Unit Corporation 40 years serving the energy industry

Unit CorporationUnit Corporation40 years serving the energy industry40 years serving the energy industry

40 years serving the energy industry

What is Unit?What is Unit?

• Contract driller and producer of domestic natural gas

• Founded in 1963; public in 1979 (NYSE: UNT)

• Average daily trading volume for 2003: 199,310 shares

• Added to the S&P SmallCap 600 Index in 2001

• Headquartered in Tulsa, Oklahoma

• Current market cap of $1.25 billion (as of 3/31/04)

• 45,709,568 shares outstanding

• Business units:

• Unit Drilling Company – 88 drilling rigs

• Unit Petroleum Company – 341.7 Bcfe proved reserves*

• Web address: www.unitcorp.com*includes PetroCorp acquisition completed January 30, 2004


Unit’s HistoryUnit’s History

Two consistently growing successful segments

0

30

60

90

0

50

100

150

200

250

300

Drilling Rigs Total Reserves (Bcfe)1963 1979 1993 2003

# Rigs Bcfe


Unit’s StrengthsUnit’s Strengths

• Two consistent growing energy segments:Two consistent growing energy segments:

Unit Drilling CompanyUnit Drilling Company

• 300% increase in rig count since 1993300% increase in rig count since 1993

• 44thth largest U.S. deep onshore drilling contractor largest U.S. deep onshore drilling contractor

Unit Petroleum CompanyUnit Petroleum Company

• 208% average production replacement since 1993208% average production replacement since 1993

• Average annual reserve growth of 12% since 1993Average annual reserve growth of 12% since 1993

• Focused on natural gas, drilling and productionFocused on natural gas, drilling and production

• Strong balance sheet focusStrong balance sheet focus

• Respected and experienced workforce drives Respected and experienced workforce drives consistent resultsconsistent results


U.S. Gas Production per Well & Total Gas WellsU.S. Gas Production per Well & Total Gas Wells

Source: EIA

0

100

200

300

400

500

600

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000

Mcf/well/day Gas Wells x 1000

21.9 Tcf Total Production 19 Tcf


Contract Drilling StrategyContract Drilling Strategy

Unit’s premium service is achieved by supplying:Unit’s premium service is achieved by supplying:

• Top quality equipment

• Experienced personnel

• Alertness to expansion opportunities


Unit Rig FleetUnit Rig Fleet

0

20

40

60

80

100

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Mechanical Electric

4th Largest Deep Drilling Contractor in United States

Hickmanacquisition

9 rigs

Parkeracquisition

13 rigs

Cactusacquisition

20 rigs

SerDrilCoacquisition

12 rigs


Service Drilling Company AcquisitionService Drilling Company Acquisition

Purchased 12 active rigsPurchased 12 active rigs

• $35 million acquisition

• Expected to be immediately accretive

• All rigs located in Anadarko Basin within the Texas Panhandle

• Acquisition includes a 12-truck moving fleet

Strategic fit:Strategic fit:

• Significant drilling contractor in the Texas Panhandle

• Well established franchise developed over 50 years

• Expands a current market area to Unit


Unit Rig Fleet Depth CapacityUnit Rig Fleet Depth Capacity

0

5000

10000

15000

20000

25000

30000450-700 h.p. 750-1000 h.p. 1200-1700 h.p. 2000 h.p. >2500 h.p.

Over 98% of wells drilled are natural gas wellsOver 98% of wells drilled are natural gas wells

6 6

15

32

17

Depthin Feet

Service DrillingCompany rigs

6

5

1


Significant Presence in Major Gas-Producing RegionsSignificant Presence in Major Gas-Producing Regions

HoustonOffice

TulsaHeadquarters

Oklahoma CityOffice

88 2003 Unit Rigs89th rig under construction

8

11

2

748

CasperOffice

12Service Drilling rigs


High Utilization vs. Industry - 2003High Utilization vs. Industry - 2003

0%

20%

40%

60%

80%

100%

450-700 h.p. 750-1000 h.p. 1200-1700 h.p. 2000 h.p. >2500 h.p. 2003

Unit Industry

Unit 1st Qtr. ‘04 Utilization

Unit Current Utilization:

95%


Cash Flow per Operating DayCash Flow per Operating Day

$0

$1,000

$2,000

$3,000

$4,000

$5,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 20041st Qtr

Rig Utilization:38% 44% 65% 80% 67% 62% 85% 90% 63% 83% 93%


$100 $9,000

$75 $8,500

Cash Flow Sensitivity – 88 rigsCash Flow Sensitivity – 88 rigsAnnual SegmentCash Flow ($mm) Rig Rates

Assumed Industry Rig Utilization

$25 $7,500

$50 $8,000

$125 $10,000

80% 85% 90% 95% 100%

Unit 200383%

75%

$150 $11,000


Unit Drilling Company RecapUnit Drilling Company Recap

• Medium and deep depth land drilling

• 4th largest fleet in the United States (88 rigs)

• Rig fleet has tripled in size in the last 10 years

• Average utilization higher than industry


Unit Petroleum Company StrategyUnit Petroleum Company Strategy

Unit provides consistent economic growth of its oil Unit provides consistent economic growth of its oil

and natural gas reserves of at least 150% of each and natural gas reserves of at least 150% of each

year’s production by:year’s production by:

• Generating most drilling prospects internally

• Staying alert for opportunistic acquisitions

• Maintaining strong cost controls


Annual Reserve Additions as a Percent of ProductionAnnual Reserve Additions as a Percent of Production

0%

50%

100%

150%

200%

250%

300%

350%

1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003

Drilling Acquisitions

143% Average Annual Reserve Replacement through drilling over last 20 years143% Average Annual Reserve Replacement through drilling over last 20 years224% Average Annual Reserve Replacement from all sources over last 20 years224% Average Annual Reserve Replacement from all sources over last 20 years

*Not Restated for Questa Activity


PetroCorp Inc. AcquisitionPetroCorp Inc. Acquisition

•Closed – January 30, 2004• Expected to be immediately accretive• Purchase price - $182,000,000 paid in cash

• Preliminary allocation of purchase price:$94,000,000 to working capital$78,000,000 to proved reserves$10,000,000 to undeveloped leasehold & partnership interest

• PetroCorp operating data:12/31/03 2003Reserves Production

Oil (MBbls) 2,740 416Natural Gas (MMcf) 40,260 4,200


Reserve GrowthReserve Growth

0

50

100

150

200

250

300

1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003

Natural Gas Oil*Not Restated for Questa Activity

BcfeAverage annual reserve growth since 1993 of 12%


Production GrowthProduction Growth

Mcfe


0

5,000

10,000

15,000

20,000

25,000

1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003 2004

First Quarter Year-End


Core Producing AreasCore Producing Areas

Proved ReservesAt 12/31/03: 341.7 Bcfe(includes PetroCorp acquisition)

HoustonOffice

TulsaHeadquarters

Gulf CoastBasin

ArkomaBasin

AnadarkoBasin

PermianBasin

12%

46%23%

17%


Wells DrilledWells Drilled


0

50

100

150

200

1994* 1995* 1996* 1997* 1998* 1999* 2000 2001 2002 2003 2004

First Quarter Year End


Acreage Inventory GrowthAcreage Inventory Growth

200,000

400,000

600,000

800,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Developed Undeveloped*Not Restated for Questa Activity


Prospect Inventory Drives Reserve GrowthProspect Inventory Drives Reserve Growth

0

100

200

300

400

500

Arkoma Basin Anadarko Basin Gulf Coast/WestTexas/Denver

Total

Prospects Proved Undeveloped

Number ofProspects

Over 90% of our drillsites are internally generated. Over 90% of our drillsites are internally generated. 127 are identified as PUD’s and reflected in our reserve base. 127 are identified as PUD’s and reflected in our reserve base. 288 (40% WI) have unrisked probable net reserves of 210 Bcfge.288 (40% WI) have unrisked probable net reserves of 210 Bcfge.


Unit’s Return HistoryUnit’s Return History

Finding Cost/Finding Cost/ Years Years Mcfe Mcfe Rev/McfeRev/Mcfe RORROR

1515 $0.94$0.94 $2.70$2.70 19.6%19.6%

1010 $1.03$1.03 $2.87$2.87 18.9%18.9%

55 $1.20$1.20 $3.60$3.60 23.4%23.4%

33 $1.65$1.65 $3.95$3.95 15.3%15.3%


$0

$30,000

$60,000

$90,000

$120,000

$150,000

$180,000

$4.87 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50

Gas Price SensitivitiesGas Price Sensitivities

Gas Price per Mcfg2003

Actual

Segment Cash Flow


RecapRecap

• Consistent Reserve Growth

• 2003 – 166% Production Replacement

• 20th consecutive year of replacing more than 150%

of production with new reserves

• Successful Drilling Program

• 20% rate of return for last 15 years

• Drilling program underway

• Expect to drill 165 to 175 wells in 2004,

up 11% to 17% over 2003


Revenues (in millions)Revenues (in millions)

$0

$50

$100

$150

$200

$250

$300

$350

1999 2000 2001 2002 2003 2004

First Quarter Year-End


Earnings per ShareEarnings per Share

-$0.50

$0.00

$0.50

$1.00

$1.50

$2.00

1999 2000 2001 2002 2003 2004



Balance Sheet SummaryBalance Sheet Summary

Working CapitalWorking Capital $20.9$20.9 $25.7$25.7

Total AssetsTotal Assets 712.9712.9 856.8856.8

Long-Term DebtLong-Term Debt .4.4 75.075.0

Shareholder’s EquityShareholder’s Equity 515.8515.8 532.7532.7

Credit Line UndrawnCredit Line Undrawn 99.699.6 75.075.0

Long-Term Debt to Total Capitalization:Long-Term Debt to Total Capitalization: 0%0% 12%12%

12/31/0312/31/03 3/31/043/31/04(In Thousands)


Cash Flow Before Changes in Working Capital (in millions)Cash Flow Before Changes in Working Capital (in millions)

$0

$30

$60

$90

$120

$150

1999 2000 2001 2002 2003 2004



Capital ExpendituresCapital Expenditures

$0

$50,000

$100,000

$150,000

$200,000

1999 2000 2001 2002 2003

Unit Petroleum Unit Drilling Cactus Rig Acquisition

Cactus rig acquisition:7.22 million shares &

$4.5 million cash

(In Thousands)


2004 Capital Program2004 Capital Program

• $95 million budgeted for Unit Petroleum$95 million budgeted for Unit Petroleum– 165 - 175 wells165 - 175 wells– $83 million drilling, $9 million acreage & $83 million drilling, $9 million acreage &

seismic, $3 million acquisitionsseismic, $3 million acquisitions– Focus areas are Anadarko & Arkoma Basins; Focus areas are Anadarko & Arkoma Basins;

Texas Gulf CoastTexas Gulf Coast

• $30 million budgeted for Unit Drilling$30 million budgeted for Unit Drilling– $8 million for drill pipe$8 million for drill pipe– $22 million for rig maintenance & additions$22 million for rig maintenance & additions


Why Unit?Why Unit?

• Two consistent growing energy segments:Two consistent growing energy segments:

Unit Drilling CompanyUnit Drilling Company

• 300% increase in rig count since 1993300% increase in rig count since 1993

• 44thth largest U.S. deep onshore drilling contractor largest U.S. deep onshore drilling contractor

Unit Petroleum CompanyUnit Petroleum Company

• 208% average production replacement since 1993208% average production replacement since 1993

• Average annual reserve growth of 12% since 1993Average annual reserve growth of 12% since 1993

• Focused on natural gas, drilling and productionFocused on natural gas, drilling and production

• Strong balance sheet focusStrong balance sheet focus

• Respected and experienced workforce drives Respected and experienced workforce drives consistent resultsconsistent results


Forward-Looking StatementForward-Looking Statement

This presentation contains forward-looking statements within the This presentation contains forward-looking statements within the

meaning of the Securities Litigation Reform Act that involve risks meaning of the Securities Litigation Reform Act that involve risks

and uncertainties, including the closing of pending acquisitions, and uncertainties, including the closing of pending acquisitions,

productive capabilities of the wells, future demand for oil and productive capabilities of the wells, future demand for oil and

natural gas, future rig utilization and dayrates, oil and natural gas natural gas, future rig utilization and dayrates, oil and natural gas

reserve information, anticipated production rates from company reserve information, anticipated production rates from company

wells, the prospective capabilities of offset acreage, anticipated wells, the prospective capabilities of offset acreage, anticipated

oil and natural gas prices, development, operational, oil and natural gas prices, development, operational,

implementation and opportunity risks, and other factors implementation and opportunity risks, and other factors

described from time to time in the company’s publicly available described from time to time in the company’s publicly available

SEC reports, which could cause actual results to differ materially SEC reports, which could cause actual results to differ materially

from those expected.from those expected.

Unit CorporationUnit Corporation40 years serving the energy industry40 years serving the energy industry

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Unit Corporation 40 years serving the energy industry