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 26, 2005 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 26, 2005, the Company issued a press release announcing its results of operations for the three and nine month periods ending September 30, 2005. 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. Section 9 - Financial Statements and Exhibits. 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 26, 2005. 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 26, 2005 By: /s/ David T. Merrill --------------------------------- Name: David T. Merrill Title: Chief Financial Officer & Treasurer 1 EXHIBIT INDEX ------------- Exhibit No. Description 99.1 Unit Corporation press release dated October 26, 2005
news UNIT CORPORATION - ------------------------------------------------------------------------------- 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136 Telephone 918 493-7700, Fax 918 493-7714 Contact: David T. Merrill Chief Financial Officer and Treasurer (918) 493-7700 For Immediate Release... October 26, 2005 UNIT CORPORATION REPORTS 2005 THIRD QUARTER AND FIRST NINE MONTHS RESULTS Third Quarter Net Income Up 134% Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its financial and operational results for the third quarter and first nine months of 2005. Consolidated net income for the third quarter was $57.6 million, or $1.25 per diluted share, on revenues of $231.0 million, compared to 2004's net income of $24.6 million, or 54 cents per diluted share, on revenue of $143.4 million. Revenues increased 61% while net income increased 134% between the comparative quarters. Net income, revenues, and earnings per share are all-time quarterly records for Unit. The dramatic improvement in revenue and net income was attributable to increases in drilling dayrates and the number of drilling rigs utilized as well as increases in natural gas production and the prices received by the Company for its oil and natural gas production. For the nine-month period, the Company reported consolidated net income of $128.0 million, or $2.78 per diluted share, on revenues of $592.5 million, compared to 2004's net income of $60.3 million, or $1.31 per diluted share, on revenues of $359.0 million. The increases resulted from improvement in oil and natural gas production and prices, as well as drilling rig utilization and dayrates. CONTRACT DRILLING RESULTS Contract drilling revenues increased 48% between the comparative third quarters to $119.9 million, primarily due to an increase in dayrates and the number of rigs being used. Average rig utilization was 102.6 rigs in the third quarter of 2005, up 12% from 2004's third quarter of 92.0 rigs. Currently, Unit has 111 operational rigs, 109 of which are operating under contract. Unit's 112th rig is completing construction and should be operational by November 15th. Unit is in the process of securing major components to build its 113th and 114th rigs, both 1,500 horsepower SCR rigs It has also ordered two new 1,500 horsepower SCR rigs, which are scheduled to be delivered in the first quarter of 2006. Drilling rig rates for the third quarter averaged $13,117 per day, up 44% above the comparable quarter of 2004. Operating margins for the third quarteraveraged $5,924 per day (before elimination of intercompany rig profit of $3.2 million) as compared to $2,814 per day (before elimination of intercompany rig profit of $0.7 million) for 2004. Unit's average dayrate at the end of the third quarter was $13,347. Between the comparative first nine months, contract drilling revenues increased 53% to $322.4 million from $211.2 million for the first nine months of 2004. Rig utilization increased to an average of 100.7 rigs for the first nine months of 2005 as compared to an average 85.8 rigs operating in the first nine months of 2004. EXPLORATION AND PRODUCTION RESULTS Revenues from Unit's oil and natural gas operations increased 81% to $84.0 million in the third quarter because of higher oil and natural gas prices and natural gas production. For the third quarter of 2005, natural gas production was 8,542 million cubic feet (MMcf) and oil production was 251,000 barrels. For the first nine months of 2005, oil and natural gas revenues were $202.8 million, an increase of 55% over the same period in 2004. Natural gas production was 24,055 MMcf in the first nine months of 2005, while oil production for the same period was 788,000 barrels. Equivalent Mcf production was up 18% over the comparative nine month periods. The Company's average natural gas prices for the third quarter of 2005 increased 56% to $8.13 per Mcf, compared to $5.21 per Mcf for the third quarter of 2004, and its average oil price was $54.60 per barrel for the third quarter of 2005 as compared to $34.46 per barrel in the third quarter of 2004, a 58% increase. For the first nine months of 2005, average natural gas prices received increased 29% to $6.74 per Mcf compared to $5.23 per Mcf during the first nine months of 2004. The average oil price received was $48.16 per barrel in the first nine months of 2005 compared to $32.17 per barrel in 2004, a 50% increase. During the first nine months of 2005, Unit completed 135 wells with a success rate of 90%, compared to 110 wells completed during the first nine months of 2004 with an 85% success rate. GAS GATHERING AND PROCESSING 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 now reflected in the gas gathering and processing segment. Before 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 purchasing, gathering, processing and treating of natural gas. The company operates two natural gas treatment plants, owns four processing plants, 35 active gathering systems and 480 miles of pipeline. For the third quarter of 2005, Superior Pipeline gathered 159,821 MMBtu's of natural gas per day and processed 36,061 MMBtu's per day. For the first nine months of 2005, Superior gathered 129,754 MMBtu's of natural gas per day and processed 32,709 MMBtu' s per day. MANAGEMENT COMMENTS "Our third quarter results reflect the impact of higher commodity prices and favorable industry conditions," said Larry Pinkston, Chief Executive Officer and President. "Unit has positioned itself to benefit from current industry conditions through strategic acquisitions and internal growth. During the third quarter, Unit announced the closing of its acquisition of all the Texas drilling operations of Texas Wyoming Drilling, Inc., which included seven drilling rigs all of which are currently working in the Barnett Shale area of North Texas and the Gulf Coast. This brings our total fleet to 111 drilling rigs. We have ordered two new rigs and continue to construct new rigs while searching for opportunities to acquire rigs to meet the continued increase in customer demand. Our drilling rig fleet continues to operate at nearly 100% utilization. Our exploration and production operations have drilled an aggressive 135 wells during the first nine months. On October 7th, we announced the signing of a purchase and sale agreement to acquire certain oil and natural gas properties consisting of 42.5 Bcfe of proved oil and natural gas reserves. The properties are located in Oklahoma, Arkansas and Texas and currently produce 6.5 MMcfe per day. The closing is anticipated to be mid-November. We will continue to evaluate acquisition opportunities during the remainder of the year. Long-term debt increased by $20.7 million from the second quarter to $115.6 million due primarily to the recent acquisition. Our debt to capitalization ratio remains at a conservative 13%." WEBCAST Unit will webcast its third quarter earnings conference call live over the Internet on October 26, 2005 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 productive capabilities of the wells, future demand for oil and natural gas, future rig utilization and dayrates, the timing of the completion of rigs currently under construction, 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 and operations data) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 - ------------------------------------------------------------------------------- Statement of Income: Revenues: Contract drilling $ 119,873 $ 80,887 $ 322,379 $ 211,211 Oil and natural gas 83,979 46,394 202,819 130,718 Gas gathering and processing 26,561 11,474 65,895 11,562 Other 635 4,595 1,402 5,497 ---------- ---------- ---------- ---------- Total revenues 231,048 143,350 592,495 358,988 ---------- ---------- ---------- ---------- Expenses: Contract drilling: Operating costs 67,161 57,816 194,890 152,736 Depreciation 11,019 8,903 31,010 24,121 Oil and natural gas: Operating costs 15,913 9,746 40,916 29,871 Depreciation, depletion and amortization 16,355 12,316 45,632 34,028 Gas gathering and processing: Operating costs 24,395 10,480 60,616 10,515 Depreciation 902 451 2,267 489 General and administrative 3,324 3,081 10,455 8,955 Interest expense 885 820 2,157 1,751 ---------- ---------- ---------- ---------- Total expenses 139,954 103,613 387,943 262,466 ---------- ---------- ---------- ---------- Income Before Income Taxes 91,094 39,737 204,552 96,522 ---------- ---------- ---------- ---------- Income Tax Expense: Current 19,628 1,470 41,185 3,597 Deferred 13,828 13,673 35,385 33,187 ---------- ---------- ---------- ---------- Total income taxes 33,456 15,143 76,570 36,784 ---------- ---------- ---------- ---------- Equity in Earnings of Unconsolidated Investments Net of Income Tax --- 53 --- 603 ---------- ---------- ---------- ---------- Net Income $ 57,638 $ 24,647 $ 127,982 $ 60,341 ========== ========== ========== ========== Net Income Per Common Share: Basic $ 1.25 $ .54 $ 2.79 $ 1.32 Diluted $ 1.25 $ .54 $ 2.78 $ 1.31 Weighted Average Common Shares Outstanding: Basic 45,959 45,733 45,873 45,709 Diluted 46,229 45,972 46,108 45,915 September 30, December 31, 2005 2004 - ------------------------------------------------------------------------------- Balance Sheet Data: Current assets $ 164,802 $ 118,601 Total assets $ 1,252,647 $ 1,023,136 Current liabilities $ 107,804 $ 77,176 Long-term debt $ 115,600 $ 95,500 Other long-term liabilities $ 39,470 $ 37,725 Deferred income taxes $ 239,971 $ 204,466 Shareholders' equity $ 749,802 $ 608,269 Nine Months Ended September 30, 2005 2004 - ------------------------------------------------------------------------------- Statement of Cash Flows Data: Cash Flow From Operations before Changes in Working Capital(1) $ 245,534 $ 149,763 Net Change in Working Capital (55,682) 2,008 ------------ ------------ Net Cash Provided by Operating Activities $ 189,852 $ 151,771 ============ ============ Net Cash Used in Investing Activities $ (222,012) $ (258,576) Net Cash Provided by Financing Activities $ 32,223 $ 107,747 Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 - ------------------------------------------------------------------------------- Contract Drilling Operations Data: Rigs Utilized 102.6 92.0 100.7 85.8 Operating Margins(2) 44% 29% 40% 28% Operating Profit Before Depreciation(2)($MM) $ 52.7 $ 23.1 $ 127.5 $ 58.5 Oil and Natural Gas Operations Data: Production Oil - MBbls 251 274 788 767 Natural Gas - MMcf 8,542 6,947 24,055 19,855 Average Prices Oil -- Bbl $ 54.60 $ 34.46 $ 48.16 $ 32.17 Natural Gas - Mcf $ 8.13 $ 5.21 $ 6.74 $ 5.23 Operating Profit Before DD&A(2)($MM) $ 68.1 $ 36.6 $ 161.9 $ 100.8 Gas Gathering and Processing Operations Data: Gas Gathering - MMBtu/day 159,821 58,436 129,754 35,376 Gas Processing - MMBtu/day 36,061 21,143 32,709 7,141 _____________ (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 dividing operating profit by segment revenue.