Editor's Note

It is tough to play any oil related equity but some have shaken off the volatility and are moving to six-month highs. Unit Corp is more of a natural gas play and has developed some loyal followers.



NEW BULLISH Plays

UNT - Unit Corp - Company Profile

Unit Corporation, operates as an oil and natural gas contract drilling company primarily in the United States. The company operates through three segments: Oil and Natural Gas, Contract Drilling, and Mid-Stream. The Oil and Natural Gas segment acquires, explores, develops, and produces oil and natural gas properties primarily located in Oklahoma and Texas, as well as in Arkansas, Colorado, Kansas, Louisiana, Mississippi, Montana, New Mexico, North Dakota, and Wyoming. As of December 31, 2015, this segment had approximately 65 gross proved undeveloped wells. The Contract Drilling segment is involved in the contract drilling of onshore oil and natural gas wells for its own account, as well as for a range of other oil and natural gas companies primarily in Oklahoma, Texas, Wyoming, and North Dakota, as well as in Louisiana and Kansas. As of December 31, 2015, this segment had 26 operating rigs. The Mid-Stream segment buys, sells, gathers, transports, processes, and treats natural gas for third parties and for its own account. This segment operates 3 natural gas treatment plants, 13 processing plants, and 25 gathering systems, as well as approximately 1,464 miles of pipeline. Unit Corporation was founded in 1963. Company description from FinViz.com.

For Q2 the company reported an adjusted loss of 15 cents compared to estimates for a loss of 22 cents. Revenue was $138.3 million. They recorded record production of 97 million cubic feet per day from the Wilcox play, a 25% increase year over year and a 9% increase from Q1. Seven of eight of their highly features BOSS rigs were currently operating under contract to other producers compared to six in Q1. The Midstream segment volumes rose 15%.

Earnings Nov 3rd.

Since oil and gas prices have declined they have reduced drilling of new wells and used their rigs to recomplete existing wells to boost production. An example of the production increase came from four Wilcox wells that were producing 700 Mcfe per day before the recompletion and 17,000 Mcfe after the work over. They anticipate putting additional rigs to work on new wells in early 2017.

Unit has been using the weakness in oil prices to reduce costs and streamline operations rather than try to continue drilling new wells during glut conditions. They are poised to increase production on demand because they own their own fleet of rigs and are not paying high lease fees for drilling equipment.

Oil prices are in rally mode this week because of a unique agreement announced on Monday where Russia and Saudi Arabia will form a joint venture to stabilize oil prices among OPEC and non-OPEC producers. It remains to be seen if it will ever happen but prices are rising on the expectations.

Unit has been relatively calm during the ups and downs in oil prices in 2016 and are poised to break out to a new high for the year.

Buy UNT shares, currently $18.08, initial stop loss $16.50.

No options recommended because of price.



NEW BEARISH Plays

No New Bearish Plays