Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October...

31
Canaccord Genuity Global Resource Conference October 17, 2012

Transcript of Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October...

Page 1: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Canaccord Genuity Global Resource Conference

October 17, 2012

Page 2: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Overview of Operations

Integrated Business Approach

(1) As of 12/31/2011.(2) As of 10/8/2012.

Tulsa based company founded in 1963 with long history of operations in the Mid-Continent

Integrated approach to business allows Unit to balance its capital deployment through the various stages of the energy cycle

Proved Reserves: 116 MMBoe(1)

Drilling Rigs: 128(2)

Miles of Midstream Pipeline: 934(1)

Location of Acquired Oil & Gas Properties and Two Gathering Systems

16

18

Bakken

Casper Office

735

16128 Unit Rigs

E&P Plays

Superior Pipeline Operations

Arkoma Basin

Marcellus

North La/ East Texas Basin

Gulf Coast Basin

Houston Office

Oklahoma City Office

Tulsa Headquarters

Anadarko Basin

Permian Basin

Page 3: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Summary of Business Strengths

Leading drilling services provider

with highly capable fleet

Midstream business generating

incremental margin opportunities

Average 1,200 HP for 128 rig fleet

96% of contracted rigs drilling horizontal wells

71% increase in rig count since 2002

Focus in emerging plays of Granite Wash, Mississippian and Marcellus shale

263% increase in per day natural gas processed volumes since 2004

661% increase in per day liquids sold volumes since 2004

Integrated Approach Enhances

Stability and Flexibility

Integrated approach to business allows Unit to balance its capital deployment through the various stages of the energy cycle

Vertical integration offers key advantages and provides industry intelligence on industry dynamics / trends

Quality upstream asset base with

significant growth potential

Large development drilling inventory with attractive economics in current price environment, with significant horizontal drilling upside potential

195% average production replacement since 2002

Page 4: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

NGL20%

Oil24%

Gas56%

NGL19%

Oil17%

Gas64%

Core Upstream Producing Areas

Beginning in late 2008, implemented strategy of increasing focus on liquids-rich and oil prospects

– Forecast to end 2012 with 42% liquids production

Key focus areas include:

– Granite Wash (Texas Panhandle)

– Marmaton (Oklahoma Panhandle oil play)

– Wilcox (Gulf Coast)

2011 reserves of 116 MMBoe were 64% natural gas and 81% proved developed

– Reserve life of approximately 10 years

2011 Proved Reserves Q2 2012 Daily Production

Proved Reserves: 116 MMBoe Daily Production: 36.7 MBoe/d

Marmaton

Granite Wash

Wilcox

Page 5: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Strategic Acquisition

Unit Corporation acquired certain oil and natural gas properties and related gathering and processing infrastructure primarily located in Western Oklahoma and the Texas Panhandle from Noble Energy (“Acquisition”)

– Immediately accretive to cash flow per share, and accretive to earnings per share beginning in 2013

Transaction value: $617.1 million

– Added ~44 MMboe of proved reserves, 10.0 Mboe/d(1) of liquids-rich production, 84,000 net acres and 600 gross potential horizontal drilling locations

– Two gathering systems – Hemphill County, TX and Ellis County, OK

Consideration:

– All cash transaction financed with new notes and revolving credit facility. In conjunction with the Acquisition, Unit increased the commitments under its credit facility to $500 million

– Company divested of approximately $270 million of certain non-core upstream assets

Timing:

– Effective April 1, 2012

– Completed September 17, 2012

(1) April 2012 average daily production.

Page 6: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Transaction Rationale

Quality, liquids rich oil and gas property set with significant upside

– 44 MMboe of proved reserves (80% PD)(1)

– 10.0 Mboe/d April 2012 daily production (36% Oil/NGLs)

Strategic fit with Unit’s existing E&P assets significantly expanding the geographic footprint of our core Granite Wash play

– Increases Granite Wash position 119% to 46,000 net acres in the Texas Panhandle Core Area

– Provides 600 gross potential horizontal drilling locations – 97% in Granite Wash

Positions the Company for future growth

– Plan to add seven additional rigs from our Contract Drilling business by early 2014 to accelerate the development of the acquired properties

Consistent with overall corporate strategy

– Acquisition provides growth drivers for all three of Unit’s business units (E&P, Contract Drilling, Superior Pipeline)

– Unit’s integrated business approach will allow it to accelerate the development of a largely undeveloped portfolio of highly economic drilling opportunities

Company maintains financial flexibility

– Transaction financed with a balanced mix of revolver borrowings and new long-term debt securities

(1) As of 4/1/2012.

Page 7: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Significant Overlap in Core Operating Area Material acreage overlap with existing

properties adding 188,000 gross acres (84,000 net acres) which is 95% HBP

Adds 25,000 net acreage in Granite Wash core area in Texas Panhandle

67% of properties operated Adds 600 potential gross horizontal drilling

locations and ~289 MMBoe of 3P reserves – 97% in Granite Wash

Integrated approach to accelerate development with assets from upstream, drilling and midstream businesses

Combination Impact – Granite Wash Texas Core

Pro forma Acreage Position in Core Mid-Continent Area

Expands Size and Scale of Current Core Granite Wash Position

LegendUnit Leaseholds - Tracts

STATUSPRODUCING

NOBLEUNDEVELOPED

GW TEXAS CORE AREA

UNTGranite Wash

NOBLEGranite Wash

Pro Forma

Proved Reserves (MMboe)

30 23 53

April 2012 Net Production (Mboe/d)

12.5 4.3 16.8

Gross Drilling Locations(Unrisked)

240 600 840

Gross Acreage ('000s) 65 40 105

Net Acreage ('000s) 21 25 46

Page 8: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Sale of Bakken Shale Properties

QEP Transaction Details

– $243 million sales price,subject to adjustment

– Q2 Average Daily Production:1,044 Boe/day

– Proved Reserves: 5.7 MMBoe(36% proved developed)

– 4,756 net acres

– 61% of total Bakken production

– Effective Date: July 1, 2012

– Completed: Sept. 27, 2012Unit Acreage Current Drilling Future Drilling Properties Sold

6,040 net acres

2,654 net acres2Q Ave: 660 Boe/day

4,756 net acres2Q Ave: 1,044 Boe/day

Net Bakken AcreageNorth Dakota

Williams County 2,654McKenzie County 4,756

Montana 6,04013,450

Page 9: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Track Record of Reserve Growth

(1) The Company uses the reserve replacement ratio as an indicator of the Company's ability to replenish annual production volumes and grow its proved reserves, including by acquisition, thereby providing some information on the sources of future production. It should be noted that the reserve replacement ratio is a statistical indicator that has limitations. The ratio is limited because it typically varies widely based on the extent and timing of discoveries and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not imbed the cost or timing of future production of new reserves, it cannot be used as a measure of value creation.

(2) 164% based on previous SEC reporting standards.

Stable and consistent economic growth of oil and natural gas reserves of at least 150% of each year’s production

218% average annual reserve replacement over last 28 years

Reserve growth driven by Oklahoma and Texas activity and a shift from vertical to horizontal / liquids-rich drilling

Proved Reserves (MMBoe)

Annual Reserve Replacement(1)

Natural GasOil / NGLs

2002 – 2011 CAGR: 14%

169% 166% 171% 176%

202%

285%261%

221%

186%

113%

0%

50%

100%

150%

200%

250%

300%

20112002 2003 2004 2005 2006 2007 2008 2009 2010

Minimum Target: 150%

164%(2)

116

45 4858

6979

8695 96

104

160

Pro formaw/Noble acq.

Page 10: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

0

10

20

30

40

50

2008 2009 2010 2011 2012E 2012E

Increasing Production while Improving Commodity Mix

Natural GasOil / NGLs Production Range

29 28

43134

Annual Production (MBoe/d)

Net Wells Drilled:

27

33

37

88 82

36

55%

39

38

Incl. Noble

Page 11: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Granite Wash Play

Noble acquisition increases Granite Wash position 119% to 46,000 net acres in the Texas Panhandle Core Area

– Adds 600 potential drilling locations

2011 – Q2 2012 Results

– First sales on 33 operated Granite Wash horizontal wells

– Average 30-day IP = 5.4 MMcfe/day

– Estimated reserves: 4.0 Bcfe(50% oil & liquids)

– Current AFE CWC: $5.5 MM (4,000’ lateral, 11 stage frac)

– Average working interest: 80%

2012 Projected

– 2 - 4 rigs drilling = 28 - 32 operated horizontal wells

– Cap Ex: $125 – 140 MM

Legend

NOBLE ACREAGE UNIT LEASEHOLD

Page 12: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Marmaton Oil Play

2011 – Q2 2012 Results

– First sales on 51 operated Marmaton horizontal wells(includes one extended lateral well)

– Average 30-day IP (incl. extended

lateral) = 311 Boe/day 298 Boe/day (excl. extended lateral)

Extended lateral: 960 Boe/day

– Estimated reserves: 130 MBoe(92% oil & liquids)

– Current AFE CWC: $2.7 MM (4,500’ lateral, 16 stage frac)Extended lateral: $4.2 MM(9,500’ lateral, 32 stage frac)

– Average working interest: 86%

2012 Projected

– 2 rigs drilling = 30-35 operated horizontal wells (includes 4 extended laterals)

– Cap Ex: $70 - 80 MM

FocusArea

Page 13: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

2003 - 2011

– Completed 109 wells at 72% success rate

Field Discovery – announced July 2012

– Reserve Resource PotentialGross – 229 Bcfe; Net – 159 Bcfe8% oil, 35% NGL, 57% natural gas

– Four Wells CompletedAve. 226’ net potential pay/well12% pay zones currently producing

– Production Rate for four wells:21 MMcfe per day

– Six Additional Wells to Drill(two in 2012, four in 2013)

– Estimated AFE CWC: $5.4 MM

– 2012 Projected

– 1 rig drilling = 12 operated vertical wells

– Cap Ex: $41 MM

27,000 net acres129,000 net options

Wilcox Liquids Play

Original Prospect Area 2011 Expansion

FieldDiscovery

Page 14: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

2012 Capital Program

Drilling CapEx by Region

2012 Upstream Budget: $457 Million 2012 D&C Budget: $385 Million

Focused Capital Program Emphasizes Higher Return Liquids-Rich Drilling Plays

E&P CapEx by Category

Drilling84%

Other16%

Dry Gas 2%

Bakken 10%

Misc. Liquids-Rich Oil

33%

Wilcox 12%

Granite Wash 24%

MarmatonOil

19%

Total CapEx by Segment

2012 Total Budget: $801 Million

E&P57%

ContractDrilling

15%

Midstream28%

No material increases to current 2012 capital program on a pro forma basis

$457 million (57% of 2012 capital budget) allocated to E&P operations

$385 million drilling capital budget allocated principally to the liquids-rich Granite Wash, Marmaton, and Wilcox plays

– Approximately $212 million allocated to Granite Wash, Oklahoma Marmaton oil play, and Texas Wilcox field operations (~55% of overall drilling budget)

Current plan will provide Unit with 9% - 12% annual growth in production

Page 15: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Significant Drilling Presence in Attractive Producing Regions

128 Unit RigsHoustonOffice

TulsaHeadquarters

OklahomaCity Office

18

16

573

CasperOffice

16 128 rig fleet

– Fleet average ~1,200 HP rating;~16,724 ft depth capacity

60% utilization rate for Q2 2012

– 87% of 47 1,200-1,700 HP rigs under contract

Refurbished / upgraded 19 rigs in 2011

– 98% of contracted rigs drilling horizontal wells

2012 – 1 new build rig (1,500 HP)

– 3 year contract, deployed to North Dakota

Contracted Rig

Commodity MixGeographical Location

Liquids Rich 97%

Dry Gas3%

AnadarkoBasin56%E. TX, LA

GC, S. TX13%

Rockies/Bakken

27%

Arkoma4%

Note: Based on 66 contracted rigs. All charts represent total 128 rig fleet.

Plan to Deploy Seven Unit Rigs to Acquired Properties by Early 2014

Page 16: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Average Number of Rigs Utilized

0

25

50

75

100

2008 2009 2010 2011 6 mos. 2012

Page 17: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Diverse and Versatile Rig Fleet

Average Depth Capacity: 16,724 feet82 rigs equipped with integrated top drives

4729 39 7 6Number of Rigs: 73%

0

20%

40%

60%

80%

100%

400-700 h.p. 750-1,000 h.p. 1,200-1,700 h.p. 2,000 h.p. >2,500 h.p.

UtilizationPercentage

(52% as of 10/8/12)

Growing demand from increased

shallow horizontal drilling

activity

35 of 47 working

Page 18: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

0

30

60

90

120

$0

$5,000

$10,000

$15,000

$20,000

2008 2009 2010 2011 6 mos. 2012

Average Dayrates and Margins(1)

Nine Consecutive Quarters of Improving Day Rates and Margins(1) Margins are before elimination of intercompany rig profit.

Margins Day Rates

Mar

gin

s /

Day

Rat

es (

$)

Average N

um

ber of Rigs U

tilized

Rigs Utilized

Page 19: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Superior Pipeline’s Core Operations

(1) Includes two treatment plants.

Three natural gas treatment plants 11 natural gas processing plants 36 active gathering systems 981 miles of pipeline

MAJOR SYSTEMSAverage Processing

Pipeline Volume Capacity(miles) (MMBtu/d) (MMcf/d)

Hemphill/Mendota 165 115,000 115Cashion 160 28,500 50Panola (1) 50 32,000 n/aSegno 37 34,000 n/a

PlantsPipeline systems

Page 20: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Historical Performance

NGLs Volumes (Bbl / d)

Contract Mix (Based on Operating Margin)(1)Contract Mix (Based on Volume)(1)

Historical Daily Gathering Volumes (MMBtu / d)

(1) POP represents percent of proceeds. POI represents percent of index.

2011 Q2 2012

Fee Based42%

POP52%

POI6%

Fee Based41%

POP55%

POI2%

2011 Q2 2012

Fee Based14%

POP57%

POI29

Fee Based21%

POP68%

POI11%

0

100,000

200,000

300,000

2008 2009 2010 2011 1st Half2012

0

5,000

10,000

15,000

2008 2009 2010 2011 1st Half2012

Page 21: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Balance Sheet Summary

Working Capital $41.5 $15.7

Total Assets 3,353.4 3,256.7

Long-Term DebtSenior Subordinated Notes 250.0 250.0Bank Facility 82.9 50.0

Total Long-Term Debt 332.9 300.0

Shareholders’ Equity 2,000.4 1,947.0

Credit Line Undrawn 167.1 200.0

Long-Term Debt toTotal Capitalization 14% 13%

(In Millions)

6/30/12 12/31/11

Page 22: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Senior Subordinated NotesAs of June 30, 2012 July 2012 Add-On

$250 million, 6.625% $400 million, 6.625%

First-time issuer Issued at 98.75% of par

Issued in May 2011

10-year, NC5

Unsecured Bank Facility (1)

Borrowing Base $600 million

Elected Commitment $250 million

Outstanding $82.9 million

Maturity September 2016

Debt Structure

Ratings S&P Moody’s FitchCorporate BB Ba3 BBSenior Subordinated Notes BB- B2 BB-

(1) As of June 30, 2012

Page 23: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

UNT’s historical commitment to a strong balance sheet has positioned the business for this opportunity

– Focus on maintaining a strong liquidity position

– Target conservative leverage metrics

– No near-term maturities –mitigation of liquidity risk

UNT has sold certain non-core E&P assets for approximately $268 million to increase liquidity

Conservative Pro Forma Balance Sheet

(1) Borrowing base of $600 million increased to $800 million for the acquisition. (2) No attributable EBITDA contribution is assumed for the acquired or divested properties.

Actual Pro Forma($ in millions) 6/30/12 Adj. 6/30/12

Cash $1 $1Working Capital $42 $37

Total Assets $3,353 $349 $3,702

Revolver $83 ($51) $32Borrowing Base (1) $600 $200 $800% Available 86% 96%

Liquidity $517 $768

Senior Subordinated Notes $250 $400 $650

Total Debt $333 $682

Shareholders' Equity $2,000 $2,000

Total Capitalization $2,333 $2,682

Debt / Capitalization 14% 25%

Operating Statistics2011 Proved Reserves (MMBoe) 116 37 153Six Mos. 2012 Daily Production (MBoe/d) 36 9 45LTM EBITDA ($MM) (2) 645 645

Credit StatisticsTotal Debt / Proved Reserves ($/Boe) $2.87 $4.46Total Debt / Six Mos. 2012 Daily Production ($/Boe/d) $9,250 $15,156Total Debt / LTM EBITDA (2) 0.5x 1.1x

Page 24: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

0

20,000

40,000

60,000

80,000

100,000

2012 2013

Hedges

Natural GasMMBtu/d

$5.09

Crude OilBbls/d

Target 50–70% of current year projected oil and natural gas production– Crude oil – 77% in 2012– Natural gas – 40% in 2012

Anticipate opportunistically adding hedges associated with production from acquired properties

0

2,000

4,000

6,000

8,000

2012 2013

$97.55$99.72

$3.63

Page 25: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Segment Contribution

Unit Petroleum Unit Drilling Superior Pipeline

(1) See EBITDA reconciliation.

Other

Revenues ($ millions) EBITDA ($ millions)(1)

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2008 2009 2010 2011 6 mos. 2012$0

$200

$400

$600

$800

2008 2009 2010 2011 6 mos. 2012

$1,358

$710

$862

$1,208

$662

$754

$371

$442

$604

$337

Page 26: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Adjusted Earnings per Share(1)

(1) See Adjusted EPS reconciliation to EPS.

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

2008 2009 2010 2011 6 mos. 2011 6 mos. 2012

Page 27: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Capital Expenditures

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

2007 2008 2009 2010 2011 2012 Budget

Unit Petroleum Unit Drilling Superior Pipeline

(In Thousands)

Page 28: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Forward-Looking Statement

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. However, the absence of these words does not mean that the statements are not forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this presentation specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including as to the Company’s drilling program, production, hedging activities, capital expenditure levels and other guidance included in this presentation. These statements are based on certain assumptions made by the Company based on management’s expectations and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include the factors discussed or referenced in the “Risk Factors” section of the Company’s Offering Memorandum provided in connection with this offering, risks relating to financial performance and results, current economic conditions and resulting capital restraints, prices and demand for oil and natural gas, availability of drilling equipment and personnel, availability of sufficient capital to execute the Company’s business plan, the Company’s ability to replace reserves and efficiently develop and exploit its current reserves and other important factors that could cause actual results to differ materially from those projected. Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. The SEC generally permits oil and gas companies, in filings made with the SEC, to disclose only proved reserves, which are reserve estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. In this communication, the Company uses the term “unproved reserves” which the SEC guidelines prohibit from being included in filings with the SEC. “Unproved reserves” refers to the Company’s internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques. Unproved reserves may not constitute reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or proposed SEC rules and does not include any proved reserves. Actual quantities that may be ultimately recovered from the Company’s interests will differ substantially. Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals and other factors; and actual drilling results, including geological and mechanical factors affecting recovery rates. Estimates of unproved reserves may change significantly as development of the Company’s core assets provide additional data. In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases.

This presentation contains financial measures that have not been prepared in accordance with U.S. Generally Accepted Accounting Principles (“non-GAAP financial measures”) including LTM EBITDA and certain debt ratios. The non-GAAP financial measures should not be considered a substitute for financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). We urge you to review the reconciliations of the non-GAAP financial measures to GAAP financial measures in the appendix.

Page 29: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

Non-GAAP Financial Measures – EBITDA

(1) Does not include allocation of G&A expense.

Years ended December 31,($ in Millions)

Net IncomeIncome TaxesDepreciation, Depletion and AmortizationImpairment of Oil and Natural Gas PropertiesInterest Expense

EBITDA

Unit PetroleumIncome Before Income Taxes (1)

Depreciation, Depletion and AmortizationImpairment of Oil and Natural Gas Properties

EBITDA

Unit DrillingIncome Before Income Taxes (1)

Depreciation and AmortizationEBITDA

Superior PipelineIncome Before Income Taxes (1)

Depreciation and AmortizationEBITDA

2008

$14482

245282

1$754

($4)160282

$438

$24070

$310

$1615

$31

2009

($56)(32)177281

1$371

($126)115281

$270

$5145

$96

$516

$21

2010

$14691

205--

$442

$177119

-$296

$6070

$130

$1715

$32

2012

$12780

314116

8$645

$81208116

$405

$16986

$255

$1319

$32

Six months endedJune 30,

2011

$9157

129-1

$278

$9285-

$177

$6037

$96

$117

$18

2012

$3321

163116

4$337

($28)109116

$197

$9443

$137

$710

$17

2011

$196123281

-4

$604

$202183

-$385

$13580

$215

$1716

$33

Twelve mos.ended

June 30,

Page 30: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.

EPS Reconciliation

6 mos. 6 mos. 6 mos. 6 mos. 2011 2011 2012 2012

(in millions except per share amounts) Amount Per Share Amount Per Share

Net income before impairment of oil and natural gas properties $ 90.8 $ 1.89 $ 105.3 $ 2.19

Impairment of oil and natural gasproperties --- --- (72.1) (1.50)

Net Income (Loss) $ 90.8 $ 1.89 $ 33.1 $ 1.69

Page 31: Canaccord Genuity Global Resource Conference...Canaccord Genuity Global Resource Conference October 17, 2012 Overview of Operations Integrated Business Approach (1) As of 12/31/2011.