After looking through thousands of stocks, I happened to recently stumble on a unique opportunity in the oil and gas industry.
Most investors think of oil and gas stocks as risky bets on commodity prices. Either you catch the upcycle or you get crushed when prices roll over.
Unit Corporation is different.
Unit Corp (OTC: UNTC) doesn’t look like a typical oil and gas stock and that’s the point. Unit Corp is a small, OTC traded oil and gas company based in Oklahoma that has been quietly returning cash to its shareholders for the last 5 years.
Unit Corp currently has no debt and after the recent sale of their contract drilling business for $120 million, has roughly $144 million in net cash (after deducting ARO and liabilities), which makes up nearly half of their current market cap.
Unit Corp has roughly $14 per share in cash with no debt and the stock closed today at $31. The company has been paying consistent dividends of about $5 per share, which translates to a 16.1% dividend yield at current prices. The company has paid out nearly $50 per share in dividends over the last 3 years.
This is not a growth story or a bet on commodity prices. Unit Corp has been returning nearly all its cash and profits to shareholders, and I believe Unit Corp represents a slow, low-risk liquidation play.
In this article, I’ll explain what I think the remaining E&P business is worth, do a brief “sum-of-the-parts” valuation and provide projected return metrics.
Over the last several years, Unit has been steadily transforming itself from a diversified energy operator into what is effectively a controlled runoff and capital-return vehicle.
Let’s take a look…
