You may have missed it last week, so I wanted to circle back and highlight a press release in today’s post. Succession planning is huge in a well functioning and exceptionally managed organization and this starts from the top. Board members who are aligned, knowledgeable, and approving decisions for the benefit of the shareholders. This ensures the continued high level performance at a company and shows how powerful the “G” is in ESG. It’s not a problem in Oil and Gas, and I wanted to make sure you know that’s what I think.

So it is with a heavy heart that I pass on the news that Mr. Larry D. Pinkston has announced his retirement from Unit Corporation after assuming the role of CEO and President in 2005, and having been with them for 39 years. Said the Chairman of the Board, Michael Adcock (who has been on the board since 1997 and elected chair in 2016):

“The Board would like to express its appreciation to Larry for his steadfast leadership since he assumed the Chief Executive Officer and President roles in 2005. Larry began his career in 1981 and was named Chief Financial Officer in 1989. In his many roles, Larry strived to achieve the best results for both the company and its shareholders. After nearly 39 years of service, Larry’s retirement is very well deserved. We look forward to his continuing service on the Board and wish him the best in his retirement.”

Fortunately, Mr. David T. Merrill who has been part of the succession planning since 2017 and has been with the company since 2003, will be assuming the role of CEO and President on April 1, 2020. That’s the key to continued performance.

It cannot be understated that the Board is a KEY element to company’s performance. As you can imagine, since my semi-retirement, I have been beating recruiters off with a stick. Board members bring much value; so much so that the range of cash compensation is equivalent to a high level technical support staff or finance professional. And, to further ensure alignment with the shareholders, stock awards of $110,000 per non executive director per annum are KEY to retention. That’s how you keep a board of directors around for so long (for consistency).

Bottom line: Unit Corporation is a complicated business- the only one of it’s kind with an upstream business, a drilling business and a midstream business. I imagine it’s too hard for anyone else to run it. And since I’m not a drilling contractor, I don’t feel dumb asking: is 32% rig utilization good?

Finally, based on history, the 2019 10-K will come out in late March but as of YE2018 at the higher SEC price deck, the SMOG PV-10 was $983.7 million against $784.3 million of debt, of which $650 million matures May 15, 2021. For the 9 months ending September 30, 2019, cash flow from operations was $219.5 million against $357.8 million invested, leaving the need for $132.5 million in additional financing. I don’t see 2019 on the bar chart yet…

As I have not been since 1981, I remain not a shareholder of Unit. As an aside, I’ve worked for at least 8 companies since graduating college in 2000.

Governance IS NOT a problem.