Unit Corp. · OTC:UNTC
Unit — Investor Presentation (May 2020)
47 slides from Unit's investor presentation, May 26, 2020
Slide 1: Investor Presentation March 2020
Investor Presentation March 2020
Slide 2: Forward Looking Statement
Forward Looking Statement The information contained herein may include proprietary, sensitive, and confidential information regarding Unit Corporation (together with its wholly-owned direct and indirect subsidiaries, the “Company”), which has not been publicly disclosed. This information is being pr
Slide 3: Company Overview
Company Overview NYSE: UNT
Slide 4: A Diversified Energy Company
A Diversified Energy Company 12 8 Casper Marcellus Pittsburgh Mississippian Basin Anadarko Tulsa Headquarters Basin 23 Oklahoma Arkoma Basin City Permian North LA/ • Basin East Texas Basin Tulsa based, Drilling Rigs (58) 11 4 incorporated in 1963 E&P Operations • Houston Gulf Coast Integrated approa
Slide 5: Business Strategy
Business Strategy Increase Exposure to Oil Prone Projects Expand Midstream Objective: Manage Drilling Fleet to Maximize Operations by Enhance Stakeholder Value Through Focusing on High Utilization Rate and Sustainable, Capital-Efficient Growth Growth Areas Day Rate Margins Maintain Financial Flexibi
Slide 6: Company Highlights
Company Highlights Unit is an integrated oil & gas company capturing margin across the value chain 1 Diversified and integrated asset base across upstream, midstream, and drilling services 2 Upstream portfolio in the core of the Mid-Con and Gulf Coast with multiple years of inventory 3 Continuing sh
Slide 7: Experienced Management Team
Experienced Management Team Years Position Experience Previous Experience President & Chief Larry D. Pinkston1 38 years Executive Officer David T. Merrill1 Chief Operating Officer 36 years General Counsel & Mark E. Schell 40 years C & S Exploration Corporate Secretary G. Les Austin Chief Financial O
Slide 8: Business Segment Overview
Business Segment Overview Unit Petroleum Corporation (“UPC”) Unit Drilling Corporation (“UDC”) Superior Pipeline Company (“SPC”) • Currently running 0 rigs • 58 rig fleet; 18 rigs contracted • Conducted through Superior Pipeline Company • Q3 2019 Production: 47.8 Mboe/d L.L.C., a JV with SP Investor
Slide 9: Unit's Integrated Approach
Unit’s Integrated Approach Unit’s contract drilling business’ strong margins and cash flow generation helps fund investment in the upstream segment UPC only uses Unit drillings rigs, thereby integrating the value chain Superior’s 25% commodity based exposure allows for some upside to improving commo
Slide 10: Upstream Segment Overview
Upstream Segment Overview NYSE: UNT
Slide 11: Upstream Segment Overview
Upstream Segment Overview Proved Reserves PDNP Mid Continent Region YE 2019E Proved 15% PDP Reserves (Mboe): PUD 58% Hoxbar/STACK PDP: 73,889 PUD18% PDP 67% Granite Wash PDNP: 15,790 30% PUD: 19,997 PDNP Upper Gulf Coast Region 12% Wilcox Q3 2019 Daily Production Oil Q3 2019 Daily 21% Production: Ga
Slide 12: 2019E YE Reserve Detail
2019E YE Reserve Detail Oil (Mbbls) Nat Gas (MMcf) NGL (Mbbls) Total (Mboe) PV-10 ($MM) PDP 12,358 227,003 23,697 73,889 $474 PDNP 2,358 52,484 4,685 15,790 $53 PUD 6,864 44,592 5,701 19,997 $97 Total Proved 21,579 324,079 34,084 109,676 $623 Reserves based on SEC price deck; oil at $55.69/Bbl; natu
Slide 13: History of Production Growth with Increased Liquids Content
History of Production Growth with Increased Liquids Content (Mboe/d) 60 60% 55 50 47 47 46 46 45 44 45% 39 33 30 29 30% 28 27 24 25 19 15 15 15% 10 10 11 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9 mos. Gas Oil / NGLs % Liquids 2019 NYSE: UNT 9
Slide 14: Track Record of Reserve Growth
Track Record of Reserve Growth 179 180 160 160 150 150 150 135 132 116 118 120 104 95 96 86 90 79 Proved Reserves 69 58 (MMBoe) 48 60 42 45 30 0 1 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3'19 Natural Gas Oil / NGLs 450% Average: 160% 337% 285% 300%
Slide 15: Core Area Cash Margins
Core Area Cash Margins (Mcfe) $8.00 $7.00 Adjusted Base $6.28 $6.00 $0.33 Adjusted Base Adjusted Base $1.37 $5.03 $5.14 $5.00 $0.38 $0.55 Adjusted Base $4.25 Differential - Adjusted* $4.00 $1.12 $0.40 LOE & Taxes $1.49 Adjusted Base Adjusted Base $3.40 $3.33 Cash Margin $1.06 $0.47 $3.00 Adjusted Ba
Slide 16: SOHOT – Low Cost, High ROR Oil Play
SOHOT – Low Cost, High ROR Oil Play Unit Petroleum 11 5D “A” 18/7 1HXL IP30: 497 Boe/d 98% Oil Kaiser Francis 10 Amanda 21-6-8 1H IP30: 540 Boe/d 71% Oil Kaiser Francis 9 Torralba 10-5-8 1H IP30: 578 Boe/d 70% Oil Unit Petroleum Camino Unit Petroleum Echo E&P LLC 8 5D 13/12 1HXL Kaiser- Francis IP30
Slide 17: SOHOT – Low Cost, High ROR Oil Play
SOHOT – Low Cost, High ROR Oil Play Marchand Marchand Type Curve 5,000’ 7,500’ IP - 30 (Boe/d) 720 1,006 ROR (1) 73% 108% EUR (Mboe) 568 812 % Liquids 76% 76% Well Cost ($mm) $4.7 $5.9 Single Well Economics 350% 300% 250% % 200% ROR 150% 100% Marchand Horizontal 50% 0% Unit Petroleum $45 / $2.50 11/
Slide 18: SOHOT – Predictable Oil Production and Improving Capital Efficiency
SOHOT – Predictable Oil Production and Improving Capital Efficiency Geology SOHOT Daily Net BOE by Type 6,000 • Marchand stacked lenses provide multiple oil drilling targets • Medrano proved gas potential 5,000 Land • 31,500 net acres 4,000 • 84% HBP • Majority operated Oil • Average working interes
Slide 19: Red Fork – Adds Oily Drilling Inventory
Red Fork – Adds Oily Drilling Inventory Red Fork Summary • 19,100 net acres • 86% HBP • 64% average WI • 9 horizontal wells drilled • 20-30 operated locations • 15-25 non-op locations • Well costs: • 4,500’ $5.7 MM • 7,500’ $7.1 MM Unit Petroleum Unit Petroleum Unit Petroleum Unit Petroleum Unit Pet
Slide 20: STACK Core – Provides Good ROR Oil/Wet Gas with Dry Gas Optionality
STACK Core – Provides Good ROR Oil/Wet Gas with Dry Gas Optionality Continental Resources 10 Privott 17_20-16N-9 1HX 10 IP30: 4,308 Boe/d 30% Oil Unit Petroleum Cont’l Resources Devon Energy Devon Energy 9 9 Tiger Swallowtail 1HX Cimarex IP30: 18.4 MMcfe/d 81% Gas Citizen Energy II 8 6 Devon Energy
Slide 21: STACK Core – Provides Good ROR Oil/Wet Gas with Dry Gas Optionality
STACK Core – Provides Good ROR Oil/Wet Gas with Dry Gas Optionality Oil Condensate Dry Gas* Type Curve Window Window Window IP - 30 (Boe/d, Mcfe/d*) 1,671 1,727 12,212* ROR (1) 104% 36% 0% EUR (Mboe/Bcfe*) 1,890 1,914 13.2* % Liquids/Gas* 63% 55% 99%* Lateral Length 10,000 10,000 10,000 Well Cost ($
Slide 22: STACK – Growing into Core Production Growth Area
STACK – Growing into Core Production Growth Area for Unit Petroleum STACK Daily BOE by Type Geology 3,000 • Stacked drilling targets in Osage, Meramec, and Woodford • Red Fork Potential in some areas • Sands consistently present across play 2,500 Land • 12,000 net acres in STACK Core 2,000 • 5,000 n
Slide 23: Granite Wash – Low Risk Wet Gas Condensate Play
Granite Wash – Low Risk Wet Gas Condensate Play with NGL Price Upside Francis 5713 EXL #3H 1 IP30: 9.5 MMcfe/d (78% Gas) Carr 1357 WXL #4H Francis 5859 EXL #5H 2 5 IP30: 10.0 MMcfe/d (84% Gas) IP30: 5.5 Mmcfe/d (63% Gas) Meek #6836H Meek 6814 #2H 3 6 IP30: 5.8 MMcfe/d (76% Gas) IP30: 9.3 Mmcfe/d (82
Slide 24: Granite Wash – Competitive Advantages Drive Differentiated Value
Granite Wash – Competitive Advantages Drive Differentiated Value Geology Daily Net MMcfe • 11 stacked Granite Wash sands 60 significantly improves capital efficiency • Sands present across acreage 50 Land • 9,000 net largely contiguous acres allow for extended lateral (XL) drilling 40 • 90% HBP and
Slide 25: Wilcox – Conventional Stacked Over-Pressured Intervals
Wilcox – Conventional Stacked Over-Pressured Intervals Provide Low Cost High Potential Overall Wilcox Drilling Program Results • Drilled 177 operated wells since 2003 (166 vertical, 11 horizontal) • Program ROR > 81% • Operated with working interest ~ 91% • Production: ~ 80 MMcfe/d (36% liquids) Gil
Slide 26: Drilling Segment Overview
Drilling Segment Overview NYSE: UNT
Slide 27: Rig Fleet Presence in Key Regions
Rig Fleet Presence in Key Regions 12 • 58 rig fleet • 31% total fleet utilization • 55 rigs pad capable 8 • SCR rigs modified to meet customer requirements • All 14 BOSS rigs operating 23 Current Rigs Operating(1) Area # of Rigs Mid-Continent 2 11 Bakken 6 4 Niobrara 2 Permian 8 Total 18 1. As of Ma
Slide 28: Average Dayrates and Margins
Average Dayrates and Margins (1) Dayrates $20,000 40 • Average dayrates increased 4% quarter-over-quarter during 3Q’19 $15,000 30 Average Core Customers UtilizedRigs Dayrates $10,000 20 Margins Margins and $5,000 10 $0 0 2015 2016 2017 2018 Q3'19 Margins Dayrates Average Rigs Utilized 1. See Reconci
Slide 29: The BOSS Drilling Rig Optimized for Pad Drilling
The BOSS Drilling Rig Optimized for Pad Drilling • Multi-direction walking system • Racking & setback capacity for additional tubulars Faster Between Locations • Quick assembly substructure • 32-34 truck loads More Hydraulic Horsepower • (2) 2,200 horsepower mud pumps All 14 BOSS rigs • 1,500 gpm av
Slide 30: SCR Rigs Continue to Make an Important Contribution
SCR Rigs Continue to Make an Important Contribution 40 Average Annual Prices1 Crude Natural Gas 35 2015 $48.78 $2.63 2016 $43.41 $2.55 30 21 2017 $50.91 $3.02 21 2018 $64.81 $3.07 25 2019 $57.03 $2.53 18 20 12 • Currently, 18 drilling rigs 4 15 operating 14 • All BOSS rigs operating 10 11 or under c
Slide 31: Midstream Segment Overview
Midstream Segment Overview NYSE: UNT
Slide 32: Midstream Core Operations Key Metrics
Midstream Core Operations Key Metrics Northern Oklahoma and Kansas Tulsa . Approx. 1.9 million dedicated acres Bellmon Headquarters . 176 MMcf/d processing capacity • 21 active gathering systems . Approx. 1,2501 miles of gathering Hemphill pipeline Cashion • Panola 12 gas processing plants Texas Pan
Slide 33: Midstream Segment Contract Mix
Midstream Segment Contract Mix 2010 Contract Mix Based on Volume Q3 2019 25% 49% 51% Fee Based 75% Commodity Based Contract Mix Based on Margin 15% 29% 85% Fee Based 71% Commodity Based Unit vs. 3rd Party Margin Contribution 41% 34% 59% 3rd Party 66% Unit NYSE: UNT 27
Slide 34: Superior Joint Venture Overview
Superior Joint Venture Overview SP Investor Holdings, LLC 50% 50% • Retains 50% equity interest • Acquired 50% equity interest • Received $300 million • $300 million consideration • Retains operational control of • Non-managing member Superior NYSE: UNT 28
Slide 35: Superior Joint Venture Key Terms
Superior Joint Venture Key Terms • Unit’s sale of 50% of its interest in Superior Pipeline Company, L.L.C. is governed by the Purchase and Sale Agreement and the Drilling Commitment Agreement • These agreements contain provisions which have implications on any distributions from or a sale of SPC: •
Slide 36: Financial Summary
Financial Summary NYSE: UNT
Slide 37: Unit's Operational & Financial Policy
Unit’s Operational & Financial Policy UPC History of managing production growth through volatile commodity price environments Increasing oil and liquids cuts through opportunistic development of the asset base Focused on driving free cash flow generation UDC Significant amounts of free cash
Slide 38: Operating Segment Capital Expenditures
Operating Segment Capital Expenditures ($ in millions) 2019E Activity Oil and Natural Gas $500 • Focused on the high margin Western Oklahoma area • Increasing liquids cut and $400 generate cash flow Contract Drilling $300 • Added a 14th Boss Rig to the fleet • 100% Boss Rig utilization $200 Midstrea
Slide 39: Long-Term Forecast Assumptions
Long-Term Forecast Assumptions UPC • Base Case : Solely focused on highest return wells at UPC with 2020E 2021E 2022E 2023E 2024E no Granite Wash development Western Oklahoma 2.0 2.0 2.0 2.0 2.0 • Alternate Case: Assumes a portion of UPC’s development plan is directed to the Granite Wash Granite Was
Slide 40: 5 Year Consolidated Summary Projections – Base Case
5 Year Consolidated Summary Projections – Base Case ($ in millions) Production (No Granite Wash Drilling; Boed) EBITDA $199 $190 $194 $200 % Liquids 50.1% 53.7% 53.9% 54.4% 54.9% $175 $34 $34 $34 $34 $34 $23 $18 $20 $23 $22 38,682 38,406 37,171 36,463 36,231 $172 $174 $149 $168 $169 ($30) ($30) ($30
Slide 41: 5 Year Consolidated Summary Projections – Alternate Case
5 Year Consolidated Summary Projections – Alternate Case ($ in millions) Production (Granite Wash Drilling; Boed) EBITDA $200 $192 $181 $192 % Liquids 50.1% 51.5% 46.7% 50.6% 52.2% $175 $34 $34 $34 $34 $34 $30 $25 $26 $22 $26 38,682 39,664 42,212 39,195 38,075 $149 $158 $150 $163 $170 ($30) ($30) ($
Slide 42: Appendix
Appendix NYSE: UNT
Slide 43: Corporate Structure Overview
Corporate Structure Overview Unit Corporation Superior SPC Midstream Unit Drilling Unit Petroleum 8200 Unit Pipeline SP Investor Operating, Company Company Drive, L.L.C. Company, Holdings, LLC L.L.C. L.L.C.1 Unit Drilling Superior Superior USA Colombia, Pipeline Texas, Appalachian L.L.C. L.L.C. Pipe
Slide 44: Derivative Summary
Derivative Summary Crude Oil 2019 2020 Q4 Q1 Q2 Q3 Q4 Collars Volume (Bbl) -- -- -- -- -- Weighted Avg Floor -- -- -- -- -- Weighted Avg Ceiling -- -- -- -- -- 3-Way Collars Volume (Bbl) 368,000 -- -- -- -- Weighted Avg Floor $61.25 -- -- -- -- Weighted Avg Subfloor 51.25 -- -- -- -- Weighted Avg Ce
Slide 45: Unit 2019 Preliminary Consolidated Financials
Unit 2019 Preliminary Consolidated Financials ($ in millions) 2019E Low 2019E High Production (MBoed) 45.5 - 46.5 Consolidated Revenue $670 - $680 Consolidated Adjusted EBITDA $283 - $288 Consolidated Net Capex1 $340 - $345 1. Includes proceeds from divestures NYSE: UNT 37
Slide 46: Non-GAAP Financial Measures - Segments
Non-GAAP Financial Measures - Segments Reconciliation of Margin by Segment Nine Months Ended Year Ended December 31, September 30, (In thousands) 2015 2016 2017 2018 2019 Oil and natural gas $ 219,728 $ 174,037 $ 226,955 $ 291,384 $ 137,635 Contract drilling 109,260 33,932 52,120 65,107 42,283 Gas g
Slide 47: Non-GAAP Financial Measures - Segments
Non-GAAP Financial Measures - Segments Segment Adjusted EBITDA (with G&A allocated) ($ In millions) Nine months ended Sept. 30, Years ended December 31, Unit Petroleum 2018 2019 2015 2016 2017 2018 Income (Loss) Before Income Taxes (1) $ 82 $ (157) $(1,622) $ (138) $ 126 $ 139 Depreciation, Depletio