Unit Corporation (ticker: UNT) is a diversified energy company engaged through its subsidiaries in the exploration for and production of oil and natural gas, the acquisition of producing oil and natural gas properties, the contract drilling of onshore oil and natural gas wells, and the gathering and processing of natural gas. The company celebrated its 50th Anniversary in 2013.
Unit Corporation announced its 2014 capital expenditures budget will consist of $928 million, according to a news release on January 13, 2014. The budget is a 26% increase compared to its estimated expenditures in 2013 and does not include costs for acquisitions. The money will be spread over its three business segments; $718 million will be allotted for its oil and gas program, $132 million for its contract drilling segment and $78 for its midstream operations.
Upstream Allocation
Source: UNT presentation on January 14, 2014
The budget will be funded primarily from UNT’s internal cash flow and proceeds from the potential sale of non-core assets. UNT may also elect to draw from its $900 million credit facility, which had no outstanding borrowings at year-end 2013. Its hedging program for the upcoming year consists of approximately 62% of its anticipated oil production and 51% of its anticipated gas production.
UNT is scheduled to present at EnerCom’s The Oil & Services Conference™ on February 19, 2014. The company will also host a webcast to discuss its Q4’13 results on February 24, 2014.
More Activity in 2014
UNT plans on drilling 125 wells in its ramped-up 2014 program and initially estimated its upstream segment would command between $600 million and $725 million of the budget. Its official number of $718 million for upstream development comes in on the high side, and the total budget of $928 also exceeds preliminary estimates of $800 million to $900 million.
The company sees upside potential in its core plays consisting of 1,600 to 2,100 gross wells with reserves varying from 564 MMBOE to 726 MMBOE (47% liquids). The company holds working interest of approximately 73% and has no plans to enter a joint venture.
Management said it expects 2014 production growth to increase by 15% to 18% compared to its 2013 levels. Its BOSS rig will make its debut during Q1’14, and three additional BOSS rigs are already committed to third-party operators.
Much of its future growth will focus on the Granite Wash and Wilcox core plays. The capital for the midstream segment will be entirely devoted to expanding systems in the mentioned areas. In its most recent company presentation, UNT management said it has drilled 72 wells to date in the Granite Wash with an average return rate of 41%. The Buffalo Wallow, an additional 25,000 net acres in the midst of Unit’s core Granite Wash position, was acquired from Noble Energy (ticker: NBL) in June 2012. The region is currently holds 617 potential horizontal drilling locations for Unit, and a rig was moved to the area in mid-2013. UNT has commenced a drilling prospect on a per pad basis, and three separate pad locations have been drilled. Flow back began on one of the pads and UNT anticipates revisiting the area in mid-2014, depending on test results.
A comprehensive review of UNT’s current operations was highlighted in an analyst day on December 6, 2013. OAG 360 covered the event in a recent feature article.
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