News Column

Diversification Serves Firm Well

Sept. 17, 2012

Unit Corp. is a Tulsa-based energy company whose subsidiaries are engaged in oil and gas exploration, production, contract drilling and gas gathering and processing.

Analysts like Unit because it is diversified and has a proven record of increasing revenue and earnings.

Unit, which trades under the ticker symbol UNT, has increased its liquids production from 27 percent of the annual production mix in 2009 to 41 percent of production in 2012.

But that's just one reason to like Unit, said Jim Huntzinger, chief investment officer for BOK Financial Corp.

"UNT is the fourth largest rig contractor in the U.S., with a fleet of 127 rigs, with utilization rates presently around 64 percent," Huntzinger said.

"In recent weeks, UNT entered an agreement to acquire 84,000 acres in the mid-continent from Noble Energy for $617 million in cash. The recent acquisition is expected to have proved reserves of 44 million barrels of oil equivalent, with average daily production of 10,000 barrels of oil."

In Unit's second quarter that ended June 30, the company reported a net loss of $19.3 million, or 40 cents per share, compared with 2011 second quarter income of $49.8 million, or $1.04 per share.

Included in the second quarter results was a non-cash ceiling test write down of $115.9 million. The ceiling test write down was required to reduce the carrying value of the company's oil and natural gas properties resulting from significantly lower commodity prices during the second quarter, company executives said.

Second-quarter revenue was $329.89 million, a 13.2 percent increase compared with the same quarter last year.

Bruce DeShazo, vice president and financial adviser at American Heritage Investments, said he likes Unit as an investment because it has shown a steady increase in earnings and its price-to-earnings ratio is fairly low at 14.

"It is my pick because revenue and earnings keep growing," DeShazo said. "A risk is continued low natural gas prices. But they are diversified enough that they will continue to have reasonable growth."

Source: (C) 2012 Tulsa World. via ProQuest Information and Learning Company; All Rights Reserved

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