**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**Form      10-Q**

|   | **[x]                QUARTERLY REPORT PURSUANT TO SECTION 13 OR                15(d)** |
|--------|----------------------------------------------------------------------------------------|

|   | **OF                THE SECURITIES EXCHANGE ACT OF                1934** |
|--------|--------------------------------------------------------------------------|

**For      the quarterly period ended September 30, 2007**

|   | **OR** |
|--------|--------|

|   | **[  ]                TRANSITION REPORT PURSUANT TO SECTION 13 OR                15(d)** |
|--------|----------------------------------------------------------------------------------------------------|

|   | **OF                THE SECURITIES EXCHANGE ACT OF                1934** |
|--------|--------------------------------------------------------------------------|

**UNIT      CORPORATION**

|    | **Delaware**                                                  | **73-1283193**                                      |
|--------------|---------------------------------------------------------------|-----------------------------------------------------|
|         | (State                or other jurisdiction of incorporation) | (I.R.S.                Employer Identification No.) |

|   | **7130                South Lewis, Suite 1000, Tulsa, Oklahoma** | **74136**                 |
|--------|------------------------------------------------------------------|---------------------------|
|   | (Address                of principal executive offices)          | (Zip                Code) |

|   | **(918)                493-7700**                                                        |
|--------|------------------------------------------------------------------------------------------|
|   | (Registrant’s                telephone number, including area                code) |

|   | **None**                                                            |
|--------|---------------------------------------------------------------------|
|   | (Former                name, former address and former fiscal year, |
|   | if                changed since last report)                        |

|   | Yes                [x] | No                [  ] |
|--------|------------------------|----------------------------------|

|          Large                accelerated filer [x] |                   Accelerated filer [  ] | Non-accelerated                filer [  ] |
|--------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-----------------------------------------------------|

|   | Yes                [  ] | No                [x] |
|--------|-----------------------------------|-----------------------|

**FORM      10-Q**

**UNIT      CORPORATION**

**TABLE      OF CONTENTS**

|   |                    |                                                                       | Page   |
|--------|-------------------------|----------------------------------------------------------------------------|--------|
|   |                    |                                                                       | Number |
|   |                    | PART                I. Financial Informat**ion**                           |   |
|   | Item                1.  | Financial                Statements (Unaudited)                            |   |
|   |                    |                                                                       |   |
|   |                    | Condensed                Consolidated Balance Sheets                       |   |
|   |                    | September                30, 2007 and December 31, 2006                    | 3      |
|   |                    |                                                                       |   |
|   |                    | Condensed                Consolidated Statements of Income                 |   |
|   |                    | Three                and Nine Months Ended September 30, 2007 and 2006     | 5      |
|   |                    |                                                                       |   |
|   |                    | Condensed                Consolidated Statements of Cash Flows             |   |
|   |                    | Nine                Months Ended September 30, 2007 and 2006               | 6      |
|   |                    |                                                                       |   |
|   |                    | Condensed                Consolidated Statements of Comprehensive Income   |   |
|   |                    | Three                and Nine Months Ended September 30, 2007 and 2006     | 7      |
|   |                    |                                                                       |   |
|   |                    | Notes                to Condensed Consolidated Financial Statements        | 8      |
|   |                    |                                                                       |   |
|   |                    | Report                of Independent Registered Public Accounting Firm     | 18     |
|   |                    |                                                                       |   |
|   | Item                2.  | Management’s                Discussion and Analysis of Financial     |   |
|   |                    | Condition                and Results of Operations                         | 19     |
|   |                    |                                                                       |   |
|   | Item                3.  | Quantitative                and Qualitative Disclosure about Market Risk   | 37     |
|   |                    |                                                                       |   |
|   | Item                4.  | Controls                and Procedures                                     | 37     |
|   |                    |                                                                       |   |
|   |                    | PART                II. Other Information                                  |   |
|   | Item                1.  | Legal                Proceedings                                           | 38     |
|   |                    |                                                                       |   |
|   | Item                1A. | Risk                Factors                                                | 38     |
|   |                    |                                                                       |   |
|   | Item                2.  | Unregistered                Sales of Equity Securities and Use of Proceeds | 38     |
|   |                    |                                                                       |   |
|   | Item                3.  | Defaults                Upon Senior Securities                             | 38     |
|   |                    |                                                                       |   |
|   | Item                4.  | Submission                of Matters to a Vote of Security Holders         | 38     |
|   |                    |                                                                       |   |
|   | Item                5.  | Other                Information                                           | 38     |
|   |                    |                                                                       |   |
|   | Item                6.  | Exhibits                                                                   | 38     |
|   |                    |                                                                       |   |
|   | Signatures              |                                                                       | 39     |

**Forward-Looking      Statements**

**PART      I. FINANCIAL INFORMATION**

**Item      1.    Financial Statements**

**UNIT      CORPORATION AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS (UNAUDITED)**

|                                                                                                                                                                                        |   | **September                30,**  |      |   |   | **December                31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|--------|---------------------------------|--------|
|                                                                                                                                                                                        |   | **2007**                          |      |   |   | **2006**                        |   |
|                                                                                                                                                                                        |   | **(In                thousands)** |      |
| **ASSETS**                                                                                                                                                                                  |   |                              |      |   |   |                            |   |   |   |
| Current                Assets:                                                                                                                                                              |   |                              |      |   |   |                            |   |   |   |
| Cash                and cash equivalents                                                                                                                                                    |   | $                                 | 853       |   |   |                            | $      | 589 |   |
| Restricted                cash                                                                                                                                                              |   |                              | 19        |   |   |                            |   | 18 |   |
| Accounts                receivable, net of allowance for doubtful accounts of $3,350 at September                30, 2007 and $1,600 at                    December 31, 2006 |   |                              | 165,392   |   |   |                            |   | 200,415 |   |
| Materials                and supplies                                                                                                                                                       |   |                              | 16,932    |   |   |                            |   | 18,901 |   |
| Other                                                                                                                                                                                       |   |                              | 16,388    |   |   |                            |   | 13,017 |   |
| Total                current assets                                                                                                                                                         |   |                              | 199,584   |   |   |                            |   | 232,940 |   |
|                                                                                                                                                                                        |   |                              |      |   |   |                            |   |   |   |
| Property                and Equipment:                                                                                                                                                      |   |                              |      |   |   |                            |   |   |   |
| Drilling                equipment                                                                                                                                                           |   |                              | 948,125   |   |   |                            |   | 781,190 |   |
| Oil                and natural gas properties, on the full cost                                                                                                                             |   |                              |      |   |   |                            |   |   |   |
| method:                                                                                                                                                                                     |   |                              |      |   |   |                            |   |   |   |
| Proved                properties                                                                                                                                                            |   |                              | 1,528,655 |   |   |                            |   | 1,330,010 |   |
| Undeveloped                leasehold not being amortized                                                                                                                                    |   |                              | 66,327    |   |   |                            |   | 53,687 |   |
| Gas                gathering and processing equipment                                                                                                                                       |   |                              | 110,530   |   |   |                            |   | 85,339 |   |
| Transportation                equipment                                                                                                                                                     |   |                              | 22,400    |   |   |                            |   | 20,749 |   |
| Other                                                                                                                                                                                       |   |                              | 19,618    |   |   |                            |   | 17,082 |   |
|                                                                                                                                                                                        |   |                              | 2,695,655 |   |   |                            |   | 2,288,057 |   |
| Less                accumulated depreciation, depletion, amortization                                                                                                                       |   |                              |      |   |   |                            |   |   |   |
| and                impairment                                                                                                                                                               |   |                              | 874,069   |   |   |                            |   | 735,394 |   |
| Net                property and equipment                                                                                                                                                   |   |                              | 1,821,586 |   |   |                            |   | 1,552,663 |   |
|                                                                                                                                                                                        |   |                              |      |   |   |                            |   |   |   |
| Goodwill                                                                                                                                                                                    |   |                              | 62,808    |   |   |                            |   | 57,524 |   |
| Other                Intangible Assets, Net                                                                                                                                                 |   |                              | 14,960    |   |   |                            |   | 17,087 |   |
| Other                Assets                                                                                                                                                                 |   |                              | 14,523    |   |   |                            |   | 13,882 |   |
| Total                Assets                                                                                                                                                                 |   | $                                 | 2,113,461 |   |   |                            | $      | 1,874,096 |   |

**UNIT      CORPORATION AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS (UNAUDITED) - CONTINUED**

|                                                                                                                                                            |   | **September                30,**  |      |   |   | **December                31,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|-----------|--------|--------|---------------------------------|--------|
|                                                                                                                                                            |   | **2007**                          |      |   |   | **2006**                        |   |
|                                                                                                                                                            |   | **(In                thousands)** |      |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                   |   |                              |      |   |   |                            |   |   |   |
| Current                Liabilities:                                                                                                                             |   |                              |      |   |   |                            |   |   |   |
| Accounts                payable                                                                                                                                 |   | $                                 | 94,439    |   |   |                            | $      | 92,125 |   |
| Accrued                liabilities                                                                                                                              |   |                              | 43,280    |   |   |                            |   | 52,166 |   |
| Income                taxes payable                                                                                                                             |   |                              | —   |   |   |                            |   | 2,956 |   |
| Contract                advances                                                                                                                                |   |                              | 3,231     |   |   |                            |   | 5,061 |   |
| Current                portion of other liabilities                                                                                                             |   |                              | 10,475    |   |   |                            |   | 8,634 |   |
| Total                current liabilities                                                                                                                        |   |                              | 151,425   |   |   |                            |   | 160,942 |   |
|                                                                                                                                                            |   |                              |      |   |   |                            |   |   |   |
| Long-Term                Debt                                                                                                                                   |   |                              | 153,600   |   |   |                            |   | 174,300 |   |
| Other                Long-Term Liabilities                                                                                                                      |   |                              | 52,135    |   |   |                            |   | 55,741 |   |
| Deferred                Income Taxes                                                                                                                            |   |                              | 397,690   |   |   |                            |   | 325,077 |   |
|                                                                                                                                                            |   |                              |      |   |   |                            |   |   |   |
| Shareholders’                Equity:                                                                                                                      |   |                              |      |   |   |                            |   |   |   |
| Preferred                stock, $1.00 par value, 5,000,000 shares authorized,                none issued                                                        |   |                              | —   |   |   |                            |   | — |   |
| Common                stock, $.20 par value, 175,000,000 shares authorized,                46,379,233 and 46,283,990 shares issued,                respectively |   |                              | 9,280     |   |   |                            |   | 9,257 |   |
| Capital                in excess of par value                                                                                                                   |   |                              | 341,744   |   |   |                            |   | 333,833 |   |
| Accumulated                other comprehensive income (loss)                                                                                                    |   |                              | (129      | )      |   |                            |   | 1,339 |   |
| Retained                earnings                                                                                                                                |   |                              | 1,007,716 |   |   |                            |   | 813,607 |   |
| Total                shareholders’ equity                                                                                                                 |   |                              | 1,358,611 |   |   |                            |   | 1,158,036 |   |
| Total                Liabilities and Shareholders’ Equity                                                                                                 |   | $                                 | 2,113,461 |   |   |                            | $      | 1,874,096 |   |

**UNIT      CORPORATION AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**

|                                                    | **Three                Months Ended** |                                                       | **Nine                Months Ended** |   |
|---------------------------------------------------------|---------------------------------------|------------------------------------------------------------|--------------------------------------|--------|
|                                                    | **September                30,**      |                                                       | **September                30,**     |   |
|                                                    | **2007**                              |                                                       | **2006**                             |   | **2007** |   | **2006** |   |
|                                                    |                                  | **(In                thousands except per share amounts)** |                                 |
| Revenues:                                               |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Contract                drilling                        | $                                     | 157,769                                                    |                                 | $      | 182,461 |   | $ | 472,403 |   | $ | 519,799 |   |
| Oil                and natural gas                      |                                  | 95,231                                                     |                                 |   | 91,238 |   |   | 277,680 |   |   | 267,518 |   |
| Gas                gathering and processing             |                                  | 32,784                                                     |                                 |   | 25,638 |   |   | 99,321 |   |   | 72,840 |   |
| Other                                                   |                                  | 551                                                        |                                 |   | 557 |   |   | 842 |   |   | 2,894 |   |
| Total                revenues                           |                                  | 286,335                                                    |                                 |   | 299,894 |   |   | 850,246 |   |   | 863,051 |   |
|                                                    |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Expenses:                                               |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Contract                drilling:                       |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Operating                costs                          |                                  | 77,951                                                     |                                 |   | 78,595 |   |   | 228,967 |   |   | 238,021 |   |
| Depreciation                                            |                                  | 14,793                                                     |                                 |   | 13,403 |   |   | 41,192 |   |   | 38,089 |   |
| Oil                and natural gas:                     |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Operating                costs                          |                                  | 23,101                                                     |                                 |   | 21,560 |   |   | 69,701 |   |   | 58,854 |   |
| Depreciation,                depletion and amortization |                                  | 32,297                                                     |                                 |   | 27,557  |   |   | 92,367 |   |   | 76,780 |   |
| Gas                gathering and processing:            |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Operating                costs                          |                                  | 28,275                                                     |                                 |   | 22,216 |   |   | 87,171 |   |   | 63,734 |   |
| Depreciation                and amortization            |                                  | 2,858                                                      |                                 |   | 1,637 |   |   | 7,752 |   |   | 4,019 |   |
| General                and administrative               |                                  | 5,355                                                      |                                 |   | 4,630 |   |   | 15,784 |   |   | 12,998 |   |
| Interest                                                |                                  | 1,797                                                      |                                 |   | 1,228 |   |   | 5,167 |   |   | 3,235 |   |
| Total                expenses                           |                                  | 186,427                                                    |                                 |   | 170,826 |   |   | 548,101 |   |   | 495,730 |   |
| Income                Before Income Taxes               |                                  | 99,908                                                     |                                 |   | 129,068 |   |   | 302,145 |   |   | 367,321 |   |
|                                                    |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Income                Tax Expense:                      |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Current                                                 |                                  | 11,152                                                     |                                 |   | 26,442 |   |   | 53,498 |   |   | 89,741 |   |
| Deferred                                                |                                  | 24,695                                                     |                                 |   | 21,361 |   |   | 54,538 |   |   | 46,585 |   |
| Total                income taxes                       |                                  | 35,847                                                     |                                 |   | 47,803 |   |   | 108,036 |   |   | 136,326 |   |
|                                                    |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Net                Income                               | $                                     | 64,061                                                     |                                 | $      | 81,265 |   | $ | 194,109 |   | $ | 230,995 |   |
|                                                    |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Net                Income per Common Share:             |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Basic                                                   | $                                     | 1.38                                                       |                                 | $      | 1.76 |   | $ | 4.19 |   | $ | 5.00 |   |
|                                                    |                                  |                                                       |                                 |   |   |   |   |   |   |   |   |   |
| Diluted                                                 | $                                     | 1.37                                                       |                                 | $      | 1.75 |   | $ | 4.16 |   | $ | 4.98 |   |

**UNIT      CORPORATION AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)**

|                                                                |   | **Nine                Months Ended** |     |
|---------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                |   | **September                30,**     |     |
|                                                                |   | **2007**                             |     |   |   | **2006** |   |
|                                                                |   | **(In                thousands)**    |     |
| Cash                Flows From Operating Activities:                |   |                                 |     |   |   |   |   |   |   |
| Net                income                                           |   | $                                    | 194,109  |   |   |   | $ | 230,995 |   |
| Adjustments                to reconcile net income to net cash      |   |                                 |     |   |   |   |   |   |   |
| provided                by operating activities:                    |   |                                 |     |   |   |   |   |   |   |
| Depreciation,                depletion and amortization             |   |                                 | 141,968  |   |   |   |   | 119,422 |   |
| Deferred                tax expense                                 |   |                                 | 54,538   |   |   |   |   | 46,585 |   |
| Other                                                               |   |                                 | 3,792    |   |   |   |   | 5,843 |   |
| Changes                in operating assets and liabilities          |   |                                 |     |   |   |   |   |   |   |
| increasing                (decreasing) cash:                        |   |                                 |     |   |   |   |   |   |   |
| Accounts                receivable                                  |   |                                 | 35,023   |   |   |   |   | (4,840 | ) |
| Accounts                payable                                     |   |                                 | (24,497  | ) |   |   |   | (27,424 | ) |
| Material                and supplies inventory                      |   |                                 | 1,969    |   |   |   |   | (9,044 | ) |
| Accrued                liabilities                                  |   |                                 | (14,066  | ) |   |   |   | (9,139 | ) |
| Contract                advances                                    |   |                                 | (1,830   | ) |   |   |   | 5,129 |   |
| Other                – net                                    |   |                                 | (1,627   | ) |   |   |   | (7,928 | ) |
| Net                cash provided by operating activities            |   |                                 | 389,379  |   |   |   |   | 349,599 |   |
|                                                                |   |                                 |     |   |   |   |   |   |   |
| Cash                Flows From (Used In) Investing Activities:      |   |                                 |     |   |   |   |   |   |   |
| Capital                expenditures                                 |   |                                 | (344,524 | ) |   |   |   | (299,312 | ) |
| Cash                paid for acquisitions                           |   |                                 | (38,500  | ) |   |   |   | (53,820 | ) |
| Proceeds                from disposition of assets                  |   |                                 | 3,866    |   |   |   |   | 5,865 |   |
| Other-net                                                           |   |                                 | (388     | ) |   |   |   | (241 | ) |
| Net                cash used in investing activities                |   |                                 | (379,546 | ) |   |   |   | (347,508 | ) |
|                                                                |   |                                 |     |   |   |   |   |   |   |
| Cash                Flows From (Used In) Financing Activities:      |   |                                 |     |   |   |   |   |   |   |
| Borrowings                under line of credit                      |   |                                 | 144,600  |   |   |   |   | 183,200 |   |
| Payments                under line of credit                        |   |                                 | (165,300 | ) |   |   |   | (183,100 | ) |
| Proceeds                from exercise of stock options              |   |                                 | 659      |   |   |   |   | 726 |   |
| Tax                benefit from stock options                       |   |                                 | —  |   |   |   |   | 290 |   |
| Book                overdrafts                                      |   |                                 | 10,472   |   |   |   |   | (3,548 | ) |
| Net                cash used in financing activities                |   |                                 | (9,569   | ) |   |   |   | (2,432 | ) |
|                                                                |   |                                 |     |   |   |   |   |   |   |
| Net                Increase (Decrease) in Cash and Cash Equivalents |   |                                 | 264      |   |   |   |   | (341 | ) |
|                                                                |   |                                 |     |   |   |   |   |   |   |
| Cash                and Cash Equivalents, Beginning of Period       |   |                                 | 589      |   |   |   |   | 947 |   |
| Cash                and Cash Equivalents, End of Period             |   | $                                    | 853      |   |   |   | $ | 606 |   |

**UNIT      CORPORATION AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME      (UNAUDITED)**

|                                                            |   | **Three                  Months Ended** |   |     |   | **Nine                  Months Ended** |   |
|-----------------------------------------------------------------|--------|-----------------------------------------|--------|----------|--------|----------------------------------------|--------|
|                                                            |   | **September                  30,**      |   |     |   | **September                  30,**     |   |
|                                                            |   | **2007**                                |   | **2006** |   |                                   |   | **2007** |   | **2006** |   |
|                                                            |   | **(In                  thousands)**     |   |
|                      Net Income                  |   | $                                       | 64,061 |     | $      | 81,265                                 |   |   |   | $ | 194,109 |   | $ | 230,995 |   |
|                      Other Comprehensive Income, |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| Net                  of Taxes:                                  |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| Change                  in value of                             |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| derivative                  instruments                         |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| used                  as cash flow                              |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| hedges                  (net of tax                             |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| of                  $(52), $(62),                               |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| $(566)                  and $161)                               |   |                                    | (122   | )        |   | (106                                   | )      |   |   |   | (1,026 | ) |   | 273 |   |
| Reclassification                  -                             |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
|    derivative                  settlements       |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
|    (net                  of tax of $(93), $(87), |   |                                    |   |     |   |                                   |   |   |   |   |   |   |   |   |   |
| $(269)                  and $(158))                             |   |                                    | (121   | )        |   | (148                                   | )      |   |   |   | (442 | ) |   | (267 | ) |
|                      Comprehensive Income        |   | $                                       | 63,818 |     | $      | 81,011                                 |   |   |   | $ | 192,641 |   | $ | 231,001 |   |

**UNIT      CORPORATION AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE      1 - BASIS OF PREPARATION AND PRESENTATION**

|                                                   |   | **Nine                Months Ended** |    |
|--------------------------------------------------------|--------|--------------------------------------|---------|
|                                                   |   | **September                30,**     |    |
|                                                   |   | **2007**                             |    | **2006** |   |
|                                                   |   |                                 |    |   |   |   |   |
| Options                Granted                         |   |                                 | 28,000  |   |   | 33,000 |   |
|                                                   |   |                                 |    |   |   |   |   |
| Estimated                Fair Value (In Millions)      |   | $                                    | 0.6     |   | $ | 0.8 |   |
|                                                   |   |                                 |    |   |   |   |   |
| Estimate                of Stock Volatility            |   |                                 | 0.33    |   |   | 0.38 |   |
|                                                   |   |                                 |    |   |   |   |   |
| Estimated                Dividend Yield                |   |                                 | — | % |   | — | % |
|                                                   |   |                                 |    |   |   |   |   |
| Risk                Free Interest Rate                 |   |                                 | 5.00    | % |   | 5.00 | % |
|                                                   |   |                                 |    |   |   |   |   |
| Expected                Life Based on                  |   |                                 |    |   |   |   |   |
|   Prior                Experience (In Years) |   |                                 | 5       |   |   | 3                to 7 |   |

|                                              |   | **Three                Months Ended** |    | **Nine                Months Ended** |   |
|---------------------------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                                              |   | **September                30,**      |    | **September                30,**     |   |
|                                              |   | **2007**                              |    | **2006**                             |   | **2007** |   | **2006** |   |
|                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Shares                Granted                     |   |                                  | 409,932 |                                 |   | — |   |   | 415,432 |   |   | — |   |
|                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Estimated                Fair Value (In Millions) |   | $                                     | 17.6    |                                 | $      | — |   | $ | 17.9 |   | $ | — |   |
|                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Percentage                of Shares Granted       |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |
| Expected                to be Distributed         |   |                                  | 89      | %                                    |   | — |   |   | 89 | % |   | — |   |
|                                              |   |                                  |    |                                 |   |   |   |   |   |   |   |   |   |

**NOTE      2 - EARNINGS PER SHARE**

|                                                                                  |   |                                                                                                                                                                                                                   |    | **Weighted**      |   |          |   |
|---------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-------------------|--------|---------------|--------|
|                                                                                  |   | **Income**                                                                                                                                                                                                             |    | **Shares**        |   | **Per-Share** |   |
|                                                                                  |   | **(Numerator)**                                                                                                                                                                                                        |    | **(Denominator)** |   | **Amount**    |   |
|                                                                                  |   | **                          (In                thousands except per share amounts)** |    |
| For                the Three Months Ended                                             |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| September                30, 2007:                                                    |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| Basic                earnings per common share                                        |   | $                                                                                                                                                                                                                      | 64,061  |              |   | 46,382        |   | $ | 1.38 |   |
| Effect                of dilutive stock options                                       |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| and                restricted stock shares                                            |   |                                                                                                                                                                                                                   | — |              |   | 249           |   |   | (0.01 | ) |
| Diluted                earnings per common share                                      |   | $                                                                                                                                                                                                                      | 64,061  |              |   | 46,631        |   | $ | 1.37 |   |
|                                                                                  |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| For                the Three Months Ended                                             |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| September                30, 2006:                                                    |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| Basic                earnings per common share                                        |   | $                                                                                                                                                                                                                      | 81,265  |              |   | 46,241        |   | $ | 1.76 |   |
| Effect                of dilutive stock options                                       |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
|     and                restricted stock shares                    |   |                                                                                                                                                                                                                   | — |              |   | 203           |   |   | (0.01 | ) |
|                       Diluted earnings per common share |   | $                                                                                                                                                                                                                      | 81,265  |              |   | 46,444        |   | $ | 1.75 |   |

|                                  |   | **2007** |   |   |   | **2006** |
|---------------------------------------|--------|----------|--------|--------|--------|----------|
|                                  |   |     |   |   |   |     |   |   |
| Options                               |   |     | 61,000 |   |   |     |   | 33,000 |
|                                  |   |     |   |   |   |     |   |   |
| Average                Exercise Price |   | $        | 59.67  |   |   |     | $ | 61.40 |

|                                                               |   |                                                                                                                                                                                                                   |    | **Weighted**      |   |          |   |
|--------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-------------------|--------|---------------|--------|
|                                                               |   | **Income**                                                                                                                                                                                                             |    | **Shares**        |   | **Per-Share** |   |
|                                                               |   | **(Numerator)**                                                                                                                                                                                                        |    | **(Denominator)** |   | **Amount**    |   |
|                                                               |   | **                          (In                thousands except per share amounts)** |    |
| For                the Nine Months Ended                           |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| September                30, 2007:                                 |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| Basic                earnings per common share                     |   | $                                                                                                                                                                                                                      | 194,109 |              |   | 46,361        |   | $ | 4.19 |   |
| Effect                of dilutive stock options                    |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| and                restricted stock shares                         |   |                                                                                                                                                                                                                   | — |              |   | 259           |   |   | (0.03 | ) |
| Diluted                earnings per common share                   |   | $                                                                                                                                                                                                                      | 194,109 |              |   | 46,620        |   | $ | 4.16 |   |
|                                                               |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| For                the Nine Months Ended                           |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| September                30, 2006:                                 |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
| Basic                earnings per common share                     |   | $                                                                                                                                                                                                                      | 230,995 |              |   | 46,223        |   | $ | 5.00 |   |
| Effect                of dilutive stock options                    |   |                                                                                                                                                                                                                   |    |              |   |          |   |   |   |   |
|     and                restricted stock shares |   |                                                                                                                                                                                                                   | — |              |   | 206           |   |   | (0.02 | ) |
| Diluted                earnings per common share                   |   | $                                                                                                                                                                                                                      | 230,995 |              |   | 46,429        |   | $ | 4.98 |   |

|                                  |   | **2007** |   |   |   | **2006** |
|---------------------------------------|--------|----------|--------|--------|--------|----------|
|                                  |   |     |   |   |   |     |   |   |
| Options                               |   |     | 61,000 |   |   |     |   | 29,500 |
|                                  |   |     |   |   |   |     |   |   |
| Average                Exercise Price |   | $        | 59.67  |   |   |     | $ | 62.29 |

**NOTE      3 – ACQUISITION**

|   | Drilling                Rigs            |   | $      | 39,326  |   |
|--------|-----------------------------------------|--------|--------|---------|--------|
|   | Spare                Drilling Equipment |   |   | 1,613   |   |
|   | Drill                Pipe and Collars   |   |   | 7,784   |   |
|   | Trucks                                  |   |   | 1,551   |   |
|   | Other                Vehicles           |   |   | 190     |   |
|   | Yard                and Office          |   |   | 846     |   |
|   | Goodwill                                |   |   | 5,285   |   |
|   | Deferred                Income Taxes    |   |   | (18,095 | )      |
|   | Total                Consideration      |   | $      | 38,500  |   |

**NOTE      4 – LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES**

***             Long-Term Debt***

|                                                               |   | **September                30,**  |    | **December                31,** |   |
|--------------------------------------------------------------------|--------|-----------------------------------|---------|---------------------------------|--------|
|                                                               |   | **2007**                          |    | **2006**                        |   |
|                                                               |   | **(In                thousands)** |    |
| Revolving                Credit Facility,                          |   |                              |    |                            |   |   |   |
|   with                Interest at September 30, 2007 and |   |                              |    |                            |   |   |   |
|   December                31, 2006 of 6.4%               |   | $                                 | 153,600 |                            | $      | 174,300 |   |
|                                                               |   |                              |    |                            |   |   |   |
| Less                Current Portion                                |   |                              | — |                            |   | — |   |
|                                                               |   |                              |    |                            |   |   |   |
| Total                Long-Term Debt                                |   | $                                 | 153,600 |                            | $      | 174,300 |   |
|                                                               |   |                              |    |                            |   |   |   |

|   | **.** | the                payment of dividends (other than stock dividends) during any fiscal                year                in excess of 25% of the company’s consolidated net income for the                preceding fiscal year; |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | the                incurrence of additional debt with certain limited exceptions;                and |
|--------|-------|------------------------------------------------------------------------------------------------------|

|   | **.** | the                creation or existence of mortgages or liens, other than those in                the                ordinary course of business, on any of the company’s property, except in                favor of the company’s lenders. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | consolidated                net worth of at least $900 million; |
|--------|-------|-----------------------------------------------------------------|

|   | **.** | a                current ratio (as defined in the Credit Facility) of not less than                1 to 1;                and |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | a                leverage ratio of long-term debt to consolidated EBITDA (as defined                in the                Credit Facility) for the most recently ended rolling four fiscal                quarters                of no greater than 3.50 to 1.0. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***             Other Long-Term Liabilities***

|                                             |   |                              | **September                30,** |   |   | **December                31,** |   |
|--------------------------------------------------|--------|-----------------------------------|----------------------------------|--------|--------|---------------------------------|--------|
|                                             |   |                              | **2007**                         |   |   | **2006**                        |   |
|                                             |   | **(In                thousands)** |
|                                             |   |                              |                             |   |   |                            |   |
| Plugging                Liability                |   | $                                 | 30,762                           |   | $      | 33,692                          |   |
| Workers’                Compensation       |   |                              | 22,646                           |   |   | 22,157                          |   |
| Separation                Benefit Plans          |   |                              | 4,248                            |   |   | 3,516                           |   |
| Deferred                Compensation Plan        |   |                              | 2,969                            |   |   | 2,544                           |   |
| Gas                Balancing Liability           |   |                              | 1,080                            |   |   | 1,080                           |   |
| Retirement                Agreement              |   |                              | 905                              |   |   | 1,386                           |   |
|                                             |   |                              | 62,610                           |   |   | 64,375                          |   |
| Less                Current Portion              |   |                              | 10,475                           |   |   | 8,634                           |   |
| Total                Other Long-Term Liabilities |   | $                                 | 52,135                           |   | $      | 55,741                          |   |

**NOTE      5 – ASSET RETIREMENT OBLIGATIONS**

* *

|                                              |   | **Nine                Months Ended** |   |
|---------------------------------------------------|--------|--------------------------------------|--------|
|                                              |   | **2007**                             |   | **2006** |   |
|                                              |   | **(In                Thousands)**    |   |
|                                              |   |                                 |   |   |   |   |   |
| Plugging                Liability, January 1:     |   | $                                    | 33,692 |   | $ | 22,015 |   |
| Accretion                of Discount              |   |                                 | 1,326  |   |   | 1,091 |   |
| Liability                Incurred                 |   |                                 | 1,274  |   |   | 2,835 |   |
| Liability                Settled                  |   |                                 | (1,382 | ) |   | (156 | ) |
| Revision                of Estimates              |   |                                 | (4,148 | ) |   | 6,061 |   |
| Plugging                Liability, September 30   |   |                                 | 30,762 |   |   | 31,846 |   |
| Less                Current Portion               |   |                                 | 1,678  |   |   | 643 |   |
| Total                Long-Term Plugging Liability |   | $                                    | 29,084 |   | $ | 31,203 |   |

**NOTE      6 - NEW ACCOUNTING PRONOUNCEMENTS**

In      June 2006, the Financial Accounting Standards Board (“FASB“)      issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes,      an Interpretation of FASB Statement No. 109" (FIN 48). FIN 48 clarifies the      accounting for uncertainty in income taxes recognized in an enterprise’s      financial statements in accordance with FAS No. 109, "Accounting for Income      Taxes" and prescribes a recognition threshold and measurement attribute for      the      financial statement recognition and measurement of a tax position taken or      expected to be taken in a return. Guidance is also provided on de-recognition,      classification, interest and penalties, accounting in interim periods,      disclosure and transition. We adopted the provisions of FIN 48 effective      January 1, 2007. We have no unrecognized tax benefits and the adoption of      FIN 48 had no effect on our results of operations or financial condition and      we      do not expect any significant changes in unrecognized tax benefits in the next      twelve months.  In the third quarter of 2007, the Internal Revenue      Service completed their review of our 2004 federal tax return and no adjustments      to the return were assessed.

**NOTE      7 – GOODWILL**

**NOTE      8 – HEDGING ACTIVITY**

| **Commodity**                   | **Quantity**                       | **Price**               | **Underlying                Commodity Price** |
|---------------------------------|------------------------------------|-------------------------|-----------------------------------------------|
| Ethane                          | 623,868                gal./month  | $                0.6225 | OPIS                Ethane Conway             |
| Propane                         | 396,690                gal./month  | $                1.1475 | OPIS                Propane Conway            |
| Propane                         | 396,690                gal./month  | $                1.15   | OPIS                Propane Conway            |
| Iso                Butane       | 61,782                gal./month   | $                1.2625 | OPIS                Iso Butane Conway         |
| Iso                Butane       | 61,782                gal./month   | $                1.2975 | OPIS                Iso Butane Conway         |
| Normal                Butane    | 163,632                gal./month  | $                1.2975 | OPIS                Normal Butane Conway      |
| Normal                Butane    | 163,632                gal./month  | $                1.27   | OPIS                Normal Butane Conway      |
| Natural                Gasoline | 411,012                gal./month  | $                1.7375 | OPIS                Nat. Gas Conway In-Well   |
| Natural                Gas      | 107,710                MMBtu/month | $                7.00   | IF                PEPL Natural Gas            |
| Natural                Gas      | 107,710                MMBtu/month | $                7.04   | IF                PEPL Natural Gas            |

| **First                Contract:**  |                                      |                                                            |   |
|-------------------------------------|-------------------------------------------|-----------------------------------------------------------------|--------|
|                                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                                | Period                covered             | March                through December of 2007                   |
|                                | Prices                                    | Floor                of $6.00 and a ceiling of $10.00           |
|                                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                                |                                      |     East                – Inside FERC |
|                                |                                      |                                                            |   |   |
| **Second                Contract:** |                                      |                                                            |
|                                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                                | Period                covered             | March                through December of 2007                   |
|                                | Prices                                    | Floor                of $6.25 and a ceiling of $9.25            |
|                                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                                |                                      |     East                – Inside FERC |

| **Contract:**  |                                      |                                                            |
|---------------------|-------------------------------------------|-----------------------------------------------------------------|
|                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                | Period                covered             | January                through December of 2007                 |
|                | Prices                                    | Floor                of $6.00 and a ceiling of $9.60            |
|                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                |                                      |     East                – Inside FERC |

**NOTE      9 - INDUSTRY SEGMENT INFORMATION**

|                                        |   | **Three                Months Ended** |    |     |   | **Nine                Months Ended** |   |
|---------------------------------------------|--------|---------------------------------------|---------|----------|--------|--------------------------------------|--------|
|                                        |   | **September                30,**      |    |     |   | **September                30,**     |   |
|                                        |   | **2007**                              |    | **2006** |   |                                 |   | **2007** |   | **2006** |   |
|                                        |   | **(In                thousands)**     |    |
| Revenues:                                   |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Contract                drilling            |   | $                                     | 169,780 |     | $      | 196,953                              |   |   |   | $ | 503,580 |   | $ | 550,428 |   |
| Elimination                of inter-segment |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| revenue                                     |   |                                  | 12,011  |     |   | 14,492                               |   |   |   |   | 31,177 |   |   | 30,629 |   |
| Contract                drilling net of     |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| inter-segment                revenue        |   |                                  | 157,769 |     |   | 182,461                              |   |   |   |   | 472,403 |   |   | 519,799 |   |
|                                        |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Oil                and natural gas          |   |                                  | 95,231  |     |   | 91,238                               |   |   |   |   | 277,680 |   |   | 267,518 |   |
|                                        |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Gas                gathering and processing |   |                                  | 40,042  |     |   | 29,045                               |   |   |   |   | 112,908 |   |   | 83,303 |   |
| Elimination                of inter-segment |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| revenue                                     |   |                                  | 7,258   |     |   | 3,407                                |   |   |   |   | 13,587 |   |   | 10,463 |   |
| Gas                gathering and processing |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| net                of inter-segment revenue |   |                                  | 32,784  |     |   | 25,638                               |   |   |   |   | 99,321 |   |   | 72,840 |   |
|                                        |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Other                (1)                    |   |                                  | 551     |     |   | 557                                  |   |   |   |   | 842 |   |   | 2,894 |   |
| Total                revenues               |   | $                                     | 286,335 |     | $      | 299,894                              |   |   |   | $ | 850,246 |   | $ | 863,051 |   |
|                                        |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Operating                Income (2):        |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| Contract                drilling            |   | $                                     | 65,025  |     | $      | 90,463                               |   |   |   | $ | 202,244 |   | $ | 243,689 |   |
| Oil                and natural gas          |   |                                  | 39,833  |     |   | 42,121                               |   |   |   |   | 115,612 |   |   | 131,884 |   |
| Gas                gathering and processing |   |                                  | 1,651   |     |   | 1,785                                |   |   |   |   | 4,398 |   |   | 5,087 |   |
| Total                operating income       |   |                                  | 106,509 |     |   | 134,369                              |   |   |   |   | 322,254 |   |   | 380,660 |   |
| General                and administrative   |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| expense                                     |   |                                  | (5,355  | )        |   | (4,630                               | )      |   |   |   | (15,784 | ) |   | (12,998 | ) |
| Interest                expense             |   |                                  | (1,797  | )        |   | (1,228                               | )      |   |   |   | (5,167 | ) |   | (3,235 | ) |
| Other                income - net           |   |                                  | 551     |     |   | 557                                  |   |   |   |   | 842 |   |   | 2,894 |   |
| Income                before income         |   |                                  |    |     |   |                                 |   |   |   |   |   |   |   |   |   |
| taxes                                       |   | $                                     | 99,908  |     | $      | 129,068                              |   |   |   | $ | 302,145 |   | $ | 367,321 |   |

|   | (1) | Includes                a $1.0 million gain recognized in the first quarter of 2006 from                insurance                proceeds on the loss of a drilling rig from a blow out and fire in                January                2006. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  (2) | Operating                income is total operating revenues less operating expenses, depreciation,                depletion and amortization and does not include non-operating revenues,                general corporate expenses, interest expense or income                taxes. |
|--------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**Item      2.  Management’s Discussion and Analysis of Financial Condition and      Results of Operations**

|                        •  Financial Condition                          |
|---------------------------------------------------------------------------------------------------------------------------|
|                        •  Results of Operations                        |
|                        •  New Accounting                Pronouncements |

**FINANCIAL      CONDITION**

***         Summary***

|                          •  the prices we receive for our natural gas production and, to                  a lesser extent, the prices we receive for our oil                  production; |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          •  the quantity of natural gas and oil we                  produce;                                                                                              |
|                          •  the demand for and the dayrates we receive for our drilling                  rigs; and                                                                        |
|                          •  the margins we obtain from our natural gas gathering and                  processing contracts.                                                               |

|                        •  contract drilling carried out by our subsidiaries Unit                Drilling Company and its subsidiaries Unit Texas                Drilling, |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     L.L.C.                and Leonard Hudson Drilling Company;                                                                                                                                           |
|                        •  oil and natural gas exploration, carried out by our                subsidiary Unit Petroleum Company; and its subsidiaries;                and  |
|                        •  mid stream operations (consisting of natural gas buying,                selling, gathering, processing and treating) carried                out |
|    by                our                subsidiary Superior Pipeline Company,                L.L.C.                                                                                                           |

|                                                           |   |                                                           | **September                30,** |   |   | **September                30,** |   |   | **Percent** |   |
|----------------------------------------------------------------|--------|----------------------------------------------------------------|----------------------------------|--------|--------|----------------------------------|--------|--------|-------------|--------|
|                                                           |   |                                                           | **2007**                         |   |   | **2006**                         |   |   | **Change**  |   |
|                                                           |   | **(In                thousands except percent amounts)**  |
|                                                           |   |                                                           |                             |   |   |                             |   |   |        |   |
| Working                Capital                                 |   | $                                                              | 48,159                           |   | $      | 96,760                           |   |   | (50         | )%     |
| Long-Term                Debt                                  |   | $                                                              | 153,600                          |   | $      | 145,100                          |   |   | 6           | %      |
| Shareholders’                Equity                      |   | $                                                              | 1,358,611                        |   | $      | 1,074,561                        |   |   | 26          | %      |
| Ratio                of Long-Term Debt to Total Capitalization |   |                                                           | 10                               | %      |   | 12                               | %      |   | (17         | )%     |
| Net                Income                                      |   | $                                                              | 194,109                          |   | $      | 230,995                          |   |   | (16         | )%     |
| Net                Cash Provided by Operating Activities       |   | $                                                              | 389,379                          |   | $      | 349,599                          |   |   | 11          | %      |
| Net                Cash Used in Investing Activities           |   | $                                                              | (379,546                         | )      | $      | (347,508                         | )      |   | 9           | %      |
| Net                Cash Used in Financing Activities           |   | $                                                              | (9,569                           | )      | $      | (2,432                           | )      |   | 293         | %      |

|                                                          |   | **September                30,** |    | **September                30,** |   |    | **Percent** |   |
|--------------------------------------------------------------------|--------|----------------------------------|---------|----------------------------------|--------|---------|-------------|--------|
|                                                               |   | **2007**                         |    | **2006**                         |   |    | **Change**  |   |
| Oil                Production (MBbls)                              |   |                             | 1,260   |                             |   | 1,062   |        |   | 19 | % |
| Natural                Gas Production (MMcf)                       |   |                             | 32,507  |                             |   | 32,350  |        |   | — | % |
| Average                Oil Price Received                          |   | $                                | 54.90   |                             | $      | 57.18   |        |   | (4 | )% |
| Average                Oil Price Received Excluding Hedges         |   | $                                | 54.90   |                             | $      | 57.18   |        |   | (4 | )% |
| Average                Natural Gas Price Received                  |   | $                                | 6.30    |                             | $      | 6.28    |        |   | — | % |
| Average                Natural Gas Price Received Excluding Hedges |   | $                                | 6.24    |                             | $      | 6.28    |        |   | (1 | )% |
| Average                Number of Our Drilling Rigs in Use During   |   |                             |    |                             |   |    |        |   |   |   |
| the                Period                                          |   |                             | 98.4    |                             |   | 109.8   |        |   | (10 | )% |
| Total                Number of Drilling Rigs Available at the End  |   |                             |    |                             |   |    |        |   |   |   |
| of                the Period                                       |   |                             | 128     |                             |   | 116     |        |   | 10 | % |
| Average                Dayrate                                     |   | $                                | 18,858  |                             | $      | 18,442  |        |   | 2 | % |
| Gas                Gathered—MMBtu/day                        |   |                             | 221,943 |                             |   | 245,435 |        |   | (10 | )% |
| Gas                Processed—MMBtu/day                       |   |                             | 47,432  |                             |   | 27,226  |        |   | 74 | % |
| Gas                Liquids Sold—Gallons/day                  |   |                             | 115,781 |                             |   | 57,840  |        |   | 100 | % |
| Number                of Active Natural Gas Gathering Systems      |   |                             | 36      |                             |   | 37      |        |   | (3 | )% |
| Number                of Active Processing Systems                 |   |                             | 7       |                             |   | 7       |        |   | — | % |

***             Our Bank Credit Facility.***

|   | **.** | the                payment of dividends (other than stock dividends) during any fiscal                year                in excess of 25% of our consolidated net income for the preceding                fiscal                year, |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | the                incurrence of additional debt with certain limited exceptions,                and |
|--------|-------|------------------------------------------------------------------------------------------------------|

|   | **.** | the                creation or existence of mortgages or liens, other than those in                the                ordinary course of business, on any of our property, except in favor                of                our lenders. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | consolidated                net worth of at least $900 million, |
|--------|-------|-----------------------------------------------------------------|

|   | **.** | a                current ratio (as defined in the Credit Facility) of not less than                1 to 1,                and |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | a                leverage ratio of long-term debt to consolidated EBITDA (as defined                in the                Credit Facility) for the most recently ended rolling four fiscal                quarters                of no greater than 3.50 to 1.0. |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Contractual Commitments***

|                                         |   |   |   | **Payments                Due by Period** |    |
|----------------------------------------------|--------|--------|--------|-------------------------------------------|---------|
|                                         |   |   |   |                                      |    | **Less** |   |   |   |   |   |   |   |
| **Contractual**                              |   |   |   |                                      |    | **Than                1** |   | **2-3** |   | **4-5** |   | **After                5** |   |
| **Obligations**                              |   |   |   | **Total**                                 |    | **Year** |   | **Years** |   | **Years** |   | **Years** |   |
|                                         |   |   |   | **(In                thousands)**         |    |
| Bank                Debt (1)                 |   |   |   | $                                         | 198,702 |   | $ | 9,395 |   | $ | 19,584 |   | $ | 169,723 |   | $ | — |   |
| Retirement                Agreements (2)     |   |   |   |                                      | 905     |   |   | 727 |   |   | 178 |   |   | — |   |   | — |   |
| Operating                Leases (3)          |   |   |   |                                      | 3,904   |   |   | 1,504 |   |   | 2,091 |   |   | 309 |   |   | — |   |
| Drill                Pipe, Drilling Rigs and |   |   |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equipment                Purchases (4)       |   |   |   |                                      | 13,337  |   |   | 13,337 |   |   | — |   |   | — |   |   | — |   |
| Total                Contractual             |   |   |   |                                      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                                  |   |   |   | $                                         | 216,848 |   | $ | 24,963 |   | $ | 21,853 |   | $ | 170,032 |   | $ | — |   |

|   | (1) | See                the previous discussion in Management Discussion and Analysis regarding                our bank credit facility. This obligation is presented in accordance                with                the terms of the credit facility and includes interest calculated                at the                September 30, 2007 interest rate of 5.6% including the effect of                the                interest rate swap related to $50.0 million of the outstanding                debt. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | In                the second quarter of 2001, we recorded $1.3 million in additional                employee benefit expense for the present value of a separation agreement                made in connection with the retirement of King Kirchner from his                position                as Chief Executive Officer. The liability associated with this expense,                including accrued interest, is paid in monthly installments of $25,000                which started in July 2003 and will continue through June 2009. In                the                first quarter of 2004, we acquired a liability for the present value                of a                separation agreement between PetroCorp Incorporated and one of its                previous officers. The liability associated with this agreement is                paid in                quarterly installments of $12,500 through December 31, 2007. In the                first                quarter of 2005, we recorded $0.7 million in additional employee                benefit                expense for the present value of a separation agreement made in connection                with the retirement of John Nikkel from his position as Chief Executive                Officer. The liability associated with this expense, including accrued                interest, is paid in monthly installments of $31,250 which started                in                November 2006 and will continue through October 2008. These liabilities                as                presented above are undiscounted. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | We                lease office space in Tulsa and Woodward, Oklahoma; Houston and Midland,                Texas; and Denver, Colorado under the terms of operating leases expiring                through January 31, 2012. Additionally, we have several equipment                leases                and lease space on short-term commitments to stack excess drilling                rig                equipment and production inventory. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Due                to the potential for limited availability of new drill pipe within                the                industry, we have committed to purchase approximately $9.3 million                of                drill pipe and drill collars.  We have also committed to                purchase $3.1 million of drilling rig components with 20% or $0.6                million                paid through September 30, 2007.  We have committed to purchase                approximately 75 vehicles within the next 9 months for approximately                $1.5                million. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                       |   |   |   |   |   |          |    | **Amount                of Commitment Expiration** |   |
|--------------------------------------------|--------|--------|--------|--------|--------|---------------|---------|----------------------------------------------------|--------|
|                                       |   |   |   |   |   |          |    | **Per                Period**                      |   |
|                                       |   |   |   |   |   | **Total**     |    |                                               |   |   |   |   |   |   |   |
|                                       |   |   |   |   |   | **Amount**    |    |                                               |   |   |   |   |   |   |   |
|                                       |   |   |   |   |   | **Committed** |    | **Less**                                           |   |   |   |   |   |   |   |
| **Other**                                  |   |   |   |   |   | **Or**        |    | **Than                1**                          |   | **2-3** |   | **4-5** |   | **After                5** |   |
| **Commitments**                            |   |   |   |   |   | **Accrued**   |    | **Year**                                           |   | **Years** |   | **Years** |   | **Years** |   |
|                                       |   |   |   |   |   |          |    | **(In                thousands)**                  |   |
| Deferred                Compensation       |   |   |   |   |   |          |    |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Agreement                (1)               |   |   |   |   |   | $             | 2,969   |                                               |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Separation                Benefit          |   |   |   |   |   |          |    |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Agreement                (2)               |   |   |   |   |   | $             | 4,248   |                                               |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Plugging                Liability (3)      |   |   |   |   |   | $             | 30,762  |                                               | $      | 1,678 |   | $ | 1,851 |   | $ | 2,638 |   | $ | 24,595 |   |
| Gas                Balancing               |   |   |   |   |   |          |    |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability                (4)               |   |   |   |   |   | $             | 1,080   |                                               |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Repurchase                                 |   |   |   |   |   |          |    |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                (5)             |   |   |   |   |   |          | Unknown |                                               |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Workers’                Compensation |   |   |   |   |   |          |    |                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Liability                (6)               |   |   |   |   |   | $             | 22,646  |                                               | $      | 8,070 |   | $ | 4,467 |   | $ | 1,480 |   | $ | 8,629 |   |

|   | (1) | We                  provide a salary deferral plan which allows participants to defer                  the                  recognition of salary for income tax purposes until actual distribution                  of                  benefits, which occurs at either termination of employment, death                  or                  certain defined unforeseeable emergency hardships. We recognize                  payroll                  expense and record a liability, included in other long-term liabilities                  in                  our condensed consolidated  balance sheet, at the time of                  deferral. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Effective                  January 1, 1997, we adopted a separation benefit plan (“Separation Plan”).                  The Separation Plan allows eligible employees whose employment                  with us is                  involuntarily terminated or, in the case of an employee who has                  completed                  20 years of service, voluntarily or involuntarily terminated, to                  receive                  benefits equivalent to 4 weeks salary for every whole year of service                  completed with the company up to a maximum of 104 weeks. To receive                  payments the recipient must waive any claims against us in exchange                  for                  receiving the separation benefits. On October 28, 1997, we adopted                  a                  Separation Benefit Plan for Senior Management (“Senior Plan”). The Senior                  Plan provides certain officers and key executives of the company                  with                  benefits generally equivalent to the Separation Plan. The Compensation                  Committee of the Board of Directors has absolute discretion in                  the                  selection of the individuals covered in this plan. On May 5, 2004                  we also                  adopted the Special Separation Benefit Plan (“Special Plan”). This plan is                  identical to the Separation Benefit Plan with the exception that                  the                  benefits under the plan vest on the earliest of a participant’s reaching                  the age of 65 or serving 20 years with the company. At September                  30, 2007,                  there were 31 eligible employees to participate in the                  plan. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | When                  a well is drilled or acquired, under Financial Accounting Standards                  No.                  143, “Accounting for Asset Retirement Obligations” (FAS 143), we have                  recorded the fair value of liabilities associated with the retirement                  of                  long-lived assets (mainly plugging and abandonment costs for our                  depleted                  wells). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | We                  have recorded a liability for certain properties where we believe                  there                  are insufficient oil and natural gas reserves available to allow                  the                  under-produced owners to recover their under-production from future                  production volumes. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | We                  formed The Unit 1984 Oil and Gas Limited Partnership and the 1986                  Energy                  Income Limited Partnership along with private limited partnerships                  (the                  “Partnerships”) with certain qualified employees, officers and directors                  from 1984 through 2007, with a subsidiary of ours serving as general                  partner. The Partnerships were formed for the purpose of conducting                  oil                  and natural gas |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5)                - cont. | acquisition,                drilling and development operations and serving as co-general partner                with                us in any additional limited partnerships formed during that year.                The                Partnerships participated on a proportionate basis with us in most                drilling operations and most producing property acquisitions commenced                by                us for our own account during the period from the formation of the                Partnership through December 31 of that year. These partnership agreements                require, on the election of a limited partner, that we repurchase                the                limited partner’s interest at amounts to be determined by appraisal in the                future. Such repurchases in any one year are limited to 20% of the                units                outstanding. We made repurchases of $7,000, $4,000 and $14,000 in                2006,                2005 and 2004, respectively and have not had any repurchases in                2007. |
|--------|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | We                  have recorded a liability for future estimated payments related                  to                  workers’ compensation claims primarily associated with our contract                  drilling segment. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***               Hedging***
**. **

| **Commodity**                   | **Quantity**                       | **Price**               | **Underlying                Commodity Price** |
|---------------------------------|------------------------------------|-------------------------|-----------------------------------------------|
| Ethane                          | 623,868                gal./month  | $                0.6225 | OPIS                Ethane Conway             |
| Propane                         | 396,690                gal./month  | $                1.1475 | OPIS                Propane Conway            |
| Propane                         | 396,690                gal./month  | $                1.15   | OPIS                Propane Conway            |
| Iso                Butane       | 61,782                gal./month   | $                1.2625 | OPIS                Iso Butane Conway         |
| Iso                Butane       | 61,782                gal./month   | $                1.2975 | OPIS                Iso Butane Conway         |
| Normal                Butane    | 163,632                gal./month  | $                1.2975 | OPIS                Normal Butane Conway      |
| Normal                Butane    | 163,632                gal./month  | $                1.27   | OPIS                Normal Butane Conway      |
| Natural                Gasoline | 411,012                gal./month  | $                1.7375 | OPIS                Nat. Gas Conway In-Well   |
| Natural                Gas      | 107,710                MMBtu/month | $                7.00   | IF                PEPL Natural Gas            |
| Natural                Gas      | 107,710                MMBtu/month | $                7.04   | IF                PEPL Natural Gas            |

| **First                Contract:**  |                                      |                                                            |   |
|-------------------------------------|-------------------------------------------|-----------------------------------------------------------------|--------|
|                                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                                | Period                covered             | March                through December of 2007                   |
|                                | Prices                                    | Floor                of $6.00 and a ceiling of $10.00           |
|                                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                                |                                      |     East                – Inside FERC |
|                                |                                      |                                                            |   |   |
| **Second                Contract:** |                                      |                                                            |
|                                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                                | Period                covered             | March                through December of 2007                   |
|                                | Prices                                    | Floor                of $6.25 and a ceiling of $9.25            |
|                                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                                |                                      |     East                – Inside FERC |

| **Contract:**  |                                      |                                                            |
|---------------------|-------------------------------------------|-----------------------------------------------------------------|
|                | Production                volume covered  | 10,000                MMBtu/day                                 |
|                | Period                covered             | January                through December of 2007                 |
|                | Prices                                    | Floor                of $6.00 and a ceiling of $9.60            |
|                | Underlying                commodity price | Centerpoint                Energy Gas Transmission Co.,         |
|                |                                      |     East                – Inside FERC |

***Stock      and Incentive Compensation***
*. *

***Self-Insurance      or Retentions***
*. *

***Impact of Prices for Our Oil and Natural Gas***
**.      **

***Oil and Natural Gas Acquisitions and Capital Expenditures***
***.***

***Contract Drilling***
***.***

***             Drilling Acquisitions and Capital Expenditures.***

***             Mid-Stream Operations***

***             Mid-Stream Acquisitions and Capital      Expenditures.***

***             Oil and Natural Gas Limited Partnerships and Other Entity      Relationships***
***.***

**NEW ACCOUNTING PRONOUNCEMENTS**

FAS 159 is effective for      financial statements issued for fiscal years beginning after November 15,      2007, and interim periods within those fiscal years, and is applicable beginning      in the first quarter of 2008. We are currently assessing the impact of FAS      159      on our statement of income, financial condition and cash flows.

 **RESULTS      OF      OPERATIONS**

**Quarter      Ended September 30, 2007 versus Quarter Ended September 30,      2006**

|                                                              |   |   |   | **Quarter                Ended** |        | **Quarter                Ended** |   |        |   |
|-------------------------------------------------------------------|--------|--------|--------|----------------------------------|-------------|----------------------------------|--------|-------------|--------|
|                                                              |   |   |   | **September                30,** |        | **September                30,** |   | **Percent** |   |
|                                                              |   |   |   | **2007**                         |        | **2006**                         |   | **Change**  |   |
| Total                Revenue                                      |   |   |   | $                                | 286,335,000 |                             | $      | 299,894,000 |   | (5 | )% |
| Net                Income                                         |   |   |   | $                                | 64,061,000  |                             | $      | 81,265,000  |   | (21 | )% |
| **Drilling:**                                                     |   |   |   |                             |        |                             |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                | 157,769,000 |                             | $      | 182,461,000 |   | (14 | )% |
| Operating                costs excluding depreciation             |   |   |   | $                                | 77,951,000  |                             | $      | 78,595,000  |   | (1 | )% |
| Percentage                of revenue from                         |   |   |   |                             |        |                             |   |        |   |   |   |
| daywork                contracts                                  |   |   |   |                             | 100         | %                                |   | 100         | %      | — | % |
| Average                number of rigs in use                      |   |   |   |                             | 100.3       |                             |   | 110.6       |   | (9 | )% |
| Average                dayrate on daywork                         |   |   |   |                             |        |                             |   |        |   |   |   |
| contracts                                                         |   |   |   | $                                | 18,470      |                             | $      | 19,559      |   | (6 | )% |
| Depreciation                                                      |   |   |   | $                                | 14,793,000  |                             | $      | 13,403,000  |   | 10 | % |
| **Oil                and Natural Gas:**                           |   |   |   |                             |        |                             |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                | 95,231,000  |                             | $      | 91,238,000  |   | 4 | % |
| Operating                costs excluding depreciation,            |   |   |   |                             |        |                             |   |        |   |   |   |
|     depletion                and amortization |   |   |   | $                                | 23,101,000  |                             | $      | 21,560,000  |   | 7 | % |
| Average                natural gas price (Mcf)                    |   |   |   | $                                | 5.77        |                             | $      | 6.02        |   | (4 | )% |
| Average                oil price (Bbl)                            |   |   |   | $                                | 62.01       |                             | $      | 59.55       |   | 4 | % |
| Natural                gas production (Mcf)                       |   |   |   |                             | 11,206,000  |                             |   | 11,200,000  |   | — | % |
| Oil                production (Bbl)                               |   |   |   |                             | 470,000     |                             |   | 376,000     |   | 25 | % |
| Depreciation,                depletion and                        |   |   |   |                             |        |                             |   |        |   |   |   |
| amortization                rate (Mcfe)                           |   |   |   | $                                | 2.29        |                             | $      | 2.04        |   | 12 | % |
| Depreciation,                depletion and                        |   |   |   |                             |        |                             |   |        |   |   |   |
| amortization                                                      |   |   |   | $                                | 32,297,000  |                             | $      | 27,557,000  |   | 17 | % |
| **Gas                Gathering and Processing:**                  |   |   |   |                             |        |                             |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                | 32,784,000  |                             | $      | 25,638,000  |   | 28 | % |
| Operating                costs excluding depreciation             |   |   |   |                             |        |                             |   |        |   |   |   |
|     and                amortization           |   |   |   | $                                | 28,275,000  |                             | $      | 22,216,000  |   | 27 | % |
| Depreciation                and amortization                      |   |   |   | $                                | 2,858,000   |                             | $      | 1,637,000   |   | 75 | % |
| Gas                gathered – MMbtu/day                     |   |   |   |                             | 221,508     |                             |   | 276,888     |   | (20 | )% |
| Gas                processed – MMbtu/day                    |   |   |   |                             | 55,721      |                             |   | 35,124      |   | 59 | % |
| Gas                liquids sold – Gallons/day               |   |   |   |                             | 137,098     |                             |   | 71,790      |   | 91 | % |
|                                                              |   |   |   |                             |        |                             |   |        |   |   |   |
| General                and Administrative Expense                 |   |   |   | $                                | 5,355,000   |                             | $      | 4,630,000   |   | 16 | % |
| Interest                Expense                                   |   |   |   | $                                | 1,797,000   |                             | $      | 1,228,000   |   | 46 | % |
| Income                Tax Expense                                 |   |   |   | $                                | 35,847,000  |                             | $      | 47,803,000  |   | (25 | )% |
| Average                Interest Rate                              |   |   |   |                             | 6.08        | %                                |   | 6.04        | %      | 1 | % |
| Average                Long-Term Debt Outstanding                 |   |   |   | $                                | 182,385,000 |                             | $      | 131,948,000 |   | 38 | % |

***               Drilling***

***             Oil and Natural Gas***

***             Mid-Stream***

***             Other***

**Nine      Months Ended September 30, 2007 versus Nine Months Ended September 30,      2006**

|                                                              |   |   |   | **Nine                Months Ended** |        | **Nine                Months Ended** |   |        |   |
|-------------------------------------------------------------------|--------|--------|--------|--------------------------------------|-------------|--------------------------------------|--------|-------------|--------|
|                                                              |   |   |   | **September                30,**     |        | **September                30,**     |   | **Percent** |   |
|                                                              |   |   |   | **2007**                             |        | **2006**                             |   | **Change**  |   |
| Total                Revenue                                      |   |   |   | $                                    | 850,246,000 |                                 | $      | 863,051,000 |   | (1 | )% |
| Net                Income                                         |   |   |   | $                                    | 194,109,000 |                                 | $      | 230,995,000 |   | (16 | )% |
| **Drilling:**                                                     |   |   |   |                                 |        |                                 |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                    | 472,403,000 |                                 | $      | 519,799,000 |   | (9 | )% |
| Operating                costs excluding depreciation             |   |   |   | $                                    | 228,967,000 |                                 | $      | 238,021,000 |   | (4 | )% |
| Percentage                of revenue from                         |   |   |   |                                 |        |                                 |   |        |   |   |   |
| daywork                contracts                                  |   |   |   |                                 | 100         | %                                    |   | 100         | %      | — | % |
| Average                number of rigs in use                      |   |   |   |                                 | 98.4        |                                 |   | 109.8       |   | (10 | )% |
| Average                dayrate on daywork                         |   |   |   |                                 |        |                                 |   |        |   |   |   |
| contracts                                                         |   |   |   | $                                    | 18,858      |                                 | $      | 18,442      |   | 2 | % |
| Depreciation                                                      |   |   |   | $                                    | 41,192,000  |                                 | $      | 38,089,000  |   | 8 | % |
| **Oil                and Natural Gas:**                           |   |   |   |                                 |        |                                 |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                    | 277,680,000 |                                 | $      | 267,518,000 |   | 4 | % |
| Operating                costs excluding depreciation,            |   |   |   |                                 |        |                                 |   |        |   |   |   |
|     depletion                and amortization |   |   |   | $                                    | 69,701,000  |                                 | $      | 58,854,000  |   | 18 | % |
| Average                natural gas price (Mcf)                    |   |   |   | $                                    | 6.30        |                                 | $      | 6.28        |   | — | % |
| Average                oil price (Bbl)                            |   |   |   | $                                    | 54.90       |                                 | $      | 57.18       |   | (4 | )% |
| Natural                gas production (Mcf)                       |   |   |   |                                 | 32,507,000  |                                 |   | 32,350,000  |   | — | % |
| Oil                production (Bbl)                               |   |   |   |                                 | 1,260,000   |                                 |   | 1,062,000   |   | 19 | % |
| Depreciation,                depletion and                        |   |   |   |                                 |        |                                 |   |        |   |   |   |
| amortization                rate (Mcfe)                           |   |   |   | $                                    | 2.29        |                                 | $      | 1.97        |   | 16 | % |
| Depreciation,                depletion and                        |   |   |   |                                 |        |                                 |   |        |   |   |   |
| amortization                                                      |   |   |   | $                                    | 92,367,000  |                                 | $      | 76,780,000  |   | 20 | % |
| **Gas                Gathering and Processing:**                  |   |   |   |                                 |        |                                 |   |        |   |   |   |
| Revenue                                                           |   |   |   | $                                    | 99,321,000  |                                 | $      | 72,840,000  |   | 36 | % |
| Operating                costs excluding depreciation,            |   |   |   |                                 |        |                                 |   |        |   |   |   |
|     and                amortization           |   |   |   | $                                    | 87,171,000  |                                 | $      | 63,734,000  |   | 37 | % |
| Depreciation                and amortization                      |   |   |   | $                                    | 7,752,000   |                                 | $      | 4,019,000   |   | 93 | % |
| Gas                gathered – MMbtu/day                     |   |   |   |                                 | 221,943     |                                 |   | 245,435     |   | (10 | )% |
| Gas                processed – MMbtu/day                    |   |   |   |                                 | 47,432      |                                 |   | 27,226      |   | 74 | % |
| Gas                liquids sold – Gallons/day               |   |   |   |                                 | 115,781     |                                 |   | 57,840      |   | 100 | % |
|                                                              |   |   |   |                                 |        |                                 |   |        |   |   |   |
| General                and Administrative Expense                 |   |   |   | $                                    | 15,784,000  |                                 | $      | 12,998,000  |   | 21 | % |
| Interest                Expense                                   |   |   |   | $                                    | 5,167,000   |                                 | $      | 3,235,000   |   | 60 | % |
| Income                Tax Expense                                 |   |   |   | $                                    | 108,036,000 |                                 | $      | 136,326,000 |   | (21 | )% |
| Average                Interest Rate                              |   |   |   |                                 | 6.10        | %                                    |   | 5.76        | %      | 6 | % |
| Average                Long-Term Debt Outstanding                 |   |   |   | $                                    | 175,408,000 |                                 | $      | 121,323,000 |   | 45 | % |

***                ***
***Drilling***

***             Oil and Natural Gas***

***             Mid-Stream***

***             Other***

**SAFE      HARBOR STATEMENT**

|         | • |   | the                amount and nature of our future capital expenditures;                                  |
|--------------|---------|--------|-----------------------------------------------------------------------------------------------------------|
|    | • |   | the                amount of wells to be drilled or reworked;                                             |
|    | • |   | prices                for oil and natural gas;                                                            |
|    | • |   | demand                for oil and natural gas;                                                            |
|    | • |   | our                exploration prospects;                                                                 |
|    | • |   | estimates                of our proved oil and natural gas reserves;                                      |
|    | • |   | oil                and natural gas reserve potential;                                                     |
|    | • |   | development                and infill drilling potential;                                                 |
|    | • |   | our                drilling prospects;                                                                    |
|    | • |   | expansion                and other development trends of the oil and natural gas                industry; |
|         | • |   | our                business strategy;                                                                     |
|         | • |   | production                of oil and natural gas reserves;                                                |
|         | • |   | growth                potential for our mid-stream operations;                                            |
|         | • |   | gathering                systems and processing plants we plan to construct or                acquire;    |
|         | • |   | volumes                and prices for natural gas gathered and processed;                                 |
|         | • |   | expansion                and growth of our business and operations; and                                   |
|         | • |   | demand                for our drilling rigs and drilling rig                rates.                        |

|         | • |   | the                risk factors discussed in this report and in the documents we incorporate                by reference; |
|--------------|---------|--------|---------------------------------------------------------------------------------------------------------------------------|
|    | • |   | general                economic, market or business conditions;                                                           |
|    | • |   | the                nature or lack of business opportunities that we                pursue;                                |
|    | • |   | demand                for our land drilling services;                                                                     |
|    | • |   | changes                in laws or regulations; and                                                                        |
|    | • |   | other                factors, most of which are beyond our                control.                                        |

**Item      3.  Quantitative and Qualitative Disclosure about Market      Risk**

***Commodity      Price Risk.***

***Interest      Rate Risk.***

**Item      4.  Controls and Procedures**

***Evaluation      of Disclosure Controls and Procedures.***

***Changes      in Internal Controls.***

**                    PART      II. OTHER      INFORMATION**

**Item      1.  Legal Proceedings**

**Item      1A.  Risk Factors**

**Item      2.  Unregistered Sales of Equity Securities and Use of      Proceeds**

**Item      3.  Defaults Upon Senior Securities**

**Item      4.  Submission of Matters to a Vote of Security      Holders**

**Item      5.  Other Information**

**Item      6.  Exhibits**

|                     10.2.48 | Separation                Benefit Plan of Unit Corporation and Participating Subsidiaries as                amended, effective August 21, 2007. |
|-------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|                                            |                                                                                                                                            |
|                     15      | Letter                re:  Unaudited Interim Financial Information.                                                                   |
|                                            |                                                                                                                                            |
|                     31.1    | Certification                of Chief Executive Officer under Rule 13a – 14(a) of                the                                      |
|                                            | Exchange                Act.                                                                                                                    |
|                                            |                                                                                                                                            |
|                     31.2    | Certification                of Chief Financial Officer under Rule 13a – 14(a) of                the                                      |
|                                            | Exchange                Act.                                                                                                                    |
|                                            |                                                                                                                                            |
|                     32      | Certification                of Chief Executive Officer and Chief Financial Officer                under                                        |
|                                            | Rule                13a – 14(a) of the Exchange Act and 18 U.S.C. Section 1350, as                adopted                                 |
|                                            | under                Section 906 of the Sarbanes-Oxley Act of                2002.                                                              |

**SIGNATURES**

|                                             | Unit                Corporation                |
|--------------------------------------------------|-----------------------------------------------------|
| Date:  November                1, 2007 | By:  /s/                Larry D. Pinkston |
|                                             | LARRY                D. PINKSTON                    |
|                                             | Chief                Executive Officer and Director |
|                                             |                                                |
| Date:  November                1, 2007 | By:  /s/                David T. Merrill  |
|                                             | DAVID                T. MERRILL                     |
|                                             | Chief                Financial Officer and          |
|                                             | Treasurer                                           |