Unit Corp beat my forecast
Posted: Tue Feb 25, 2014 2:14 pm
Great stuff from UNT. 2014 should be a very profitable year for this company. Big winner if natgas prices stay this high. - Dan
“For the oil and natural gas segment, we are very pleased with our fourth quarter production growth. For the full year, we achieved the upper end of our production guidance. Fourth quarter production growth was primarily driven by the Wilcox and Granite Wash plays. During 2013, we completed sales of certain non-core oil and natural gas assets, with total proceeds of $78.8 million with the most significant portion coming from the sale of the majority of our non-operated Bakken assets. We ended 2013 with total proved reserves of 160 million barrels of oil equivalent (MMBoe), a 7% increase, despite the sale of non-core properties with total proved reserves of 3.5 MMBoe. Weather and operational delays will affect first quarter 2014 production; however, we continue to anticipate production growth for 2014 of between 15% and 18%.
“Our contract drilling segment operated in a soft drilling market throughout 2013; however, we were able to maintain fairly consistent utilization. During the fourth quarter of 2013 we averaged 65 drilling rigs operating. We have seen improvement in utilization in the first quarter of 2014. Currently, we have 69 drilling rigs operating with continued improvement expected through the end of the first quarter. We also initiated a comprehensive evaluation of our drilling rig fleet that included a review regarding the possible realignment of our fleet’s capabilities and efficiencies. In view of the demand for drilling rigs using new technologies and capabilities, we determined we should pursue the sale of several of our older and larger drilling rigs that have not worked for some time. As a result, during 2013, we sold four of our idle 2,000 horsepower drilling rigs and one 3,000 horsepower drilling rig with proceeds totaling $32.4 million. In addition, the sale of four additional idle 3,000 horsepower drilling rigs was completed after year end. The proceeds from these sales will be used in our new drilling rig program, a program we launched to design and build a new proprietary drilling rig, the BOSS rig. We anticipate this drilling rig, coupled with continued enhancements to our existing fleet, will position us to continue to meet the demands of our existing customers and allow us to compete for the work of new customers. Our first BOSS drilling rig will work for our oil and natural gas segment during the first quarter of 2014. We are optimistic that the BOSS drilling rig will be well received by operators and will result in additional new-build contract opportunities.
“The midstream segment is experiencing the benefit of previous capital investments in several of our projects including the Bellmon facility in the Mississippian play in Oklahoma and the Pittsburgh Mills facility in the Appalachian area. Downward price pressure on natural gas liquids (NGLs) during 2012 impacted this segment’s cash flows. Due to the increase in liquids pricing in the first quarter of 2014, particularly propane, we are now operating in full ethane recovery mode at all of our processing facilities. Our goal is to position this segment for more sustainable growth with less cash flow volatility. Where possible, we are restructuring existing commodity price based contracts as they expire to fee based contracts. These changes, while allowing us to remain competitive, should reduce this segment’s exposure to commodity price risks.”
“For the oil and natural gas segment, we are very pleased with our fourth quarter production growth. For the full year, we achieved the upper end of our production guidance. Fourth quarter production growth was primarily driven by the Wilcox and Granite Wash plays. During 2013, we completed sales of certain non-core oil and natural gas assets, with total proceeds of $78.8 million with the most significant portion coming from the sale of the majority of our non-operated Bakken assets. We ended 2013 with total proved reserves of 160 million barrels of oil equivalent (MMBoe), a 7% increase, despite the sale of non-core properties with total proved reserves of 3.5 MMBoe. Weather and operational delays will affect first quarter 2014 production; however, we continue to anticipate production growth for 2014 of between 15% and 18%.
“Our contract drilling segment operated in a soft drilling market throughout 2013; however, we were able to maintain fairly consistent utilization. During the fourth quarter of 2013 we averaged 65 drilling rigs operating. We have seen improvement in utilization in the first quarter of 2014. Currently, we have 69 drilling rigs operating with continued improvement expected through the end of the first quarter. We also initiated a comprehensive evaluation of our drilling rig fleet that included a review regarding the possible realignment of our fleet’s capabilities and efficiencies. In view of the demand for drilling rigs using new technologies and capabilities, we determined we should pursue the sale of several of our older and larger drilling rigs that have not worked for some time. As a result, during 2013, we sold four of our idle 2,000 horsepower drilling rigs and one 3,000 horsepower drilling rig with proceeds totaling $32.4 million. In addition, the sale of four additional idle 3,000 horsepower drilling rigs was completed after year end. The proceeds from these sales will be used in our new drilling rig program, a program we launched to design and build a new proprietary drilling rig, the BOSS rig. We anticipate this drilling rig, coupled with continued enhancements to our existing fleet, will position us to continue to meet the demands of our existing customers and allow us to compete for the work of new customers. Our first BOSS drilling rig will work for our oil and natural gas segment during the first quarter of 2014. We are optimistic that the BOSS drilling rig will be well received by operators and will result in additional new-build contract opportunities.
“The midstream segment is experiencing the benefit of previous capital investments in several of our projects including the Bellmon facility in the Mississippian play in Oklahoma and the Pittsburgh Mills facility in the Appalachian area. Downward price pressure on natural gas liquids (NGLs) during 2012 impacted this segment’s cash flows. Due to the increase in liquids pricing in the first quarter of 2014, particularly propane, we are now operating in full ethane recovery mode at all of our processing facilities. Our goal is to position this segment for more sustainable growth with less cash flow volatility. Where possible, we are restructuring existing commodity price based contracts as they expire to fee based contracts. These changes, while allowing us to remain competitive, should reduce this segment’s exposure to commodity price risks.”