Unit Corporation (UNT) Sharply Higher After Raising 2015 Production Growth

Shares of Tulsa, Oklahoma, based Unit Corporation (UNT) rose on Tuesday, against the backdrop of a mixed day in stocks overall. Unit's stock was up 31.37%, rising $4.37 per share, to close at $18.30, on volume of 4,356,984 shares. Unit's stock price took off on the company's announcement that production growth in it's 2015 oil and gas output would double compared to earlier projections.

Founded in 1986, Unit Corp. is a diversified energy company engaged in the exploration 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 through its subsidiary, Unit Drilling Co. The company's oil and gas operations are primarily in the US.
The company's stock trades on the NYSE.

Unit's stock took off after the company announced that it is raising its 2015 production growth guidance for its oil and natural gas production. Original guidance suggested annual production growth of 2% to 4% for the year, but that has now been revised upward to the 6% to 8% range. Reaction to the news was greeted positively by investors. Unit's stock price had been down by 59% before Tuesday's rebound.

"Due to strong well results primarily in our SOHOT, Wilcox and our Granite Wash plays, we are increasing our production guidance for 2015," reported Unit Corporation CEO and President, Larry Pinkston. "We are also reducing our anticipated capital expenditures in this segment for 2015 because of the efficiencies we have captured. We believe how quickly the BOSS drilling rigs are returning to work in this challenging commodity cycle is a testament to their quality and performance. Finally, we believe the new borrowing base provides us with ample liquidity, and we are confident that we will remain in compliance with all financial covenants of our long-term debt agreements during the course of this cycle."

Unit also announced that it's 2015 capital expenditures are expected to be approximately $30 million less than originally budgeted. The reduction is attributed primarily to its oil and natural gas segment.

In it's second quarter earning report issued on August 4, Unit reported that a customer intended to exercise an early termination of two of its BOSS drilling rig contracts. But on Tuesday it was announced that Unit is involved in active discussions with the customer, and it is now likely that they will keep one of the drilling rigs through the end of the original term. Unit has contracted the remaining BOSS rig to a third party operator.

Unit's lenders recently completed their regularly scheduled semi-annual borrowing base re-determination under its credit agreement. The company's borrowing base was determined to be $550 million, a level that is above its elected commitment of $500 million. No other terms are reported to have changed under the credit agreement, and the company is fully in compliance with the financial covenants in the credit agreement.

The company has elected to maintain its commitment amount at $500 million, which it believes is sufficient to meet the company's financing needs during this current commodity cycle. As of September 30, 2015, Unit had $261.7 million outstanding under its credit agreement, $18.8 million below the amount outstanding as of June 30, 2015.

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Published on Oct 7, 2015
By Kevin Mercadante

Copyrighted 2016. Content published with author's permission.

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