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): February 9, 2010
(Exact
name of registrant as specified in its charter)
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Delaware
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1-9260
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73-1283193
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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7130
South Lewis, Suite 1000, Tulsa, Oklahoma
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74136
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(Address
of principal executive offices)
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(Zip
Code)
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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:
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Section
8 - Other Events.
Item 8.01 Other
Events.
On
February 9, 2010, Unit Corporation issued a press release announcing its
exploration segment’s 2009 year end oil and natural gas reserves and 2009
production, 2009 segment information and the sale of eight drilling
rigs. The information regarding the 2009 year end oil and natural gas
reserves and 2009 production is preliminary and unaudited. Audited
results will be contained in the company’s Annual Report on Form 10-K for the
year ended December 31, 2009 to be filed on or before March 1,
2010. Actual results may vary from those contained in this press
release.
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. Except as required by law, we
disclaim any obligation to publicly update or revise forward looking statements
after the date of this report to conform them to actual results.
A copy of the press release is filed as Exhibit 99.1 to this Current Report
on Form 8-K and is incorporated herein by reference.
Section
9 – Financial Statements and Exhibits
Item
9.01 Financial
Statements and Exhibits.
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(a)
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Financial
Statements of Businesses Acquired.
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Not
Applicable.
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(b)
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Pro Forma
Financial Information.
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Not
Applicable.
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(c)
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Shell
Company Transactions.
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Not
Applicable.
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(d)
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Exhibits.
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Exhibit
No.
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Description
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99.1
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Press
Release announcing Unit Corporation's exploration segment's year
ended 2009 total oil and natural gas proved reserves and 2009
production, 2009 segment information and the sale of eight drilling
rigs.
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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.
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Unit
Corporation
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Date:
February 9, 2010
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By: /s/ Mark E.
Schell
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Mark
E. Schell
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Senior
Vice President
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1
EXHIBIT
INDEX
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Description
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99.1
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Press
Release announcing Unit Corporation's exploration segment's year
ended 2009 total oil and natural gas proved reserves and 2009
production, 2009 segment information and the sale of eight drilling
rigs.
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news
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UNIT
CORPORATION
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7130
South Lewis Avenue, Suite 1000, Tulsa,
Oklahoma 74136
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Telephone
918 493-7700, Fax 918 493-7711
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Contact:
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David
T. Merrill
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Chief
Financial Officer & Treasurer
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(918)
493-7700
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For
Immediate Release…
February
9, 2010
UNIT
CORPORATION ANNOUNCES SEGMENT INFORMATION REGARDING 2009 TOTAL PROVED RESERVES
AND PRODUCTION AS WELL AS THE SALE OF EIGHT DRILLING RIGS
Tulsa, Oklahoma . . . Unit Corporation
(NYSE – UNT) announced the following information regarding its exploration
segment for 2009 and certain 2010 information.
Oil
and Natural Gas Segment Information
(The
following information is unaudited and preliminary. Audited results
will be provided in our Annual Report on Form 10-K for the year ended December
31, 2009.)
For 2009 this segment achieved the
following reserve and production results :
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·
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Year
end proved reserves of 577.0 billion cubic feet equivalents
(Bcfe).
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·
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Oil
and natural gas production of 60.7
Bcfe.
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This segment replaced 175% of its 2009
production (excluding negative revisions of 38 Bcfe), or 113% when those
revisions are taken into account.
2009 Total Proved Oil and
Natural Gas Reserves
Total proved reserves at December 31,
2009 were 577.0 Bcfe of natural gas, consisting of 11.7 million barrels (MMbls)
of oil, 14.7 MMbls of natural gas liquids (NGLs) and 419.1 Bcf of
natural
gas. This represents a 1% increase over 2008 year-end total proved
reserves. Eighty percent of the company’s proved oil and natural gas
reserves are "proved developed”, with the remaining 20% comprising "proved
undeveloped” reserves. Natural gas comprises 73% of the total proved
reserves.
Ryder
Scott Company, L.P. (Ryder Scott), an independent reserve engineering firm,
audited the company’s proved reserves. Their audit covered properties
that made up about 85% of the company’s total proved reserves at year end
2009.
The following details the changes to
our proved reserves after December 31, 2008:
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Proved
Reserves
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(Bcfe)
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Proved
Reserves, at December 31, 2008
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569.4
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Revisions
of previous estimates*
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(37.9)
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Extensions,
discoveries and other additions
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105.9
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Purchases
of minerals in place
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0.3
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Production
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(60.7)
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Proved
Reserves, at December 31, 2009
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577.0
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*Includes
26 Bcfe of pricing related revisions.
The estimated future net cash flow from
our December 31, 2009 total proved reserves, before income taxes, is $1.4
billion. The present value of those reserves (before income taxes and
discounted at 10% (PV-10)) is about $0.8 billion. These value
estimates were made using unescalated prices of $61.18 per barrel of oil, $34.44
per barrel of NGLs and $3.86 per Mcf of natural gas, adjusted for price
differentials, for the estimated life of the respective
properties. PV-10 is a non-GAAP financial measure. See
below for the reconciliation of PV-10 to the standardized measure of discounted
future net cash flows as defined by GAAP.
Revised SEC
Rules
The company’s proved reserves were
calculated using the Securities and Exchange Commission’s (SEC) revised rules
that went into effect with year-end 2009 reserve reporting. Instead
of using the prices existing at year-end to calculate the reserves as previously
required under the SEC’s old rules, the prices used were the average of the
prices existing on the first day of each prior 12 months. Consequently, the
prices used in our reserve estimates were $3.86 per
million
British thermal units (MMbtu) for natural gas, $61.18 per barrel, and $34.44 per
barrel for NGL, as opposed to $5.79 per MMbtu for natural gas, $79.36 per barrel
for oil and $55.13 per barrel for NGLs, which would have been the prices used
under the old SEC rules. Unit’s proved reserves using the old SEC
pricing rules would have been approximately 608.7 Bcfe at December 31,
2009. This would have resulted in 164% replacement of production, as
compared to 113% under the new SEC rules, and reserve growth of
7%.
Preliminary 2009 Production
and Wells Drilled
Production during the fourth quarter of
2009 by this segment was 295,000 barrels of oil, 346,000 barrels of NGLs and
10.5 Bcf of natural gas, or 14.3 Bcfe, a decrease of 2% and 15% over the third
quarter of 2009 and the fourth quarter of 2008, respectively. Total
production for 2009 was 60.7 Bcfe, a decrease of 4% from the 63.4 Bcfe produced
in 2008.
During 2009 the company participated in
the drilling of 95 wells compared to 278 wells in 2008, a reduction of
66%.
2010
Contract Drilling Segment Rig Fleet Update
In January and February 2010, the
company’s contract drilling segment entered into contracts to sell eight of its
idle mechanical drilling rigs to an unaffiliated third party. These
drilling rigs ranged in horse power from 800 to 1,000. The closing on
one of these drilling rigs occurred on February 1, 2010. Five more
are scheduled to close during the first quarter of 2010 with the last
transaction for the remaining two rigs anticipated to close during the second
quarter of 2010. Proceeds from the sale of all the drilling rigs will
be $23.9 million resulting in an estimated gain of $6.1 million. On
completion of these transactions, this segment will have 122 drilling rigs in
its fleet.
Management
Comments
Larry Pinkston, President and Chief
Executive Officer of Unit Corporation, said: "The 2009 year was a
very challenging one. Our oil and natural gas segment intentionally
reduced its drilling activities to almost a standstill during the first half of
the year while commodity prices were rapidly decreasing. By mid-year
2009, with the cost to drill and complete wells decreasing in some regions by as
much as 40% to 50%, we began to increase our exploration efforts. We
exited
2009 with an active drilling program and plan to continue that program into
2010. During 2010, we plan to drill 175 wells, compared to 95 in
2009. Our preliminary annual production guidance for 2010 is
approximately 66.0 to 67.0 Bcfe, an increase of 9% to 10% over
2009.
"The new
SEC rule pertaining to how year-end reserve report prices are determined,
particularly its impact on our natural gas price, had a significant negative
impact on the outcome of our 2009 year end reserves. However, even
with a significantly low level of drilling activity and the new SEC pricing
rules, we were still able to overcome negative reserve revisions of 38 Bcfe,
grow reserves and reduce significantly the level of long-term debt
outstanding.
"The proceeds from sale of the eight
idle mechanical drilling rigs will be used in our contract drilling segment to
accelerate its 2010 plans to refurbish and upgrade more rigs in the fleet
targeted toward horizontal drilling activity. The upgrades to the
rigs will result in performance improvements and additional customer
opportunities.”
Fourth
Quarter and Year-End 2009 Webcast
Unit will release its fourth quarter
and year-end 2009 earnings and host a conference call on Tuesday, February 23,
2010. The webcast will be broadcast live over the Internet at 11:00
a.m. Eastern time at http://www.unitcorp.com.
Unit
Corporation is a Tulsa-based, publicly held energy company engaged through its
subsidiaries in oil and natural gas exploration, production, contract drilling
and natural 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 private
Securities Litigation Reform Act. All statements, other than
statements of historical facts, included in this release that address
activities, events or developments that the Company expects or anticipates will
or may occur in the future are forward-looking statements. A number
of risks and uncertainties could cause actual results to differ materially from
these statements, including the impact that the current decline in wells being
drilled will have on production and drilling rig utilization, productive
capabilities of the Company’s wells, future demand for oil and natural gas,
future drilling rig utilization and dayrates, projected growth of the Company’s
oil and natural gas production, oil and gas reserve information, as well as the
ability to meet its future reserve replacement goals, anticipated gas gathering
and processing rates and throughput volumes, the prospective capabilities of the
reserves associated with the Company’s inventory of future drilling sites,
anticipated oil and natural gas prices, the number of wells to be drilled by the
Company’s oil and natural gas segment, development, operational, implementation
and opportunity risks, possibility of future growth opportunities, and other
factors described from time to time in the Company’s publicly available SEC
reports. The Company assumes no obligation to update publicly such
forward-looking statements, whether as a result of new information, future
events or otherwise.
Non-GAAP
Financial Measures
We report
our financial results in accordance with generally accepted accounting
principles (GAAP). We believe certain non-GAAP performance measures
provide users of our financial information and our management additional
meaningful information to evaluate the performance of our company.
Unit
Corporation
Unaudited
Reconciliation of PV-10 to Standard Measure
December
31, 2009
PV-10 is
the estimated future net cash flows from proved reserves discounted at an annual
rate of 10 percent before giving effect to income taxes. Standardized
Measure is the after-tax estimated future cash flows from proved reserves
discounted at an annual rate of 10 percent, determined in accordance with
GAAP. The company uses PV-10 as one measure of the value of its
proved reserves and to compare relative values of proved reserves among
exploration and production companies without regard to income
taxes. The company believes that securities analysts and rating
agencies use PV-10 in similar ways. The company’s management believes
PV-10 is a useful measure for comparison of proved reserve values among
companies because, unlike Standardized Measure, it excludes future income taxes
that often depend principally on the characteristics of the owner of the
reserves rather than on the nature, location and quality of the reserves
themselves. Below is a reconciliation of PV-10 to Standardized
Measure:
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2009
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($
in billions)
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PV-10
at December 31, 2009
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$ 0.8
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Discounted
effect of income taxes
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(0.3)
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Standardized
Measure at December 31, 2009
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$
0.5
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