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Unit Corp Shares Slip Marginally After Q3 Earnings Decline Y/Y
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Shares of Unit Corporation (UNTC - Free Report) have lost 0.1% since reporting results for the third quarter of 2026 compared with the S&P 500 index’s 1.7% decline. Over the past month, the stock has lost 3.6% compared with the S&P 500’s 4.2% fall.
Earnings & Revenue Performance
Third-quarter revenues increased 12% year over year to $26.4 million from $23.6 million, supported by stronger oil and natural gas liquids prices. However, earnings per share fell to 12 cents from 69 cents in the prior-year quarter, and net income declined to $1.2 million from $6.9 million. Continuing operations generated $1.2 million, down 74% from $4.6 million in the prior-year quarter. The year-earlier quarter also included $2.3 million of income from discontinued operations, which contributed 23 cents per share.
Production Declines Despite Stronger Liquids Prices
Total production fell 8% to 894,000 barrels of oil equivalent in the third quarter of 2026. Oil volumes decreased 15% to 173,000 barrels, natural gas liquids production declined 7% to 235,000 barrels, and natural gas output fell 5% to 2.9 billion cubic feet. Management attributed the volume changes to natural well declines and line pressure issues during excessive regional heat.
Excluding settled derivatives, average oil prices increased 34% to $85.19 per barrel, while natural gas liquids prices rose 45% to $24.25 per barrel. Natural gas prices decreased 2% to $1.99 per thousand cubic feet. These divergent price trends explain how revenues grew despite lower output across all three product categories.
Lower Overhead Supports Operating Income
Operating income increased to $8.8 million from $4 million in the prior-year quarter, reflecting revenue growth and lower overall operating expenses. General and administrative expenses fell 41% to $3.6 million, primarily because of employee reductions following the sale of Unit Drilling Company and lower rent under a lease extension completed in the first quarter.
Those savings outweighed an 8% increase in operating costs to $12 million, driven primarily by higher employee costs in the oil and gas business. Depreciation, depletion and amortization declined to $2.1 million from $2.5 million in the prior-year quarter, providing another source of expense relief.
Derivative Losses & Taxes Weigh on Earnings
The improvement in operating income did not translate into stronger net earnings. Unit recorded a $7.2-million net derivative loss against a $1.7-million gain a year earlier. The latest loss included $6.9 million in unrealized losses and $0.3 million in losses on settled contracts. Management attributed the unfavorable comparison primarily to market pricing changes affecting outstanding commodity positions.
At Sept. 30, swaps covered approximately 64% of oil production and 37% of natural gas production for the remaining 2026 period, based on third-quarter average daily output. For 2027, oil coverage was approximately 47%, with no natural gas swaps outstanding. This leaves next year’s gas production exposed to market price movements.
Interest income increased 154% to $1.7 million, supported by higher cash balances. Nevertheless, income tax expenses rose 21% to $2.1 million despite lower pretax income. A $1.2-million increase in the valuation allowance related to losses and non-deductible accruals contributed to higher tax expenses.
Liquidity & Management’s Funding Outlook
Unit ended Sept. 30 with $188.1 million in unrestricted cash and cash equivalents, and no outstanding credit facility borrowings. Working capital totaled $176.8 million, up from $172.1 million at the end of 2025.
For the first nine months of 2026, the operating cash flow declined 49% to $37.8 million, reflecting unfavorable derivative positions, lower earnings and working capital changes following the drilling business disposal. Capital expenditure decreased to $9.3 million from $19.7 million in the year-ago quarter.
Management expects cash, operating cash generation and available credit to cover working capital, capital spending, dividends, discretionary repurchases and other requirements for at least 12 months. Unit paid out a quarterly dividend of $1.25 per share on Sept. 25, totaling $12.4 million. Future dividends remain at the board’s discretion and are expected to be funded from balance-sheet cash.
Other Developments
Unit received $0.1 million in net proceeds from sales of non-core oil and natural gas assets during the quarter compared with $1.5 million a year earlier. These proceeds reduced the carrying value of its full-cost pool, with no gain or loss recognized because the sales did not significantly alter that pool.
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Unit Corp Shares Slip Marginally After Q3 Earnings Decline Y/Y
Shares of Unit Corporation (UNTC - Free Report) have lost 0.1% since reporting results for the third quarter of 2026 compared with the S&P 500 index’s 1.7% decline. Over the past month, the stock has lost 3.6% compared with the S&P 500’s 4.2% fall.
Earnings & Revenue Performance
Third-quarter revenues increased 12% year over year to $26.4 million from $23.6 million, supported by stronger oil and natural gas liquids prices. However, earnings per share fell to 12 cents from 69 cents in the prior-year quarter, and net income declined to $1.2 million from $6.9 million. Continuing operations generated $1.2 million, down 74% from $4.6 million in the prior-year quarter. The year-earlier quarter also included $2.3 million of income from discontinued operations, which contributed 23 cents per share.
Production Declines Despite Stronger Liquids Prices
Total production fell 8% to 894,000 barrels of oil equivalent in the third quarter of 2026. Oil volumes decreased 15% to 173,000 barrels, natural gas liquids production declined 7% to 235,000 barrels, and natural gas output fell 5% to 2.9 billion cubic feet. Management attributed the volume changes to natural well declines and line pressure issues during excessive regional heat.
Excluding settled derivatives, average oil prices increased 34% to $85.19 per barrel, while natural gas liquids prices rose 45% to $24.25 per barrel. Natural gas prices decreased 2% to $1.99 per thousand cubic feet. These divergent price trends explain how revenues grew despite lower output across all three product categories.
Lower Overhead Supports Operating Income
Operating income increased to $8.8 million from $4 million in the prior-year quarter, reflecting revenue growth and lower overall operating expenses. General and administrative expenses fell 41% to $3.6 million, primarily because of employee reductions following the sale of Unit Drilling Company and lower rent under a lease extension completed in the first quarter.
Those savings outweighed an 8% increase in operating costs to $12 million, driven primarily by higher employee costs in the oil and gas business. Depreciation, depletion and amortization declined to $2.1 million from $2.5 million in the prior-year quarter, providing another source of expense relief.
Derivative Losses & Taxes Weigh on Earnings
The improvement in operating income did not translate into stronger net earnings. Unit recorded a $7.2-million net derivative loss against a $1.7-million gain a year earlier. The latest loss included $6.9 million in unrealized losses and $0.3 million in losses on settled contracts. Management attributed the unfavorable comparison primarily to market pricing changes affecting outstanding commodity positions.
At Sept. 30, swaps covered approximately 64% of oil production and 37% of natural gas production for the remaining 2026 period, based on third-quarter average daily output. For 2027, oil coverage was approximately 47%, with no natural gas swaps outstanding. This leaves next year’s gas production exposed to market price movements.
Interest income increased 154% to $1.7 million, supported by higher cash balances. Nevertheless, income tax expenses rose 21% to $2.1 million despite lower pretax income. A $1.2-million increase in the valuation allowance related to losses and non-deductible accruals contributed to higher tax expenses.
Liquidity & Management’s Funding Outlook
Unit ended Sept. 30 with $188.1 million in unrestricted cash and cash equivalents, and no outstanding credit facility borrowings. Working capital totaled $176.8 million, up from $172.1 million at the end of 2025.
For the first nine months of 2026, the operating cash flow declined 49% to $37.8 million, reflecting unfavorable derivative positions, lower earnings and working capital changes following the drilling business disposal. Capital expenditure decreased to $9.3 million from $19.7 million in the year-ago quarter.
Management expects cash, operating cash generation and available credit to cover working capital, capital spending, dividends, discretionary repurchases and other requirements for at least 12 months. Unit paid out a quarterly dividend of $1.25 per share on Sept. 25, totaling $12.4 million. Future dividends remain at the board’s discretion and are expected to be funded from balance-sheet cash.
Other Developments
Unit received $0.1 million in net proceeds from sales of non-core oil and natural gas assets during the quarter compared with $1.5 million a year earlier. These proceeds reduced the carrying value of its full-cost pool, with no gain or loss recognized because the sales did not significantly alter that pool.