(Source: Business Wire)
Unit Corporation (NYSE: UNT) announced today net income of $32.0 million, or $0.68 per diluted share, for the three months ended June 30, 2009, compared to net income of $94.1 million, or $2.00 per diluted share, for the three months ended June 30, 2008. Total revenues for the second quarter of 2009 were $164.1 million (30% contract drilling, 55% oil and natural gas, and 14% mid-stream), compared to total revenues for the second quarter of 2008 of $370.1 million (41% contract drilling, 44% oil and natural gas, and 15% mid-stream).
For the first six months of 2009, Unit reported a net loss of $115.5 million, or $2.46 per diluted share, compared to net income of $171.2 million, or $3.65 per diluted share, for the six months ended June 30, 2008. Included in the 2009 results was a $281.2 million ($175.1 million after tax, or $3.72 per diluted share) noncash ceiling test write down that occurred in the first quarter. The ceiling test write down was required to reduce the carrying value of the company's oil and natural gas properties due to significantly lower commodity prices at the end of the first quarter 2009. Excluding the ceiling test write down, net income for the first six months of 2009 would have been $59.6 million, or $1.26 per diluted share (see Non-GAAP Financial Measures below). Total revenues for the first six months of 2009 were $365.1 million (38% contract drilling, 49% oil and natural gas, and 12% mid-stream), compared to $691.5 million (43% contract drilling, 43% oil and natural gas, and 14% mid-stream) for the first six months of 2008.
CONTRACT DRILLING SEGMENT INFORMATION
Average drilling rig utilization for the second quarter of 2009 was 31.6 drilling rigs, or 24%, a decrease of 70% from the second quarter of 2008, and a decrease of 40% from the first quarter of 2009. Contract drilling rig rates for the second quarter of 2009 averaged $17,335 per day, a decrease of 3%, or $555 per day, from the second quarter of 2008, and a decrease of 7%, or $1,303 per day, from the first quarter of 2009. Average operating margins for the second quarter of 2009 were $7,138 per day (before elimination of intercompany drilling rig profit of $0.4 million; see Non-GAAP Financial Measures below) as compared to $8,339 per day (before elimination of intercompany drilling rig profit of $6.4 million; see Non-GAAP Financial Measures below) for the same quarter in 2008, a decrease of 14%.
For the first six months of 2009, drilling rig utilization averaged 32% as compared to 79% for the same period during 2008. Unit averaged 42.1 drilling rigs working during the first six months of 2009, a decrease of 59% from the 102.5 drilling rigs working during the first six months of 2008. Average operating margins for the first six months of 2009 were $7,807 per day (before elimination of intercompany drilling rig profit of $1.1 million; see Non-GAAP Financial Measures below) as compared to $8,551 per day (before elimination of intercompany drilling rig profit of $13.9 million for the same period in 2008; see Non-GAAP Financial Measures below), a decrease of 9%.
Currently, Unit has 131 drilling rigs of which 38 are under contract. The following table illustrates this segment's drilling rig count at the end of each period and its average utilization rate during the period:
2(nd) Qtr 09 1(st) Qtr 09 4(th) Qtr 08 3(rd) Qtr 08 2(nd) Qtr 08 1(st) Qtr 08 4(th) Qtr 07 3(rd) Qtr 07 2(nd) Qtr 07 Rigs 131 131 132 131 131 129 129 128 128 Utilization 24% 40% 74% 85% 80% 78% 80% 78% 81% -------------------------------------------------------------------------------
Larry Pinkston, Unit's Chief Executive Officer and President, said: "Contract drilling industry and our rig fleet utilization rates continued to be negatively impacted by low commodity prices and minimal capital spending by exploration and production companies during the second quarter. We have concentrated on reducing costs in this challenging environment, focusing on both drilling rig wages and infrastructure. Our personnel have done an excellent job of balancing the necessary reductions with preserving Unit's ongoing commitment of efficient results-driven service to its customers."
OIL AND NATURAL GAS SEGMENT INFORMATION
Completed 16 and 37 gross wells during the 2009 second quarter and first six months, respectively.
Curtailed approximately 4.8 MMcf per day of production during the second quarter of 2009 due to low commodity prices.
Approximately 73% of anticipated natural gas production and 70% of anticipated crude oil production is hedged for 2009.
Increased estimated capital expenditures for 2009 from $200 million to $220 million.
Revised estimate of gross wells to be drilled for 2009 from 140 to 120 wells.
Second quarter 2009 production was 348,000 barrels of oil, in comparison to 335,000 barrels of oil in the second quarter of 2008, a 4% increase. Natural gas liquids (NGLs) production during the second quarter of 2009 was 391,000 barrels in comparison to 350,000 barrels in the second quarter of 2008, a 12% increase. Second quarter 2009 natural gas production decreased 7% to 11.0 billion cubic feet (Bcf) from 11.8 Bcf during the comparable quarter of 2008. Second quarter 2009 equivalent production totaled 15.4 Bcfe, a 3% decrease over second quarter 2008. Total production for the first six months of 2009 was 31.7 Bcfe, an increase of 3% over the 30.7 Bcfe produced during the first six months of 2008.
Unit's average natural gas price for the second quarter of 2009 decreased 40% to $5.49 per thousand cubic feet (Mcf) as compared to $9.16 per Mcf for the second quarter of 2008. Unit's average oil price for the second quarter of 2009 was $54.84 per barrel compared to $102.23 per barrel for the second quarter of 2008, a 46% decrease, and Unit's average NGLs price for the second quarter of 2009 was $23.88 per barrel compared to $56.78 per barrel for the second quarter of 2008, a 58% decrease. For the first six months of 2009, Unit's average natural gas price decreased 35% to $5.47 per Mcf as compared to $8.43 per Mcf during the first six months of 2008. Unit's average oil price for the first six months of 2009 was $52.69 per barrel compared to $98.08 per barrel during the first six months of 2008, a 46% decrease. Unit's average NGLs price for the first six months of 2009 was $21.29 per barrel compared to $54.56 per barrel during the first six months of 2008, a 61% decrease.
For 2009, approximately 73% of this segment's anticipated average daily natural gas production is hedged through NYMEX plus basis at several delivery points and approximately 70% of its anticipated oil production is hedged. Of the natural gas hedges, 89% are under swap contracts at a comparable NYMEX average price of $7.20 and 11% are under a collar contract with a comparable NYMEX floor of $8.22 and a ceiling of $10.80. The average basis differentials for these swaps are ($0.85). Of the oil hedges, 80% are under swap contracts at an average price of $51.87 and 20% under a collar contract with a floor of $100.00 and a ceiling of $156.25. For 2010, approximately 65% of the company's anticipated average daily natural gas production is hedged and 56% of its anticipated daily oil production is hedged. The natural gas production is hedged under swap contracts at a comparable average NYMEX price of $6.95. The average basis differentials for the swaps are ($0.66). Of the oil hedges, 75% are under swap contracts at an average price of $61.36 and 20% are under a collar contract with a floor of $65.00 and a ceiling of $74.85. Subsequent to June 30, 2009, Unit hedged approximately 55% of its anticipated average daily NGLs production for the balance of 2009.
The following table illustrates this segment's production and certain results for the periods indicated:
2(nd) Qtr 09 1(st) Qtr 09 4(th) Qtr 08 3(rd) Qtr 08 2(nd) Qtr 08 1(st) Qtr 08 4(th) Qtr 07 3(rd) Qtr 07 2(nd) Qtr 07 Production, Bcfe 15.4 16.3 16.8 15.9 16.0 14.7 14.7 14.0 13.2 Realized Price, Mcfe $5.75 $5.48 $6.21 $9.49 $10.19 $8.72 $7.66 $6.69 $7.19 Wells Drilled (gross) 16 21 67 82 72 57 81 51 67 Success Rate 100% 90% 90% 89% 90% 86% 90% 88% 82% -------------------------------------------------------------------------------
During the second quarter of 2009, Unit participated in the drilling of 16 wells, of which all 16 were completed as producing wells for a success rate of 100% in comparison to the completion of 72 wells with a 90% success rate during the second quarter of 2008.
Pinkston said: "Our drilling program for the first half of 2009 has intentionally been at a reduced level due to weak commodity prices and the expectation of reduced well costs. Production for the second quarter of 2009 was reduced by approximately 4.8 MMcf per day that was curtailed due to weak commodity prices. With the significant reduction in well costs that have taken place primarily over the past four months, we have elected to accelerate our level of drilling activity for the second half of the year and have increased our estimated 2009 capital expenditures for this segment from $200 million to $220 million, still within anticipated cash flow. Production for the year is currently estimated to be approximately 63 Bcfe. Our drilling efforts continue to be focused in prospects having a combination of natural gas and oil or where the natural gas has a high BTU content, yielding NGLs which are more correlated to crude pricing, and in prospects with possible short-term lease expirations."
MID-STREAM SEGMENT INFORMATION
Increased second quarter 2009 liquids sold per day volumes 9% over first quarter of 2009 and 18% over second quarter of 2008.
17 new wells connected to existing systems during the first six months of 2009.
Second quarter of 2009 processing volumes of 75,481 MMBtu per day and liquids sold volumes of 239,121 gallons per day increased 12% and 18%, respectively, over second quarter of 2008. Second quarter 2009 gathering volumes were 187,666 MMBtu per day, a 9% decrease over second quarter of 2008. Operating profit (as defined in the Selected Financial and Operational Highlights) for the second quarter was $4.0 million, an increase of $2.6 million from the first quarter of 2009, due primarily to increased liquids prices, which resulted in increased processing margins.
For the first six months of 2009, processing volumes of 74,074 MMBtu per day and liquids sold volumes of 228,998 gallons per day increased 16% and 19%, respectively, from the first six months of 2008. Gathering volumes for the first six months of 2009 were 189,980 MMBtu per day, a 6% decrease from the first six months of 2008.
