UNIT CORP 10-Q for FY2021 Q2

UNIT CORP (UNTC)

10-Q 2021-08-16 For: 2021-06-30

Added on April 12, 2026

About this 10-Q

UNIT CORP filed this 10-Q on August 16, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $134.06M; up 50.6% from $89.01M a year earlier
Net loss: $12.99M; compared with a net loss of $215.65M a year earlier
Diluted EPS: -$1.09; compared with -$4.03 a year earlier

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Delaware			73-1283193
(State or other jurisdiction of incorporation)			(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A


		Page Number
	PART I. Financial Information

Item 1.	Financial Statements (Unaudited)	4











	Notes to Unaudited Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosure s About Market Risk	39

Item 4.	Controls and Procedures	40

	PART II. Other Information

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upo n Senior Securities	42

Item 4.	Mine Safety Disclosures	42

Item 5.	Other Information	42

Item 6.	Exhibits	42

Signatures		42


	June 30, 2021		December 31, 2020
	(In thousands except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	6,989	$	12,145
Restricted cash	—		569
Accounts receivable, net of allowance for credit losses of $4,265 and $3,783 at June 30, 2021 and December 31, 2020, respectively	63,879		57,846



Current income tax receivable	34		1,150

Prepaid expenses and other	6,212		11,212
Total current assets	77,114		82,922
Property and equipment:
Oil and natural gas properties, on the full cost method:
Proved properties	233,004		238,581
Unproved properties not being amortized	487		1,591
Drilling equipment	64,056		63,687
Gas gathering and processing equipment	255,338		251,404
Land and building	32,635		32,635
Transportation equipment	3,486		3,130
Other	8,935		9,961
	597,941		600,989
Less accumulated depreciation, depletion, amortization, and impairment	88,416		54,189
Net property and equipment	509,525		546,800


Right of use asset (Note 14)	6,406		5,592
Other assets	16,111		14,389
Total assets (1)	$	609,156	$	649,703


	June 30, 2021		December 31, 2020
	(In thousands except share amounts)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	38,081	$	37,368
Accrued liabilities (Note 8)	23,748		25,204
Current operating lease liability (Note 14)	3,515		4,075
Current portion of long-term debt (Note 9)	—		600
Current derivative liabilities (Note 12)	37,960		1,047
Warrant liability (Note 13)	4,459		885
Current portion of other long-term liabilities (Note 9)	7,551		11,168
Total current liabilities	115,314		80,347
Long-term debt (Note 9)	35,000		98,400
Non-current derivative liabilities (Note 12)	23,270		4,659
Operating lease liability (Note 14)	2,856		1,445
Other long-term liabilities (Note 9)	38,871		39,259
Commitments and contingencies (Note 15)
Shareholders’ equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 25,000,000 shares authorized; 12,000,000 shares issued and 11,400,000 outstanding at June 30, 2021 and 12,000,000 shares issued and outstanding at December 31, 2020	120		120
Treasury stock	(9,048)		—
Capital in excess of par value	197,561		197,242

Retained deficit	(33,071)		(18,140)
Total shareholders’ equity attributable to Unit Corporation	155,562		179,222
Non-controlling interests in consolidated subsidiaries	238,283		246,371
Total shareholders' equity	393,845		425,593
Total liabilities(1) and shareholders’ equity	$	609,156	$	649,703


	Successor		Predecessor		Successor		Predecessor
	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
	(In thousands except per share amounts)
Revenues:
Oil and natural gas	$	41,970	$	26,956	$	96,994	$	75,478
Contract drilling	18,061		29,202		33,735		65,834
Gas gathering and processing	74,026		32,849		124,225		70,071
Total revenues	134,057		89,007		254,954		211,383
Expenses:
Operating costs:
Oil and natural gas	15,487		71,540		34,636		102,203
Contract drilling	14,080		20,951		25,951		46,400
Gas gathering and processing	45,056		22,612		84,719		50,223
Total operating costs	74,623		115,103		145,306		198,826
Depreciation, depletion, and amortization	16,364		35,960		33,875		97,577
Impairments (Note 3)	—		109,318		—		851,242
Loss on abandonment of assets (Note 3)	—		—		—		17,554
General and administrative	5,751		25,814		12,920		37,367
(Gain) loss on disposition of assets	(1,710)		877		(2,182)		1,267
Total operating expenses	95,028		287,072		189,919		1,203,833
Income (loss) from operations	39,029		(198,065)		65,035		(992,450)
Other income (expense):
Interest, net (excludes interest expense of $5.4 million on senior subordinated notes subject to compromise, for the three and six months ended June 30, 2020)	(487)		(7,608)		(3,193)		(20,865)
Write-off of debt issuance costs	—		(2,426)		—		(2,426)
Loss on derivatives (Note 12)	(42,400)		(6,937)		(65,231)		(6,454)
Loss on change in fair value of warrants (Note 13)	(3,574)		—		(3,574)		—
Reorganization items, net	(1,852)		(7,027)		(2,988)		(7,027)
Other, net	(831)		43		(755)		103
Total other income (expense)	(49,144)		(23,955)		(75,741)		(36,669)
Loss before income taxes	(10,115)		(222,020)		(10,706)		(1,029,119)
Income tax benefit:
Current	—		—		—		(917)
Deferred	—		(6,455)		—		(8,963)
Total income taxes	—		(6,455)		—		(9,880)
Net loss	(10,115)		(215,565)		(10,706)		(1,019,239)
Net income (loss) attributable to non-controlling interest	2,879		84		4,225		(33,096)
Net loss attributable to Unit Corporation	$	(12,994)	$	(215,649)	$	(14,931)	$	(986,143)
Net loss attributable to Unit Corporation per common share (Note 7):
Basic	$	(1.09)	$	(4.03)	$	(1.25)	$	(18.50)
Diluted	$	(1.09)	$	(4.03)	$	(1.25)	$	(18.50)


	Three Months Ended June 30, 2021
	Shareholders' Equity Attributable to Unit Corporation
	Common Stock		Treasury Stock		Capital in Excess of Par Value		Retained Earnings (Deficit)		Non-controlling Interest in Consolidated Subsidiaries		Total
	(In thousands except per share amounts)
Balances, March 31, 2021 (Successor)	$	120	$	—	$	197,316	$	(20,077)	$	247,733	$	425,092
Net income (loss)	—		—		—		(12,994)		2,879		(10,115)

Activity in stock-based compensation plans	—		—		245		—		15		260
Distributions to non-controlling interests	—		—		—		—		(12,344)		(12,344)
Repurchase of common stock	—		(9,048)		—		—		—		(9,048)
Balances, June 30, 2021 (Successor)	$	120	$	(9,048)	$	197,561	$	(33,071)	$	238,283	$	393,845



	Classification on the unaudited condensed consolidated balance sheets	June 30, 2021		December 31, 2020		Change
		(In thousands)
Assets
Current contract assets	Prepaid expenses and other	$	3,226	$	6,084	$	(2,858)
Non-current contract assets	Other assets	—		173		(173)
Total contract assets		$	3,226	$	6,257	$	(3,031)

Liabilities
Current contract liabilities	Current portion of other long-term liabilities	$	2,098	$	2,583	$	(485)
Non-current contract liabilities	Other long-term liabilities	626		1,589		(963)
Total contract liabilities		2,724		4,172		(1,448)
Contract assets (liabilities), net		$	502	$	2,085	$	(1,583)


Contract	Remaining Term of Contract	2021		2022		2023 and beyond		Total Remaining Impact to Revenue
		(In thousands)
Demand fee contracts	4 - 16 months	$	(1,876)	$	1,374	$	—	$	(502)


	Earnings (Loss) (Numerator)		Weighted Shares (Denominator)	Per-Share Amount
	(In thousands except per share amounts)
For the three months ended June 30, 2021 (Successor)
Basic loss attributable to Unit Corporation per common share	$	(12,994)	11,901	$	(1.09)
Effect of dilutive stock options and restricted stock	—		—	—
Diluted loss attributable to Unit Corporation per common share	$	(12,994)	11,901	$	(1.09)
For the three months ended June 30, 2020 (Predecessor)
Basic loss attributable to Unit Corporation per common share	$	(215,649)	53,503	$	(4.03)
Effect of dilutive stock options and restricted stock	—		—	—
Diluted loss attributable to Unit Corporation per common share	$	(215,649)	53,503	$	(4.03)


	Earnings (Loss) (Numerator)		Weighted Shares (Denominator)	Per-Share Amount
	(In thousands except per share amounts)
For the six months ended June 30, 2021 (Successor)
Basic loss attributable to Unit Corporation per common share	$	(14,931)	11,950	$	(1.25)
Effect of dilutive stock options and restricted stock	—		—	—
Diluted loss attributable to Unit Corporation per common share	$	(14,931)	11,950	$	(1.25)
For the six months ended June 30, 2020 (Predecessor)
Basic loss attributable to Unit Corporation per common share	$	(986,143)	53,317	$	(18.50)
Effect of dilutive stock options and restricted stock	—		—	—
Diluted loss attributable to Unit Corporation per common share	$	(986,143)	53,317	$	(18.50)


		Derivative Liabilities
		Fair Value

	Classification on the unaudited condensed consolidated balance sheets	June 30, 2021		December 31, 2020
		(In thousands)
Commodity derivatives:
Current	Current derivative liability	$	37,960	$	1,047
Long-term	Non-current derivative liability	23,270		4,659
Total derivative liabilities		$	61,230	$	5,706



	June 30, 2021
	Level 2		Level 3		Effect of Netting		Net Amounts Presented
	(In thousands)
Financial assets (liabilities):
Commodity derivatives:
Assets	$	—	$	—	$	—	$	—
Liabilities	(61,230)		—		—		(61,230)
Total commodity derivatives	$	(61,230)	$	—	$	—	$	(61,230)



	December 31, 2020
	Level 2		Level 3		Effect of Netting		Net Amounts Presented
	(In thousands)
Financial assets (liabilities):
Commodity derivatives:
Assets	$	3,436	$	—	$	(3,436)	$	—
Liabilities	(9,142)		—		3,436		(5,706)
Total commodity derivatives	$	(5,706)	—		—		(5,706)


	Net Derivatives
	Successor		Predecessor		Successor		Predecessor
	Three Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020

	(In thousands)
Beginning of period	$	—	$	948	$	—	$	1,204
Total gains or losses (realized and unrealized):
Included in earnings (1)	—		714		—		1,277
Settlements	—		(819)		—		(1,638)
End of period	$	—	$	843	$	—	$	843
Total losses for the period included in earnings attributable to the change in unrealized gain (loss) relating to assets still held at end of period	$	—	$	(105)	$	—	$	(361)


	Successor		Predecessor
	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
	(In thousands)
ARO liability, January 1:	$	23,356	$	66,627
Accretion of discount	931		1,169
Liability incurred	1		460
Liability settled	(302)		(435)
Liability sold	(721)		(463)
Revision of estimates (1)	(93)		(3,110)
ARO liability, June 30:	23,172		64,248
Less: current portion	2,132		1,104
Total long-term ARO	$	21,040	$	63,144


	Amount
	(In thousands)
Ending June 30,
2022	$	3,686
2023	1,528
2024	1,271
2025	86
2026	12
2027 and beyond	57
Total future payments	6,640
Less: Interest	269
Present value of future minimum operating lease payments	6,371
Less: Current portion	3,515
Total long-term operating lease payments	$	2,856


	Successor
	Three Months Ended June 30, 2021
	Oil and Natural Gas (2)		Contract Drilling		Mid-Stream		Corporate and Other		Eliminations (3)		Total Consolidated
	(In thousands)
Revenues: (1)
Oil and natural gas	$	59,776	$	—	$	—	$	—	$	(17,806)	$	41,970
Contract drilling	—		18,061		—		—		—		18,061
Gas gathering and processing	—		—		66,323		—		7,703		74,026
Total revenues	59,776		18,061		66,323		—		(10,103)		134,057
Expenses:
Operating costs:
Oil and natural gas	16,350		—		—		—		(863)		15,487
Contract drilling	—		14,080		—		—		—		14,080
Gas gathering and processing	—		—		55,176		—		(10,120)		45,056
Total operating costs	16,350		14,080		55,176		—		(10,983)		74,623
Depreciation, depletion, and amortization	6,476		1,570		8,064		254		—		16,364

Total expenses	22,826		15,650		63,240		254		(10,983)		90,987

General and administrative	—		—		—		4,871		880		5,751
Gain on disposition of assets	(67)		(1,618)		—		(25)		—		(1,710)
Income (loss) from operations	37,017		4,029		3,083		(5,100)		—		39,029
Loss on derivatives	—		—		—		(42,400)		—		(42,400)
Loss on change in fair value of warrants	—		—		—		(3,574)		—		(3,574)

Reorganization items, net	—		—		—		(1,852)		—		(1,852)
Interest, net	—		—		641		(1,128)		—		(487)
Other	34		11		(850)		(26)		—		(831)
Income (loss) before income taxes	$	37,051	$	4,040	$	2,874	$	(54,080)	$	—	$	(10,115)


	Predecessor
	Three Months Ended June 30, 2020
	Parent		Combined Guarantor Subsidiaries		Combined Non-Guarantor Subsidiaries		Consolidating Adjustments		Total Consolidated
	(In thousands)
Revenues	$	—	$	56,159	$	37,719	$	(4,871)	$	89,007
Expenses:
Operating costs	—		93,305		26,671		(4,873)		115,103
Depreciation, depletion, and amortization	607		25,005		10,348		—		35,960
Impairments	—		109,318		—		—		109,318
General and administrative	—		25,814		—		—		25,814
(Gain) loss on disposition of assets	1,479		(593)		(9)		—		877
Total operating costs	2,086		252,849		37,010		(4,873)		287,072
Income (loss) from operations	(2,086)		(196,690)		709		2		(198,065)
Interest, net	(7,066)		—		(542)		—		(7,608)
Write-off of debt issuance costs	(2,426)		—		—		—		(2,426)
Loss on derivatives	(6,937)		—		—		—		(6,937)
Reorganization items, net	(2,205)		(4,822)		—		—		(7,027)
Other, net	4		18		21		—		43
Income (loss) before income taxes	(20,716)		(201,494)		188		2		(222,020)
Income tax benefit	(6,455)		—		—		—		(6,455)
Equity in net earnings from investment in subsidiaries, net of taxes	(201,304)		—		—		201,304		—
Net income (loss)	(215,565)		(201,494)		188		201,306		(215,565)
Less: net income attributable to non-controlling interest	84		—		84		(84)		84
Net income (loss) attributable to Unit Corporation	$	(215,649)	$	(201,494)	$	104	$	201,390	$	(215,649)


	Successor		Predecessor		Percent Change (1)
	Six Months Ended June 30, 2021		Six Months Ended June 30, 2020
	(In thousands except percentages)
Net cash provided by operating activities	73,965		26,467		179	%
Net cash provided by (used in) investing activities	7,605		(19,517)		139	%
Net cash provided by (used in) financing activities	(87,295)		29,473		NM
Net increase (decrease) in cash, restricted cash and cash equivalents	$	(5,725)	$	36,423


	June 30, 2021
	(In thousands)
Bank of Oklahoma	$	(60,369)
Bank of Montreal	(861)
Total net liabilities	$	(61,230)


3.1			Amended and Restated Certificate of Incorporation.

10.1			Second Amendment to Amended and Restated Credit Agreement effective July 26, 2021.

31.1			Certification of Chief Executive Officer under Rule 13a – 14(a) of the Exchange Act.

31.2			Certification of Chief Financial Officer under Rule 13a – 14(a) of the Exchange Act.

32			Certification of Chief Executive Officer and Chief Financial Officer under Rule 13a – 14(a) of the Exchange Act and 18 U.S.C. Section 1350, as adopted under Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			XBRL Instance Document.

101.SCH			XBRL Taxonomy Extension Schema Document.

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.

104			Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101)


		Unit Corporation

Date:	August 16, 2021	By: /s/ Philip B. Smith
		PHILIP B. SMITH
		President and Chief Executive Officer

Date:	August 16, 2021	By: /s/ Thomas D. Sell
		THOMAS D. SELL
		Chief Financial Officer