Newspaper article THE JOURNAL RECORD

Tulsa-Based Unit Profits for 2007 Fall despite Positive 4Q

Newspaper article THE JOURNAL RECORD

Tulsa-Based Unit Profits for 2007 Fall despite Positive 4Q

Article excerpt

Unit Corp. earnings for 2007 dropped 14.7 percent from record 2006 marks despite a 12-percent hike in fourth-quarter profits.

"We had the second-best year in our 45-year history for revenues, net income and earnings per share," said Unit President and Chief Executive Larry Pinkston.

Observers pinned the decline on falling drilling rig utilization rates and average operating margins, both factors Pinkston had warned about in previous quarters.

Although the Tulsa drilling contractor, energy producer and pipeline operator met analyst expectations for both the quarter and year, its stock opened 53 cents down in a roller-coaster day before finishing in positive territory under a general market upswing.

UNT closed up 41 cents Tuesday to $55.33, its 634,898 shares traded on the New York Stock Exchange double its daily average. An after-hours trade of 100 shares dropped the stock 46 cents.

"It really has worked on about a seven-month base and is starting to move higher," Greg Womack said of Unit's technical price trends.

With its low price/earnings ratio, strong earnings outlook and great book value, he said the trading could point to a momentum move - especially with the price of oil hitting $100 a barrel.

"It looks like it's poised to continue to possibly move higher," said the certified financial planner with Womack Investment Advisers of Edmond. "Although there could be resistance at the $65 range, once it gets back to that level."

Unit posted a 2007 net income of $266.3 million, or $5.71 per diluted share, down from $312.2 million, or $6.72, the prior year.

Analysts surveyed by Zacks Investment Research of Chicago had forecast earnings of $5.71.

Revenue slipped 0.39 percent to $1.158 billion from $1.16 billion. Unit drew about 54 percent of its 2007 revenue from contract drilling contracts and 34 percent from oil and natural gas, a change from 60-percent drilling and 31-percent commodities in 2006.

Year-over-year contract drilling revenues fell 10 percent to $627.6 million. Average daily rigs operating fell to 99.4 from 109 the prior year.

Unit posted 80-percent rig utilization last year, down from 96 percent in 2006. Before eliminating $22.7 million in intercompany drilling rig profit, average daily operating margins fell 6.6 percent to $9,568 from $10,246.

Part of that reflected Unit's contract drilling segment expansion, adding 12 rigs - nine of those acquired in June, three built. That raised its fleet to a record 129 drilling rigs.

"We are in the process of constructing two new drilling rigs, which we plan to place into service in our Rocky Mountain division in May," Pinkston said. Both 1,500 horsepower, diesel-electric rigs are already contracted to an existing customer for three years.

Average contract drilling rig rates fell 8 percent in the fourth quarter from 2006 to $18,114 per day. Average operating margins fell 17 percent to $9,144 per day, before eliminating $7 million intercompany drilling rig profit. …

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