Unit Corporation reported that total revenues for the second quarter of 2012 were $329.9 million (45% contract drilling, 40% oil and natural gas, and 15% mid-stream), compared to $291.5 million (40% contract drilling, 45% oil and natural gas, and 15% mid-stream) for the second quarter of 2011.

For the first six months of 2012, Unit reported net income of $33.1 million, or $0.69 per diluted share. For the same period in 2011, net income was $90.8 million, or $1.89 per diluted share. Excluding the effect of the second quarter 2012 ceiling test write down, net income for the first six months would have been $105.3 million, or $2.19 per diluted share, an increase of 16% over the same period in 2011 (see Non-GAAP Financial Measures below). Total revenues for the first six months of 2012 were $662.3 million (43% contract drilling, 40% oil and natural gas, and 16% mid-stream), compared to $538.9 million (40% contract drilling, 45% oil and natural gas, and 15% mid-stream) for the first six months of 2011.

CONTRACT DRILLING SEGMENT INFORMATION

The average number of drilling rigs used in the second quarter of 2012 was 76.7, an increase of 5% over the second quarter of 2011, and a decrease of 6% from the first quarter of 2012. Per day drilling rig rates for the second quarter of 2012 averaged $20,128, an increase of 7%, or $1,267, from the second quarter of 2011, and an increase of 1%, or $290, from the first quarter of 2012. Average per day operating margin for the second quarter of 2012 was $11,130 (before elimination of intercompany drilling rig profit of $4.7 million). This compares to $8,370 (before elimination of intercompany drilling rig profit of $5.1 million) for the second quarter of 2011, an increase of 33%, or $2,760. As compared to the first quarter of 2012 ($9,414 before elimination of intercompany drilling rig profit of $4.3 million), second quarter 2012 operating margin increased 18% or $1,716 (in each case with regard to the elimination of intercompany drilling rig profit see Non-GAAP Financial Measures below). Approximately $2,188 per day of the second quarter 2012 average operating margin was the result of early termination fees resulting from the cancellation of certain long-term contracts.

For the first six months of 2012, Unit averaged 79.1 drilling rigs working, up 10% from 71.6 drilling rigs working during the first six months of 2011. Average per day operating margin for the first six months of 2012 was $10,246 (before elimination of intercompany drilling rig profit of $9.0 million) as compared to $8,229 (before elimination of intercompany drilling rig profit of $10.1 million) for the first six months of 2011, an increase of 25% (in each case with regard to the elimination of intercompany drilling rig profit see Non-GAAP Financial Measures below).

Approximately $1,109 per day of the first six months of 2012 average operating margin was the result of early termination fees resulting from the cancellation of certain long-term contracts.

Larry Pinkston, Unit's Chief Executive Officer and President, said: "We are pleased with the results that our contract drilling segment has been able to attain. As the industry has continued to transition to drilling horizontal or directional wells, we have been able to respond to that demand by refurbishing our existing drilling rigs or adding new drilling rigs. Approximately 97% of our drilling rigs working today are drilling for oil or natural gas liquids (NGLs) and approximately 96% are drilling horizontal or directional wells. During the second quarter of 2012, we placed a new 1,500 horsepower, diesel-electric drilling rig in North Dakota under a three-year contract. Currently, we have 128 drilling rigs in our fleet, of which 73 are under contract. Long-term contracts (contracts with original terms ranging from six months to two years in length) are in place for 39 of those 73 drilling rigs. Of these contracts, 13 are up for renewal during the third quarter of 2012, nine during the fourth quarter of 2012, and 17 in 2013 and beyond. During the quarter, we had three drilling rigs that were under long-term contracts that were terminated early by the operator. The early termination fees associated with those contracts are approximately $15 million."

OIL AND NATURAL GAS SEGMENT INFORMATION

The second quarter marks the tenth consecutive quarter that liquids (oil and NGLs) production has increased. Unit's strategy of drilling oil or NGLs rich wells is evident in its production results. Liquids production represented 44% and 42% of total equivalent production during the second and first quarters of 2012, respectively. Second quarter 2012 total equivalent production increased 12% to 3.3 MMBoe over the second quarter of 2011, while total liquids production for the second quarter of 2012 increased 26% over the comparable quarter of 2011.

Second quarter 2012 oil production was 786,000 barrels, in comparison to 591,000 barrels for the same period of 2011, an increase of 33%. NGLs production during the second quarter of 2012 was 674,000 barrels, an increase of 19% when compared to 567,000 barrels for the same period of 2011. Second quarter 2012 natural gas production increased 3% to 11.3 billion cubic feet (Bcf) compared to 10.9 Bcf for the comparable quarter of 2011. Total production for the first six months of 2012 was 6.6 MMBoe.

In Polk County, Texas, Unit has drilled a significant multi-zone, deeper Wilcox field discovery. To date, Unit has drilled four wells on the prospect averaging 226 feet of potential net pay with an average working interest of approximately 94%. First production in the new discovery started in July 2011 and currently three wells are producing at a combined approximate rate of 9.7 MMcf per day, 260 barrels of oil per day and 1,090 barrels of NGLs per day, or an equivalent rate of 17.8 MMcfe per day from an average of 26 feet of perforations per well. The fourth well, which is approximately 5,200 feet away from the other three wells, is currently being completed for production. Unit's estimated total net resource potential for this prospect area is estimated at approximately 159 Bcfe, consisting of approximately 2.2 million barrels of oil, 9.2 million barrels of NGLs, and 90.4 Bcf of natural gas, of which approximately 16% is currently proved reserves. Unit plans to drill two additional step-out wells in this prospect in 2012 and anticipates drilling four infill development wells in 2013.