**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 March 31, 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)                            |   |
|   |                      |                                                                         |   |
|   |                      | Consolidated                  Condensed Balance Sheets                       |   |
|   |                      | March                  31, 2007 and December 31, 2006                        | 2      |
|   |                      |                                                                         |   |
|   |                      | Consolidated                  Condensed Statements of Income                 |   |
|   |                      | Three                  Months Ended March 31, 2007 and 2006                  | 4      |
|   |                      |                                                                         |   |
|   |                      | Consolidated                  Condensed Statements of Cash Flows             |   |
|   |                      | Three                  Months Ended March 31, 2007 and 2006                  | 5      |
|   |                      |                                                                         |   |
|   |                      | Consolidated                  Condensed Statements of Comprehensive Income   |   |
|   |                      | Three                  Months Ended March 31, 2007 and 2006                  | 6      |
|   |                      |                                                                         |   |
|   |                      | Notes                  to Consolidated Condensed Financial Statements        | 7      |
|   |                      |                                                                         |   |
|   |                      | Report                  of Independent Registered Public Accounting Firm     | 14     |
|   |                      |                                                                         |   |
|   | Item                  2.  | Management’s                  Discussion and Analysis of Financial     |   |
|   |                      | Condition                  and Results of Operations                         | 15     |
|   |                      |                                                                         |   |
|   | Item                  3.  | Quantitative                  and Qualitative Disclosures about Market Risk  | 28     |
|   |                      |                                                                         |   |
|   | Item                  4.  | Controls                  and Procedures                                     | 28     |
|   |                      |                                                                         |   |
|   |                      | PART                  II. Other Information                             |   |
|   | Item                  1.  | Legal                  Proceedings                                           | 29     |
|   |                      |                                                                         |   |
|   | Item                  1A. | Risk                  Factors                                                | 29     |
|   |                      |                                                                         |   |
|   | Item                  2.  | Unregistered                  Sales of Equity Securities and Use of Proceeds | 29     |
|   |                      |                                                                         |   |
|   | Item                  3.  | Defaults                  Upon Senior Securities                             | 29     |
|   |                      |                                                                         |   |
|   | Item                  4.  | Submission                  of Matters to a Vote of Security Holders         | 29     |
|   |                      |                                                                         |   |
|   | Item                  5.  | Other                  Information                                           | 29     |
|   |                      |                                                                         |   |
|   | Item                  6.  | Exhibits                                                                     | 29     |
|   |                      |                                                                         |   |
|   | Signatures                |                                                                         | 30     |

**PART        I. FINANCIAL INFORMATION**

**Item        1. Financial Statements**

**UNIT        CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED        CONDENSED BALANCE SHEETS (UNAUDITED)**

|                                                                                                                                                                                        |   | **March                  31,**      |      |   |   | **December                  31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|--------|--------|-----------------------------------|--------|
|                                                                                                                                                                                        |   | **200****7**                        |      |   |   | **200****6**                      |   |
|                                                                                                                                                                                        |   | **(In                  thousands)** |      |
| **ASSETS**                                                                                                                                                                                  |   |                                |      |   |   |                              |   |   |   |
| Current                  Assets:                                                                                                                                                            |   |                                |      |   |   |                              |   |   |   |
|                          Cash and cash equivalents                                                                                                       |   | $                                   | 603       |   |   |                              | $      | 589 |   |
|                          Restricted cash                                                                                                                 |   |                                | 19        |   |   |                              |   | 18 |   |
|                          Accounts receivable                                                                                                             |   |                                | 191,893   |   |   |                              |   | 200,415 |   |
|                          Materials and supplies                                                                                                          |   |                                | 18,402    |   |   |                              |   | 18,901 |   |
|                          Other                                                                                                                           |   |                                | 11,312    |   |   |                              |   | 13,017 |   |
|                         Total                  current assets       |   |                                | 222,229   |   |   |                              |   | 232,940 |   |
|                                                                                                                                                                                        |   |                                |      |   |   |                              |   |   |   |
|  Property                  and Equipment:                                                                                                                                              |   |                                |      |   |   |                              |   |   |   |
|                          Drilling equipment                                                                                                              |   |                                | 828,730   |   |   |                              |   | 781,190 |   |
|                          Oil and natural gas properties, on the full cost                                                                                |   |                                |      |   |   |                              |   |   |   |
|                              method:                                                                                                 |   |                                |      |   |   |                              |   |   |   |
|                 Proved                  properties                                                          |   |                                | 1,394,270 |   |   |                              |   | 1,330,010 |   |
|                 Undeveloped                  leasehold not being amortized                                  |   |                                | 59,774    |   |   |                              |   | 53,687 |   |
|                          Gas gathering and processing equipment                                                                                          |   |                                | 93,234    |   |   |                              |   | 85,339 |   |
|                          Transportation equipment                                                                                                        |   |                                | 20,875    |   |   |                              |   | 20,749 |   |
|                          Other                                                                                                                           |   |                                | 18,092    |   |   |                              |   | 17,082 |   |
|                                                                                                                                                                                        |   |                                | 2,414,975 |   |   |                              |   | 2,288,057 |   |
| Less                  accumulated depreciation, depletion, amortization                                                                                                                     |   |                                |      |   |   |                              |   |   |   |
|                      and impairment                                                                                                                                          |   |                                | 778,921   |   |   |                              |   | 735,394 |   |
|                         Net                  property and equipment |   |                                | 1,636,054 |   |   |                              |   | 1,552,663 |   |
|                                                                                                                                                                                        |   |                                |      |   |   |                              |   |   |   |
| Goodwill                                                                                                                                                                                    |   |                                | 57,524    |   |   |                              |   | 57,524 |   |
| Other                  Intangible Assets, Net                                                                                                                                               |   |                                | 16,435    |   |   |                              |   | 17,087 |   |
| Other                  Assets                                                                                                                                                               |   |                                | 14,023    |   |   |                              |   | 13,882 |   |
| Total                  Assets                                                                                                                                                               |   | $                                   | 1,946,265 |   |   |                              | $      | 1,874,096 |   |

**UNIT        CORPORATION AND SUBSIDIARIES**

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

|                                                                                                                                                                                               |   | **March                  31****,**  |      |   |   | **December                  31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|--------|--------|-----------------------------------|--------|
|                                                                                                                                                                                               |   | **200****7**                        |      |   |   | **200****6**                      |   |
|                                                                                                                                                                                               |   | **(In                  thousands)** |      |
| **LIABILITIES                  AND SHAREHOLDERS’ EQUITY**                                                                                                                                    |   |                                |      |   |   |                              |   |   |   |
| Current                  Liabilities:                                                                                                                                                              |   |                                |      |   |   |                              |   |   |   |
|                          Accounts payable                                                                                                                       |   | $                                   | 97,084    |   |   |                              | $      | 92,125 |   |
|                          Accrued liabilities                                                                                                                    |   |                                | 45,304    |   |   |                              |   | 52,166 |   |
|                          Income taxes payable                                                                                                                   |   |                                | 18,091    |   |   |                              |   | 2,956 |   |
|                          Contract advances                                                                                                                      |   |                                | 4,421     |   |   |                              |   | 5,061 |   |
|                          Current portion of other liabilities                                                                                                   |   |                                | 10,037    |   |   |                              |   | 8,634 |   |
|                                          Total current liabilities              |   |                                | 174,937   |   |   |                              |   | 160,942 |   |
|                                                                                                                                                                                               |   |                                |      |   |   |                              |   |   |   |
| Long-Term                  Debt                                                                                                                                                                    |   |                                | 152,000   |   |   |                              |   | 174,300 |   |
|                                                                                                                                                                                               |   |                                |      |   |   |                              |   |   |   |
| Other                  Long-Term Liabilities                                                                                                                                                       |   |                                | 55,680    |   |   |                              |   | 55,741 |   |
|                                                                                                                                                                                               |   |                                |      |   |   |                              |   |   |   |
| Deferred                  Income Taxes                                                                                                                                                             |   |                                | 337,997   |   |   |                              |   | 325,077 |   |
|                                                                                                                                                                                               |   |                                |      |   |   |                              |   |   |   |
| Shareholders’                  Equity:                                                                                                                                                       |   |                                |      |   |   |                              |   |   |   |
|                          Preferred stock, $1.00 par value, 5,000,000 shares                                                                                     |   |                                |      |   |   |                              |   |   |   |
|                              authorized, none issued                                                                                        |   |                                | ---       |   |   |                              |   | --- |   |
|                          Common stock, $0.20 par value, 175,000,000 shares                                                                                      |   |                                |      |   |   |                              |   |   |   |
|                              authorized, 46,399,260 and 46,283,990 shares                                                                   |   |                                |      |   |   |                              |   |   |   |
|                              issued, respectively                                                                                           |   |                                | 9,275     |   |   |                              |   | 9,257 |   |
|                          Capital in excess of par value                                                                                                         |   |                                | 338,691   |   |   |                              |   | 333,833 |   |
|                          Accumulated other comprehensive income (loss)                                                                                          |   |                                | (404      | )      |   |                              |   | 1,339 |   |
|                          Retained earnings                                                                                                                      |   |                                | 878,089   |   |   |                              |   | 813,607 |   |
|                                           Total shareholders’ equity |   |                                | 1,225,651 |   |   |                              |   | 1,158,036 |   |
| Total                  Liabilities and Shareholders’ Equity                                                                                                                                  |   | $                                   | 1,946,265 |   |   |                              | $      | 1,874,096 |   |

**UNIT        CORPORATION AND SUBSIDIARIES**

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

|                                                      | **Three                  Months Ended**                  |    |     |
|-----------------------------------------------------------|----------------------------------------------------------|---------|----------|
|                                                      | **March                  31,**                           |    |     |
|                                                      | **2007**                                                 |    | **2006** |   |   |
|                                                      | (In                  thousands except per share amounts) |    |     |
| Revenues:                                                 |                                                     |    |     |   |   |   |   |
| Contract                  drilling                        | $                                                        | 160,285 |     | $ | 161,430 |   |   |
| Oil                  and natural gas                      |                                                     | 86,106  |     |   | 94,326 |   |   |
| Gas                  gathering and processing             |                                                     | 30,768  |     |   | 25,482 |   |   |
| Other                                                     |                                                     | 112     |     |   | 1,570 |   |   |
| Total                  revenues                           |                                                     | 277,271 |     |   | 282,808 |   |   |
|                                                      |                                                     |    |     |   |   |   |   |
| Expenses:                                                 |                                                     |    |     |   |   |   |   |
| Contract                  drilling:                       |                                                     |    |     |   |   |   |   |
| Operating                  costs                          |                                                     | 76,287  |     |   | 80,309 |   |   |
| Depreciation                                              |                                                     | 12,717  |     |   | 11,841 |   |   |
| Oil                  and natural gas:                     |                                                     |    |     |   |   |   |   |
| Operating                  costs                          |                                                     | 22,139  |     |   | 18,306 |   |   |
| Depreciation,                  depletion and amortization |                                                     | 29,347  |     |   | 24,182 |   |   |
| Gas                  gathering and processing:            |                                                     |    |     |   |   |   |   |
| Operating                  costs                          |                                                     | 27,501  |     |   | 22,801 |   |   |
| Depreciation                  and amortization            |                                                     | 2,339   |     |   | 1,150 |   |   |
| General                  and administrative               |                                                     | 5,182   |     |   | 3,966 |   |   |
| Interest                                                  |                                                     | 1,641   |     |   | 990 |   |   |
| Total                  expenses                           |                                                     | 177,153 |     |   | 163,545 |   |   |
| Income                  Before Income Taxes               |                                                     | 100,118 |     |   | 119,263 |   |   |
|                                                      |                                                     |    |     |   |   |   |   |
| Income                  Tax Expense:                      |                                                     |    |     |   |   |   |   |
| Current                                                   |                                                     | 22,697  |     |   | 30,158 |   |   |
| Deferred                                                  |                                                     | 12,939  |     |   | 14,192 |   |   |
| Total                  income taxes                       |                                                     | 35,636  |     |   | 44,350 |   |   |
| Net                  Income                               | $                                                        | 64,482  |     | $ | 74,913 |   |   |
|                                                      |                                                     |    |     |   |   |   |   |
| Net                  Income per Common Share:             |                                                     |    |     |   |   |   |   |
| Basic                                                     | $                                                        | 1.39    |     | $ | 1.62 |   |   |
|                                                      |                                                     |    |     |   |   |   |   |
| Diluted                                                   | $                                                        | 1.39    |     | $ | 1.61 |   |   |

**UNIT        CORPORATION AND SUBSIDIARIES**

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

|                                                                                                                                                                                                  |   | **Three                  Months Ended** |     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                                                                                                                                                  |   | **March                  31,**          |     |
|                                                                                                                                                                                                  |   | **2007**                                |     |   |   | **2006** |   |
|                                                                                                                                                                                                  |   |                                    |     |   |   |   |   |
|                                                                                                                                                                                                  |   | **(In                  thousands)**     |     |
|  Cash                  Flows From Operating Activities:                                                                                                                                          |   |                                    |     |   |   |   |   |   |   |
|                          Net income                                                                                                                                |   | $                                       | 64,482   |   |   |   | $ | 74,913 |   |
|                          Adjustments to reconcile net income to net cash                                                                                           |   |                                    |     |   |   |   |   |   |   |
|                              provided (used) by operating activities:                                                                          |   |                                    |     |   |   |   |   |   |   |
|                                  Depreciation, depletion and amortization                                                  |   |                                    | 44,617   |   |   |   |   | 37,340 |   |
|                                  Deferred tax expense                                                                      |   |                                    | 12,939   |   |   |   |   | 14,192 |   |
|                                  Other                                                                                     |   |                                    | 2,379    |   |   |   |   | 1,492 |   |
|                          Changes in operating assets and liabilities                                                                                               |   |                                    |     |   |   |   |   |   |   |
|                              increasing (decreasing) cash:                                                                                     |   |                                    |     |   |   |   |   |   |   |
|                                  Accounts receivable                                                                       |   |                                    | 8,522    |   |   |   |   | 16,614 |   |
|                                  Accounts payable                                                                          |   |                                    | (15,877  | ) |   |   |   | (20,177 | ) |
|                                  Materials and supplies inventory                                                          |   |                                    | 499      |   |   |   |   | (2,063 | ) |
|                                  Accrued liabilities                                                                       |   |                                    | 10,619   |   |   |   |   | 12,324 |   |
|                                  Contract advances                                                                         |   |                                    | (640     | ) |   |   |   | 5,338 |   |
|                                  Other - net                                                                               |   |                                    | 1,166    |   |   |   |   | 876 |   |
|                                          Net cash provided by operating activities |   |                                    | 128,706  |   |   |   |   | 140,849 |   |
|                                                                                                                                                                                                  |   |                                    |     |   |   |   |   |   |   |
| Cash                  Flows From Investing Activities:                                                                                                                                                |   |                                    |     |   |   |   |   |   |   |
|                          Capital expenditures                                                                                                                      |   |                                    | (112,403 | ) |   |   |   | (82,709 | ) |
|                          Proceeds from disposition of assets                                                                                                       |   |                                    | 1,153    |   |   |   |   | 2,889 |   |
|                          Other-net                                                                                                                                 |   |                                    | (1       | ) |   |   |   | (1,339 | ) |
|                                          Net cash used in investing activities     |   |                                    | (111,251 | ) |   |   |   | (81,159 | ) |
|                                                                                                                                                                                                  |   |                                    |     |   |   |   |   |   |   |
| Cash                  Flows From Financing Activities:                                                                                                                                                |   |                                    |     |   |   |   |   |   |   |
|                          Borrowings under line of credit                                                                                                           |   |                                    | 22,100   |   |   |   |   | 21,500 |   |
|                          Payments under line of credit                                                                                                             |   |                                    | (44,400  | ) |   |   |   | (76,200 | ) |
|                          Proceeds from exercise of stock options                                                                                                   |   |                                    | 191      |   |   |   |   | 625 |   |
|                          Book overdrafts                                                                                                                           |   |                                    | 4,668    |   |   |   |   | (5,741 | ) |
|                                          Net cash used in financing activities     |   |                                    | (17,441  | ) |   |   |   | (59,816 | ) |
|                                                                                                                                                                                                  |   |                                    |     |   |   |   |   |   |   |
| Net                  Increase (Decrease) in Cash and Cash Equivalents                                                                                                                                 |   |                                    | 14       |   |   |   |   | (126 | ) |
|                                                                                                                                                                                                  |   |                                    |     |   |   |   |   |   |   |
| Cash                  and Cash Equivalents, Beginning of Year                                                                                                                                         |   |                                    | 589      |   |   |   |   | 947 |   |
| Cash                  and Cash Equivalents, End of Period                                                                                                                                             |   | $                                       | 603      |   |   |   | $ | 821 |   |

**UNIT        CORPORATION AND SUBSIDIARIES**

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

|                                                                                                                                                                                    |   | **Three                  Months Ended** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------|
|                                                                                                                                                                                    |   | **March                  31,**          |   |
|                                                                                                                                                                                    |   | **200****7**                            |   | **200****6** |   |
|                                                                                                                                                                                    |   | **(In                  thousands)**     |   |
| Net                  Income                                                                                                                                                             |   | $                                       | 64,482 |   | $ | 74,913 |   |
| Other                  Comprehensive Income,                                                                                                                                            |   |                                    |   |   |   |   |   |
|                          Net of Taxes:                                                                                                               |   |                                    |   |   |   |   |   |
|                                  Change in value of cash flow derivative                                     |   |                                    |   |   |   |   |   |
|                     instruments                  used as cash flow hedges           |   |                                    |   |   |   |   |   |
|                                      (net of tax of $877 and $64)                        |   |                                    | (1,534 | ) |  | 224 |   |
|                                  Reclassification -                                                          |   |                                    |   |   |   |   |   |
|                                      derivative settlements (net of tax or $114 and $26) |   |                                    | (209   | ) |   | (50 | ) |
| Comprehensive                  Income                                                                                                                                                   |   | $                                       | 62,739 |   | $ | 75,087 |   |

**UNIT        CORPORATION AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS**

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

*Share-Based        Payment*

**NOTE        2 - EARNINGS PER SHARE**

|                                                                                                    |   |                                                         |   | **Weighted**      |   |          |   |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|-------------------|--------|---------------|--------|
|                                                                                                    |   | **Income**                                                   |   | **Shares**        |   | **Per-Share** |   |
|                                                                                                    |   | **(Numerator)**                                              |   | **(Denominator)** |   | **Amount**    |   |
|                                                                                                    |   | **(In                  thousands except per share amounts)** |   |
| For                  the Three Months Ended                                                             |   |                                                         |   |              |   |          |   |   |   |   |
|     March                  31, 2007:                                                |   |                                                         |   |              |   |          |   |   |   |   |
|         Basic                  earnings per common share        |   | $                                                            | 64,482 |              |   | 46,330        |   | $ | 1.39 |   |
|                                                                                                    |   |                                                         |   |              |   |          |   |   |   |   |
|                          Effect of dilutive stock options and grants |   |                                                         | ---    |              |   | 203           |   |   | --- |   |
|                                                                                                    |   |                                                         |        |              |   |               |   |   |  |   |
|                          Diluted earnings per common share           |   | $                                                            | 64,482 |              |   | 46,533        |   | $ | 1.39 |   |
|                                                                                                    |   |                                                         |   |              |   |          |   |   |   |   |
| For                  the Three Months Ended                                                             |   |                                                         |   |              |   |          |   |   |   |   |
|                      March 31, 2006:                                                     |   |                                                         |   |              |   |          |   |   |   |   |
|                          Basic earnings per common share             |   | $                                                            | 74,913 |              |   | 46,200        |   | $ | 1.62 |   |
|                                                                                                    |   |                                                         |   |              |   |          |   |   |   |   |
|                          Effect of dilutive stock options            |   |                                                         | ---    |              |   | 214           |   |   | (0.01 | ) |
|                                                                                                    |   |                                                              |   |              |        |               |   |  |  |   |
|                          Diluted earnings per common share           |   | $                                                            | 74,913 |              |   | 46,414        |   | $ | 1.61 |   |

**NOTE        3 - LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES**

|                                                                    |   | **March                  31,**      |    | **December                  31,** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------|---------|-----------------------------------|--------|
|                                                                    |   | **200****7**                        |    | **200****6**                      |   |
|                                                                    |   | **(In                  thousands)** |    |
| Revolving                  Credit Facility,                             |   |                                |    |                              |   |   |   |
|                      with Interest at March 31, 2007 and |   |                                |    |                              |   |   |   |
|                      December 31, 2006 of 6.4%**,**      |   | $                                   | 152,000 |                              | $      | 174,300 |   |
| Less                  Current Portion                                   |   |                                | ---     |                              |   | --- |   |
|                                                                    |   |                                |    |                              |   |   |   |
| Total                  Long-Term Debt                                   |   | $                                   | 152,000 |                              | $      | 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 banks. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | consolidated                  net worth of at least $350 million, |
|--------|-------|-------------------------------------------------------------------|

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

|   | **.** | a                  leverage ratio of long-term debt to consolidated EBITDA (as defined                  in the                  credit agreement) for the most recently ended rolling four fiscal                  quarters                  of no greater than 3.25 to 1.0. |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                               |   |                                | **March                  31,** |   |   | **December                  31,** |   |
|----------------------------------------------------|--------|-------------------------------------|--------------------------------|--------|--------|-----------------------------------|--------|
|                                               |   |                                | **2007**                       |   |   | **2006**                          |   |
|                                               |   | **(In                  thousands)** |
|                                               |   |                                |                           |   |   |                              |   |
| Separation                  Benefit Plans          |   | $                                   | 3,752                          |   | $      | 3,516                             |   |
| Deferred                  Compensation Plan        |   |                                | 2,763                          |   |   | 2,544                             |   |
| Retirement                  Agreement              |   |                                | 1,224                          |   |   | 1,386                             |   |
| Workers’                  Compensation       |   |                                | 22,643                         |   |   | 22,157                            |   |
| Gas                  Balancing Liability           |   |                                | 1,080                          |   |   | 1,080                             |   |
| Plugging                  Liability                |   |                                | 34,255                         |   |   | 33,692                            |   |
|                                               |   |                                | 65,717                         |   |   | 64,375                            |   |
| Less                  Current Portion              |   |                                | 10,037                         |   |   | 8,634                             |   |
| Total                  Other Long-Term Liabilities |   | $                                   | 55,680                         |   | $      | 55,741                            |   |

**NOTE        4 - ASSET RETIREMENT OBLIGATIONS**

* *

|                                                |   | **Three****Months Ended**      |   |
|-----------------------------------------------------|--------|--------------------------------|--------|
|                                                |   | **March                  31,** |   |
|                                                |   | **200****7**                   |   | **200****6** |   |
|                                                |   | **(In****thousands)**          |   |
| Plugging                  Liability, January 1      |   | $                              | 33,692 |   | $ | 22,015 |   |
| Accretion                  of Discount              |   |                           | 434    |   |   | 310 |   |
| Liability                  Incurred                 |   |                           | 325    |   |   | 323 |   |
| Liability                  Settled                  |   |                           | (331   | ) |   | (18 | ) |
| Revision                  of Estimates              |   |                           | 135    |   |   | 6,968 |   |
| Plugging                  Liability, March 31       |   |                           | 34,255 |   |   | 29,598 |   |
| Less                  Current Portion               |   |                           | 1,091  |   |   | 477 |   |
| Total                  Long-Term Plugging Liability |   | $                              | 33,164 |   | $ | 29,121 |   |

**NOTE        5 - NEW ACCOUNTING PRONOUNCEMENTS**

**NOTE        6 - HEDGING ACTIVITY**

| **First                  Contract:**  |                                        |                                                      |   |
|---------------------------------------|---------------------------------------------|-----------------------------------------------------------|--------|
|                                  | Production                  volume covered  | 10,000                  MMBtus/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                  MMBtus/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    |

| **First                    Contract:** |                                          |                                                        |   |
|----------------------------------------|-----------------------------------------------|-------------------------------------------------------------|--------|
|                                   | Production                    volume covered  | 10,000                    MMBtus/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        7 - INDUSTRY SEGMENT INFORMATION**

|                                                                                                                                                                               |   | **Three                  Months Ended** |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|---------|
|                                                                                                                                                                               |   | **March                  31****,**      |    |
|                                                                                                                                                                               |   | **200****7**                            |    | **200****6** |   |
|                                                                                                                                                                               |   | **(In                  thousands)**     |    |
| Revenues:                                                                                                                                                                          |   |                                    |    |   |   |   |   |
|                          Contract drilling                                                                                                      |   | $                                       | 168,813 |   | $ | 167,682 |   |
|                          Elimination of inter-segment revenue                                                                                   |   |                                    | 8,528   |   |   | 6,252 |   |
|                          Contract drilling net of                                                                                               |   |                                    |    |   |   |   |   |
|                              inter-segment revenue                                                                          |   |                                    | 160,285 |   |   | 161,430 |   |
|                                                                                                                                                                               |   |                                    |    |   |   |   |   |
|                          Oil and natural gas                                                                                                    |   |                                    | 86,106  |   |   | 94,326 |   |
|                                                                                                                                                                               |   |                                    |    |   |   |   |   |
|                          Gas gathering and processing                                                                                           |   |                                    | 33,931  |   |   | 29,238 |   |
|                          Elimination of inter-segment revenue                                                                                   |   |                                    | 3,163   |   |   | 3,756 |   |
|                          Gas gathering and processing                                                                                           |   |                                    |    |   |   |   |   |
|                              net of inter-segment revenue                                                                   |   |                                    | 30,768  |   |   | 25,482 |   |
|                                                                                                                                                                               |   |                                    |    |   |   |   |   |
|         Other                  (1)                                                                                                         |   |                                    | 112     |   |   | 1,570 |   |
|                                          Total revenues         |   | $                                       | 277,271 |   | $ | 282,808 |   |
|                                                                                                                                                                               |   |                                    |    |   |   |   |   |
| Operating                  Income (2):                                                                                                                                             |   |                                    |    |   |   |   |   |
|                          Contract drilling                                                                                                      |   | $                                       | 71,281  |   | $ | 69,280 |   |
|                          Oil and natural gas                                                                                                    |   |                                    | 34,620  |   |   | 51,838 |   |
|                          Gas gathering and processing                                                                                           |   |                                    | 928     |   |   | 1,531 |   |
|                                          Total operating income |   |                                    | 106,829 |   |   | 122,649 |   |
|                          General and administrative                                                                                             |   |                                    |    |   |   |   |   |
|                              expense                                                                                        |   |                                    | (5,182  | ) |   | (3,966 | ) |
|                          Interest expense                                                                                                       |   |                                    | (1,641  | ) |   | (990 | ) |
|                          Other income - net                                                                                                     |   |                                    | 112     |   |   | 1,570 |   |
|                                  Income before income taxes                                             |   | $                                       | 100,118 |   | $ | 119,263 |   |

| (1)   | Includes                  a $1.0 million gain 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**

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

***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.                                                               |

| •                  land contract drilling carried out by our subsidiary Unit Drilling                  Company                  and its subsidiary Unit Texas Drilling, L.L.C.;                                              |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •                  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 and processing) carried out by our subsidiary Superior                  Pipeline                  Company, L.L.C. |

|                                                             |   |  **March                  31,**                             |      |  **March                  31,** |   |    | **Percent** |   |
|------------------------------------------------------------------|--------|------------------------------------------------------------------|-----------|--------------------------------------|--------|---------|-------------|--------|
|                                                             |   | **2007**                                                         |      | **2006**                             |   |    | **Change**  |   |
|                                                             |   | **(In                  thousands except percent amounts)**  |
|                                                             |   |                                                             |      |                                 |   |    |        |   |   |   |
| Working                  Capital                                 |   | $                                                                | 47,292    |                                 | $      | 44,242  |        |   | 7 |                      % |
| Long-Term                  Debt                                  |   | $                                                                | 152,000   |                                 | $      | 90,300  |        |   | 68 | % |
| Shareholders’                  Equity                      |   | $                                                                | 1,225,651 |                                 | $      | 913,411 |        |   | 34 | % |
| Ratio                  of Long-Term Debt to Total Capitalization |   |                                                             | 11        | %                                    |   | 9       | %           |   | 22 | % |
| Net                  Income                                      |   | $                                                                | 64,482    |                                 | $      | 74,913  |        |   | (14 | )% |
| Net                  Cash Provided by Operating Activities       |   | $                                                                | 128,706   |                                 | $      | 140,849 |        |   | (9 | )% |
| Net                  Cash Used in Investing Activities           |   | $                                                                | (111,251  | )                                    | $      | (81,159 | )           |   | 37 | % |
| Net                  Cash Used In Financing Activities           |   | $                                                                | (17,441   | )                                    | $      | (59,816 | )      |   | (71 | )% |

|                                                           |   | **March                  31,** |    | **March                  31,** |   |    | **Percent** |   |
|---------------------------------------------------------------------|--------|--------------------------------|---------|--------------------------------|--------|---------|-------------|--------|
|                                                                |   | **2007**                       |    | **2006**                       |   |    | **Change**  |   |
| Oil                  Production (MBbls)                             |   |                           | 356     |                           |   | 327     |        |   | 9 | % |
| Natural                  Gas Production (MMcf)                      |   |                           | 10,673  |                           |   | 10,713  |        |   | --- | % |
| Average                  Oil Price Received                         |   | $                              | 47.59   |                           | $      | 54.53   |        |   | (13 | )% |
| Average                  Oil Price Received Excluding Hedges        |   | $                              | 47.59   |                           | $      | 54.53   |        |   | (13 | )% |
| Average                  Natural Gas Price Received                 |   | $                              | 6.37    |                           | $      | 7.04    |        |   | (10 | )% |
| Average                  Natural Gas Price Received Excluding       |   |                           |    |                           |   |    |        |   |   |   |
| Hedges                                                              |   | $                              | 6.36    |                           | $      | 7.04    |        |   | (10 | )% |
| Average                  Number of Our Drilling Rigs in Use During  |   |                           |    |                           |   |    |        |   |   |   |
| the                  Period                                         |   |                           | 96.8    |                           |   | 108.6   |        |   | (11 | )% |
| Total                  Number of Drilling Rigs Available at the End |   |                           |    |                           |   |    |        |   |   |   |
| of                  the Period                                      |   |                           | 118     |                           |   | 111     |        |   | 6 | % |
| Average                  Dayrate                                    |   | $                              | 19,427  |                           | $      | 17,122  |        |   | 13 | % |
| Gas                  Gathered—MMBtu/day                       |   |                           | 226,081 |                           |   | 215,341 |        |   | 5 | % |
| Gas                  Processed—MMBtu/day                      |   |                           | 43,327  |                           |   | 30,668  |        |   | 41 | % |
| Number                  of Active Natural Gas Gathering Systems     |   |                           | 37      |                           |   | 36      |        |   | 3 | % |

***Our        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 banks. |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | **.** | consolidated                  net worth of at least $350 million, |
|--------|-------|-------------------------------------------------------------------|

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

|   | **.** | a                  leverage ratio of long-term debt to consolidated EBITDA (as defined                  in the                  loan agreement) for the most recently ended rolling four fiscal                  quarters                  of no greater than 3.25 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)                              |   |   |   | $                                           | 161,989 |   | $ | 8,558 |   | $ | 153,431 |   | $ | --- |   | $ | --- |   |
| Retirement                  Agreements (2)                  |   |   |   |                                        | 1,224   |   |   | 726 |   |   | 498 |   |   | --- |   |   | --- |   |
| Operating                  Leases (3)                       |   |   |   |                                        | 4,488   |   |   | 1,446 |   |   | 2,583 |   |   | 459 |   |   | --- |   |
| Drill                  Pipe and                             |   |   |   |                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Drilling Components (4) |   |   |   |                                        | 33,195  |   |   | 33,195 |   |   | --- |   |   | --- |   |   | --- |   |
| SerDrilco                  Inc. Earn-Out                    |   |   |   |                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Agreement (5)           |   |   |   |                                        | 17,866  |   |   | 17,866 |   |   | --- |   |   | --- |   |   | --- |   |
| Total                  Contractual                          |   |   |   |                                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations                                                 |   |   |   | $                                           | 218,762 |   | $ | 61,791 |   | $ | 156,512 |   | $ | 459 |   | $ | --- |   |

|   | (1) | See                  the previous discussion in MD&A regarding our bank credit facility.                  This obligation is presented in accordance with the terms of the                  credit                  facility and includes interest calculated at the March 31, 2007                  interest                  rate of 6.4% 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 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 payments                of                $25,000 through June 2009. In the first quarter of 2004, we assumed                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                  will be paid in quarterly payments of $12,500 through December                  31, 2007.                  In the first quarter of 2005, we recorded $0.7 million in 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, will be paid in monthly payments of $31,250 starting                  in November                  2006 and continuing 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 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 $30.7 million                  of                  drill pipe and drill collars. We have also committed to purchase                  $3.1                  million of rig components with 20% or $0.6 million paid through                  March 31,                  2007. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | On                  December 8, 2003, the company acquired SerDrilco Incorporated and                  its                  subsidiary, Service Drilling Southwest, L.L.C., for $35.0 million                  in cash.                  The terms of the acquisition include an earn-out provision allowing                  the                  sellers to receive one-half of the cash flow in excess of $10.0                  million                  for each of the three years following the acquisition. For the                  year ending                  December 31, 2006, the third and final year of the earn-out period,                  the                  drilling rigs included in the earn-out provision had cash flow                  providing                  an earn-out of $17.9 million which was paid in April                  2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |   |   |   |   |   |          |    | **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              |   |   |   |   |   |          |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Plan (1)        |   |   |   |   |   | $             | 2,763   |                                                 |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Separation                  Benefit                 |   |   |   |   |   |          |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Plans (2)       |   |   |   |   |   | $             | 3,752   |                                                 | $      | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Plugging                  Liability (3)             |   |   |   |   |   | $             | 34,255  |                                                 | $      | 1,091 |   | $ | 2,262 |   | $ | 3,079 |   | $ | 27,823 |   |
| Gas                  Balancing                      |   |   |   |   |   |          |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Liability (4)   |   |   |   |   |   | $             | 1,080   |                                                 |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Repurchase                                          |   |   |   |   |   |          |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Obligations (5) |   |   |   |   |   |          | Unknown |                                                 |   | Unknown |   |   | Unknown |   |   | Unknown |   |   | Unknown |   |
| Workers’                  Compensation        |   |   |   |   |   |          |    |                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|                      Liability (6)   |   |   |   |   |   | $             | 22,643  |                                                 | $      | 8,220 |   | $ | 4,182 |   | $ | 1,505 |   | $ | 8,736 |   |

|   | (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 consolidated condensed 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 March 31, 2007, there were                  33                  eligible employees participating 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 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***
**.        **

| **First                  Contract:**  |                                        |                                                      |   |
|---------------------------------------|---------------------------------------------|-----------------------------------------------------------|--------|
|                                  | Production                  volume covered  | 10,000                  MMBtus/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                  MMBtus/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    |

| **First                    Contract:** |                                          |                                                        |   |
|----------------------------------------|-----------------------------------------------|-------------------------------------------------------------|--------|
|                                   | Production                    volume covered  | 10,000                    MMBtus/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    |

***Self-Insurance***
*.        *

***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***

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

**NEW ACCOUNTING PRONOUNCEMENTS**

FAS        159)        which permits entities to choose to measure many financial instruments and        certain other items at fair value at specified election dates. A business        entity        is required to report unrealized gains and losses on items for which the        fair        value option has been elected in earnings at each subsequent reporting date.        This statement is expected to expand the use of fair value measurement.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 March 31, 2007 versus Quarter Ended March 31,        2006**

|                                                                                                           |   |   | **Quarter                  Ended** |        | **Quarter                  Ended** |   |        |   |
|----------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------|-------------|------------------------------------|--------|-------------|--------|
|                                                                                                           |   |   | **March                  31****,** |        | **March****31,**                   |   | **Percent** |   |
|                                                                                                           |   |   | **200****7**                       |        | **200****6**                       |   | **Change**  |   |
|                                                                                                           |   |   |                               |        |                               |   |        |   |   |   |
| Total                  Revenue                                                                                 |   |   | $                                  | 277,271,000 |                               | $      | 282,808,000 |   | (2 | )% |
| Net                  Income                                                                                    |   |   | $                                  | 64,482,000  |                               | $      | 74,913,000  |   | (14 | )% |
| **Drilling:**                                                                                                  |   |   |                               |        |                               |   |        |   |   |   |
|                          Revenue                                            |   |   | $                                  | 160,285,000 |                               | $      | 161,430,000 |   | (1 | )% |
|                          Operating costs excluding depreciation             |   |   | $                                  | 76,287,000  |                               | $      | 80,309,000  |   | (5 | )% |
|                          Percentage of revenue from daywork                 |   |   |                               |        |                               |   |        |   |   |   |
|                              contracts                  |   |   |                               | 100         | %                                  |   | 100         | %      |   |   |
|                          Average number of rigs in use                      |   |   |                               | 96.8        |                               |   | 108.6       |   | (11 | )% |
|                          Average dayrate on daywork                         |   |   |                               |        |                               |   |        |   |   |   |
|                              contracts                  |   |   | $                                  | 19,427      |                               | $      | 17,122      |   | 13 | % |
|                          Depreciation                                       |   |   | $                                  | 12,717,000  |                               | $      | 11,841,000  |   | 7 | % |
| **Oil                  and Natural Gas:**                                                                      |   |   |                               |        |                               |   |        |   |   |   |
|                          Revenue                                            |   |   | $                                  | 86,106,000  |                               | $      | 94,326,000  |   | (9 | )% |
|                          Operating costs excluding depreciation,            |   |   |                               |        |                               |   |        |   |   |   |
|                              depletion and amortization |   |   | $                                  | 22,139,000  |                               | $      | 18,306,000  |   | 21 | % |
|                          Average natural gas price (Mcf)                    |   |   | $                                  | 6.37        |                               | $      | 7.04        |   | (10 | )% |
|                          Average oil price (Bbl)                            |   |   | $                                  | 47.59       |                               | $      | 54.53       |   | (13 | )% |
|                          Natural gas production (Mcf)                       |   |   |                               | 10,673,000  |                               |        | 10,713,000  |   | --- | % |
|                          Oil production (Bbl)                               |   |   |                               | 356,000     |                               |   | 327,000     |   | 9 | % |
|                          Depreciation, depletion and                        |   |   |                               |        |                               |   |        |   |   |   |
|                              amortization rate (Mcfe)   |   |   | $                                  | 2.28        |                               | $      | 1.90        |   | 20 | % |
|                          Depreciation, depletion and                        |   |   |                               |        |                               |   |        |   |   |   |
|                              amortization               |   |   | $                                  | 29,347,000  |                               | $      | 24,182,000  |   | 21 | % |
| **Mid-Stream                  Operations:**                                                                    |   |   |                               |        |                               |   |        |   |   |   |
|                          Revenue                                            |   |   | $                                  | 30,768,000  |                               | $      | 25,482,000  |   | 21 | % |
|                          Operating costs excluding depreciation             |   |   |                               |        |                               |   |        |   |   |   |
|                              and amortization           |   |   | $                                  | 27,501,000  |                               | $      | 22,801,000  |   | 21 | % |
|                          Depreciation and amortization                      |   |   | $                                  | 2,339,000   |                               | $      | 1,150,000   |   | 103 | % |
|                          Gas gathered - MMbtu/day                           |   |   |                               | 226,081     |                               |   | 215,341     |   | 5 | % |
|                          Gas processed - MMbtu/day                          |   |   |                               | 43,327      |                               |   | 30,668      |   | 41 | % |
| General                  and Administrative Expense                                                            |   |   | $                                  | 5,182,000   |                               | $      | 3,966,000   |   | 31 | % |
| Interest                  Expense                                                                              |   |   | $                                  | 1,641,000   |                               | $      | 990,000     |   | 66 | % |
| Income                  Tax Expense                                                                            |   |   | $                                  | 35,636      |                               | $      | 44,350      |   | (20 | )% |
| Average                  Interest Rate                                                                         |   |   |                               | 6.08        | %                                  |   | 5.41        | %      | 12 | % |
| Average                  Long-Term Debt Outstanding                                                            |   |   | $                                  | 164,451,000 |                               | $      | 113,599,000 |   | 45 | % |

**SAFE        HARBOR STATEMENT**

|         | . |   | the                      amount and nature of our future capital expenditures;                   |
|--------------|---|--------|--------------------------------------------------------------------------------------------------|
|         | . |   | the                      amount of wells we plan to drill or rework;                             |
|         | . |   | prices                      for oil and natural gas;                                             |
|         | . |   | demand                      for oil and natural gas;                                             |
|         | . |   | our                      exploration prospects;                                                  |
|         | . |   | the                      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**

|   | 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:                  May 3, 2007 | By:/s/                  Larry D. Pinkston                   |
|                               | LARRY                  D. PINKSTON                          |
|                               | Chief                  Executive Officer and Director  |
|                               |                                                        |
| Date:                  May 3, 2007 | By:/s/                  David T. Merrill                    |
|                               | DAVID                  T. MERRILL                           |
|                               | Chief                  Financial Officer and                |
|                               | Treasurer                                                   |