Unit Corporation Reports 2014 First Quarter Results

  Unit Corporation Reports 2014 First Quarter Results

Business Wire

TULSA, Okla. -- May 8, 2014

Unit Corporation (NYSE:UNT) today reported its financial and operational
results for the first quarter 2014.

Larry Pinkston, Unit’s Chief Executive Officer and President, stated, “For the
quarter, Unit reported net income of $56.9 million, or $1.17 per diluted
share, and adjusted net income of $62.8 million, or $1.29 per diluted share
(see Non-GAAP Financial Measures below). We continue to make progress on our
key initiatives within each business segment.

“For the oil and natural gas segment, production for the quarter increased 5%
over the first quarter of 2013 with oil and natural gas liquids (NGLs)
production increasing from 40% to 45% of total equivalent production. Compared
to the fourth quarter of 2013, production decreased 4%, or 1,745 barrels of
oil equivalent (Boe) per day. The decrease was due primarily to weather
related factors. The combination of weather related issues and mechanical
issues reduced anticipated 2014 production by approximately 2.2 billion cubic
feet equivalent (Bcfe), representing approximately 2% of our original
production guidance for 2014. Fortunately, the weather related issues appear
to be behind us and the mechanical issues are mostly resolved. Going forward,
we plan to accelerate our development operations in the Granite Wash and our
SOHOT (Southern Oklahoma Hoxbar Oil Trend) emerging play while slowing our
drilling schedule in the Mississippian play. Our original capital budget of
$718 million for this segment remains unchanged. We remain confident in our
prospect inventory and our ability to continue to provide solid growth in
production throughout the balance of 2014 and beyond.

“Rig utilization in our contract drilling segment improved through the first
quarter. Average utilization increased 4% to 68 drilling rigs working compared
to 65 drilling rigs working in the fourth quarter of 2013. The improvement is
continuing into the second quarter. We sold four idle 3,000 horsepower
drilling rigs to an international contractor during the quarter. Our first
BOSS drilling rig was placed into service in late March, bringing our total
rig fleet to 118 drilling rigs. We have contracts for three additional BOSS
drilling rigs. Those drilling rigs are currently being built and scheduled to
go into service in the second and third quarters of this year.

“Our midstream segment continues to benefit from our previous capital
investments in several of its projects including the Bellmon facility in the
Mississippian play in Oklahoma and the Pittsburgh Mills facility in the
Appalachian area. Operating profit for the quarter benefitted from strong NGLs
pricing, particularly propane, and we are now operating in full ethane
recovery mode at all of our processing facilities. Our goal is to position
this segment for sustainable growth with less exposure to commodity price
volatility. As appropriate, we continue to restructure expiring commodity
price based contracts to fee based contracts.”

Notable items for the quarter include:

  *Adjusted non-GAAP net income of $62.8 million, or $1.29 per diluted share
    (see Non-GAAP Financial Measures below).
  *Total production of 4.2 million barrels of oil equivalent (MMBoe), a 5%
    increase over the first quarter of 2013.
  *The first BOSS drilling rig went into service, with three additional BOSS
    drilling rigs under construction.
  *Average drilling rig utilization increased 4% over the prior quarter.
  *Mid-stream segment’s liquids sold volumes per day increased by 69% over
    the first quarter of 2013.

Net income for the quarter was $56.9 million, or $1.17 per diluted share,
compared to $40.2 million, or $0.83 per diluted share, for the first quarter
of 2013. Adjusted net income, which excludes the effect of non-cash commodity
derivatives, was $62.8 million, or $1.29 per diluted share (see Non-GAAP
Financial Measures below). Total revenues were $388.0 million (49% oil and
natural gas, 27% contract drilling, and 24% mid-stream), compared to $318.5
million (48% oil and natural gas, 34% contract drilling, and 18% mid-stream)
for the first quarter of 2013.

OIL AND NATURAL GAS SEGMENT INFORMATION

Total equivalent production for the quarter was 46,500 Boe per day, an
increase of 5% over the first quarter of 2013 and a decrease of 4% from the
fourth quarter of 2013. Liquids (oil and NGLs) production represented 45% of
total equivalent production for the quarter. Liquids production has increased
155% since the first quarter of 2009. Oil production for the quarter was 9,000
barrels per day, an increase of 2% over the first quarter of 2013 and a
decrease of 7% from the fourth quarter of 2013. NGLs production for the
quarter was 11,800 barrels per day, an increase of 32% over the first quarter
of 2013 and a decrease of 6% from the fourth quarter of 2013. Natural gas
production for the quarter was 153,900 Mcf per day, a decrease of 3% from the
first quarter of 2013 and a decrease of 1% from the fourth quarter of 2013.

Unit’s average realized per barrel equivalent price for the quarter was
$41.84, an increase of 10% and 9% over the first quarter of 2013 and the
fourth quarter of 2013, respectively. Unit’s average natural gas price for the
quarter was $4.24 per thousand cubic feet (Mcf), an increase of 28% and 32%
over the first quarter of 2013 and the fourth quarter of 2013, respectively.
Unit’s average oil price for the quarter was $91.53 per barrel, a decrease of
4% and 3% from the first quarter of 2013 and the fourth quarter of 2013,
respectively. Unit’s average NGLs price for the quarter was $39.56 per barrel,
an increase of 13% and 17% over the first quarter of 2013 and the fourth
quarter of 2013, respectively. All prices in this paragraph include the
effects of derivatives.

For 2014, Unit has derivative contracts for 7,250 Bbls per day of oil
production and 90,000 MMBtu per day of natural gas production. The contracts
for oil production are swap contracts for 3,250 Bbls per day and collars for
4,000 Bbls per day. The swap transactions were done at a comparable average
NYMEX price of $92.35. The collar transactions were done at a comparable
average NYMEX floor price of $90.00 and ceiling price of $96.08. The contracts
for natural gas production are swaps for 80,000 MMBtu per day and a collar for
10,000 MMBtu per day. The swap transactions were done at a comparable average
NYMEX price of $4.24. The collar transaction was done at a comparable average
NYMEX floor price of $3.75 and ceiling price of $4.37.

The following table illustrates Unit’s production and realized prices for the
periods indicated:

             1^st      4^th      3^rd      2^nd      1^st      4^th      3^rd      2^nd      1^st
                Qtr 14      Qtr 13      Qtr 13      Qtr 13      Qtr 13      Qtr 12      Qtr 12      Qtr 12      Qtr 12
Oil and NGL
Production,   1,875.2   2,046.7   1,832.9   1,794.1   1,600.6   1,694.1   1,545.8   1,460.2   1,375.2
MBbl
Natural Gas
Production,   13.9      14.3      14.3      13.9      14.2      14.5      11.7      11.3      11.4
Bcf
Production,   4,184     4,438     4,217     4,109     3,971     4,115     3,498     3,341     3,275
MBoe
Production,   46.5      48.2      45.8      45.2      44.1      44.7      38.0      36.7      36.0
MBoe/day
Realized
Price, Boe    $41.84    $38.24    $35.77    $39.10    $37.99    $39.56    $37.99    $38.49    $40.51
(1)
                                                                                             

(1) Realized price includes oil, natural gas liquids, natural gas and
associated derivatives.

During the quarter, Unit experienced two factors that contributed to the
estimated production loss of approximately 2.2 Bcfe. The first was weather.
Well freeze offs and operational delays caused by inclement weather, primarily
in the company’s Mid-Continent plays, resulted in a reduction in production
from the impacted wells. Second, Unit incurred mechanical issues on nine
separate wells primarily within its Granite Wash play. These problems involved
either liner issues in the horizontal component of the wells or casing leaks
just above the liner top packer. As a result, the wells required remediation
work before they could be completed. To date, six of the nine wells have been
repaired. Work is continuing on the remaining three wells. Although the
company believes it will successfully repair all nine wells, the flow rate
from five of the nine wells may experience reduced rates as a result of these
problems. On average, first production from these nine wells has been delayed
approximately three months as compared to their initial forecasted production
date. Going forward, Unit has modified its casing and liner program which
should eliminate any further problems. In response to these production delays,
Unit plans to accelerate its drilling program in both the Granite Wash and its
new emerging play (SOHOT, discussed below) in an effort to make up part of the
incurred production losses; however, the company forecasts that its first
production resulting from these increased drilling efforts will not occur
until mid-to-late third quarter primarily due to the production timing of pad
drilling. As a result, Unit is reducing its current 2014 production guidance
to 13% - 15%. The capital required for the increased drilling in the Granite
Wash and SOHOT will be reallocated from its Mississippian play (as discussed
below).

Unit’s newest core play, SOHOT, is an emerging play located in southwest Grady
County. The Hoxbar is a Pennsylvanian sand/shale sequence that is
approximately 2,000’ thick that contains four to six potentially productive
stacked sand benches. Unit recently completed horizontal wells in two of the
Hoxbar sand benches, indicating the discovery of an oil zone (Marchand) and a
natural gas zone (Medrano) at true vertical depths of approximately 11,000’
and 9,800’ respectively. The completed well cost for the Marchand with a
4,300’ lateral is approximately $7.0 million. The estimated ultimate reserves
(EUR) are projected at 300 MBoe to 500 MBoe for this well, consisting of
approximately 85% to 90% oil. The Medrano completed well cost with a 4,200’
lateral is approximately $4.2 million with an EUR of 3.0 to 4.5 Bcfe,
consisting of an average of approximately 30% liquids. In its current focus
area in southwest Grady County, Unit has 50,560 gross acres and 12,810 net
acres. The company has one rig drilling in the play and plans to add two
additional rigs in June for a total of three rigs running during the second
half of 2014. The 2014 capital drilling budget in this area has been increased
approximately 49% to $82 million.

In the Granite Wash (GW) play, all nine wells in the initial horizontal
program in the Buffalo Wallow field have been successfully completed. Unit
will move one drilling rig back into the Buffalo Wallow field in late May.
Unit will add an additional rig in the GW play in July. After adding these two
drilling rigs, there will be a total of six drilling rigs running in the GW
with expectations to maintain that pace through the rest of the year.

The Wilcox play, located in southeast Texas, achieved its fifth consecutive
quarter of production growth with production up 32% for the first quarter 2014
compared to the first quarter 2013. The Gilly field continues to be a first
class Basal Wilcox field discovery with excellent results obtained from four
recent well recompletions. For 2014, the company plans to run two rigs
supplemented by a strategic recompletion program throughout the Wilcox play
area.

In the Marmaton horizontal oil play, three horizontally stacked lateral wells
have recently been drilled targeting both the Upper and Lower Marmaton benches
in the same wellbore. The production from these wells will be evaluated to
determine the feasibility of drilling a greater portion of our Marmaton well
program with this design. Currently, Unit anticipates maintaining the two
drilling rig program in the play.

In the Mississippian play, located in south central Kansas, the current
drilling program is being modified to reduce from two drilling rigs to one
drilling rig while Unit evaluates the well production results and explores the
potential of shooting a 3-D seismic survey over a portion of its leasehold.
Unit’s revised budgeted capital for this play is approximately $89 million,
which is a reduction of approximately $48 million. The $48 million will be
reallocated to the company’s GW and SOHOT plays.

CONTRACT DRILLING SEGMENT INFORMATION

The average number of drilling rigs used in the first quarter of 2014 was
67.9, an increase of 2% and 4% over the first quarter of 2013 and the fourth
quarter of 2013, respectively. Per day drilling rig rates for the first
quarter of 2014 averaged $19,615, relatively flat with the first quarter of
2013 and the fourth quarter of 2013. Average per day operating margin for the
first quarter of 2014 was $7,870 (before elimination of intercompany drilling
rig profit of $5.3 million). This compares to $7,534 (before elimination of
intercompany drilling rig profit of $3.4 million) for the first quarter of
2013, an increase of 4%, or $336. As compared to the fourth quarter of 2013
($8,132 before elimination of intercompany drilling rig profit of $5.7
million), first quarter 2014 operating margin decreased 3% or $262 (in each
case regarding eliminating intercompany drilling rig profit see Non-GAAP
Financial Measures below). For the fourth quarter of 2013 average operating
margins included early termination fees of approximately $161 per day from the
cancellation of certain long-term contracts.

Larry Pinkston said: “Drilling rig demand continued at a steady increase
during the first quarter of 2014. Almost all of our drilling rigs working
today are drilling for oil or NGLs. With the sale of the four idle 3,000
horsepower drilling rigs and adding our first BOSS drilling rig, our drilling
fleet currently totals 118 drilling rigs. Of the 118 drilling rigs, we
currently have 73 under contract. Long-term contracts (contracts with original
terms ranging from six months to two years in length) are in place for 30 of
the 73 drilling rigs. Of the 30 long-term contracts, one is up for renewal
during the second quarter, nine in the third quarter, eight in the fourth
quarter, and 12 are up for renewal in 2015. We are currently building three
additional BOSS rigs. All three are contracted to third party operators and
are anticipated to be placed into service in the second and third quarters of
2014.”

The following table illustrates Unit’s drilling segment drilling rig count at
the end of each period and average utilization rate during the period:

                1^st     4^th     3^rd     2^nd     1^st     4^th     3^rd     2^nd     1^st
             Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr
                14       13       13       13       13       12       12       12       12
Drilling      118    121    124    126    127    127    127    128    127
Rigs
Utilization   57%    53%    51%    51%    52%    50%    58%    60%    64%
                                                                     

MID-STREAM SEGMENT INFORMATION

First quarter per day liquids sold were 712,225 gallons, an increase of 69%
over the first quarter of 2013. Per day gas gathered and processed volumes
increased 11% and 16%, respectively, as compared to the first quarter of 2013.
Compared to the fourth quarter of 2013, gathered volumes per day decreased 3%,
while liquids sold volumes per day and processed volumes per day increased 9%
and 1%, respectively. Operating profit (as defined in the Selected Financial
and Operational Highlights) for the quarter was $12.2 million, an increase of
53% over the first quarter of 2013 and relatively flat compared to the fourth
quarter of 2013.

The following table illustrates certain results from this segment’s operations
for the periods indicated:

             1^st      4^th      3^rd      2^nd      1^st      4^th      3^rd      2^nd      1^st
                Qtr 14      Qtr 13      Qtr 13      Qtr 13      Qtr 13      Qtr 12      Qtr 12      Qtr 12      Qtr 12
Gas
gathered      304,083   312,254   326,474   326,039   272,831   279,990   241,271   262,269   217,404
Mcf/day
Gas
processed     150,042   149,069   145,020   138,130   129,857   131,570   134,907   144,257   125,231
Mcf/day
Liquids
sold          712,225   656,415   586,446   508,189   420,291   441,973   576,889   629,350   522,829

Gallons/day
                                                                                             

Larry Pinkston said: “During the quarter, we continued to see improvement in
NGLs pricing primarily associated with propane price increases due to seasonal
demand and shortages of supply. In order to maximize our propane recovery, we
began recovering all liquids. We operated in full ethane recovery mode at all
of our processing systems during the quarter, which resulted in a significant
increase in liquids sold volumes. As a result of prior capital investment, we
have positioned the segment for growth with limited incremental capital
investment required to more efficiently utilize our system capacity. During
the quarter, we connected 46 new wells as compared to 31 wells in the fourth
quarter of 2013. These activities resulted in achieving new records for gas
processed volumes at three of our Central Oklahoma processing plants. We
believe this speaks positively to the activity levels in the plays in which we
have made investments.”

FINANCIAL INFORMATION

Unit ended the quarter with long-term debt of $645.8 million (comprising
senior subordinated notes), and a debt to capitalization ratio of 22%. Unit
currently has no borrowings under its credit agreement. Under the credit
agreement, the amount Unit could borrow is the lesser of the amount it elects
as the commitment amount (currently $500 million) or the value of its
borrowing base as determined by the lenders (currently $900 million), but in
either event not to exceed $900 million.

WEBCAST

Unit will webcast its first quarter conference call live over the Internet on
May 8, 2014 at 10:00 a.m. Central Time (11:00 a.m. Eastern). To listen to the
live call, please go to http://www.unitcorp.com/investor/calendar.htm at least
fifteen minutes prior to the start of the call to download and install any
necessary audio software. For those who are not available to listen to the
live webcast, a replay will be available shortly after the call and will
remain on the site for 90 days.

Unit Corporation is a Tulsa-based, publicly held energy company engaged
through its subsidiaries in oil and gas exploration, production, contract
drilling and gas gathering and processing. Unit’s Common Stock is on the New
York Stock Exchange under the symbol UNT. For more information about Unit
Corporation, visit its website at http://www.unitcorp.com.

FORWARD-LOOKING STATEMENT

This news release contains forward-looking statements within the meaning of
the private Securities Litigation Reform Act. All statements, other than
statements of historical facts, included in this release that address
activities, events or developments that the company expects or anticipates
will or may occur in the future are forward-looking statements. Several risks
and uncertainties could cause actual results to differ materially from these
statements, including the productive capabilities of the company’s wells,
future demand for oil and natural gas, future drilling rig utilization and
dayrates, projected growth of the company’s oil and natural gas production,
oil and gas reserve information, and its ability to meet its future reserve
replacement goals, anticipated gas gathering and processing rates and
throughput volumes, the prospective capabilities of the reserves associated
with the company’s inventory of future drilling sites, anticipated oil and
natural gas prices, the number of wells to be drilled by the company’s oil and
natural gas segment, development, operational, implementation and opportunity
risks, possible delays caused by limited availability of third party services
needed in its operations, unexpected delays or operational issues associated
with the company’s new drilling rig design, possibility of future growth
opportunities, and other factors described from time to time in the company’s
publicly available SEC reports. The company assumes no obligation to update
publicly such forward-looking statements, whether because of new information,
future events or otherwise.

                                      
Unit Corporation
Selected Financial and Operations Highlights
(In thousands except per share and operations data)
                                         
                                         Three Months Ended
                                         March 31,
                                      2014          2013
Statement of Income:                                  
Revenues:
Oil and natural gas                      $ 188,207       $ 153,609
Contract drilling                          106,600         107,528
Gas gathering and processing              93,181        57,395  
Total revenues                            387,988       318,532 
                                                         
Expenses:
Oil and natural gas:
Operating costs                            40,415          43,038
Depreciation, depletion, and
amortization                               59,680          51,983
Contract drilling:
Operating costs                            63,804          66,002
Depreciation                               18,395          17,260
Gas gathering and processing:
Operating costs                            80,960          49,410
Depreciation and amortization              9,591           7,156
General and administrative                 9,637           8,673
(Gain) loss on disposition of assets      (9,426  )      84      
Total expenses                            273,056       243,606 
                                                         
Income from operations                    114,932       74,926  
                                                         
Other income (expense):
Interest, net                              (3,790  )       (3,561  )
Loss on derivatives not
designated as hedges and                   (18,366 )       (5,924  )
hedge ineffectiveness, net
Other                                     120           (66     )
Total other income (expense)              (22,036 )      (9,551  )
                                                         
Income before income taxes                 92,896          65,375
                                                         
Income tax expense:
Current                                    9,795           2,517
Deferred                                  26,156        22,652  
Total income taxes                        35,951        25,169  
                                                         
Net income                               $ 56,945       $ 40,206  
                                                         
Net income per common share:
Basic                                    $ 1.17          $ 0.84
Diluted                                  $ 1.17          $ 0.83
                                                         
Weighted average shares outstanding:
Basic                                      48,493          48,117
Diluted                                    48,872          48,412
                                                                   

                                           March 31,        December 31,
                                          2014             2013
Balance Sheet Data:
Current assets                               $ 223,263           $ 212,031
Total assets                                 $ 4,116,836         $ 4,022,390
Current liabilities                          $ 263,237           $ 243,573
Long-term debt                               $ 645,809           $ 645,696
Other long-term liabilities                  $ 145,454           $ 158,331
Deferred income taxes                        $ 827,554           $ 801,398
Shareholders’ equity                         $ 2,234,782         $ 2,173,392
                                                                 
                                                                 
                                             Three Months Ended March 31,
                                          2014             2013
Statement of Cash Flows Data:
Cash flow from operations before changes
in operating assets and liabilities (1)      $ 178,224           $ 153,314
Net change in operating assets and            (54,764   )        26,346    
liabilities
Net cash provided by operating               $ 123,460          $ 179,660   
activities
Net cash used in investing activities        $ (160,518  )       $ (191,471  )
Net cash provided by financing               $ 19,517            $ 11,990
activities
                                                                 
                                                                 
                                             Three Months Ended
                                             March 31,
                                          2014             2013
Oil and Natural Gas Operations Data:
Production:
Oil – MBbls                                    810                 797
Natural Gas Liquids - MBbls                    1,065               804
Natural Gas - MMcf                             13,854              14,220
Average Prices:
Oil price per barrel received                $ 91.53             $ 95.23
Oil price per barrel received, excluding     $ 95.05             $ 91.94
derivatives
NGLs price per barrel received               $ 39.56             $ 34.99
NGLs price per barrel received,
excluding derivatives                        $ 39.56             $ 34.99
Natural gas price per Mcf received           $ 4.24              $ 3.30
Natural gas price per Mcf received,
excluding derivatives                        $ 4.68              $ 3.14
Operating profit before depreciation,
depletion,
and amortization (2) ($MM)                   $ 147.8             $ 110.6
                                                                 
Contract Drilling Operations Data:
Rigs utilized                                  67.9                66.3
Operating margins (2)                          40        %         39        %
Operating profit before depreciation (2)     $ 42.8              $ 41.5
($MM)
                                                                 
Mid-Stream Operations Data:
Gas gathering - Mcf/day                        304,083             272,831
Gas processing - Mcf/day                       150,042             129,857
Liquids sold – Gallons/day                     712,225             420,291
Operating profit before depreciation
and amortization (2) ($MM)                   $ 12.2              $ 8.0
                                                                 

(1) The company considers its cash flow from operations before changes in
operating assets and liabilities an important measure in meeting the
performance goals of the company (see Non-GAAP Financial Measures below).

(2) Operating profit before depreciation is calculated by taking operating
revenues by segment less operating expenses excluding depreciation, depletion,
amortization, general and administrative, and gain (loss) on disposition of
assets. Operating margins are calculated by dividing operating profit by
segment revenue.

Non-GAAP Financial Measures

Unit Corporation reports its financial results in accordance with generally
accepted accounting principles (“GAAP”). The Company believes certain non-GAAP
performance measures provide users of its financial information and its
management additional meaningful information to evaluate the performance of
the company.

This press release includes cash flow from operations before changes in
operating assets and liabilities, its drilling segment’s average daily
operating margin before elimination of intercompany drilling rig profit, net
income, and earnings per share including only the effect of the cash settled
commodity derivatives.

Below is a reconciliation of GAAP financial measures to non-GAAP financial
measures for the three months ended March 31, 2014 and 2013. Non-GAAP
financial measures should not be considered by themselves or a substitute for
results reported in accordance with GAAP.

                               Unit Corporation
Reconciliation of Cash Flow From Operations Before Changes in Operating Assets
                               and Liabilities

                                                 Three Months Ended
                                                   March 31,
                                                   2014        2013
                                                   (In thousands)
Net cash provided by operating activities          $ 123,460     $ 179,660
Net change in operating assets and liabilities      54,764       (26,346 )
Cash flow from operations before changes
in operating assets and liabilities                $ 178,224     $ 153,314 

________________

The Company has included the cash flow from operations before changes in
operating assets and liabilities because:

  *It is an accepted financial indicator used by its management and companies
    in the industry to measure the company’s ability to generate cash which is
    used to internally fund its business activities.
  *It is used by investors and financial analysts to evaluate the performance
    of the company.

                               Unit Corporation
    Reconciliation of Average Daily Operating Margin Before Elimination of
                           Intercompany Rig Profit

                                    Three Months Ended
                                      December 31,   March 31,
                                      2013             2014        2013
                                      (In thousands except operating days
                                      and operating margins)
Contract drilling revenue             $   101,598      $ 106,600     $ 107,528
Contract drilling operating cost         58,700        63,804       66,002
Operating profit from contract            42,898         42,796        41,526
drilling
Add:
                                         5,741         5,313        3,409
Elimination of intercompany rig
profit
Operating profit from contract
drilling
before elimination of
intercompany
rig profit                                48,639         48,109        44,935
Contract drilling operating days         5,981         6,113        5,964
Average daily operating margin
before
elimination of intercompany rig       $   8,132        $ 7,870       $ 7,534
profit

________________

The Company has included the average daily operating margin before elimination
of intercompany rig profit because:

  *Its management uses the measurement to evaluate the cash flow performance
    of its contract drilling segment and to evaluate the performance of
    contract drilling management.
  *It is used by investors and financial analysts to evaluate the performance
    of the company.

                               Unit Corporation
Reconciliation of Adjusted Net Income and Adjusted Diluted Earnings per Share

                                     Three Months Ended
                                       March 31,
                                       2014                     2013
                                       
                                      (In thousands except per share amounts)
Adjusted net income:
Net income                             $    56,945                $   40,206
Loss on derivatives not designated
as hedges
and hedge ineffectiveness (net of           11,258                    3,644
income tax)
Settlements during the period of
matured
derivative contracts (net of               (5,438    )              639
income tax)
                                                                  
Adjusted net income                    $    62,765               $   44,489
                                                                  
Adjusted diluted earnings per
share:
Diluted earnings per share             $    1.17                  $   0.83
Diluted earnings per share from
the loss
on derivatives                              0.23                      0.08
Diluted earnings per share from
the settlements
of matured derivative contracts            (0.11     )              0.01
                                                                  
Adjusted diluted earnings per          $    1.29                 $   0.92
share

________________

The Company has included the net income and diluted earnings per share
excluding the impairment of oil and natural gas properties and including only
the cash settled commodity derivatives because:

  *It uses the adjusted net income to evaluate the operational performance of
    the company.
  *The adjusted net income is more comparable to earnings estimates provided
    by securities analyst.

Contact:

Unit Corporation
Michael D. Earl, 918-493-7700
Vice President, Investor Relations
www.unitcorp.com
 
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