Unit Corp. (UNT, Financial) filed Quarterly Report for the period ended 2009-06-30.
UNIT CORP. is engaged in the land contract drilling of oil and natural gas wells the development acquisition and production of oil and natural gasproperties and the marketing of natural gas. Its principal areas ofoperations are located in the Anadarko and Arkoma Basins which coverportions of Oklahoma Texas Kansas and Arkansas and has additionalproducing properties located in other states including but not limited toNew Mexico Louisiana North Dakota Colorado Wyoming Montana Alabama and Mississippi. Unit Corp. has a market cap of $1.59 billion; its shares were traded at around $33.53 with a P/E ratio of 5.8 and P/S ratio of 1.2. Unit Corp. had an annual average earning growth of 29.9% over the past 10 years. GuruFocus rated Unit Corp. the business predictability rank of 2.5-star.
Second quarter 2009 production from our oil and natural gas segment averaged 170,000 Mcfe per day, a 6% decrease from the average for the first quarter of 2009 and a 3% decrease from the average for the second quarter of 2008. The decreases primarily resulted from the slowdown of drilling new wells due to current economic conditions.
Oil and natural gas revenues increased 1% from the first quarter of 2009 and decreased 45% from the second quarter of 2008. Our oil, natural gas and NGL prices, including hedges, in the second quarter of 2009 increased 9%, 1% and 28%, respectively, from the first quarter of 2009 and our oil, natural gas and NGL prices, including hedges, decreased 46%, 40% and 58%, respectively, from the second quarter of 2008. Direct profit (oil and natural gas revenues less oil and natural gas operating expense) increased 13% from the first quarter of 2009 and decreased 46% from the second quarter of 2008. The increase from the first quarter 2009 and the decrease from second quarter 2008 primarily resulted from the impact of commodity prices. Operating cost per Mcfe produced decreased 26% from the first quarter of 2009 and decreased 42% from the second quarter of 2008 primarily due to reduced production taxes resulting from the large decrease in commodity prices and a production tax credit received attributable to high-cost gas wells. For 2009, we have hedged approximately 65% of our average daily oil production (based on our second quarter 2009 production) and approximately 77% of our average daily natural gas production (based on our second quarter 2009 production). Currently, for 2010, we have hedged approximately 52%
Second quarter 2009 liquids sold per day increased 9% from the first quarter of 2009 and increased 18% from the second quarter of 2008. Liquids sold per day increased from the first quarter of 2009 primarily due to the processing plants operating in an ethane rejection mode due to an extremely low ethane price in the first quarter 2009, and increased from the second quarter of 2008 primarily as the result of upgrades and expansions to existing plants. Gas processed per day increased 4% over the first quarter of 2009 and increased 12% over the second quarter of 2008, respectively. Gas gathered per day decreased 2% from the first quarter of 2009 and decreased 9% from the second quarter of 2008 primarily from our Southeast Oklahoma gathering system experiencing natural production declines associated with connected wells.
NGL prices in the second quarter of 2009 increased 7% from the price received in the first quarter of 2009 and decreased 58% over the price received in the second quarter of 2008. The price of liquids as compared to natural gas affects the revenue in our mid-stream operations and determines the fractionation spread which is the difference in the value received for the NGLs recovered from natural gas in comparison to the amount received for the equivalent MMBtu s of natural gas if unprocessed. In 2008, we had hedged approximately 50% of our average fractionation spread volumes to help manage our cash flow from this segment. We currently do not have any fractionation spread hedges in place for 2009 and beyond due to the unfavorable current market condition of futures prices.
Direct profit (mid-stream revenues less mid-stream operating expense) increased 175% from the first quarter of 2009 and decreased 58% from the second quarter of 2008. Half of the increase from the first quarter 2009 is due to the $1.3 million contract termination penalty we incurred during the first quarter of 2009 and the remainder of the increase, as well as, the decrease from the second quarter 2008 resulted primarily from changes in commodity prices which resulted in changes in processing margins. Total operating cost for our mid-stream segment decreased 7% from the first quarter of 2009 and decreased 57% from the second quarter of 2008. Our anticipated capital expenditures for 2009 for this segment are $13.0 million. Commodity prices started to decline in the third quarter of 2008 and continued to be at low levels during the second quarter of 2009 except for liquids prices which slightly increased in the second quarter of 2009. Prices may continue to decrease or remain at their current lower levels for an indeterminable period of time, which could result in fewer wells being connected to existing gathering systems and lower fractionation spreads resulting in possible future declines in volumes or margins.
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UNIT CORP. is engaged in the land contract drilling of oil and natural gas wells the development acquisition and production of oil and natural gasproperties and the marketing of natural gas. Its principal areas ofoperations are located in the Anadarko and Arkoma Basins which coverportions of Oklahoma Texas Kansas and Arkansas and has additionalproducing properties located in other states including but not limited toNew Mexico Louisiana North Dakota Colorado Wyoming Montana Alabama and Mississippi. Unit Corp. has a market cap of $1.59 billion; its shares were traded at around $33.53 with a P/E ratio of 5.8 and P/S ratio of 1.2. Unit Corp. had an annual average earning growth of 29.9% over the past 10 years. GuruFocus rated Unit Corp. the business predictability rank of 2.5-star.
Highlight of Business Operations:
Our second quarter 2009 utilization rate was 24%, compared to 40% and 80% in the first quarter 2009 and second quarter 2008, respectively. Dayrates for the second quarter of 2009 averaged $17,335, a decrease of 7% from the first quarter of 2009 and a decrease of 3% from the second quarter of 2008. Direct profit (contract drilling revenue less contract drilling operating expense) decreased 48% from the first quarter of 2009 and 72% from the second quarter of 2008, primarily due to the decrease in utilization. Operating cost per day decreased 2% from the first quarter of 2009 and increased 26% from the second quarter of 2008 primarily attributable to certain indirect drilling costs being spread over fewer utilization days. In the third quarter of 2008, prices for oil and natural gas started to decrease and continued to be at low levels during the second quarter of 2009 and we anticipate commodity prices will remain at depressed levels for an unknown period of time which will continue to adversely affect our dayrates and utilization.Second quarter 2009 production from our oil and natural gas segment averaged 170,000 Mcfe per day, a 6% decrease from the average for the first quarter of 2009 and a 3% decrease from the average for the second quarter of 2008. The decreases primarily resulted from the slowdown of drilling new wells due to current economic conditions.
Oil and natural gas revenues increased 1% from the first quarter of 2009 and decreased 45% from the second quarter of 2008. Our oil, natural gas and NGL prices, including hedges, in the second quarter of 2009 increased 9%, 1% and 28%, respectively, from the first quarter of 2009 and our oil, natural gas and NGL prices, including hedges, decreased 46%, 40% and 58%, respectively, from the second quarter of 2008. Direct profit (oil and natural gas revenues less oil and natural gas operating expense) increased 13% from the first quarter of 2009 and decreased 46% from the second quarter of 2008. The increase from the first quarter 2009 and the decrease from second quarter 2008 primarily resulted from the impact of commodity prices. Operating cost per Mcfe produced decreased 26% from the first quarter of 2009 and decreased 42% from the second quarter of 2008 primarily due to reduced production taxes resulting from the large decrease in commodity prices and a production tax credit received attributable to high-cost gas wells. For 2009, we have hedged approximately 65% of our average daily oil production (based on our second quarter 2009 production) and approximately 77% of our average daily natural gas production (based on our second quarter 2009 production). Currently, for 2010, we have hedged approximately 52%
Second quarter 2009 liquids sold per day increased 9% from the first quarter of 2009 and increased 18% from the second quarter of 2008. Liquids sold per day increased from the first quarter of 2009 primarily due to the processing plants operating in an ethane rejection mode due to an extremely low ethane price in the first quarter 2009, and increased from the second quarter of 2008 primarily as the result of upgrades and expansions to existing plants. Gas processed per day increased 4% over the first quarter of 2009 and increased 12% over the second quarter of 2008, respectively. Gas gathered per day decreased 2% from the first quarter of 2009 and decreased 9% from the second quarter of 2008 primarily from our Southeast Oklahoma gathering system experiencing natural production declines associated with connected wells.
NGL prices in the second quarter of 2009 increased 7% from the price received in the first quarter of 2009 and decreased 58% over the price received in the second quarter of 2008. The price of liquids as compared to natural gas affects the revenue in our mid-stream operations and determines the fractionation spread which is the difference in the value received for the NGLs recovered from natural gas in comparison to the amount received for the equivalent MMBtu s of natural gas if unprocessed. In 2008, we had hedged approximately 50% of our average fractionation spread volumes to help manage our cash flow from this segment. We currently do not have any fractionation spread hedges in place for 2009 and beyond due to the unfavorable current market condition of futures prices.
Direct profit (mid-stream revenues less mid-stream operating expense) increased 175% from the first quarter of 2009 and decreased 58% from the second quarter of 2008. Half of the increase from the first quarter 2009 is due to the $1.3 million contract termination penalty we incurred during the first quarter of 2009 and the remainder of the increase, as well as, the decrease from the second quarter 2008 resulted primarily from changes in commodity prices which resulted in changes in processing margins. Total operating cost for our mid-stream segment decreased 7% from the first quarter of 2009 and decreased 57% from the second quarter of 2008. Our anticipated capital expenditures for 2009 for this segment are $13.0 million. Commodity prices started to decline in the third quarter of 2008 and continued to be at low levels during the second quarter of 2009 except for liquids prices which slightly increased in the second quarter of 2009. Prices may continue to decrease or remain at their current lower levels for an indeterminable period of time, which could result in fewer wells being connected to existing gathering systems and lower fractionation spreads resulting in possible future declines in volumes or margins.
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