UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 27, 2004 Unit Corporation (Exact name of registrant as specified in its charter) Oklahoma 1-9260 73-1283193 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 7130 South Lewis, Suite 1000, Tulsa, Oklahoma 74136 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918) 493-7700 Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: Written communications pursuant to Rule 425 under the Securities Act - --- (17 CFR 230.425) Soliciting material pursuant to Rule 14a-12 under the Exchange Act - --- (17 CFR 240.14a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the - --- Exchange Act (17 CFR 240.14d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the - --- Exchange Act (17 CFR 240.13e-4(c))Section 2 - Financial Information. Item 2.02 Results of Operations and Financial Condition. ---------------------------------------------- On October 27, 2004, the Company issued a press release announcing its results of operations for the three and nine month periods ending September 30, 2004. A copy of that release is furnished with this filing as Exhibit 99.1. The press release furnished as an exhibit to this report includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by the Company from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, the Company's actual results may differ materially from those indicated or implied by such forward-looking statements. Item 9.01 Financial Statements and Exhibits. --------------------------------- (a) Financial Statements of Businesses Acquired. -------------------------------------------- Not Applicable. (b) Pro Forma Financial Information. -------------------------------- Not Applicable. (c) Exhibits. --------- 99.1 Unit Corporation press release dated October 27, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Unit Corporation Date: October 27, 2004 By: /s/ Mark E. Schell -------------------- Name: Mark E. Schell Title: Senior Vice President 2 EXHIBIT INDEX ------------- Exhibit No. Description 99.1 Unit Corporation press release dated October 27, 2004
news UNIT CORPORATION - ------------------------------------------------------------------------------- 7130 South Lewis Avenue, Tulsa, Oklahoma 74136 Telephone 918 493-7700, Fax 918 493-7711 Contact: David T. Merrill Chief Financial Officer and Treasurer (918) 493-7700 For Immediate Release... October 27, 2004 UNIT CORPORATION REPORTS 2004 THIRD QUARTER AND FIRST NINE MONTHS RESULTS Third Quarter Net Income Increases 93% Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its financial and operational results for the third quarter and first nine months of 2004. Consolidated net income for the third quarter was $24.6 million, or 54 cents per diluted share, on revenues of $143.4 million, compared to 2003's net income of $12.8 million, or 29 cents per diluted share, on revenue of $77.8 million. Revenues increased 84% while net income increased 93% between the comparative quarters. The dramatic improvement in net income was due to significant increases in oil and natural gas production and prices, an increased number of contract drilling rigs being utilized, increased dayrates, and a $3.8 million pre-tax gain on the sale of the Company's investment in a natural gas marketing limited partnership. In June 2003, Unit purchased a 16.7% interest in this limited partnership and in August 2004 sold its interest for $6.2 million. The investment was carried at cost and therefore the sale of this investment has no impact on the ongoing operations of Unit. For the nine-month period, the Company reported consolidated net income of $60.3 million, or $1.31 per diluted share, on revenues of $359.0 million, compared to 2003's net income of $38.4 million, or 88 cents per diluted share, on revenues of $218.8 million. The increases were due to an improvement in oil and natural gas production and prices, rig utilization and dayrates, the acquisition of the 60% of Superior Pipeline Company L.L.C. that Unit did not already own, and a gain on the sale of the Company's investment in the natural gas marketing limited partnership.UNIT DRILLING RESULTS Contract drilling revenues increased 62% between the comparative third quarters to $80.9 million due to increases in both dayrates and the number of rigs utilized. The average rig utilization was 92.0 rigs in the third quarter of 2004, up 35% from 2003's third quarter. Currently, Unit has 98 of its 100 rigs operating under contract. Daywork rates for the third quarter averaged $9,103 per day, which was 14% above the comparable quarter of 2003. Contract drilling operating margins (per drilling rig) averaged $2,727 per day during the third quarter of 2004, compared to $2,294 for the same period in 2003. Unit is in the process of constructing its 101st rig, a 1,000 horsepower drilling rig, which is expected to be placed into service the first of December. On August 2, 2004, Unit announced the completion of the acquisition of Sauer Drilling Company. The acquisition included 9 drilling rigs, a fleet of trucks, and an equipment and repair yard with associated inventory, located in Casper, Wyoming. Currently, 8 of the 9 rigs are operating under contract in Unit's Rocky Mountain division. Between the comparative first nine months, contract drilling revenues increased 63% to $211.2 million with rig utilization increasing to an average of 85.8 rigs operating during the first nine months of 2004 as compared to an average 60.6 rigs operating in the first nine months of 2003. Contract drilling operating margins (per drilling rig) averaged $2,487 per day during the first nine months of 2004, compared to $1,977 for the same period in 2003. UNIT PETROLEUM RESULTS Revenues from Unit's oil and natural gas operations increased 69% in the third quarter to $46.4 million due to significantly higher oil and natural gas production and prices. During the first nine months of 2004, oil and natural gas revenues were $130.7 million, an increase of 49% over the same period in 2003. Natural gas production was 6,947 million cubic feet (MMcf) in the third quarter of 2004, while oil production for the same period was 274,000 barrels. Natural gas production was 19,855 MMcf in the first nine months of 2004, while oil production for the same period was 767,000 barrels. For the first nine months, equivalent barrel production was up 42% on a year-over-year basis. Excluding the acquisition of PetroCorp Incorporated in February 2004, the first nine months equivalent barrel production for 2004 increased 17%. Average natural gas prices received during the third quarter of 2004 increased 16% to $5.21 per Mcf compared to $4.50 per Mcf during the third quarter of 2003. The average oil price received was $34.46 per barrel in the third quarter of 2004 and $25.51 per barrel in the 2003 comparative quarter, a 35% increase. For the first nine months of 2004, average natural gas prices received increased 4% to $5.23 per Mcf compared to $5.05 per Mcf during the first nine months of 2003. The average oil price received was $32.17 per barrel in the first nine months of 2004 compared to $27.02 per barrel in 2003, a 19% increase. During the first nine months of 2004, Unit completed 110 wells with a success rate of 85%, compared to 98 wells completed during the first nine months of 2003 with an 85% success rate. SUPERIOR PIPELINE RESULTS On July 29, 2004, Unit purchased the 60% of Superior Pipeline Company LLC that it did not already own for $19.8 million. The operations of Superior Pipeline and Unit's previously existing gas gathering activities are reflected in the gas gathering and processing segment. Prior to this acquisition, Unit's 40% interest in the operations of Superior Pipeline was shown as equity in earnings of unconsolidated investments. Superior Pipeline is a mid-stream company engaged primarily in the gathering, processing and treating of natural gas. The company owns one natural gas treatment plant, two processing plants, 12 active gathering systems and 400 miles of pipeline. For the third quarter of 2004, Superior Pipeline gathered 28,356 MMBtu's of natural gas per day and processed 26,669 MMBtu's per day. For the nine months of 2004, Superior Pipeline gathered 26,090 MMBtu's per day and processed 26,669 MMBtu's per day. MANAGEMENT COMMENTS "Our third quarter results reflect the impact of a higher commodity pricing environment and favorable industry conditions," said John Nikkel, Chairman and Chief Executive Officer. "With the help of strategic acquisitions, Unit has positioned itself to benefit from current industry conditions. During the third quarter of 2004, we completed three significant transactions with the acquisition of Sauer Drilling Company, the acquisition of the 60% of Superior Pipeline Company LLC that we did not already own, and the sale of our investment in a natural gas limited partnership. With 110 wells completed during the first nine months of 2004, our exploration and production segment is on track to drill 165 to 175 wells by year-end. Our contract drilling segment is benefiting from higher commodity prices. We have seen a 4% rise in average dayrates from the previous quarter and all of our rigs are currently contracted. Long-term debt has increased to $107.5 million due to strong acquisition activity during the first nine months of the year, which still leaves us with a conservative 16% debt to capitalization ratio. We are pleased with Unit's growth and will continue along that path as the year comes to a close." WEBCAST Unit will webcast its third quarter earnings conference call live over the Internet on October 27, 2004 at 11:00 a.m. Eastern Time. To listen to the live call, please go to www.unitcorp.com at least fifteen minutes prior to the start of the call to download and install any necessary audio software. For those who are not available to listen to the live webcast, a replay will be available shortly after the call and will remain on the site for twelve months. --------------------------------------- Unit Corporation is a Tulsa-based, publicly held energy company engaged through its subsidiaries in oil and gas exploration, production, contract drilling and gas gathering and processing. Unit's Common Stock is listed on the New York Stock Exchange under the symbol UNT. For more information about Unit Corporation, visit its website at http://www.unitcorp.com. This news release contains forward-looking statements within the meaning of the Securities Litigation Reform Act that involve risks and uncertainties, including the closing of the pending acquisitions, the productive capabilities of the wells, future demand for oil and natural gas, future rig utilization and dayrates, oil and gas reserve information, anticipated production rates from company wells, anticipated gas gathering and processing rates, the prospective capabilities of offset acreage, anticipated oil and natural gas prices, the number of wells to be drilled by the company, development, operational, implementation and opportunity risks, and other factors described from time to time in the company's publicly available SEC reports, which could cause actual results to differ materially from those expected. Unit Corporation Selected Financial and Operations Highlights (In thousands except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2003 2004 2003 2004 - ------------------------------------------------------------------------------- Statement of Income: Revenues: Contract drilling $ 50,052 $ 80,887 $ 129,839 $ 211,211 Oil and natural gas 27,402 46,394 87,521 130,718 Gas gathering and processing 148 11,474 566 11,562 Other 198 4,595 832 5,497 ---------- ---------- ---------- ---------- Total revenues 77,800 143,350 218,758 358,988 ---------- ---------- ---------- ---------- Expenses: Contract drilling: Operating costs 35,653 57,816 97,105 152,736 Depreciation and amortization 6,318 8,903 17,111 24,121 Oil and natural gas: Operating costs 6,207 9,746 18,655 29,871 Depreciation, depletion and amortization 6,972 12,316 19,464 34,028 Gas gathering and processing: Operating costs 50 10,480 307 10,515 Depreciation and amortization 58 451 125 489 General and administrative 2,246 3,081 6,766 8,955 Interest expense 154 820 540 1,751 ---------- ---------- ---------- ---------- Total expenses 57,658 103,613 160,073 262,466 ---------- ---------- ---------- ---------- Income Before Income Taxes 20,142 39,737 58,685 96,522 ---------- ---------- ---------- ---------- Income Tax Expense: Current 157 1,470 456 3,597 Deferred 7,506 13,673 21,856 33,187 ---------- ---------- ---------- ---------- Total income taxes 7,663 15,143 22,312 36,784 ---------- ---------- ---------- ---------- Equity in Earnings of Unconsolidated Investments Net of Income Tax 284 53 740 603 ---------- ---------- ---------- ---------- Income Before Change in Accounting Principle 12,763 24,647 37,113 60,341 Cumulative Effect of Change in Accounting Principle --- --- 1,325 --- ---------- ---------- ---------- ---------- Net Income $ 12,763 $ 24,647 $ 38,438 $ 60,341 ========== ========== ========== ========== Income Before Change in Accounting Principle Per Common Share: Basic $ .29 $ .54 $ .85 $ 1.32 Diluted $ .29 $ .54 $ .85 $ 1.31 Net Income Per Common Share: Basic $ .29 $ .54 $ .88 $ 1.32 Diluted $ .29 $ .54 $ .88 $ 1.31 Weighted Average Common Shares Outstanding: Basic 43,556 45,733 43,503 45,709 Diluted 43,736 45,972 43,677 45,915 December 31, September 30, 2003 2004 - ------------------------------------------------------------------------------- Balance Sheet Data: Current assets $ 72,742 $ 109,173 Total assets $ 712,925 $ 983,430 Current liabilities $ 51,811 $ 87,599 Long-term debt $ 400 $ 107,500 Other long-term liabilities $ 17,893 $ 24,727 Deferred income taxes $ 127,053 $ 186,742 Shareholders' equity $ 515,768 $ 576,862 Nine Months Ended September 30, 2003 2004 - ------------------------------------------------------------------------------- Statement of Cash Flows Data: Cash Flow From Operations before Changes in Working Capital (1) $ 98,114 $ 149,763 Net Change in Working Capital (9,702) 2,008 ----------- ----------- Net Cash Provided by Operating Activities $ 88,412 $ 151,771 =========== =========== Net Cash Used in Investing Activities $ (67,375) $ (258,576) Net Cash Provided by (Used in) Financing Activities $ (19,769) $ 107,747 Three Months Ended Nine Months Ended September 30, September 30, 2003 2004 2003 2004 - ------------------------------------------------------------------------------- Contract Drilling Operations Data: Rigs Utilized 68.2 92.0 60.6 85.8 Operating Margins (2) 29% 29% 25% 28% Operating Profit Before Depreciation (2) ($MM) $ 14.4 $ 23.1 $ 32.7 $ 58.5 Oil and Natural Gas Operations Data: Production Oil - MBbls 134 274 372 767 Natural Gas - MMcf 5,233 6,947 15,043 19,855 Average Prices Oil -- Bbl $ 25.51 $ 34.46 $ 27.02 $ 32.17 Natural Gas - Mcf $ 4.50 $ 5.21 $ 5.05 $ 5.23 Operating Profit Before DD&A (2) ($MM) $ 21.2 $ 36.6 $ 68.9 $ 100.8 Gas Gathering and Processing Operations Data: Gas gathered - MMBtu/day 14,758 28,356 11,200 26,090 Gas processed - MMBtu/day --- 26,669 --- 26,669 - ------------- (1) Unit Corporation considers Unit's cash flow from operations before changes in working capital an important measure in meeting the performance goals of the company. (2) Operating profit before depreciation is calculated by taking operating revenues by segment less operating expenses by segment excluding depreciation, depletion, amortization and impairment, general and administrative and interest expense. Operating margins are calculated by taking operating profit divided by segment revenue. End of Filing