Improving commodity prices driving demand
Unit Corp. (Ticker: UNT) announced its first quarter 2017 results Thursday with the drilling segment of the company showing higher levels of rig utilization. The average number of Unit’s drilling rigs working during the quarter was 25.5, an increase of 24% over the first quarter of 2016 and an increase of 31% over the fourth quarter of 2016, according to the company’s press release.
“Currently, all nine of our BOSS drilling rigs are operating, and we began construction of our tenth BOSS drilling rig,” said Unit President and CEO Larry Pinkston. “Improved commodity prices have led to more operator inquiries and more contracts for our drilling rigs.”
Of the company’s 94 drilling rigs, 229 were working at the end of the first quarter, Unit said in its earnings release, rebounding from a low of 13 rigs during the second quarter of 2016. Long-term contracts (contracts with original terms ranging from six months to two years in length) are in place for eight of the company’s drilling rigs. Of the eight, seven are up for renewal during 2017 and one in 2018, UNT said.
Dayrates averaged $15,835, a decrease of 14% year-over-year and a 6% decrease from last quarter. “Margins were adversely impacted by long-term contract repricing, additional expenses associated with rig relocations, and general startup expenses. During the latter part of the quarter, we began to obtain some modest dayrate increases on contract renewals,” said Pinkston.
Production is down, but realized prices are up
Unit’s oil and gas segment reported 42 MBOEPD of average production during the first quarter of the year, down 15% year-over-year and 8% sequentially. Liquids (oil and NGLs) production represented 46% of total equivalent production. Oil production was 7,141 barrels per day, a decrease of 19% from the first quarter of 2016 and a decrease of 8% from the fourth quarter of 2016. NGLs production was 12,190 barrels per day, a decrease of 14% from the first quarter of 2016 and a 12% decrease from the fourth quarter of 2016. Natural gas production was 135,838 Mcf/d, a decrease of 15% from the first quarter of 2016 and a decrease of 6% from the fourth quarter of 2016.
Unit’s average natural gas price was $2.68 per Mcf, an increase of 43% over the first quarter of 2016 and an increase of 13% over the fourth quarter of 2016. Unit’s average oil price was $48.68 per barrel, an increase of 50% over the first quarter of 2016 and an increase of 6% over the fourth quarter of 2016. Unit’s average NGLs price was $17.81 per barrel, a 170% increase over the first quarter of 2016 and an increase of 22% over the fourth quarter of 2016.
Unit recorded net income of $15.9 million for the quarter, or $0.31 per diluted share, compared to a net loss of $41.1 million, or $0.83 per share, for the first quarter of 2016. For the first quarter of 2016, Unit incurred a pre-tax non-cash ceiling test write-down of $37.8 million in the carrying value of its oil and natural gas properties. Adjusted net income (which excludes the effect of non-cash commodity derivatives) for the quarter was $7.5 million, or $0.15 per diluted share. Total revenues were $175.7 million (50% oil and natural gas, 21% contract drilling, and 29% midstream), compared to $136.2 million (43% oil and natural gas, 28% contract drilling, and 29% midstream) for the first quarter of 2016. Adjusted EBITDA for the quarter was $74.5 million, or $1.46 per diluted share.
