Unit Corporation Quarterly Revenue up 30 Percent

Unit Corporation announced today its financial and operational results for the third quarter and first nine months of 2006. Net income for the third quarter of 2006 was $81.3 million, or $1.75 per diluted share, on company-record third quarter revenues of $299.9 million, compared with net income of $57.6 million, or $1.25 per diluted share, on revenues of $231.0 million for the third quarter of 2005.

Unit ended the quarter with working capital of $96.8 million, long-term debt of $145.1 million, and a debt to capitalization ratio of 12%. As of September 30, 2006, Unit had $89.9 million of borrowing capacity based on the borrowing base associated with its credit facility. In October, in conjunction with the Brighton Energy LLC acquisition, Unit amended its credit facility, increasing the commitment amount to $275 million from $235 million.

For the nine-month period, Unit reported net income of $231.0 million, or $4.98 per diluted share, on record revenues for the period of $863.1 million, compared to 2005’s nine month net income of $128.0 million, or $2.78 per diluted share, on revenues of $592.5 million. Increased oil and natural gas production, higher oil prices, an increased number of drilling rigs operating and higher dayrates produced record results for the first nine months of the year.

Contract drilling rig rates for the third quarter averaged a record $19,559 per day, up 49% from the comparable quarter of 2005. Operating margins for the quarter reached an all-time record averaging $10,994 per day (before elimination of intercompany drilling rig profit of $8.0 million) as compared to $5,924 per day (before elimination of intercompany drilling rig profit of $3.2 million) for 2005, an increase of 86%. Contract drilling revenues increased 52% between the comparative third quarters to $182.5 million, primarily due to increases in dayrates and the number of working drilling rigs. Average drilling rig utilization was 110.6 drilling rigs in the third quarter of 2006, up 8% from 2005’s third quarter rate of 102.6 drilling rigs. Currently, Unit has 116 operational drilling rigs of which 114 are under contract. Unit is in the process of adding three additional drilling rigs to its fleet. The 117th rig, a 750 horsepower, SCR drilling rig, should be placed into service during December and the 118th and 119th drilling rigs are expected to be placed into service early in 2007. Both of these rigs are 1,500 horsepower, SCR drilling rigs.

Third quarter production for Unit’s oil and natural gas operations was a record 376,000 barrels of oil and a record 11.2 billion cubic feet (Bcf) of natural gas, a 34% equivalent thousand cubic feet (Mcfe) increase from the third quarter of 2005. Exiting the quarter, Unit was producing 150.9 MMcfe per day. Revenues for the third quarter were $91.2 million, 9% higher than 2005’s third quarter. The increase in revenue resulted from a 50% increase in oil production, as well as a 31% increase in natural gas production and higher oil prices.

During the first nine months of 2006, Unit began drilling operations on 194 wells and completed 178 of those wells with a success rate of 87% compared to the completion of 135 wells with a 90% success rate for the first nine months of 2005. Unit also had 16 wells in progress at the end of September 2006.

During the first nine months of 2006, oil and natural gas revenues were $267.5 million, an increase of 32% over the same period in 2005. Natural gas production was 32.3 Bcf in the first nine months of 2006, while oil production for the same period was 1,062,000 barrels. Equivalent Mcf production was up 35% over the comparative nine month periods. The average natural gas price received decreased 7% to $6.28 per Mcf compared to $6.74 per Mcf during the first nine months of 2005. The average oil price received was $57.18 per barrel in the first nine months of 2006 compared to $48.16 per barrel in 2005, a 19% increase.

Third quarter 2006 gathering volumes for Unit’s gas gathering and processing operations were 276,888 MMBtu per day, a 73% increase from the third quarter of 2005. The increase in volumes gathered per day is primarily attributable to one system that gathered 153,883 MMBtu and 86,736 MMBtu per day during the third quarter of 2006 and 2005, respectively. While gathering volumes increased, total revenue decreased approximately 3% from the third quarter of 2005 due to lower natural gas prices.
Processing volumes for the first nine months of 2006 were 27,226 MMBtd per day, a 17% decrease from the first nine months of 2005. This decrease was due to changing pipeline deliveries, between comparative periods, to an outlet that accepted unprocessed natural gas. In August 2006, the construction of a natural gas processing plant was completed that allowed Superior to resume processing this natural gas. Operating profit (as defined below in the financial tables) for the third quarter was $3.4 million or 55% higher than 2005’s third quarter.

Natural gas gathering volumes for the first nine months of 2006 were 245,435 MMBtu per day, an 89% increase from the first nine months of 2005, while operating profit before depreciation for the nine month period was $9.1 million for 2006 and $5.3 million for the comparative period of 2005, an increase of 72%.
Unit’s gas gathering and processing operations are conducted through Superior Pipeline Company LLC and its subsidiaries, which operates three natural gas treatment plants, owns seven processing plants, 37 active gathering systems and 600 miles of pipeline.



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