million,
or $0.07 per diluted share, compared to net income attributable to
Unit of $7.9 million, or $0.15 per diluted share, for the first
quarter of 2018. Adjusted net income attributable to Unit (which
excludes the effect of non-cash commodity derivatives) for the
quarter was $4.5 million, or $0.09 per diluted share, as compared
to $0.21 per diluted share for the same quarter for 2018 (see
Non-GAAP financial measures below). Adjusted net income decreased
due to lower oil and gas segment margins, which were primarily
reduced by lost production resulting from the plant shut-down and
an increase in DD&A, which was partially offset by improved
contract drilling margins and derivative settlements received.
Total revenues for the quarter were $189.7 million (45% oil and
natural gas, 27% contract drilling, and 28% mid-stream), compared
to $205.1 million (50% oil and natural gas, 23% contract drilling,
and 27% mid-stream) for the first quarter of 2018. Adjusted EBITDA
attributable to Unit was $77.1 million, or $1.47 per diluted share
(see Non-GAAP financial measures below).
OIL AND NATURAL GAS SEGMENT INFORMATION
For the quarter, total equivalent production was 4.1 million
barrels of oil equivalent (MMBoe), a decrease of 5% from the fourth
quarter of 2018. Oil and natural gas liquids (NGLs) production
represented 46% of total equivalent production. Oil production was
7,642 barrels per day, a decrease of 7% from the fourth quarter of
2018. NGLs production was 13,410 barrels per day, an increase of 1%
over the fourth quarter of 2018. Natural gas production was 148.6
million cubic feet (MMcf) per day, a decrease of 3% from the fourth
quarter of 2018. The decrease in daily production from the fourth
quarter of 2018 to the first quarter of 2019 was due to a 14-day
plant shut-down that resulted in losing slightly over 165 MBoe
during the quarter.
Unit’s average realized per barrel equivalent price for the
quarter was $20.92, an 8% decrease from the fourth quarter of 2018.
Unit’s average natural gas price was $2.52 per Mcf, a decrease of
9% from the fourth quarter of 2018. Unit’s average oil price was
$56.29 per barrel, an increase of 4% over the fourth quarter of
2018. Unit’s average NGLs price was $16.06 per barrel, a decrease
of 18% from the fourth quarter of 2018. All prices in this
paragraph include the effects of derivative contracts.
In the Gulf Coast area, Unit began delineation of its Shoal
Creek prospect with the drilling of its Blackstone G #2, which
encountered multiple stacked pay intervals in the Lower Wilcox.
After being completed in mid-December in three of the lower stacked
pay intervals, the well produced 6 to 8 MMcfe per day with 25%
being oil. The size of the Shoal Creek prospect will be further
delineated with additional drilling as the year progresses.
In response to low natural gas prices, especially in its Texas
Panhandle area, Unit has refocused its drilling capital toward its
oilier drilling inventory in the Red Fork and Marchand plays in
western Oklahoma. Additional third-party gas takeaway capacity
expected to come on line later in the year should help improve
natural gas pricing in the Texas Panhandle area.
Pinkston said: “The first quarter production decline was due to
the third-party plant shut-down. The 14-day shut-down had a
significant impact on both production and revenues. Wilcox
production generally receives LLS oil pricing, Mt. Belvieu liquids,
and Henry Hub natural gas index pricing, which lately are some of
the best price points we are seeing. We are optimistic that the
plant turnaround will result in improved recoveries going forward.
As we have noted, we are continuing to move our drilling focus to
increase our oil content. To that end, we now have two drilling
rigs operating in each of the Penn Sands and SOHOT core areas, with
both areas having a higher oil content. We are encouraged by our
efforts to successfully expand our leasehold position in those
areas where we have seen higher oil production."
This table illustrates certain comparative production, realized
prices, and operating profit for the periods indicated:
Three Months Ended Three Months
Ended
Mar 31,2019
Mar 31,2018
Change
Mar 31,2019
Dec 31,2018
Change Oil and NGLs Production, MBbl 1,895
1,931 (2)% 1,895 1,976
(4)% Natural Gas Production, Bcf 13.4
13.5 (1)% 13.4 14.1
(5)% Production, MBoe 4,123 4,181
(1)% 4,123 4,318 (5)%
Production, MBoe/day 45.8 46.5
(1)% 45.8 46.9 (2)% Avg. Realized
Natural Gas Price, Mcf (1) $ 2.52 $ 2.62
(4)% $ 2.52 $ 2.77 (9)%
Avg. Realized NGL Price, Bbl (1) $ 16.06 $
21.08 (24)% $ 16.06 $ 19.61
(18)% Avg. Realized Oil Price, Bbl (1) $ 56.29
$ 55.10 2% $ 56.29 $ 54.01
4% Avg. Price / Boe for Revenue Recognition $
(1.36 ) $ (0.76 ) (79)% $ (1.36 ) $ (1.25 )
(9)% Realized Price / Boe (1) $ 20.92 $
23.42 (11)% $ 20.92 $ 22.74
(8)% Operating Profit Before Depreciation, Depletion, &
Amortization (MM) (2) $ 53.4 $ 67.1
(21)% $ 53.4 $ 74.9 (29)%
(1) Realized price includes oil, NGLs, natural gas, and
associated derivatives. (2) Operating profit before depreciation is
calculated by taking operating revenues for this segment less
operating expenses excluding depreciation, depletion, amortization,
and impairment. (See non-GAAP financial measures below.)
CONTRACT DRILLING SEGMENT INFORMATION
Unit's average number of drilling rigs working during the
quarter was 31.4, a decrease of 5% from the fourth quarter of 2018.
Per day drilling rig rates averaged $18,339, a 2% increase over the
fourth quarter of 2018. Average per day operating margin for the
quarter was $7,376 (before elimination of intercompany drilling rig
profit of $1.1 million). This margin compares to fourth quarter
2018 average operating margin of $5,859 (before elimination of
intercompany drilling rig profit of $0.6 million), an increase of
26%, or $1,517 (see non-GAAP financial measures below). Average
operating margins for the quarter included early termination fees
of approximately $4.8 million, or $1,684 per day, from the
cancellation of certain third-party long-term contracts.
Pinkston said: “Our contract drilling segment’s operations held
steady during the quarter. During January, we completed and placed
into service our 12th BOSS rig, and during February, our 13th BOSS
rig was placed into service under a long-term contract. All 13 of
our BOSS rigs are under contract, and we currently have a total of
31 drilling rigs operating. Term contracts (contracts with original
terms ranging from six months to three years in length) are in
place for 15 of our drilling rigs at the end of the quarter. Of the
15 contracts, five are up for renewal in the second quarter of
2019, two in the third quarter, three in the fourth quarter, two in
2020, and three after 2020.”
This table illustrates certain comparative results for the
periods indicated:
Three Months Ended Three Months
Ended
Mar 31,2019
Mar 31,2018
Change
Mar 31,2019
Dec 31,2018
Change Rigs Utilized 31.4 31.7
(1)% 31.4 33.1 (5)% Operating Profit Before
Depreciation (MM)(1) $ 19.8 $ 14.3 38%
$ 19.8 $ 17.2 15% (1) Operating profit before
depreciation is calculated by taking operating revenues for this
segment less operating expenses excluding depreciation and
impairment. (See non-GAAP financial measures below.)
MID-STREAM SEGMENT INFORMATION
For the quarter, gas gathering and gas processing volumes per
day increased 14% and 1%, respectively, while liquids sold volumes
per day decreased 7% from the fourth quarter of 2018. Operating
profit (as defined in the footnote below) for the quarter was $13.1
million, an increase of 6% over the fourth quarter of 2018.
This table illustrates certain comparative results for the
periods indicated:
Three Months Ended Three Months
Ended Mar 31,2019 Mar
31,2018 Change Mar 31,2019
Dec 31,2018 Change Gas
Gathering, Mcf/day 449,916 372,862 21% 449,916
394,203 14% Gas Processing, Mcf/day 161,748
151,039 7% 161,748 160,786 1% Liquids
Sold, Gallons/day 650,614 577,560 13% 650,614
697,161 (7)% Operating Profit Before Depreciation
& Amortization (MM) (1) $ 13.1 $ 14.4 (9)%
$ 13.1 $ 12.4 6% (1) Operating profit
before depreciation is calculated by taking operating revenues for
this segment less operating expenses excluding depreciation,
amortization, and impairment. (See non-GAAP financial measures
below.)
Pinkston said: “In our Appalachian region, seven new extended
lateral wells were brought online on the Pittsburgh Mills gathering
system, increasing daily volume by nearly 115 MMcfe per day.
Overall, the mid-stream segment saw a 14% increase in throughput
volumes despite the Wilcox processing plant shut-down which
adversely impacted Segno gathered volumes. The Reeding processing
plant was placed into service after the end of the first quarter.
This processing plant is an addition to the Cashion system in
central Oklahoma.”
FINANCIAL INFORMATION
Unit ended the quarter with long-term debt of $685.0 million,
consisting of $645.0 million in senior subordinated notes (net of
unamortized discount and debt issuance costs) and $40 million in
borrowings under the Unit credit agreement. The Unit credit
agreement is subject to an elected commitment and borrowing base of
$425 million.
WEBCAST
Unit uses its website to disclose material nonpublic information
and for complying with its disclosure obligations under Regulation
FD. The website includes those disclosures in the 'Investor
Information' sections. So, investors should monitor that portion of
the website, besides following the press releases, SEC filings, and
public conference calls and webcasts.
Unit will webcast its first quarter earnings conference call
live over the Internet on May 2, 2019 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 before 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 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.
FORWARD-LOOKING STATEMENT
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, believes, or anticipates will or may occur are
forward-looking statements. Several risks and uncertainties could
cause actual results to differ materially from these statements,
including changes in commodity prices, the productive capabilities
of the company’s wells, future demand for oil and natural gas,
future drilling rig utilization and dayrates, projected rate of the
company’s oil and natural gas production, the amount available to
the company for borrowings, its anticipated borrowing needs under
its credit agreements, the number of wells to be drilled by the
company’s oil and natural gas segment, the potential productive
capability of its prospective plays, and other factors described
occasionally 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 Highlights
(In thousands except per share
amounts)
Three Months Ended March 31,
2019 2018 Statement of
Operations: Revenues: Oil and natural gas $ 86,095 $
103,099 Contract drilling 51,155 45,989 Gas gathering and
processing 52,441 56,044 Total revenues 189,691 205,132 Expenses:
Operating costs: Oil and natural gas 32,714 35,962 Contract
drilling 31,401 31,667 Gas gathering and processing 39,355 41,604
Total operating costs 103,470 109,233 Depreciation, depletion, and
amortization 62,126 57,066 General and administrative 9,741 10,762
(Gain) loss on disposition of assets 1,615 (161) Total operating
expenses 176,952 176,900 Income from operations 12,739
28,232 Other income (expense): Interest, net (8,538)
(10,004) (Loss) on derivatives not designated as hedges (6,932)
(6,762) Other 5 6 Total other income (expense) (15,465) (16,760)
Income (loss) before income taxes (2,726) 11,472
Income tax expense: Deferred (444) 3,607 Total income taxes (444)
3,607 Net income (loss) (2,282) 7,865 Net income
attributable to non-controlling interest 1,222 — Net income (loss)
attributable to Unit Corporation $ (3,504) $ 7,865 Net
income (loss) attributable to Unit Corporation per common share:
Basic $ (0.07) $ 0.15 Diluted $ (0.07) $ 0.15 Weighted
average shares outstanding: Basic 52,557 51,730 Diluted 52,557
52,272
Unit Corporation Selected Financial
Highlights - continued
(In thousands)
March 31, December 31,
2019 2018 Balance Sheet Data: Current
assets $ 131,011 $ 170,359 Total assets $ 2,729,180 $ 2,698,053
Current liabilities $ 197,662 $ 213,859 Long-term debt $ 685,031 $
644,475 Other long-term liabilities and non-current derivative
liability $ 106,259 $ 101,527 Deferred income taxes $ 144,369 $
144,748 Total shareholders’ equity attributable to Unit Corporation
$ 1,392,992 $ 1,390,881
Three Months Ended March 31,
2019 2018 Statement of Cash
Flows Data: Cash flow from operations before changes in
operating assets and liabilities $ 76,166 $ 79,966 Net change in
operating assets and liabilities 912 3,602 Net cash provided by
operating activities $ 77,078 $ 83,568 Net cash used in investing
activities $ (120,897) $ (68,165) Net cash provided by financing
activities $ 41,258 $ (15,352)
Non-GAAP Financial Measures
Unit Corporation reports its financial results under generally
accepted accounting principles (“GAAP”). The company believes
certain non-GAAP measures provide users of its financial
information and its management additional meaningful information to
evaluate the performance of the company.
This press release includes net income (loss) and earnings
(loss) per share excluding the effect of the cash-settled commodity
derivatives, its reconciliation of segment operating profit, its
drilling segment’s average daily operating margin before
elimination of intercompany drilling rig profit and bad debt
expense, its cash flow from operations before changes in operating
assets and liabilities, and its reconciliation of net income to
adjusted EBITDA.
Below are reconciliations of GAAP financial measures to non-GAAP
financial measures for the periods below. Non-GAAP financial
measures should not be considered by themselves or a substitute for
results reported under GAAP. This non-GAAP information should be
considered by the reader in addition to, but not instead of, the
financial statements prepared under GAAP. The non-GAAP financial
information presented may be determined or calculated differently
by other companies and may not be comparable to similarly titled
measures.
Unit Corporation Reconciliation of Adjusted Net Income
(Loss) and Adjusted Diluted Earnings per Share
Three Months Ended March 31, 2019
2018 (In thousands except earnings per share)
Adjusted net income attributable to Unit Corporation: Net
income (loss) attributable to Unit Corporation $ (3,504) $ 7,865
Loss on derivatives (net of income tax) 5,802 4,636 Settlements
during the period of matured derivative contracts (net of income
tax) 2,224 (1,421) Adjusted net income attributable to Unit
Corporation $ 4,522 $ 11,080 Adjusted diluted earnings
attributable to Unit Corporation per share: Diluted earnings (loss)
per share $ (0.07) $ 0.15 Diluted earnings per share from loss on
derivatives 0.11 0.09 Diluted earnings per share from settlements
of matured derivative contracts 0.05 (0.03) Adjusted diluted income
per share attributable to Unit $ 0.09 $ 0.21 Weighted shares
(denominator) 52,557 52,272
________________
The company has included the net income and diluted earnings per
share including only the cash-settled commodity derivatives
because:
- It uses 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.
Unit Corporation Reconciliation of Segment Operating
Profit Three Months Ended December
31, March 31, 2018 2019
2018 (In thousands) Oil and natural gas $
74,863 $ 53,381 $ 67,137 Contract drilling 17,173
19,754 14,322 Gas gathering and processing 12,409 13,086 14,440
Total operating profit 104,445 86,221 95,899 Depreciation,
depletion and amortization (64,629) (62,126) (57,066) Impairments
(147,884) — — Total operating income (loss) (108,068) 24,095 38,833
General and administrative (9,955) (9,741) (10,762) Gain (loss) on
disposition of assets 129 (1,615) 161 Interest, net (7,816) (8,538)
(10,004) Gain (loss) on derivatives 22,424 (6,932) (6,762) Other 5
5 6 Income (loss) before income taxes $ (103,281) $ (2,726) $
11,472
_________________
The company has included segment operating profit because:
- It considers segment operating profit
to be an important supplemental measure of operating performance
for presenting trends in its core businesses.
- Segment operating profit is useful to
investors because it provides a means to evaluate the operating
performance of the segments and company using the criteria used by
management.
Unit Corporation Reconciliation of Average Daily
Operating Margin Before Elimination of Intercompany Rig Profit
and Bad Debt Expense Three Months Ended
December 31, March 31, 2018
2019 2018 (In thousands except for
operating days and operating margins) Contract drilling revenue
$ 52,965 $ 51,155 $ 45,989 Contract drilling operating cost
35,792 31,401 31,667 Operating profit from contract drilling 17,173
19,754 14,322 Add: Elimination of intercompany rig profit and bad
debt expense 644 1,060 434 Operating profit from contract drilling
before elimination of intercompany rig profit and bad debt expense
17,817 20,814 14,756 Contract drilling operating days 3,041 2,822
2,849 Average daily operating margin before elimination of
intercompany rig profit and bad debt expense $ 5,859 $ 7,376 $
5,179
________________
The company has included the average daily operating margin
before elimination of intercompany rig profit and bad debt expense
because:
- Its management uses the measurement to
evaluate the cash flow performance of its 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 the company.
Unit Corporation Reconciliation of Cash Flow From
Operations Before Changes in Operating Assets and Liabilities
Three Months Ended March 31, 2019
2018 (In thousands) Net cash provided by
operating activities $ 77,078 $ 83,568 Net change in
operating assets and liabilities (912) (3,602) Cash flow from
operations before changes in operating assets and liabilities $
76,166 $ 79,966
________________
The company has included the cash flow from operations before
changes in operating assets and liabilities because:
- It is an accepted financial indicator
used by its management and companies in the industry to measure the
company’s ability to generate cash used to internally fund its
business activities.
- It is used by investors and financial
analysts to evaluate the performance of the company.
Unit Corporation Reconciliation of Adjusted EBITDA
Three Months Ended March 31, 2019
2018 (In thousands except earnings per share)
Net income (loss) $ (2,282) $ 7,865 Income taxes (444) 3,607
Depreciation, depletion and amortization 62,126 57,066 Interest,
net 8,538 10,004 Loss on derivatives 6,932 6,762 Settlements during
the period of matured derivative contracts 2,656 (2,073) Stock
compensation plans 5,134 6,609 Other non-cash items (138) (532)
(Gain) loss on disposition of assets 1,615 (161) Adjusted EBITDA
84,137 89,147 Adjusted EBITDA attributable to non-controlling
interest 7,022 — Adjusted EBITDA attributable to Unit Corporation $
77,115 $ 89,147 Diluted earnings (loss) per share
attributable to Unit $ (0.07) $ 0.15 Diluted earnings per share
from income taxes (0.01) 0.07 Diluted earnings per share from
depreciation, depletion and amortization 1.08 1.09 Diluted earnings
per share from interest, net 0.16 0.19 Diluted earnings per share
from loss on derivatives 0.13 0.13 Diluted earnings per share from
settlements during the period of matured derivative contracts 0.05
(0.04) Diluted earnings per share from stock compensation plans
0.10 0.13 Diluted earnings per share from other non-cash items —
(0.01) Diluted earnings per share from (gain) loss on disposition
of assets 0.03 — Adjusted EBITDA per diluted share $ 1.47 $ 1.71
Weighted shares (denominator) 52,557 52,272
________________
The company has included the adjusted EBITDA, which excludes
gain or loss on disposition of assets and includes only the
cash-settled commodity derivatives because:
- It uses adjusted EBITDA to evaluate the
operational performance of the company.
- Adjusted EBITDA is more comparable to
estimates provided by securities analysts.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190502005215/en/
Michael D. EarlVice President, Investor Relations(918)
493-7700www.unitcorp.com
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