Filed by Unit Corporation
Pursuant to Rule 425 under the Securities Act of 1933 and
Deemed Filed Pursuant to Rule 14a-12 under the Securities Exchange Act of 1934
Subject Company: PETROCORP INCORPORATION
Commission File No. 0-22650
Dated: July 23, 2003
news UNIT CORPORATION
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1000 Kensington Tower, 7130 South Lewis Avenue, Tulsa, Oklahoma 74136
Telephone 918 493-7700, Fax 918 493-7714
Contact: Larry D. Pinkston
Executive Vice President, Treasurer
and Chief Financial Officer
(918) 493-7700
For Immediate Release...
July 23, 2003
UNIT CORPORATION REPORTS SECOND QUARTER
& FIRST SIX MONTH RESULTS IN 2003
Tulsa, Oklahoma . . . Unit Corporation (NYSE - UNT) announced today its
financial and operational results for the second quarter and first six months of
2003. Consolidated net income for the second quarter was $11.7 million, or 27
cents per diluted share, on revenues of $73.0 million, compared to 2002's net
income of $5.1 million, or 14 cents per diluted share, on revenue of $44.8
million. Revenues increased 63 percent while net income increased 129 percent
between the comparative quarters. The dramatic improvement in net income was
attributable to significantly higher natural gas prices and increased drilling
rig utilization.
For the six-month period, the Company reported consolidated net income of
$25.7 million, or 59 cents per diluted share. Net income in the first quarter of
2003 included $1.3 million of income, net of tax for the impact of the adoption
of SFAS 143, "Accounting for Asset Retirement Obligations," which became
effective in the first quarter of 2003. SFAS 143 requires oil and natural gas
operating companies to recognize in current periods the present value of the
estimated future cost for the plugging of its oil and natural gas wells and upon
implementation requires the recalculation of depreciation, depletion and
amortization for prior years. Income before the change in accounting principle
for the first six months of 2003 was $24.4 million, on revenues of $141.4
million, or 56 cents per diluted share, compared to 2002's first six month net
income of $7.8 million, or 21 cents per diluted share, on revenue of $83.5
million.
UNIT PETROLEUM RESULTS
Revenues from Unit's oil and natural gas operations increased 44 percent in
the second quarter to $26.9 million due to significantly higher oil and natural
gas prices. During the first six months of 2003, oil and natural gas revenues
were $60.1 million, an increase of 96 percent over the same period in 2002.
Natural gas production was 4,955 million cubic feet (MMcf) in the second quarter
of 2003, while oil production for the same period was 123,000 barrels, which on
an equivalent Mcf basis was one percent less than the second quarter of 2002.
Natural gas production was 9,810 MMcf in the first six months of 2003, while oil
production for the same period was 238,000 barrels, a 2 percent increase on an
equivalent Mcf basis over the first six months of 2002.
Average natural gas prices received during the second quarter of 2003
increased 58 percent to $4.74 per Mcf compared to $3.00 per Mcf during the
second quarter of 2002. The average oil price received was $25.51 per barrel in
the second quarter of 2003 compared to $22.59 per barrel in the 2002 comparative
quarter, a 13 percent increase. For the first six months of 2003, average
natural gas prices received increased 111 percent to $5.34 per Mcf compared to
$2.53 per Mcf during the first six months of 2002. The average oil price
received was $27.86 per barrel in the first six months of 2003 compared to
$19.83 per barrel in 2002, a 40 percent increase. During the first six months of
2003, Unit completed 62 wells with a success rate of 85 percent.
UNIT DRILLING RESULTS
Contract drilling revenues increased 75 percent between the comparative
second quarters to $45.2 million, due to an increase in the number of rigs
utilized. The average rig utilization was 62.4 rigs in the second quarter of
2003, up 88 percent from 2002's second quarter. Currently, Unit has 69 of its 75
rigs operating. Daywork rates for the second quarter averaged $7,601 per day,
which was 1.3 percent below the comparable quarter of 2002.
Between the comparative first six months, contract drilling revenues
increased 52 percent in 2003 to $79.8 million with rig utilization increasing to
an average of 56.8 rigs operating in the first six months of 2003, compared to
33.0 rigs in the first six months of 2002. Contract drilling cash operating
margins per rig averaged $1,784 per day during the first six months of 2003,
compared to $2,224 for the same period in 2002.
MANAGEMENT COMMENTS
"The increase in commodity prices and current industry conditions are
presenting growth opportunities for Unit," said John Nikkel, President and Chief
Executive Officer. "We recently announced that Unit signed a letter of intent
with PetroCorp Incorporated to acquire all outstanding shares of that company
for approximately $190 million. The acquisition price is to be paid using a
combination of 2,000,000 shares of Unit Corporation stock and cash. PetroCorp
explores and develops oil and natural gas properties primarily in Texas and
Oklahoma. This acquisition will fit well with Unit's current operations,
providing us with the opportunity to further develop and exploit new fields. Our
exploration and production operations are on track to drill 140 to 150 wells by
year-end. Our contract drilling operations are improving with a current rig
utilization rate of an impressive 92 percent of 75 total rigs compared to 56
percent of 55 total rigs at this time in 2002. We are pleased with the
industry's responses to higher natural gas prices and will continue our emphasis
on growing our asset base."
WEBCAST
Unit will webcast its second quarter earnings conference call live over the
Internet on July 23, 2003 at 2:30 p.m. Eastern Time. To listen to the live call,
please go to www.unitcorp.com at least fifteen minutes prior to the start of the
call to download and install any necessary audio software. For those who are not
available to listen to the live webcast, a replay will be available shortly
after the call and will remain on the site for twelve months.
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Unit Corporation is a Tulsa-based, publicly held energy company engaged
through its subsidiaries in oil and gas exploration, production and contract
drilling. 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 Securities Litigation Reform Act that involve risks and uncertainties,
including the closing of the pending acquisition of PetroCorp Incorporated, the
productive capabilities of the wells, future demand for oil and natural gas,
future rig utilization and dayrates, oil and gas reserve information,
anticipated production rates from company wells, the prospective capabilities of
offset acreage, anticipated oil and natural gas prices, the number of wells to
be drilled by the company, development, operational, implementation and
opportunity risks, and other factors described from time to time in the
company's publicly available SEC reports, which could cause actual results to
differ materially from those expected.
Unit Corporation
Selected Financial and Operations Highlights
(In thousands except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2003 2002 2003
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Statement of Operations:
Revenues:
Contract drilling $ 25,841 $ 45,221 $ 52,555 $ 79,787
Oil and natural gas 18,668 26,871 30,629 60,119
Other 244 888 299 1,520
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Total revenues 44,753 72,980 83,483 141,426
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Expenses:
Contract drilling:
Operating costs 20,137 33,641 39,269 61,452
Depreciation and amortization 2,928 5,899 5,739 10,793
Oil and natural gas:
Operating costs 5,161 5,893 10,109 12,508
Depreciation, depletion and
amortization 5,988 6,445 11,257 12,492
General and administrative 2,013 2,070 4,042 4,520
Interest 229 175 516 386
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Total expenses 36,456 54,123 70,932 102,151
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Income Before Income Taxes and
Change in Accounting Principle 8,297 18,857 12,551 39,275
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Income Tax Expense:
Current 238 144 360 299
Deferred 2,951 7,022 4,441 14,626
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Total income taxes 3,189 7,166 4,801 14,925
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Income Before Change in Accounting
Principle 5,108 11,691 7,750 24,350
Cumulative Effect of Change in
Accounting Principle -- -- -- 1,325
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Net Income $ 5,108 $ 11,691 $ 7,750 $ 25,675
========= ========= ========= =========
Income Before Change in Accounting
Principle Per Common Share:
Basic $ .14 $ .27 $ .21 $ .56
Diluted $ .14 $ .27 $ .21 $ .56
Net Income Per Common Share:
Basic $ .14 $ .27 $ .21 $ .59
Diluted $ .14 $ .27 $ .21 $ .59
Weighted Average Common Shares
Outstanding:
Basic 36,109 43,521 36,072 43,477
Diluted 36,405 43,749 36,336 43,690
December 31, June 30,
2002 2003
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Balance Sheet Data:
Current assets $ 51,399 $ 60,501
Total assets $ 578,163 $ 620,249
Current liabilities $ 34,532 $ 33,662
Long-term debt $ 30,500 $ 19,000
Other long-term liabilities $ 5,439 $ 17,399
Deferred income taxes $ 86,320 $ 101,713
Shareholders' equity $ 421,372 $ 448,475
Six Months Ended
June 30,
2002 2003
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Statement of Cash Flows Data:
Cash Flow From Operations before Changes
in Working Capital (1) $ 29,702 $ 63,550
Net Change in Working Capital 11,109 (2,895)
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Net Cash Provided by Operating Activities $ 40,811 $ 60,655
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Net Cash Used in Investing Activities $ 27,822 $ 44,082
Net Cash Used in Financing Activities $ 11,922 $ 15,744
Three Months Ended Six Months Ended
June 30, June 30,
2002 2003 2002 2003
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Contract Drilling Operations Data:
Rigs Utilized 33.2 62.4 33.0 56.8
Operating Margins 22% 26% 25% 23%
Operating Profit Before
Depreciation(2)($MM) $ 5.7 $ 11.6 $ 13.3 $ 18.3
Oil and Natural Gas Operations Data:
Production
Oil - MBbls 110 123 227 238
Natural Gas - MMcf 5,097 4,955 9,653 9,810
Average Prices
Oil - Bbl $ 22.59 $ 25.51 $ 19.83 $ 27.86
Natural Gas - Mcf $ 3.00 $ 4.74 $ 2.53 $ 5.34
Operating Profit Before
DD&A(2)($MM) $ 13.5 $ 21.0 $ 20.5 $ 47.6
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(1) Unit Corporation considers Unit's cash flow from operations before changes
in working capital an important measure in meeting the performance goals of the
company and the amount is used as a performance limit to meet the covenants
contained in our credit facility.
(2) Operating profit before depreciation is calculated by taking operating
revenues by segment less operating expenses by segment excluding depreciation,
depletion, amortization and impairment, general and administrative and interest
expense.