Unit Corp. (UNT) Misses Q4 EPS by 4c, Revenues Miss

Unit Corp. (NYSE: UNT) reported Q4 EPS of $0.27, $0.04 worse than the analyst estimate of $0.31. Revenue for the quarter came in at $214.79 million versus the consensus estimate of $221.4 million.

• Oil and natural gas segment production increased 7% year-over-year from 2017.
• Total year-end 2018 proved oil and natural gas reserves increased 7% over 2017, and 158% of 2018 production was replaced with new reserves.
• In December, Unit acquired approximately 8,700 net acres in the Penn sands play in western Oklahoma adding additional oil prospects similar to Unit’s existing Southern Oklahoma Hoxbar Oil Trend (SOHOT) play. The final adjusted price of the acquisition totaled approximately $29.6 million and included net proved reserves of 2.6 million barrels of oil equivalent (MMBoe). The acquisition provides Unit with 20 to 30 horizontal drilling locations and 82% of the acreage is held by production.
• Contract drilling segment placed its 11th BOSS rig into service during the second quarter. Its 12th BOSS rig was placed into service during January 2019. Further, its 13th BOSS rig was recently placed into service under a long-term contract.
• During the quarter, the mid-stream segment completed the connection of the Miller Pad to its Pittsburgh Mills gathering system. The wells from the new pad began being placed online in late January 2019.
• The mid-stream segment’s natural gas gathering, processing and liquids sold volumes increased 2%, 15% and 24% year-over-year, respectively.
• Unit amended its bank credit agreement during the quarter, in part extending its maturity until October 2023.

Larry Pinkston, Unit’s Chief Executive Officer and President, said: “During the fourth quarter, as part of our periodic evaluation process, we removed 41 drilling rigs from our fleet as well as some other equipment. Those rigs included our 29 remaining mechanical drilling rigs and 12 of our SCR drilling rigs that were not considered to be economic to upgrade to meet market demands. Our remaining rig fleet includes 13 BOSS AC drilling rigs as well as upgraded SCR rigs that are well suited for current operator requirements. Additionally, we have other SCR rigs that are available to return to service as market conditions and demand improve or are good candidates for upgrade to meet future customer demands and requirements. Our drilling rig fleet now totals 57 rigs.”

“For our oil and natural gas segment, we are focusing on increasing the proportion of oil in our production mix. As part of this effort, we are building a position in western Oklahoma to add drilling inventory in prospective areas we believe have a greater concentration of oil. We continue to look for bolt-on opportunities near our existing core areas.”

2019 CAPITAL BUDGET AND PRODUCTION GUIDANCE

Unit’s 2019 capital budget is anticipated to range from $336 million to $422 million, a decrease of 27% to 8% from 2018, excluding acquisitions. The decrease is in response to the current commodity price environment and keeps the budget in-line with anticipated cash flow plus proceeds from any non-core asset sales. The capital budget is allocated, as follows, among the three business segments: $271 million to $315 million for the oil and natural gas segment; $30 million to $65 million for the contract drilling segment; and $35 million to $42 million for the mid-stream segment. The budget does not include amounts for any possible acquisitions and is based on realized prices for the year averaging $55.04 per barrel of oil, $24.73 per barrel of natural gas liquids, and $3.00 per Mcf of natural gas (all prices are before differentials and hedges are applied).

Unit’s oil and natural gas segment’s 2019 production is anticipated to be 17.4 to 17.9 MMBoe (an increase of 2% to 5%, year-over-year) based on the capital budget range.

Pinkston said: "We have considerably reduced our 2019 capital expenditure plans from 2018 levels. Historically, we have focused on keeping our capital expenditure budget in line with anticipated cash flow, adjusting our spending mid-year if conditions warranted a change. We begin 2019 with the same objective of maintaining our capital spending in line with anticipated cash flow."

For earnings history and earnings-related data on Unit Corp. (UNT) click here.

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