unit corporation 40 years serving the energy industry
TRANSCRIPT
Unit CorporationUnit Corporation40 years serving the energy industry40 years serving the energy industry
40 years serving the energy industry
What is Unit?What is Unit?
• Contract driller and producer of domestic natural gas
• Founded in 1963; public in 1979 (NYSE: UNT)
• Average daily trading volume for 2003: 199,310 shares
• Added to the S&P SmallCap 600 Index in 2001
• Headquartered in Tulsa, Oklahoma
• Current market cap of $1.25 billion (as of 3/31/04)
• 45,709,568 shares outstanding
• Business units:
• Unit Drilling Company – 88 drilling rigs
• Unit Petroleum Company – 341.7 Bcfe proved reserves*
• Web address: www.unitcorp.com*includes PetroCorp acquisition completed January 30, 2004
40 years serving the energy industry
Unit’s HistoryUnit’s History
Two consistently growing successful segments
0
30
60
90
0
50
100
150
200
250
300
Drilling Rigs Total Reserves (Bcfe)1963 1979 1993 2003
# Rigs Bcfe
40 years serving the energy industry
Unit’s StrengthsUnit’s Strengths
• Two consistent growing energy segments:Two consistent growing energy segments:
Unit Drilling CompanyUnit Drilling Company
• 300% increase in rig count since 1993300% increase in rig count since 1993
• 44thth largest U.S. deep onshore drilling contractor largest U.S. deep onshore drilling contractor
Unit Petroleum CompanyUnit Petroleum Company
• 208% average production replacement since 1993208% average production replacement since 1993
• Average annual reserve growth of 12% since 1993Average annual reserve growth of 12% since 1993
• Focused on natural gas, drilling and productionFocused on natural gas, drilling and production
• Strong balance sheet focusStrong balance sheet focus
• Respected and experienced workforce drives Respected and experienced workforce drives consistent resultsconsistent results
40 years serving the energy industry
U.S. Gas Production per Well & Total Gas WellsU.S. Gas Production per Well & Total Gas Wells
Source: EIA
0
100
200
300
400
500
600
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000
Mcf/well/day Gas Wells x 1000
21.9 Tcf Total Production 19 Tcf
40 years serving the energy industry
Contract Drilling StrategyContract Drilling Strategy
Unit’s premium service is achieved by supplying:Unit’s premium service is achieved by supplying:
• Top quality equipment
• Experienced personnel
• Alertness to expansion opportunities
40 years serving the energy industry
Unit Rig FleetUnit Rig Fleet
0
20
40
60
80
100
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Mechanical Electric
4th Largest Deep Drilling Contractor in United States
Hickmanacquisition
9 rigs
Parkeracquisition
13 rigs
Cactusacquisition
20 rigs
SerDrilCoacquisition
12 rigs
40 years serving the energy industry
Service Drilling Company AcquisitionService Drilling Company Acquisition
Purchased 12 active rigsPurchased 12 active rigs
• $35 million acquisition
• Expected to be immediately accretive
• All rigs located in Anadarko Basin within the Texas Panhandle
• Acquisition includes a 12-truck moving fleet
Strategic fit:Strategic fit:
• Significant drilling contractor in the Texas Panhandle
• Well established franchise developed over 50 years
• Expands a current market area to Unit
40 years serving the energy industry
Unit Rig Fleet Depth CapacityUnit Rig Fleet Depth Capacity
0
5000
10000
15000
20000
25000
30000450-700 h.p. 750-1000 h.p. 1200-1700 h.p. 2000 h.p. >2500 h.p.
Over 98% of wells drilled are natural gas wellsOver 98% of wells drilled are natural gas wells
6 6
15
32
17
Depthin Feet
Service DrillingCompany rigs
6
5
1
40 years serving the energy industry
Significant Presence in Major Gas-Producing RegionsSignificant Presence in Major Gas-Producing Regions
HoustonOffice
TulsaHeadquarters
Oklahoma CityOffice
88 2003 Unit Rigs89th rig under construction
8
11
2
748
CasperOffice
12Service Drilling rigs
40 years serving the energy industry
High Utilization vs. Industry - 2003High Utilization vs. Industry - 2003
0%
20%
40%
60%
80%
100%
450-700 h.p. 750-1000 h.p. 1200-1700 h.p. 2000 h.p. >2500 h.p. 2003
Unit Industry
Unit 1st Qtr. ‘04 Utilization
Unit Current Utilization:
95%
40 years serving the energy industry
Cash Flow per Operating DayCash Flow per Operating Day
$0
$1,000
$2,000
$3,000
$4,000
$5,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 20041st Qtr
Rig Utilization:38% 44% 65% 80% 67% 62% 85% 90% 63% 83% 93%
40 years serving the energy industry
$100 $9,000
$75 $8,500
Cash Flow Sensitivity – 88 rigsCash Flow Sensitivity – 88 rigsAnnual SegmentCash Flow ($mm) Rig Rates
Assumed Industry Rig Utilization
$25 $7,500
$50 $8,000
$125 $10,000
80% 85% 90% 95% 100%
Unit 200383%
75%
$150 $11,000
40 years serving the energy industry
Unit Drilling Company RecapUnit Drilling Company Recap
• Medium and deep depth land drilling
• 4th largest fleet in the United States (88 rigs)
• Rig fleet has tripled in size in the last 10 years
• Average utilization higher than industry
40 years serving the energy industry
Unit Petroleum Company StrategyUnit Petroleum Company Strategy
Unit provides consistent economic growth of its oil Unit provides consistent economic growth of its oil
and natural gas reserves of at least 150% of each and natural gas reserves of at least 150% of each
year’s production by:year’s production by:
• Generating most drilling prospects internally
• Staying alert for opportunistic acquisitions
• Maintaining strong cost controls
40 years serving the energy industry
Annual Reserve Additions as a Percent of ProductionAnnual Reserve Additions as a Percent of Production
0%
50%
100%
150%
200%
250%
300%
350%
1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003
Drilling Acquisitions
143% Average Annual Reserve Replacement through drilling over last 20 years143% Average Annual Reserve Replacement through drilling over last 20 years224% Average Annual Reserve Replacement from all sources over last 20 years224% Average Annual Reserve Replacement from all sources over last 20 years
*Not Restated for Questa Activity
40 years serving the energy industry
PetroCorp Inc. AcquisitionPetroCorp Inc. Acquisition
•Closed – January 30, 2004• Expected to be immediately accretive• Purchase price - $182,000,000 paid in cash
• Preliminary allocation of purchase price:$94,000,000 to working capital$78,000,000 to proved reserves$10,000,000 to undeveloped leasehold & partnership interest
• PetroCorp operating data:12/31/03 2003Reserves Production
Oil (MBbls) 2,740 416Natural Gas (MMcf) 40,260 4,200
40 years serving the energy industry
Reserve GrowthReserve Growth
0
50
100
150
200
250
300
1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003
Natural Gas Oil*Not Restated for Questa Activity
BcfeAverage annual reserve growth since 1993 of 12%
40 years serving the energy industry
Production GrowthProduction Growth
Mcfe
*Not Restated for Questa Activity
0
5,000
10,000
15,000
20,000
25,000
1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003 2004
First Quarter Year-End
40 years serving the energy industry
Core Producing AreasCore Producing Areas
Proved ReservesAt 12/31/03: 341.7 Bcfe(includes PetroCorp acquisition)
HoustonOffice
TulsaHeadquarters
Gulf CoastBasin
ArkomaBasin
AnadarkoBasin
PermianBasin
12%
46%23%
17%
40 years serving the energy industry
Wells DrilledWells Drilled
*Not Restated for Questa Activity
0
50
100
150
200
1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003 2004
First Quarter Year End
40 years serving the energy industry
Acreage Inventory GrowthAcreage Inventory Growth
200,000
400,000
600,000
800,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Developed Undeveloped*Not Restated for Questa Activity
40 years serving the energy industry
Prospect Inventory Drives Reserve GrowthProspect Inventory Drives Reserve Growth
0
100
200
300
400
500
Arkoma Basin Anadarko Basin Gulf Coast/WestTexas/Denver
Total
Prospects Proved Undeveloped
Number ofProspects
Over 90% of our drillsites are internally generated. Over 90% of our drillsites are internally generated. 127 are identified as PUD’s and reflected in our reserve base. 127 are identified as PUD’s and reflected in our reserve base. 288 (40% WI) have unrisked probable net reserves of 210 Bcfge.288 (40% WI) have unrisked probable net reserves of 210 Bcfge.
40 years serving the energy industry
Unit’s Return HistoryUnit’s Return History
Finding Cost/Finding Cost/ Years Years Mcfe Mcfe Rev/McfeRev/Mcfe RORROR
1515 $0.94$0.94 $2.70$2.70 19.6%19.6%
1010 $1.03$1.03 $2.87$2.87 18.9%18.9%
55 $1.20$1.20 $3.60$3.60 23.4%23.4%
33 $1.65$1.65 $3.95$3.95 15.3%15.3%
40 years serving the energy industry
$0
$30,000
$60,000
$90,000
$120,000
$150,000
$180,000
$4.87 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50
Gas Price SensitivitiesGas Price Sensitivities
Gas Price per Mcfg2003
Actual
Segment Cash Flow
40 years serving the energy industry
RecapRecap
• Consistent Reserve Growth
• 2003 – 166% Production Replacement
• 20th consecutive year of replacing more than 150%
of production with new reserves
• Successful Drilling Program
• 20% rate of return for last 15 years
• Drilling program underway
• Expect to drill 165 to 175 wells in 2004,
up 11% to 17% over 2003
40 years serving the energy industry
Revenues (in millions)Revenues (in millions)
$0
$50
$100
$150
$200
$250
$300
$350
1999 2000 2001 2002 2003 2004
First Quarter Year-End
40 years serving the energy industry
Earnings per ShareEarnings per Share
-$0.50
$0.00
$0.50
$1.00
$1.50
$2.00
1999 2000 2001 2002 2003 2004
First Quarter Year End
40 years serving the energy industry
Balance Sheet SummaryBalance Sheet Summary
Working CapitalWorking Capital $20.9$20.9 $25.7$25.7
Total AssetsTotal Assets 712.9712.9 856.8856.8
Long-Term DebtLong-Term Debt .4.4 75.075.0
Shareholder’s EquityShareholder’s Equity 515.8515.8 532.7532.7
Credit Line UndrawnCredit Line Undrawn 99.699.6 75.075.0
Long-Term Debt to Total Capitalization:Long-Term Debt to Total Capitalization: 0%0% 12%12%
12/31/0312/31/03 3/31/043/31/04(In Thousands)
40 years serving the energy industry
Cash Flow Before Changes in Working Capital (in millions)Cash Flow Before Changes in Working Capital (in millions)
$0
$30
$60
$90
$120
$150
1999 2000 2001 2002 2003 2004
First Quarter Year End
40 years serving the energy industry
Capital ExpendituresCapital Expenditures
$0
$50,000
$100,000
$150,000
$200,000
1999 2000 2001 2002 2003
Unit Petroleum Unit Drilling Cactus Rig Acquisition
Cactus rig acquisition:7.22 million shares &
$4.5 million cash
(In Thousands)
40 years serving the energy industry
2004 Capital Program2004 Capital Program
• $95 million budgeted for Unit Petroleum$95 million budgeted for Unit Petroleum– 165 - 175 wells165 - 175 wells– $83 million drilling, $9 million acreage & $83 million drilling, $9 million acreage &
seismic, $3 million acquisitionsseismic, $3 million acquisitions– Focus areas are Anadarko & Arkoma Basins; Focus areas are Anadarko & Arkoma Basins;
Texas Gulf CoastTexas Gulf Coast
• $30 million budgeted for Unit Drilling$30 million budgeted for Unit Drilling– $8 million for drill pipe$8 million for drill pipe– $22 million for rig maintenance & additions$22 million for rig maintenance & additions
40 years serving the energy industry
Why Unit?Why Unit?
• Two consistent growing energy segments:Two consistent growing energy segments:
Unit Drilling CompanyUnit Drilling Company
• 300% increase in rig count since 1993300% increase in rig count since 1993
• 44thth largest U.S. deep onshore drilling contractor largest U.S. deep onshore drilling contractor
Unit Petroleum CompanyUnit Petroleum Company
• 208% average production replacement since 1993208% average production replacement since 1993
• Average annual reserve growth of 12% since 1993Average annual reserve growth of 12% since 1993
• Focused on natural gas, drilling and productionFocused on natural gas, drilling and production
• Strong balance sheet focusStrong balance sheet focus
• Respected and experienced workforce drives Respected and experienced workforce drives consistent resultsconsistent results
40 years serving the energy industry
Forward-Looking StatementForward-Looking Statement
This presentation contains forward-looking statements within the This presentation contains forward-looking statements within the
meaning of the Securities Litigation Reform Act that involve risks meaning of the Securities Litigation Reform Act that involve risks
and uncertainties, including the closing of pending acquisitions, and uncertainties, including the closing of pending acquisitions,
productive capabilities of the wells, future demand for oil and productive capabilities of the wells, future demand for oil and
natural gas, future rig utilization and dayrates, oil and natural gas natural gas, future rig utilization and dayrates, oil and natural gas
reserve information, anticipated production rates from company reserve information, anticipated production rates from company
wells, the prospective capabilities of offset acreage, anticipated wells, the prospective capabilities of offset acreage, anticipated
oil and natural gas prices, development, operational, oil and natural gas prices, development, operational,
implementation and opportunity risks, and other factors implementation and opportunity risks, and other factors
described from time to time in the company’s publicly available described from time to time in the company’s publicly available
SEC reports, which could cause actual results to differ materially SEC reports, which could cause actual results to differ materially
from those expected.from those expected.
Unit CorporationUnit Corporation40 years serving the energy industry40 years serving the energy industry