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Value

The U.S. domestic energy explorers are in the drivers seat. Unit Corporation (UNT - Snapshot Report) is expected to grow earnings by the double digits again in 2012 after posting double digit growth in 2011. This Zacks #1 Rank (Strong Buy) also has value to go along with the growth as it trades with a forward P/E of just 9.3.

Unit explores for oil and natural gas and conducts contract drilling of onshore and natural gas wells primarily in the Mid-Continent region, including the Anadarko, Arkoma, Permian, Rocky Mountains and Gulf Coast Basins.

Unit is a mid-cap explorer with a market cap of $2.1 billion.

Unit Beat By 7% in the Third Quarter

On Nov 2, Unit reported its third quarter results and surprised on the Zacks Consensus for the third time in the last four quarters. Earnings per share were $1.11 compared to the consensus of juts $1.04. That easily beat the 2010 results, which was just 73 cents per share.

Revenue jumped 48% to $328.8 million (with 39% contract drilling, 42% oil and natural gas and 19% mid-stream) from $218.1 million in the third quarter of 2010 (which was 39% contract drilling, 44% oil and natural gas and 17% mid-stream).

The average number of drilling rigs rose 21% to 78.9 from the year ago period. Average per day drilling rates also jumped 22% to $19.309 from last year.

In the oil and natural gas segment, the company completed 40 gross wells in the quarter. 38% of the production was oil and natural gas liquids, up from just 30% in the year ago quarter.

Oil production climbed 64% to 620,000 barrels from 379,000 barrels in the third quarter of 2010. Unit's average oil price, including the hedging effects, was $86.19 per barrel, up from $66.94 a year ago.

Unit felt the pain of falling natural gas prices, however, even with its hedges in place. Even though 2011 natural gas production rose 11%, the average natural gas price, including the hedging effects, fell 21% to $4.39 per thousand cubic feet from $5.55 in the year ago quarter.

The Mid-stream segment was also solid as liquids sold per day volumes rose 73%, processing volumes per day gained 54% and gathering volumes per day increased 25%. A new 16-mile pipeline in West Virginia was also scheduled to be completed and operational by the fourth quarter of 2011.

Double Digit Earnings Growth

Analysts are still bullish on both 2011 and 2012. The 2011 Zacks Consensus Estimates has risen a penny in the last 60 days to $4.03.

That is earnings growth of 30.3%.

The 2012 Zacks Consensus Estimate has actually fallen to $4.67 from $4.83 in the last 90 days, but the estimate hasn't changed in the prior month.

Nevertheless, that is still 2012 earnings growth of 16%.

Unit is scheduled to report fourth quarter results on Feb 21, so investors should get better guidance on the outlook for 2012 then.

Still a Value Stock

Shares fell sharply in the summer of 2011 stock market sell-off but then tried to recover. Still, shares have not regained their 3-year high.

That makes Unit an attractive value stock. Its P/E of 9.3 is well below that of the S&P 500 average of 12.4.

It also has a price-to-book of just 1.1. A P/B ratio under 3.0 usually indicates value.

The company also has other solid fundamentals including a 1-year return on equity (ROE) of 10.5%.

Unit is an attractively priced domestic mid-cap explorer. Value investors get an added bonus of double digit earnings growth.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.

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