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Unit Corporation Reports 2012 Third Quarter And First Nine Months Results

Unit Corporation (NYSE: UNT) reported net income of $46.6 million, or $0.97 per diluted share, for the three months ended September 30, 2012, compared to net income of $53.4 million, or $1.11 per diluted share for the third quarter of 2011. Total revenues for the third quarter of 2012 were $317.8 million (42% contract drilling, 41% oil and natural gas, and 17% mid-stream), compared to $323.8 million (39% contract drilling, 42% oil and natural gas, and 19% mid-stream) for the third quarter of 2011.

For the first nine months of 2012, Unit reported net income of $79.7 million, or $1.66 per diluted share. For the same period in 2011, net income was $144.2 million, or $3.01 per diluted share. Included in the second quarter 2012 results was a non-cash ceiling test write down of $115.9 million ($72.1 million after tax, or $1.50 per diluted share). The ceiling test write down was required to reduce the carrying value of the company’s oil and natural gas properties resulting from significantly lower commodity prices during the second quarter of 2012. Excluding the ceiling test write down, net income for the nine months of 2012 would have been $151.9 million, or $3.16 per diluted share, a 5% increase over the first nine months of 2011 (see Non-GAAP Financial Measures below). Total revenues for the first nine months of 2012 were $980.1 million (43% contract drilling, 41% oil and natural gas, and 16% mid-stream), compared to $862.7 million (39% contract drilling, 44% oil and natural gas, and 17% mid-stream) for the first nine months of 2011.

CONTRACT DRILLING SEGMENT INFORMATION

The average number of drilling rigs used in the third quarter of 2012 was 73.4, a decrease of 7% from the third quarter of 2011, and a decrease of 4% from the second quarter of 2012. Per day drilling rig rates for the third quarter of 2012 averaged $19,989, an increase of 4%, or $680, from the third quarter of 2011, and a 1% decrease, or $139, from the second quarter of 2012. Average per day operating margin for the third quarter of 2012 was $9,672 (before elimination of intercompany drilling rig profit of $4.0 million). This compares to $8,413 (before elimination of intercompany drilling rig profit of $4.8 million) for the third quarter of 2011, an increase of 15%, or $1,259. As compared to the second quarter of 2012 ($11,130 before elimination of intercompany drilling rig profit of $4.7 million), third quarter 2012 operating margin decreased 13% or $1,458 (in each case with regard to the elimination of intercompany drilling rig profit see Non-GAAP Financial Measures below). Approximately $1,007 and $2,188 per day of the third quarter 2012 and second quarter 2012 average operating margin, respectively, was the result of early termination fees resulting from the cancellation of certain long-term contracts.

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