Name: UNIT CORP Q2 2022 Earnings Call
Start: 2022-07-22T00:00:00.000Z

Executive Summary

Q2 2022 delivered a sharp profit swing: net income of $80.1M and diluted EPS of $7.82 on total revenues of $134.6M, versus a loss in Q2 2021; operating income rose to $70.2M, supported by higher commodity prices and stronger drilling utilization .
Drilling fundamentals improved: average rigs in use increased to 16.3 and dayrates rose, while cash and equivalents reached $115.6M with zero long-term debt, boosting balance sheet flexibility .
Strategic pivot and capital returns: the upstream sale process was terminated; $100M buyback authorization in place with $54.7M repurchased by 6/30/22 and an additional 75K shares post-quarter, signaling commitment to shareholder returns .
Headwinds: derivative cash settlements of $32.9M in Q2 weighed on realized pricing; borrowing base reduced to $31.3M following Gulf Coast asset sale closing July 1 .
Near-term stock catalysts: sustained rig utilization and dayrate momentum, plus incremental buybacks and potential dividends/distributions as tax earnings and profits calculations are finalized .

What Went Well and What Went Wrong

What Went Well
- Operating strength and pricing: income from operations rose to $70.2M; realized prices (incl. derivatives) improved YoY across oil ($56.28/bbl), gas ($4.24/Mcf), and NGLs ($34.72/bbl) .
- Drilling momentum: rigs in use increased to 16.3 with higher dayrates; management cited “full utilization of our BOSS rig fleet,” reinforcing revenue quality from contract drilling .
- Balance sheet resiliency and capital returns: cash reached $115.6M; long-term debt was reduced to $0; buyback authorization expanded to $100M with $54.7M executed by quarter-end .
What Went Wrong
- Derivative drag: cash settlements paid on commodity derivatives jumped to $32.9M in Q2, pressuring operating cash flows despite reported derivative gains .
- Volume declines: oil (-21%), natural gas (-10%), and NGL (-6%) production fell YoY due to declines and divestitures not yet offset by new drilling, tempering upstream volume leverage .
- Higher corporate costs: G&A increased to $7.4M, with management citing employee separation benefits; midstream contributions ceased post-deconsolidation, reducing consolidated revenue diversity .

Metric	Q2 2021	Q1 2022	Q2 2022
Total Revenues ($USD Millions)	$134.057	$188.365	$134.554
Net Income ($USD Millions)	$(12.994)	$(46.877)	$80.093
Diluted EPS ($)	$(1.09)	$(4.66)	$7.82
Income from Operations ($USD Millions)	$39.029	$60.644	$70.156
Income from Operations Margin (%)	29.1% (39.029/134.057)	32.2% (60.644/188.365)	52.1% (70.156/134.554)

Segment revenue mix:

Segment Revenue ($USD Millions)	Q1 2022	Q2 2022
Oil & Natural Gas	$76.810	$100.912
Contract Drilling	$28.882	$33.642
Gas Gathering & Processing	$82.673	$0

Key operating KPIs:

KPI	Q2 2021	Q1 2022	Q2 2022
Oil Production (MBbls)	389	406	309
NGL Production (MBbls)	662	613	620
Natural Gas Production (MMcf)	7,543	6,514	6,821
Avg Realized Oil Price incl. derivatives ($/Bbl)	$48.38	$59.72	$56.28
Avg Realized Gas Price incl. derivatives ($/Mcf)	$2.98	$3.31	$4.24
Avg Realized NGL Price incl. derivatives ($/Bbl)	$17.95	$32.91	$34.72
Average Rigs in Use	10.0	15.5	16.3
Average Dayrate (Daywork Contracts) ($/day)	$18,269	$19,756	$21,285
Derivative Cash Settlements ($USD Millions)	$6.4	$21.239	$32.884

Metric	Period	Previous Guidance	Current Guidance	Change
Share Repurchase Authorization	Ongoing	$50M (Oct 2021)	$100M (June 10, 2022)	Raised
RBL Borrowing Base	July 1, 2022	$80.0M reaffirmed Mar 30, 2022	$31.3M post Gulf Coast sale	Lowered
Dividends/Distributions	Future	No formal guidance	Board evaluating tax earnings & profits to enable tax-efficient cash returns	New commentary
Long-Term Debt	June 30, 2022	$19.2M at 12/31/21	$0	Reduced to zero

Note: No Q2 2022 earnings call transcript was found; themes reflect filings and press releases.

Topic	Previous Mentions (Q1 2022)	Current Period (Q2 2022)	Trend
Commodity Hedging	Large derivative losses; settlements $21.2M; detailed hedge book	Q2 gain on derivatives $2.6M but settlements $32.9M; hedge mix updated	Hedging remains a cash drag despite mark-to-market gains
Strategic Direction	Upstream sale process ongoing with advisor	Process terminated; Gulf Coast sale closed 7/1; pivot to operations and returns	Shift to operate-and-return capital
Drilling Utilization & Pricing	15.5 rigs; dayrate ~$19.8K	16.3 rigs; dayrate ~$21.3K	Improving
Capital Returns	$41.4M repurchased to date	Authorization to $100M; $54.7M repurchased by 6/30; +75K shares post-Q2	Accelerating buybacks
Balance Sheet & Liquidity	Cash $88.3M; derivative liabilities high	Cash $115.6M; long-term debt $0	Strengthened
Midstream Consolidation Status	Deconsolidation effective 3/1; equity method	No consolidated midstream revenues; structural clarity	Stable post-deconsolidation

“We are pleased with our quarterly results and excited about future opportunities… With a June 30, 2022 cash balance in excess of $115 million… zero long-term debt, full utilization of our BOSS rig fleet… we are poised to further create and return substantial value to our shareholders.” — CEO Philip B. Smith .
“Given the Company’s growing cash balance, the Company is currently updating its calculation of tax earnings and profits… important information which can be used by the Board in implementing any future plan for return of cash via dividends and distributions… in a tax efficient manner.” — CEO Philip B. Smith .
On capital returns and strategy: authorization lifted to $100M for repurchases, signaling confidence and commitment to optimizing shareholder returns .

No Q2 2022 earnings call transcript was available; no analyst Q&A or guidance clarifications could be assessed from a call recording [Search results showed no transcript; filings only: 8‑K and 10‑Q] .

Wall Street consensus (S&P Global) for Q2 2022 was not available for comparison at the time of this analysis; UNTC’s OTC trading venue and limited coverage likely constrain formal consensus. As a result, estimate beat/miss analysis is not presented.

Operating momentum and pricing lifted Q2 profitability, with operating income margin expanding to ~52% versus ~29% in Q2 2021, reflecting stronger drilling economics and commodity backdrop .
Derivative settlements remain a material headwind; expect continued cash impacts from legacy hedges even as reported mark-to-market fluctuates with prices .
Balance sheet optionality is high: $115.6M cash, zero long-term debt, and a narrowed RBL borrowing base post-asset sale focusing capital discipline .
Capital return pathway is clear: $100M buyback authorization with sizable execution to date; management is working toward tax-efficient dividends/distributions .
Volume trajectory requires attention: YoY volume declines from divestitures and natural declines suggest production stabilization or selective drilling could be needed to sustain upstream cash flows .
Drilling segment is a key earnings lever near term, with increased utilization and dayrates supporting revenue quality as midstream no longer contributes to consolidated results .
Trading strategy: monitor additional buybacks and any dividend announcements, plus dayrate/rig trends and hedge settlement cadence; deconsolidation simplifies the story and may attract value-focused investors .