UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2022~~2023

ORor

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-9260

UNIT CORPORATION

(Exact name of registrant as specified in its charter)


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

8200 South Unit Drive,

Tulsa,

Oklahoma

74132

(Address of principal executive offices)

(Zip Code)

(918) 493-7700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

(Former name, former address and former fiscal year,

if changed since last report)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒ *

* Effective January 1, 2021, the registrant’s obligation to file reports under Section 15(d) of the Securities Exchange Act of 1934 was automatically suspended.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒

Smaller reporting company ☒☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

AsIndicate ~~of November 10,~~by ~~2022,~~check 9mark whether the registrant has filed all documents and reports required to be filed by Section 12,~~612,096~~ ~~shares~~13 or 15(d) of the ~~registrant's~~Securities ~~common~~Exchange ~~stock~~Act ~~were~~of ~~outstanding~~1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of May 11, 2023, 9,633,428 shares of the registrant's common stock were outstanding.

Table of Contents

TABLE OF CONTENTS

		PageNumber
	PART I. Financial Information
Item 1.	Financial Statements (Unaudited)	4
	Notes to Unaudited Condensed Consolidated Financial Statements	119
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3528
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4737
Item 4.	Controls and Procedures	4838
	PART II. Other Information
Item 1.	Legal Proceedings	4939
Item 1A.	Risk Factors	4939
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4939
Item 3.	Defaults Upon Senior Securities	4939
Item 4.	Mine Safety Disclosures	5039
Item 5.	Other Information	5039
Item 6.	Exhibits	5040
Signatures		5141

Table of Contents

Forward-Looking Statements

This report contains “forward-looking statements” – meaning, statements related to future events within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this document that address activities, events or developments we expect or anticipate will or may occur, are forward-looking statements. The words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts,” and similar expressions are used to identify forward-looking statements. This report modifies and supersedes documents filed by us before this report. In addition, certain information we file with the United States Securities and Exchange Commission (SEC) will automatically update and supersede information in this report.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. Future actions, conditions or events, and future results may differ materially from those expressed in our forward-looking statements. Many factors that will determine these results are beyond our ability to control or accurately predict. Specific factors that could cause actual results to differ from those in our forward-looking statements include:

•the amount and nature of our future capital expenditures and how we expect to fund our capital expenditures;

•prices for oil, NGLs, and natural gas;

•demand for oil, NGLs, and natural gas;

•our exploration and drilling prospects;

•the estimates of our proved oil, NGLs, and natural gas reserves;

•oil, NGLs, and natural gas reserve potential;

•development and infill drilling potential;

•expansion and other development trends in the oil and natural gas industry;

•our business strategy;

•our plans to maintain or increase the production of oil, NGLs, and natural gas;

•our ability to utilize the benefits of net operating losses and other deferred tax assets against potential future taxable income;

•the number of gathering systems and processing plants our mid-stream investment may plan to construct or acquire;

•volumes and prices for the natural gas our mid-stream investment gathers and processes;

•expansion and growth of our business and operations;

•demand for our drilling rigs and the rates we charge for the rigs;

•our belief that the outcome of our legal proceedings will not materially affect our financial results;

•our ability to timely secure third-party services used in completing our wells;

•our mid-stream investment's ability to transport or convey our oil, NGLs, or natural gas production to existing pipeline systems;

•the impact of federal and state legislative and regulatory actions affecting our costs and increasing operating restrictions or delays and other adverse impacts on our business;

•the possibility of security threats, including terrorist attacks and cybersecurity breaches, against or otherwise affecting our facilities and systems;

•any projected production guidelines we may issue;

•our anticipated capital budgets;

•our financial condition and liquidity;

•the number of wells our oil and natural gas segment plans to drill; and

•our estimates of any ceiling test write-downs or other potential asset impairments we may have to record in future periods.

These statements are based on our assumptions and analyses considering our experience and our perception of historical trends, current conditions, expected future developments, and other factors we believe are appropriate in the circumstances. Whether actual results and developments will meet our expectations and predictions is subject to risks and uncertainties, any one or combination of which could cause our actual results to differ materially from our expectations and predictions. Some of these risks and uncertainties are:

Table of Contents

•the risk factors discussed in this document and the documents (if any) we incorporate by reference;

•general economic, market, or business conditions;

•the availability and nature of (or lack of) business opportunities we pursue;

•demand for our land drilling services;

•changes in laws and regulations;

•changes in the current geopolitical situation, such as the current conflict occurring between Russia and Ukraine;

•risks relating to financing, including restrictions in our debt agreements and availability and cost of credit;

•risks associated with future weather conditions;

•decreases or increases in commodity prices;

•the amount and terms of our debt;

•future compliance with covenants under our credit agreements;

•our ability to pay dividends and make share repurchases;

•pandemics, epidemics, outbreaks, or other public health events, such as COVID-19; and

•other factors, most of which are beyond our control.

You should not construe this list to be exhaustive. We believe the forward-looking statements in this report are reasonable. However, there is no assurance that the actions, events, or results expressed in forward-looking statements will occur, or if any of them do, of their timing or what impact they will have on our results of operations or financial condition. Because of these uncertainties, you should not put undue reliance on any forward-looking statements. Except as required by law, we disclaim any obligation to update forward-looking information and to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after this document to reflect incorrect assumptions or unanticipated events.

Additional discussion of factors that may affect our forward-looking statements appear elsewhere in this report, including in Item 1A “Risk Factors,” Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 3 "Quantitative and Qualitative Disclosures About Market Risk - Commodity Price Risk.”

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIT CORPORATION AND SUBSIDIARIES

	September 30,2022		December 31,2021
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	179,063	$	64,140
Accounts receivable, net of allowance for credit losses of $2,355 and $2,511 at September 30, 2022 and December 31, 2021, respectively	66,461		87,248
Prepaid expenses and other	4,608		5,542
Total current assets	250,132		156,930
Property and equipment:
Oil and natural gas properties, on the full cost method:
Proved properties	173,413		225,014
Unproved properties not being amortized	4,735		422
Drilling equipment	72,410		66,058
Gas gathering and processing equipment	—		274,748
Transportation equipment	2,712		4,550
Other	8,970		8,631
	262,240		579,423
Less accumulated depreciation, depletion, amortization, and impairment	91,783		128,880
Net property and equipment	170,457		450,543
Equity method investment (Note 15)	1,658		—
Right of use asset (Note 14)	6,951		12,445
Other assets	9,528		9,559
Total assets (1)	$	438,726	$	629,477

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

1.Unit Corporation no longer consolidates the balance sheet of Superior Pipeline Company, L.L.C. (Superior) as of September 30, 2022, as discussed in Note 2 - Summary Of Significant Accounting Policies and Note 15 - Superior Investment. Unit Corporation's consolidated total assets as of December 31, 2021 included current and long-term assets of Superior of $61.1 million and $229.5 million, respectively, which can only be used to settle obligations of Superior. Unit Corporation's consolidated cash and cash equivalents of $64.1 million as of December 31, 2021 included $17.2 million held by Superior.


	March 31, 2023		December 31, 2022
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	170,912	$	213,975
Accounts receivable, net of allowance for credit losses of $2.8 million and $2.7 million at March 31, 2023 and December 31, 2022, respectively	49,145		57,776
Prepaid expenses and other	2,819		3,718
Total current assets	222,876		275,469
Property and equipment:
Oil and natural gas properties, on the full cost method:
Proved properties	182,919		176,986
Unproved properties not being amortized	1,889		6,953
Drilling equipment	77,041		76,640
Other	11,281		11,319
Property and equipment, gross	273,130		271,898
Less: accumulated depreciation, depletion, amortization, and impairment	100,762		96,605
Property and equipment, net	172,368		175,293

Deferred tax assets, net (Note 17)	74,836		—
Equity method investment (Note 15)	1,658		1,658
Right of use asset (Note 14)	9,002		6,551
Other assets	10,086		10,284
Total assets	$	490,826	$	469,255

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,894	$	20,356
Accrued liabilities (Note 8)	10,573		18,716
Current operating lease liability (Note 14)	3,196		1,605

Current derivative liabilities (Note 12)	12,571		23,566
Current portion of other long-term liabilities (Note 9)	5,280		3,989
Total current liabilities	49,514		68,232


Operating lease liability (Note 14)	5,905		5,035
Other long-term liabilities (Note 9)	34,732		33,362
Commitments and contingencies (Note 16)
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 25,000,000 shares authorized; 12,105,297 shares issued and 9,632,905 outstanding at March 31, 2023, and 12,100,356 shares issued and 9,627,964 outstanding at December 31, 2022	121		121
Treasury stock (Note 5)	(79,399)		(79,399)
Capital in excess of par value	253,956		252,464
Retained earnings	225,997		189,440
Total shareholders' equity	400,675		362,626
Total liabilities and shareholders' equity	$	490,826	$	469,255

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~BALANCE~~STATEMENTS ~~SHEETS~~OF OPERATIONS (UNAUDITED) ~~- CONTINUED~~

	September 30,2022		December 31,2021
	Three Months Ended March 31,
	(In thousands)
	2023		2022
LIABILITIES AND SHAREHOLDERS’ EQUITY
	(In thousands except per share amounts)
Current liabilities:
Revenues:
Accounts payable	$	22,395	$	58,625
Oil and natural gas	$	48,026	$	76,810
Accrued liabilities (Note 8)	20,088		22,450
Contract drilling	45,903		28,882
Current operating lease liability (Note 14)	1,581		3,791
Gas gathering and processing	—		82,673
Current derivative liabilities (Note 12)	41,498		40,876
Total revenues	93,929		188,365
Warrant liability (Note 12)	—		19,822
Expenses:
Current portion of other long-term liabilities (Note 9)	4,144		5,574
Operating costs:
Total current liabilities	89,706		151,138
Oil and natural gas	17,164		23,475
Long-term debt (Note 9)	—		19,200
Contract drilling	26,872		26,237
Non-current derivative liabilities (Note 12)	8,316		17,855
Gas gathering and processing	—		62,388
Operating lease liability (Note 14)	5,449		8,677
Total operating costs	44,036		112,100
Other long-term liabilities (Note 9)	31,923		32,939
Depreciation, depletion, and amortization	3,891		11,270
Commitments and contingencies (Note 16)
General and administrative	5,090		6,526
Shareholders' equity:
Gain on disposition of assets (Note 4)	(3,753)		(2,175)
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued	—		—
Total operating expenses	49,264		127,721
Common stock, $0.01 par value, 25,000,000 shares authorized; 12,083,965 shares issued and 9,611,573 outstanding at September 30, 2022, and 12,000,000 shares issued and 10,050,037 outstanding at December 31, 2021	121		120
Income from operations	44,665		60,644
Treasury stock (Note 5)	(79,399)		(51,965)
Other income (expense):
Capital in excess of par value	252,505		198,171
Interest income	1,757		10
Retained earnings	130,105		41,071
Interest expense	(39)		(274)
Total shareholders' equity attributable to Unit Corporation	303,332		187,397
Gain (loss) on derivatives, net (Note 12)	13,595		(64,076)
Non-controlling interests in consolidated subsidiaries	—		212,271
Loss on change in fair value of warrants (Note 13)	—		(36,612)
Total shareholders' equity	303,332		399,668
Loss on deconsolidation of Superior (Note 15)	—		(13,141)
Total liabilities and shareholders' equity (1)	$	438,726	$	629,477
Reorganization items, net	(81)		(3)
Other, net	107		747
Total other income (expense)	15,339		(113,349)
Income (loss) before income taxes	60,004		(52,705)
Income tax expense (benefit), net:
Current	190		—
Deferred	(74,836)		—
Total income tax expense (benefit), net	(74,646)		—
Net income (loss)	134,650		(52,705)
Net loss attributable to non-controlling interests (Note 15)	—		(5,828)
Net income (loss) attributable to Unit Corporation	$	134,650	$	(46,877)
Net income (loss) attributable to Unit Corporation per common share (Note 7):
Basic	$	13.93	$	(4.66)
Diluted	$	13.75	$	(4.66)

1.Unit Corporation no longer consolidates the balance sheet of Superior as of September 30, 2022, as discussed in Note 2 - Summary Of Significant Accounting Policies and Note 15 - Superior Investment. Unit Corporation's consolidated total liabilities as of December 31, 2021 included current and long-term liabilities of Superior of $42.3 million and $21.2 million, respectively. All of Unit Corporation's consolidated long-term debt of $19.2 million as of December 31, 2021 was held by Superior.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

	Three Months Ended September 30,				Nine Months Ended September 30,
	CommonStock		TreasuryStock		Capital in Excess of Par Value		RetainedEarnings (Deficit)		Total
	2022		2021		2022		2021
	(In thousands)
	(In thousands except per share amounts)
Balances as of December 31, 2022	$	121	$	(79,399)	$	252,464	$	189,440	$	362,626
Revenues:
Net income	—		—		—		134,650		134,650
Oil and natural gas	$	80,026	$	52,880	$	257,748	$	149,874
Dividends declared (Note 5)	—		—		—		(98,093)		(98,093)
Contract drilling	40,256		19,158		102,780		52,893
Stock-based compensation	—		—		1,408		—		1,408
Gas gathering and processing	—		91,210		82,673		215,435
Exercise of stock options, net of shares withheld for taxes and exercise price	—		—		(108)		—		(108)
Total revenues	120,282		163,248		443,201		418,202
Exercise of warrants, net of shares withheld for exercise price	—		—		192		—		192
Expenses:
Balances as of March 31, 2023	$	121	$	(79,399)	$	253,956	$	225,997	$	400,675
Operating costs:
Oil and natural gas	21,235		21,210		72,329		55,846
Contract drilling	25,823		15,357		77,823		41,308
Gas gathering and processing	—		62,621		62,388		147,340
Total operating costs	47,058		99,188		212,540		244,494
Depreciation, depletion, and amortization	3,521		15,294		20,452		49,169
General and administrative	5,601		5,126		19,548		18,046
Gain on disposition of assets (Note 4)	(2,158)		(4,031)		(6,399)		(6,213)
Total operating expenses	54,022		115,577		246,141		305,496
Income from operations	66,260		47,671		197,060		112,706
Other income (expense):
Interest expense, net	(37)		(702)		(408)		(3,895)
Loss on derivatives (Note 12)	(12,381)		(39,742)		(73,848)		(104,973)
Loss on change in fair value of warrants (Note 12)	—		(9,054)		(29,323)		(12,628)
Loss on deconsolidation of Superior (Note 15)	—		—		(13,141)		—
Reorganization items, net	(48)		(971)		(90)		(3,959)
Other, net	2,024		(7)		2,956		(762)
Total other income (expense)	(10,442)		(50,476)		(113,854)		(126,217)
Income (loss) before income taxes	55,818		(2,805)		83,206		(13,511)
Income tax expense, net:
Current	—		—		—		—
Deferred	—		—		—		—
Total income tax expense, net	—		—		—		—
Net income (loss)	55,818		(2,805)		83,206		(13,511)
Net loss attributable to non-controlling interests (Note 15)	—		(9,100)		(5,828)		(4,875)
Net income (loss) attributable to Unit Corporation	$	55,818	$	6,295	$	89,034	$	(8,636)
Net income (loss) attributable to Unit Corporation per common share (Note 7):
Basic	$	5.70	$	0.56	$	8.94	$	(0.74)
Diluted	$	5.60	$	0.55	$	8.79	$	(0.74)


	Common Stock		Treasury Stock		Capital in Excess of Par Value		Retained Earnings (Deficit)		Non-controlling Interest in Consolidated Subsidiaries		Total
	(In thousands)
Balances as of December 31, 2021	$	120	$	(51,965)	$	198,171	$	41,071	$	212,271	$	399,668
Net loss	—		—		—		(46,877)		(5,828)		(52,705)
Distributions to non-controlling interests	—		—		—		—		(9,479)		(9,479)
Deconsolidation of Superior	—		—		—		—		(196,964)		(196,964)
Stock-based compensation	—		—		1,038		—		—		1,038
Balances as of March 31, 2022	$	120	$	(51,965)	$	199,209	$	(5,806)	$	—	$	141,558

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES~~CASH INFLOWS ~~SHAREHOLDERS’ EQUITY~~ (UNAUDITED)

	Shareholders' Equity Attributable to Unit Corporation
	Three Months Ended March 31,
	CommonStock		TreasuryStock		Capital in Excess of Par Value		RetainedEarnings (Deficit)		Non-controlling Interest in Consolidated Subsidiaries		Total
	2023		2022
	(In thousands)
Balances as of December 31, 2021	$	120	$	(51,965)	$	198,171	$	41,071	$	212,271	$	399,668
OPERATING ACTIVITIES:
Net loss	—		—		—		(46,877)		(5,828)		(52,705)
Net income (loss)	$	134,650	$	(52,705)
Distributions to non-controlling interests	—		—		—		—		(9,479)		(9,479)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deconsolidation of Superior	—		—		—		—		(196,964)		(196,964)
Depreciation, depletion and amortization	3,891		11,270
Stock-based compensation	—		—		1,038		—		—		1,038
(Gain) loss on derivatives, net (Note 12)	(13,595)		64,076
Balances as of March 31, 2022	$	120	$	(51,965)	$	199,209	$	(5,806)	$	—	$	141,558
Gain (loss) on derivatives settled (Note 12)	2,601		(21,239)
Net income	—		—		—		80,093		—		80,093
Deferred tax benefit	(74,836)		—
Stock-based compensation	—		—		2,848		—		—		2,848
Loss on change in fair value of warrants (Note 12)	—		36,612
Repurchases of common stock	—		(13,276)		—		—		—		(13,276)
Loss on deconsolidation of Superior (Note 15)	—		13,141
Warrant liability reclassification	—		—		49,145		—		—		49,145
Gain on disposition of assets (Note 4)	(3,753)		(2,175)
Balances as of June 30, 2022	$	120	$	(65,241)	$	251,202	$	74,287	$	—	$	260,368
Stock-based compensation plans (Note 6)	1,408		1,038
Net income	—		—		—		55,818		—		55,818
Change in credit loss reserve	62		(29)
Stock-based compensation	—		—		1,872		—		—		1,872
ARO liability accretion (Note 10)	467		493
Vesting of restricted stock units, net of shares withheld for employee taxes	1		—		(569)		—		—		(568)
Contract assets and liabilities, net (Note 3)	816		199
Repurchases of common stock	—		(14,158)		—		—		—		(14,158)
Noncash reorganization items	(70)		(77)
Balances as of September 30, 2022	$	121	$	(79,399)	$	252,505	$	130,105	$	—	$	303,332
Other, net	(226)		(401)
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable	8,569		(12,532)
Prepaid expenses and other	1,061		1,466
Accounts payable	(1,058)		4,107
Accrued liabilities	(2,587)		2,566
Net change in operating assets and liabilities	5,985		(4,393)
Net cash provided by operating activities	57,400		45,810
INVESTING ACTIVITIES:
Capital expenditures	(8,886)		(8,784)
Deconsolidation of Superior cash and cash equivalents (Note 15)	—		(10,119)
Proceeds from disposition of property and equipment (Note 4)	4,797		6,691
Net cash used in investing activities	(4,089)		(12,212)
FINANCING ACTIVITIES:
Dividend and dividend equivalent payments	(96,458)		—
Payments for employee taxes on net settlement of equity awards (Note 6)	(108)		—
Proceeds from exercise of warrants	192		—
Distributions to non-controlling interests (Note 15)	—		(9,479)
Net cash used in financing activities	(96,374)		(9,479)
Net increase (decrease) in cash and cash equivalents	(43,063)		24,119
Cash and cash equivalents, beginning of period	213,975		64,140
Cash and cash equivalents, end of period	$	170,912	$	88,259

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES~~CASH INFLOWS ~~SHAREHOLDERS’ EQUITY~~ (UNAUDITED) - CONTINUED

	Shareholders' Equity Attributable to Unit Corporation
	Three Months Ended March 31,
	CommonStock		TreasuryStock		Capital in Excess of Par Value		RetainedEarnings (Deficit)		Non-controlling Interest in Consolidated Subsidiaries		Total
	2023		2022
	(In thousands)
Balances as of December 31, 2020	$	120	$	—	$	197,242	$	(18,140)	$	246,371	$	425,593
Supplemental disclosure of cash flow information:
Net income (loss)	—		—		—		(1,937)		1,346		(591)
Cash paid (received) for:
Stock-based compensation	—		—		74		—		16		90
Interest paid	$	39	$	285
Balances as of March 31, 2021	$	120	$	—	$	197,316	$	(20,077)	$	247,733	$	425,092
Income taxes	—		—
Net income (loss)	—		—		—		(12,994)		2,879		(10,115)
Changes in accounts payable and accrued liabilities related to purchases of property and equipment	(7,134)		(161)
Stock-based compensation	—		—		245		—		15		260
Changes in accrued liabilities related to dividends declared, but not yet paid	1,636		—
Distributions to non-controlling interests	—		—		—		—		(12,344)		(12,344)
Non-cash additions to oil and natural gas properties related to asset retirement obligation additions and estimate revisions	(271)		(1,483)
Repurchases of common stock	—		(9,048)		—		—		—		(9,048)
Non-cash reductions to oil and natural gas properties related to net changes in asset retirement obligations, accounts receivable, accounts payable, and accrued liabilities resulting from divestitures	14		2,688
Balances as of June 30, 2021	$	120	$	(9,048)	$	197,561	$	(33,071)	$	238,283	$	393,845
Net income (loss) (1)	—		—		—		6,295		(9,100)		(2,805)
Balance correction (Note 2)	—		—		—		(1,437)		1,437		—
Stock-based compensation	—		—		(82)		—		—		(82)
Distributions to non-controlling interests	—		—		—		—		(3,834)		(3,834)
Repurchases of common stock	—		(10,834)		—		—		—		(10,834)
Balances as of September 30, 2021	$	120	$	(19,882)	$	197,479	$	(28,213)	$	226,786	$	376,290

1.Includes a one-time adjustment to correct an error discovered in our second quarter 2021 allocation of earnings from consolidated subsidiaries, as described in Note 2 - Summary Of Significant Accounting Policies.

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2022		2021
	(In thousands)
OPERATING ACTIVITIES:
Net income (loss)	$	83,206	$	(13,511)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization	20,452		49,169
Loss on derivatives (Note 12)	73,848		104,973
Cash payments on derivatives settled (Note 12)	(82,764)		(22,647)
Loss on change in fair value of warrants (Note 12)	29,323		12,628
Loss on deconsolidation of Superior (Note 15)	13,141		—
Gain on disposition of assets (Note 4)	(6,399)		(6,213)
Stock-based compensation plans (Note 6)	5,759		268
Change in credit loss reserve	(156)		1,695
ARO liability accretion (Note 10)	1,366		1,381
Contract assets and liabilities, net (Note 3)	(244)		2,462
Noncash reorganization items	(77)		(67)
Other, net	2,339		(2,303)
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable	(19,050)		(16,255)
Prepaid expenses and other	(3,127)		1,063
Accounts payable	(174)		12,350
Accrued liabilities	4,203		(1,607)
Income taxes	(178)		1,128
Contract advances	(158)		(88)
Net change in operating assets and liabilities	(18,484)		(3,409)
Net cash provided by operating activities	121,310		124,426
INVESTING ACTIVITIES:
Capital expenditures	(23,759)		(21,117)
Deconsolidation of Superior cash and cash equivalents (Note 15)	(10,119)		—
Proceeds from disposition of property and equipment (Note 4)	64,973		71,350
Net cash provided by investing activities	31,095		50,233
FINANCING ACTIVITIES:
Borrowings under line of credit (Note 9)	—		30,700
Payments under line of credit (Note 9)	—		(126,600)
Net payments on finance leases (Note 14)	—		(3,216)
Payments for employee taxes on net settlement of equity awards (Note 6)	(569)		—
Distributions to non-controlling interests (Note 15)	(9,479)		(16,178)
Repurchases of common stock (Note 5)	(27,434)		(19,882)
Bank overdrafts	—		(2,631)
Net cash used in financing activities	(37,482)		(137,807)
Net increase in cash and cash equivalents	114,923		36,852
Cash and cash equivalents, beginning of period	64,140		12,714
Cash and cash equivalents, end of period	$	179,063	$	49,566

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED

	Nine Months Ended September 30,
	2022		2021
	(In thousands)
Supplemental disclosure of cash flow information:
Cash paid (received) for:
Interest paid	$	553	$	4,307
Income taxes	178		(1,128)
Reorganization items	(13)		4,026
Changes in accounts payable and accrued liabilities related to purchases of property and equipment	(214)		(3,356)
Non-cash additions to oil and natural gas properties related to asset retirement obligation additions and estimate revisions	(3,304)		(4,412)
Non-cash reductions to oil and natural gas properties related to net changes in asset retirement obligations, accounts receivable, accounts payable, and accrued liabilities resulting from divestitures	8,984		2,218

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements.

Table of Contents

UNIT CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BUSINESS

Unless the context clearly indicates otherwise, references in this report to “Unit”, “Company”, “we”, “our”, “us”, or like terms refer to Unit Corporation or, as appropriate, one or more of its subsidiaries. References to "Superior" or our "mid-stream segment" refer to our 50% ownership interest in Superior Pipeline Company, L.L.C. ~~(Superior) of which we own 50%.~~

We are primarily engaged in the development, acquisition, and production of oil and natural gas properties, ~~the~~onshore ~~land~~ contract drilling of natural gas and oil wells, and the buying, selling, gathering, processing, and treating of natural gas. Our operations are all located in the United States and are organized inas the following three reporting segments: ~~(1) Oil and Natural Gas, (2) Contract Drilling, and (3) Mid-Stream.~~

Oil and Natural Gas. Carried out by our subsidiary, Unit Petroleum Company (UPC), we develop, acquire, and produce oil and natural gas properties for our own account. Our producing oil and natural gas properties, unproved properties, and related assets are primarily located in Oklahoma and Texas~~, and to a lesser extent, in Arkansas, Kansas, Louisiana, and North Dakota~~.

Contract Drilling. Carried out by our subsidiary, Unit Drilling Company (UDC), we drill onshore oil and natural gas wells for a wide range of other oil and natural gas companies as well as for our own account. Our drilling operations are primarily located in Oklahoma, Texas, New Mexico, Wyoming, and North Dakota.

Mid-Stream. Carried out by Superior ~~of which we own 50%~~. Superior buys, sells, gathers, transports, processes, and treats natural gas for UPC and for third parties. ~~Mid-Stream~~Superior's operations are primarily located in Oklahoma, Texas, Kansas, Pennsylvania, and West Virginia. We held a 50% ownership interest in Superior as of March 31, 2023, but subsequently sold our interest as discussed in Note 15 - Superior Investment.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These interim financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain disclosures have been condensed or omitted from these financial statements. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (GAAP) for complete consolidated financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 3117, ~~2022~~2023.

In the opinion of management, the unaudited condensed consolidated financial statements are fairly stated and contain all normal recurring adjustments (including the elimination of all intercompany transactions). Our financial statements are prepared in conformity with GAAP, which requires us to make certain estimates and assumptions that may affect the amounts reported in our unaudited condensed consolidated financial statements and notes. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. The Company evaluates subsequent events through the date the financial statements are issued.

The unaudited condensed consolidated financial statements include the accounts of Unit Corporation and its subsidiaries. We consolidated the financial position, operating results, and cash flows of Superior prior to March 1, 2022, on which date the Master Services and Operating Agreement (MSA) was amended and restated, with the result that we no longer consolidate Superior's financial position, operating results, and cash flows during periods subsequent to March 1, 2022. Accordingly, the unaudited condensed consolidated financial statements and notes reflect Superior activity on a consolidated basis for the two months prior to March 1, 2022. See Note 15 – Superior Investment for more information on the Superior investment and consolidation conclusions. All intercompany transactions and accounts between consolidated entities have been eliminated, including activity between Unit and Superior during the two months prior to March 1, 2022. Intercompany transactions and accounts between Unit and Superior subsequent to March 1, 2022 are not eliminated.

Table of Contents

During third quarter 2021, management identified an error in the allocation of earnings from Superior between Unit Corporation and non-controlling interests related to the three months ended June 30, 2021 as well as an unrelated error in the initial allocation of equity between Unit Corporation and non-controlling interests as of September 1, 2020 (Fresh Start Reporting Date). The impact of the errors were not material to any of our prior period financial statements and both errors were corrected with one-time adjustments in the three months ended September 30, 2021. As a result, during the three months ended September 30, 2021, net income (loss) attributable to Unit Corporation was increased by $12.2 million with a corresponding decrease to net income (loss) attributable to non-controlling interest, and retained earnings (deficit) was reduced by $1.4 million with a corresponding decrease to non-controlling interest in consolidated subsidiaries.

During second quarter 2021, management identified errors in our inter-segment eliminations presentation between oil and natural gas revenues and gas gathering and processing revenues as well as between gas gathering and processing operating costs and general and administrative expenses. The impacts of the errors were not material to any of our prior period financial statements and the current year impacts on the three months ended March 31, 2021 were corrected with a one-time adjustment in the three months ended June 30, 2021. As a result, during the three months ended June 30, 2021, oil and natural gas revenues were decreased by $8.6 million with a corresponding increase to gas gathering and processing revenues while general and administrative expenses were increased by $0.9 million with a corresponding decrease to gas gathering and processing operating costs.

Also during second quarter 2021, management identified separate errors in our prior period accrual of oil and natural gas revenues as well as oil and natural gas operating costs. The impacts of the errors were not material to any of our prior period financial statements and the errors were corrected with a one-time adjustment in the three months ended June 30, 2021. As a result, during the three months ended June 30, 2021, oil and natural gas revenues were increased by $3.9 million and oil and natural gas operating costs were decreased by $3.4 million.

Certain amounts in this report for prior periods have been reclassified to conform to current year presentation. There was no impact from these reclassifications to consolidated net income/(loss) or shareholders' equity.

Table of Contents

NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Our revenue streams are reported under three segments: oil and natural gas, contract drilling, and mid-stream which is consistent with how we report our segment revenue in Note 19 – Industry Segment Information. Revenue from the oil and natural gas segment is from sales of our oil and natural gas production. Revenue from the contract drilling segment comes from contracting with upstream companies to drill an agreed-on number of wells or provide drilling rigs and services over an agreed-on period. Revenues from the mid-stream segment are generated from the fees earned for gas gathering and processing services provided to a customer or by selling of hydrocarbons to other mid-stream companies.

Oil and Natural Gas Revenue

Typical types of revenue contracts entered into by our oil and gas segment are ~~Oil~~oil ~~Sales~~sales ~~Contracts~~contracts, North American Energy Standards Board (NAESB) Contracts, ~~Gas~~gas ~~Gathering~~gathering and ~~Processing~~processing ~~Agreements~~agreements, and revenues earned as the non-operated party with the operator serving as an agent on our behalf under joint operating agreements. Consideration received is variable and settled monthly while contract terms can range from a single month or evergreen to terms of a decade or more. Revenues from oil and natural gas sales are recognized when the customer obtains control of the sold product which typically occurs at the point of delivery to the customer.

Certain costs, as either a deduction from revenue or as an expense, are determined based on when control of the commodity is transferred to our customer, which would affect our total revenue recognized, but will not affect gross profit. For example, gathering, processing and transportation costs are included as part of the contract price with the customer on transfer of control of the commodity are included in the transaction price, while costs incurred while we are in control of the commodity represent operating costs.

Contract Drilling Revenue

Contract drilling revenues and expenses are primarily recognized as services are performed and collection is reasonably assured. Payments for mobilization and demobilization activities do not relate to a distinct good or service within the contract and are deferred for ratable recognition when material. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred and any reimbursements received for out-of-pocket expenses are recorded as both revenues and direct costs.

Table of Contents

Most of our drilling contracts have a term of one year or less and the remaining performance obligations under the contracts without a fixed term are not material.

Mid-Stream Revenue

The typical revenue contracts used by this segment are gas gathering and processing agreements as well as product sales. Superior recognizes sales revenue at the point in time when control transfers to the purchaser, typically at a specified delivery point, based on the contractually agreed upon fixed or index-based price received. Contracts for gas gathering and processing services may include terms for demand fees or shortfall fees. Demand fees or shortfall fees exist in arrangements where a customer agrees to pay a fixed fee for a contractually agreed upon pipeline capacity or shortfall fees for any minimum volumes not utilized, which create performance obligations for each individual period of reservation. Revenue for these fees is recognized once the services have been completed, the customer no longer has access to the contracted capacity, or the likelihood of the customer exercising all or a portion of their remaining rights becomes remote.

Table of Contents

Contract Assets and Liabilities

The table below ~~shows~~presents the changes in our contract asset and contract liability balances during periods ~~presented~~indicated:

	Classification on the unaudited condensed consolidated balance sheets	~~September~~March 3031,~~2022~~2023		December 31,~~2021~~2022		Change
		(In thousands)
Assets
Current contract assets	Prepaid expenses and other	$	—	$	174	$	(174)
Non-current contract assets	Other assets	—		—		—
Total contract assets		$	—	$	174	$	(174)
Liabilities
Current contract liabilities	Current portion of other long-term liabilities	$	~~239~~840	$	~~1,588~~24	$	~~(1,349)~~816
Non-current contract liabilities	Other long-term liabilities	~~182~~176		~~200~~176		~~(18)~~—
Total contract liabilities		~~421~~$	1,016	~~1,788~~$	200	~~(1,367)~~$	816
Contract assets (liabilities), net		$	(421)	$	(1,614)	$	1,193

NOTE 4 – ~~DIVESTITURES~~DISPOSITION OF PROPERTY AND EQUIPMENT

Oil and Natural Gas

The Company initiated an asset divestiture program at the beginning of 2021 to sell certain non-core oil and gas properties and reserves (the Divestiture Program). On October 4, 2021, the Company announced that it was expanding the Divestiture Program to include the potential sale of additional properties, including up to all of UPC’s oil and gas properties and reserves, and on January 20, 2022, the Company announced that it had retained a financial advisor and launched the process. On June 10, 2022, the Company announced that it had ended its engagement with the financial advisor and terminated the process. During the process, the Company entered into an agreement to sell its Texas Gulf Coast oil and gas properties.

On July 1, 2022, the Company closed on the sale of certain wells and related leases near the Texas Gulf Coast for cash proceeds of $45.4 million, net of customary closing and post-closing adjustments based on an effective date of April 1, 2022. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sale did not result in a significant alteration of the full cost pool.

On March 8, 2022, the Company closed on the sale of certain non-core wells and related leases located near the Oklahoma Panhandle for cash proceeds of $3.6 million, net of customary closing and post-closing adjustments based on an effective date of December 1, 2021. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sale did not result in a significant alteration of the full cost pool.

13Net proceeds for the sale of other non-core oil and natural gas assets totaled $0.7 million and $0.5 million during the three months ended March 31, 2023 and 2022, respectively. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sales did not result in a significant alteration of the full cost pool.

Table of Contents

On August 16, 2021, the Company closed on the sale of substantially all of our wells and related leases located near Oklahoma City, Oklahoma for cash proceeds of $16.1 million, net of customary closing and post-closing adjustments based on an effective date of August 1, 2021. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sale did not result in a significant alteration of the full cost pool.

On May 6, 2021, the Company closed on the sale of substantially all of our wells and the leases related thereto located in Reno and Stafford Counties, Kansas for cash proceeds of $7.3 million, net of customary closing and post-closing adjustments based on an effective date of February 1, 2021. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sale did not result in a significant alteration of the full cost pool.

Net proceeds for the sale of other non-core oil and natural gas assets totaled $3.9 million and $0.6 million during the three months ended September 30, 2022 and 2021, respectively, and $6.6 million and $5.0 million during the nine months ended September 30, 2022 and 2021, respectively. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the sales did not result in a significant alteration of the full cost pool.

Contract Drilling

Proceeds for the sale of non-core contract drilling assets totaled $~~3.0 million and $~~4.32 million ~~during the three months ended September 30, 2022~~ and ~~2021, respectively, and~~ $92.~~4 million and $8.~~2 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, respectively. These proceeds resulted in net gains of $23.57 million and $32.1 million during the three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021, respectively, and $6.7 million and $5.2 million during the nine months ended September 30,~~ 2022 ~~and 2021~~, respectively. The net gains are presented within gain on disposition of assets in the unaudited condensed consolidated statements of operations.

~~Corporate~~NOTE ~~and~~5 ~~Other~~– SHAREHOLDERS' EQUITY AND DIVIDENDS

OnCommon September 17, 2021, we closed the sale of our corporate headquarters building and land for $35.0 million resulting in a gain of $0.9 million, net of $2.2 million of transaction costs. In conjunction with the closing, we entered into a multi-year lease for a portion of the building. Stock

~~NOTE~~On 5September –3, ~~CAPITAL~~2020 ~~STOCK~~(Emergence Date), the Company emerged from Chapter 11 bankruptcy and issued a total of 12.0 million shares of common stock at a par value of $0.01 per share (New Common Stock) to be subsequently distributed in accordance with the Chapter 11 plan of reorganization filed with the bankruptcy court on June 9, 2020 (as amended, supplemented and modified from time to time, the “Plan”). On February 21, 2023, a final decree was approved to close the remaining Chapter 11 case and grant related relief. As a result, any shares of common stock not yet claimed were deemed unclaimed property and have been treated as reductions to the number of shares of common stock issued and outstanding as of February 21, 2023.

All shares of New Common Stock ~~Repurchases~~are subject to the transfer restrictions in the Company’s Amended and Restated Certificate of Incorporation (Charter). Article XIV of the Charter provides that, subject to the exceptions provided in Article XIV, any attempted transfer of the Company's common stock will be prohibited and void ab initio if (i) because of the transfer, any person becomes a Substantial Stockholder (as defined below) other than by reason of Treasury Regulations section 1.382-2T(j)(3) or (ii) the Percentage Stock Ownership (as defined in the Charter) interest of any Substantial Stockholder will be increased. A “Substantial Stockholder” means a person with a Percentage Stock Ownership of 4.75% or more.

In June 2021, we repurchased an aggregate of 600,000 shares of our common stock from the Lenders (as defined in Note 9 - Long-Term Debt and Other Long-Term Liabilities) which received these shares as an exit fee during our reorganization. The Lenders were paid $15.00 per share for their respective shares, for an aggregate cash purchase price of $9.0 million. 11

In June 2021, the Company's board of directors (the Board) authorized repurchasing up to $25.0 million of the Company’s outstanding common stock. The Board subsequently authorized increases to the authorized repurchases up to $50.0 million in October 2021 and then up to $100.0 million in June 2022. The repurchases are made through open market purchases, privately negotiated transactions, or other available means. The Company has no obligation to repurchase any shares under the repurchase program and may suspend or discontinue it at any time without prior notice. During the third quarter of 2022, we repurchased 275,000 shares under the repurchase program at an average share price of $51.46 for an aggregate purchase price of $14.2 million. As of September 30, 2022, we had repurchased a total of 1,794,392 shares under the repurchase program at an average share price of $38.37 for an aggregate purchase price of $68.9 million.

During the year ended December 31, 2021, we also repurchased 78,000 shares in a privately negotiated transaction at a share price of $19.07 which was not part of the repurchase program.

The cumulative number of shares repurchased as of September 30, 2022 totaled 2,472,392. The cash purchase price and any direct acquisition costs are reflected as treasury stock on the unaudited condensed consolidated balance sheets as of September 30, 2022.

Table of Contents

Common Stock Repurchases

There were no repurchases of common stock made during the three months ended March 31, 2023. As of March 31, 2023, we had repurchased a total of 2,472,392 shares of common stock at an average share price of $32.09 for an aggregate purchase cost of $79.3 million through privately negotiated transactions, the repurchase program authorized the Board of Directors in June 2021, and open market purchases. The purchase cost and any direct acquisition costs are reflected as treasury stock on the unaudited condensed consolidated balance sheets.

The remaining value of shares that may yet be purchased under the repurchase program authorization was $31.1 million as of March 31, 2023. The repurchases may be made through open market purchases, privately negotiated transactions, or other available means. The Company has no obligation to repurchase any shares under the repurchase program and may suspend or discontinue it at any time without prior notice.

Dividends

On January 5, 2023, the Company announced the declaration of a special cash dividend of $10.00 per share and approval of a quarterly cash dividend policy beginning in the Company’s second quarter. On January 31, 2023, the Company paid the special cash dividend of $10.00 per share totaling $96.1 million to stockholders of record as of the close of business on January 20, 2023. We have accrued liabilities for dividend equivalent payments to be made upon the vesting of restricted stock units outstanding as of the dividend record date, but not yet vested. There were no dividends paid by the Company during the three months ended March 31, 2022.

The initial quarterly dividend will be $2.50 per share to be paid during the Company’s second quarter with record date and payment date yet to be determined. The declaration and payment of any future dividend, whether fixed, special, or variable, will remain at the full discretion of the Company’s Board of Directors and will depend upon the Company’s financial position, results of operations, cash flows, capital requirements, business conditions, future expectations, the requirements of applicable law, and other factors that the Company’s Board of Directors finds relevant at the time of considering any potential dividend declaration.

Warrants

Each holder of Unit common stock outstanding (Old Common Stock) before the ~~September 3, 2020 emergence from bankruptcy (~~Emergence Date) that did not opt out of the release under the ~~Chapter 11 plan (as amended, supplemented and modified from time to time, the “~~Plan”) ~~of reorganization filed with the bankruptcy court on June 9, 2020~~ is entitled to receive 0.03460447 warrants for every share of Old Common Stock owned. Each warrant is exercisable for one share of common stock, subject to adjustment as provided in the Warrant Agreement. The warrants expire on the earliest of (i) September 3, 2027, (ii) consummation of a Cash Sale (as defined in the Warrant Agreement), or (iii) the consummation of a liquidation, dissolution or winding up of the Company. ~~As of September 30, 2022, the Company had authorized 1,822,203 warrants and none had been exercised.~~

~~Among~~As ~~other provisions, the Warrant Agreement outlines potential adjustments to the warrants if certain events occur, including (i) stock dividends payable in shares~~ of ~~common stock or stock splits~~March 31, ~~(ii) reverse stock splits or similar combination events~~2023, ~~(iii) Liquidity Events (as defined in~~ the ~~Warrant~~Company ~~Agreement),~~had ~~and~~authorized ~~(iv) other events not explicitly contemplated which may have an adverse impact to the intent and purpose of the warrants as set forth in the Plan~~1, ~~provided~~822,231 ~~however, the~~ warrants ~~will not be adjusted for (a) any issuances~~ of ~~securities~~which ~~in connection with a merger~~21,219 ~~share~~had ~~exchange,~~been ~~asset~~exercised ~~acquisition, stock purchase, recapitalization, reorganization~~ or other similar business combination, (b) the issuance of any securities by Unit on or after the Effective Date (as defined in the Plan) pursuant to the Plan or upon the issuance of shares of common stock upon the exercise of such securities, (c) the issuance of any shares of common stock pursuant to the exercise of the warrants, (d) the issuance of shares of common stock pursuant to any management stock option incentive or similar plan, (e) a dividend or distribution to holders of common stock of cash, property, or securities (other than common stock), and/or (f) any change in the par value of the common stockcanceled.

~~Pursuant~~Among other provisions, the Warrant Agreement outlines potential adjustments to the ~~terms~~warrants if certain events occur, including (i) stock dividends payable in shares of common stock or stock splits, (ii) reverse stock splits or similar combination events, (iii) Liquidity Events (as defined in the Warrant Agreement), ~~the~~and ~~Company~~(iv) ~~determined~~other events not explicitly contemplated which may have an adverse impact to the ~~initial~~intent ~~exercise~~and ~~price~~purpose of the warrants toas beset ~~$63.74.~~forth Onin ~~April~~the 7Plan, ~~2022~~provided, however, the ~~Company~~warrants ~~delivered~~will ~~notice~~not be adjusted for (a) any issuances of securities in connection with a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, (b) the ~~initial~~issuance ~~exercise~~of ~~price~~any securities by Unit on or after September 3, 2020 (the "Effective Date") pursuant to the ~~Warrant~~Plan ~~Agent~~or ~~and~~upon the ~~warrants~~issuance ~~became~~of ~~exercisable~~shares ~~for~~of common stock upon the exercise of such securities, (c) the issuance of any shares of common stock pursuant to the ~~Company’s~~exercise of the warrants, (d) the issuance of shares of common stock. Onpursuant to any management stock option incentive or ~~about~~similar ~~April~~plan, 25(e) a dividend or distribution to holders of common stock of cash, ~~2022~~property, ~~the~~or ~~warrants~~securities ~~began~~(other ~~trading~~than ~~over-~~common stock), and/or (f) any change in the~~-counter~~ ~~under~~par value of the ~~symbol~~common ~~"UNTCW"~~stock.

~~See Note~~ 12 ~~- Derivatives for more information on how the warrants are treated in our unaudited condensed consolidated financial statements.~~

Table of Contents

Pursuant to the terms of the Warrant Agreement, the Company determined the initial exercise price of the warrants to be $63.74. On April 7, 2022, the Company delivered notice of the initial exercise price to the Warrant Agent and the warrants became exercisable for shares of the Company’s common stock. On or about April 25, 2022, the warrants began trading over-the-counter under the symbol "UNTCW". On March 31, 2023, the warrants began trading on the OTCQX Best Market.

See Note 12 - Derivatives for more information on how the warrants are treated in our consolidated financial statements.

NOTE 6 – STOCK-BASED COMPENSATION

On the Effective Date, the Board adopted the Unit Corporation Long Term Incentive Plan (LTIP) to incentivize employees, officers, directors and other service providers of the Company and its affiliates. The LTIP ~~will~~is be administered by the ~~Board~~Compensation orCommittee ~~a committee thereof~~ and provides for the grant, from time to time, at the discretion of the Board or a committee thereof, of stock options, stock appreciation rights, restricted stock, restricted stock units ~~(RSUs)~~, stock awards, dividend equivalents, other stock-based awards, cash awards, performance awards, substitute awards or any combination of the foregoing. Subject to adjustment in the event of certain transactions or changes of capitalization in accordance with the LTIP, 903,~~226~~266 shares of New Common Stock ~~have~~were ~~been~~ reserved for issuance pursuant to awards under the LTIP. New Common Stock subject to an award that expires or is canceled, forfeited, exchanged, settled in cash, or otherwise terminated without delivery of shares and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the LTIP.

The following table ~~below~~presents ~~summarizes~~ the stock-based compensation expense activity recognized during the ~~following~~ periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		2022		2021
	2023		2022
	(In thousands)
Stock-based compensation expense	$	1,~~872~~408	$	~~(81)~~1,038	$	~~5,757~~	$	~~135~~
Capitalized stock compensation cost for our oil and natural gas properties	—		—		—		—
Tax benefit on stock-based compensation	$	331	$	254
Tax benefit (loss) on stock-based compensation	$	459	$	(20)	$	1,410	$	33

15The table below summarizes activity pertaining to outstanding stock options during the periods indicated:


	Three Months Ended March 31,
	2023			2022
	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Nonvested RSUs, beginning of period	170,313	$	27.15	315,529	$	26.71
Granted (1)	—	—		7,850	30.50
Vested	(6,359)	33.57		(524)	30.50
Forfeited	(15,059)	34.00		—	—
Nonvested RSUs, end of period	148,895	$	26.18	322,855	$	26.80

1.RSUs granted in January 2022 had an aggregate grant date fair value of $0.2 million and vest equally each month for thirty months.

2.The aggregate compensation cost related to nonvested RSUs not yet recognized as of March 31, 2023 was $3.0 million with a weighted average remaining service period of 1.0 years.

Table of Contents

The ~~tables~~table below ~~summarize~~summarizes ~~the~~ activity pertaining to ~~nonvested~~outstanding ~~RSUs~~stock options during the ~~three~~periods ~~and nine months ended September 30, 2022 and 2021~~indicated:

	Three Months Ended September 30,
	Three Months Ended March 31,
	2022			2021
	2023			2022
	Numberof Shares	~~WeightedAverage~~Weighted ~~Grant~~AverageExercise ~~DateFair~~Price ~~Value~~(4)		Numberof Shares	~~WeightedAverage~~Weighted ~~Grant~~AverageExercise ~~DateFair Value~~Price
Nonvested RSUs, beginning of period	294,818	$	28.07	109,008	$	12.90
Outstanding stock options, beginning of period	319,166	$	45.00	361,418	$	45.00
Granted	—	—		—	—
Granted (1)	—	—		13,416	45.00
Vested	(65,705)	25.21		—	—
Exercised	(18,093)	45.00		—	—
Forfeited	(1,725)	34.00		—	—
Forfeited or expired	(29,373)	35.00		—	—
Nonvested RSUs, end of period	227,388	$	28.85	109,008	$	12.90
Outstanding stock options, end of period (2)	271,700	$	35.00	374,834	$	45.00
Exercisable stock options, end of period (3)	84,460	$	35.00	—	$	45.00

	Nine Months Ended September 30,
	2022			2021
	Numberof Shares	WeightedAverage Grant DateFair Value		Numberof Shares	WeightedAverage Grant DateFair Value
Nonvested RSUs, beginning of period	315,529	$	26.71	—	$	—
Granted (1)	7,850	30.50		109,008	12.90
Vested	(94,266)	21.72		—	—
Forfeited	(1,725)	34.00		—	—
Nonvested RSUs, end of period (2)	227,388	$	28.85	109,008	$	12.90

1.Stock options granted in January 2022 had an aggregate grant date fair value of $0.1 million and 100% vested on the first anniversary of the grant date.

12.~~RSUs~~Stock ~~granted~~options inoutstanding ~~January~~as ~~2022~~of March 31, 2023 had ana ~~aggregate~~weighted ~~grant~~average ~~date~~remaining ~~fair~~contractual ~~value~~term of $03.25 ~~million~~years and ~~vest equally each month for thirty months. RSUs granted in April 2021 had~~ an aggregate ~~grant~~intrinsic ~~date fair~~ value of $12.4 million. ~~and~~The ~~vest~~aggregate ~~25%~~compensation oncost ~~each~~related ofto ~~the~~outstanding ~~following~~options ~~dates:~~not ~~May~~yet ~~27,~~recognized ~~2022,~~as ~~September~~of 3March 31, ~~2022,~~2023 ~~September~~was 3,$2.1 ~~2023,~~million ~~and~~with ~~September~~a 3,weighted ~~2024~~average remaining service period of 1.0 years.

23.~~The~~Stock ~~aggregate~~options ~~compensation~~exercisable ~~cost related to nonvested RSUs not yet recognized~~ as of ~~September~~March 3031, ~~2022~~2023 ~~was~~had ~~$4.8 million with~~ a weighted average remaining ~~service~~contractual ~~period~~term of 13.1 years and an aggregate intrinsic value of $0.7 million.

164.On January 6, 2023, in accordance with the provisions allowed under the LTIP, the Compensation Committee adjusted the exercise price of all outstanding stock options to $35.00 per share effective January 31, 2023 to account for the special dividend paid on that date.

Table of Contents

The tables below summarize the activity pertaining to outstanding stock options during the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended September 30,
	2022			2021
	Numberof Shares	Weighted AverageExercise Price		Numberof Shares	Weighted AverageExercise Price
Outstanding stock options, beginning of period	374,834	$	45.00	—	$	—
Granted	—	—		—	—
Exercised	—	—		—	—
Forfeited or expired	—	—		—	—
Outstanding stock options, end of period	374,834	$	45.00	—	$	—

	Nine Months Ended September 30,
	2022			2021
	Numberof Shares	Weighted AverageExercise Price		Numberof Shares	Weighted AverageExercise Price
Outstanding stock options, beginning of period	361,418	$	45.00	—	$	—
Granted (1)	13,416	45.00		—	—
Exercised	—	—		—	—
Forfeited or expired	—	—		—	—
Outstanding stock options, end of period (2)	374,834	$	45.00	—	$	—
Exercisable stock options, end of period (3)	65,920	$	45.00	—	$	—

1.Stock options granted in January 2022 had an aggregate grant date fair value of $0.1 million and 100% vest on the first anniversary of the grant date.

2.Stock options outstanding as of September 30, 2022 had a weighted average remaining contractual term of 4.0 years and an aggregate intrinsic value of $3.1 million. The aggregate compensation cost related to outstanding options not yet recognized as of September 30, 2022 was $3.1 million with a weighted average remaining service period of 1.0 years.

3.Stock options exercisable as of September 30, 2022 had a weighted average remaining contractual term of 4.1 years and an aggregate intrinsic value of $0.5 million.

NOTE 7 – EARNINGS (LOSS) PER SHARE

The ~~tables~~table below ~~show~~presents the calculation of earnings ~~(loss)~~ per share attributable to Unit Corporation using the treasury stock method ~~for~~during the periods indicated:

	Earnings (Loss)(Numerator)		WeightedShares(Denominator)	Per-ShareAmount
	(In thousands except per share amounts)
Three months ended September 30, 2022
Three months ended March 31, 2023
Basic earnings attributable to Unit Corporation per common share	$	55134,~~818~~650	9,~~787~~667	$	513.7093
Effect of dilutive restricted stock units and stock options (1)	—		~~178~~128	(0.1018)
Diluted earnings attributable to Unit Corporation per common share	$	55134,~~818~~650	9,~~965~~795	$	513.6075
Three months ended September 30, 2021
Three months ended March 31, 2022
Basic earnings attributable to Unit Corporation per common share	$	6,295	11,311	$	0.56
Basic loss attributable to Unit Corporation per common share	$	(46,877)	10,050	$	(4.66)
Effect of dilutive restricted stock units	—		109	(0.01)
Effect of dilutive potential common shares (2)	—		—	—
Diluted earnings attributable to Unit Corporation per common share	$	6,295	11,420	$	0.55
Diluted loss attributable to Unit Corporation per common share	$	(46,877)	10,050	$	(4.66)
1.The diluted earnings per share calculation for the three months ended March 31, 2023 excludes the effects related to 1,815,410 average warrants with a $63.74 exercise price because their inclusion would be antidilutive.2.The diluted earnings per share calculation for the three months ended March 31, 2022 excludes the effects related to 1,822,203 average warrants with a $63.74 exercise price, 319,192 average outstanding restricted stock units, and 368,126 average outstanding stock options with a $45.00 exercise price because their inclusion would be antidilutive.

1.The diluted earnings per share calculation for the three months ended September 30, 2022 excludes the effects related to 1,822,203 average warrants with a $63.74 exercise price because their inclusion would be antidilutive.14

Table of Contents

	Earnings (Loss)(Numerator)		WeightedShares(Denominator)	Per-ShareAmount
	(In thousands except per share amounts)
Nine months ended September 30, 2022
Basic earnings attributable to Unit Corporation per common share	$	89,034	9,954	$	8.94
Effect of dilutive restricted stock units and stock options (1)	—		177	(0.15)
Diluted earnings attributable to Unit Corporation per common share	$	89,034	10,131	$	8.79
Nine months ended September 30, 2021
Basic loss attributable to Unit Corporation per common share	$	(8,636)	11,735	$	(0.74)
Effect of dilutive restricted stock units (2)	—		—	—
Diluted loss attributable to Unit Corporation per common share	$	(8,636)	11,735	$	(0.74)

1.The diluted earnings per share calculation for the nine months ended September 30, 2022 excludes the effects related to 361,418 average outstanding stock options with a $45.00 exercise price and 1,822,203 average warrants with a $63.74 exercise price because their inclusion would be antidilutive.

2.The diluted loss per share calculation for the nine months ended September 30, 2021 excludes the effect related to 62,690 average outstanding restricted stock units because their inclusion would be antidilutive.

NOTE 8 – ACCRUED LIABILITIES

The table below ~~provides~~presents ~~detail~~the oncomponents ~~our~~of accrued liabilities as of the dates indicated:

September 30,2022

December 31,2021

March 31,2023

December 31,2022

(In thousands)

Employee costs

93,~~058~~886

105,~~005~~905

Lease operating expenses

3,~~490~~463

3,~~451~~383

Capital expenditures

~~4,102~~628

36,~~962~~359

Taxes

21,~~192~~488

31,~~320~~035

Interest payable

3740

~~296~~40

Other

1,~~209~~068

1,~~416~~994

Total accrued liabilities

2010,~~088~~573

2218,~~450~~716

NOTE 9 – LONG-TERM DEBT AND OTHER LONG-TERM LIABILITIES

Long-Term Debt

The table below ~~provides~~presents ~~detail~~the onindividual ~~our~~components ~~outstanding~~of long-term debt as of the dates indicated:

	September 30,2022		December 31,2021
	March 31,2023		December 31,2022
	(In thousands)
Long-term debt:
Exit credit agreement	$	—	$	—
Superior credit agreement (1)			$	19,200

Table of Contents

Exit Credit Agreement. On the Emergence Date, the Company entered into an amended and restated credit agreement (the Exit credit agreement), providing for a $140.0 million senior secured revolving credit facility (RBL Facility) and a $40.0 million senior secured term loan facility, among (i) the Company, UDC, and UPC (together, the Borrowers), (ii) the guarantors party thereto, including the Company and all of its subsidiaries existing as of the Effective Date (other than Superior and its subsidiaries), (iii) the lenders party thereto from time to time (Emergence Lenders), and (iv) BOKF, NA dba Bank of Oklahoma as administrative agent and collateral agent (in such capacity, the Administrative Agent). The maturity date of borrowings under the Exit credit agreement is March 1, 2024. The Exit credit agreement is secured by first-priority liens on substantially all of the personal and real property assets of the Borrowers and the Guarantors, including the Company’s ownership interests in Superior.

Prior to the November 1, 2022 amendment described below, Revolving Loans and Term Loans (each as defined in the Exit credit agreement) were able to be Eurodollar Loans or ABR Loans (each as defined in the Exit credit agreement). Revolving Loans that were Eurodollar Loans bore interest at a rate per annum equal to the Adjusted LIBO Rate (as defined in the Exit credit agreement) for the applicable interest period plus 525 basis points while Revolving Loans that were ABR Loans bore interest at a rate per annum equal to the Alternate Base Rate (as defined in the Exit credit agreement) plus 425 basis points. Term Loans that were Eurodollar Loans bore interest at a rate per annum equal to the Adjusted LIBO Rate for the applicable interest period plus 625 basis points while Term Loans that were ABR Loans bore interest at a rate per annum equal to the Alternate Base Rate plus 525 basis points.

On April 6, 2021, the Company finalized the first amendment to the Exit credit agreement. Under the first amendment, the Company reaffirmed its borrowing base of $140.0 million of the RBL Facility, amended certain financial covenants, and received less restrictive terms, among others, as it relates to the disposition of assets and the use of proceeds from those dispositions.

On July 27, 2021, the Company finalized the second amendment to the Exit credit agreement. Under the second amendment, the Company obtained confirmation that the Term Loan had been paid in full prior to the amendment date and received one-time waivers related to the disposition of assets.

Table of Contents

On October 19, 2021, the Company finalized the third amendment to the Exit credit agreement. Under the third amendment, the Company requested, and was granted, a reduction in the RBL Facility borrowing base from $140.0 million to $80.0 million in addition to less restrictive terms as it relates to capital expenditures, required hedges, and the use of proceeds from the disposition of certain assets, while also amending certain financial covenants.

On March 30, 2022, the RBL Facility borrowing base of $80.0 million was reaffirmed.

On July 1, 2022, the RBL Facility borrowing base was automatically reduced to $31.3 million as a result of closing the Texas Gulf Coast properties sale discussed in Note 4 - ~~Divestitures~~Disposition Of Property And Equipment.

On November 1, 2022, the Company finalized the fourth amendment to the Exit credit agreement. Under the fourth amendment, (i) the RBL Facility borrowing base was increased to $35.0 million, (ii) the lenders party to the agreement were revised to only BOKF, NA dba Bank of Oklahoma, and (iii) the Eurodollar Loan borrowing option was amended to a secured overnight financing rate (SOFR) option. Subsequent to the fourth amendment, Revolving Loans are able to be SOFR Loans or ABR Loans (each as defined in the Exit credit agreement). Revolving Loans that are SOFR Loans bear interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Exit credit agreement) for the applicable interest period plus 525 basis points while Revolving Loans that are ABR Loans bear interest at a rate per annum equal to the Alternate Base Rate plus 425 basis points.

~~The~~On ~~Exit~~March ~~credit~~24, ~~agreement~~2023, ~~requires~~ the Company tofinalized ~~comply with certain financial ratios, including:~~ the ~~Net~~fifth ~~Leverage~~amendment ~~Ratio~~to ~~(as defined in~~ the Exit credit agreement~~) as of the last day of any fiscal quarter cannot be greater than 3~~.25 toUnder ~~1.00,~~ the ~~Current~~fifth ~~Ratio (as defined in the Exit credit agreement) as of the last day of any fiscal quarter cannot be less than 1.00 to 1.00~~amendment, ~~and~~ the ~~Interest~~RBL ~~Coverage~~Facility ~~Ratio~~borrowing ~~(as~~base ~~defined in the Exit credit agreement) as~~ of ~~the last day of any fiscal quarter cannot be less than 2~~$35.500 tomillion ~~1.00.~~was ~~The~~reaffirmed ~~Exit credit agreement also contains provisions, among others, that limit certain capital expenditures,~~ and ~~require~~ certain ~~hedging~~references ~~activities.~~to ~~The Exit credit agreement further requires~~ the Company's toequity ~~provide~~ownership ~~quarterly~~interests ~~financial~~in ~~statements~~Superior ~~within~~were 45removed ~~days~~in ~~after~~anticipation ~~the end~~ of ~~each of~~ the ~~first~~sale ~~three quarters~~ of ~~each~~our ~~fiscal~~ownership ~~year~~interests ~~and annual financial statements within 90 days after the end of each fiscal year. As of September 30, 2022, the Company was~~ in ~~compliance with these covenants~~Superior.

AsThe ofExit ~~September 30,~~credit ~~2022~~agreement requires the Company to comply with certain financial ratios, weincluding: ~~had~~the noNet ~~long-term~~Leverage ~~borrowings~~Ratio ~~and~~(as $2defined in the Exit credit agreement) as of the last day of any fiscal quarter cannot be greater than 3.725 ~~million~~to 1.00, the Current Ratio (as defined in the Exit credit agreement) as of ~~letters~~the last day of any fiscal quarter cannot be less than 1.00 to 1.00, and the Interest Coverage Ratio (as defined in the Exit credit ~~outstanding~~agreement) ~~under~~as of the last day of any fiscal quarter cannot be less than 2.50 to 1.00. The Exit credit agreement also contains provisions, among others, that limit certain capital expenditures, and require certain hedging activities. The Exit credit agreement further requires the Company to provide quarterly financial statements within 45 days after the end of each of the first three quarters of each fiscal year and annual financial statements within 90 days after the end of each fiscal year. As of March 31, 2023, the Company was in compliance with these covenants.

19As of March 31, 2023, we had no long-term borrowings and $2.7 million of letters of credit outstanding under the Exit credit agreement.

Table of Contents

Superior Credit Agreement. On May 10, 2018, Superior entered into a five-year, $200.0 million senior secured revolving credit facility with an option to increase the credit amount up to $250.0 million, subject to certain conditions (Superior credit agreement). The amounts borrowed under the Superior credit agreement bore annual interest at a rate, at Superior’s option, equal to (a) LIBOR plus the applicable margin of 2.00% to 3.25% or (b) the alternate base rate (greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) the Thirty-Day LIBOR Rate (as defined in the Superior credit agreement)) plus the applicable margin of 1.00% to 2.25%.

On April 29, 2022, Superior entered into an Amended and Restated Credit Agreement for a four-year, $135.0 million senior secured revolving credit facility with an option to increase the credit amount up to $200.0 million, subject to certain conditions (Amended Superior credit agreement). The amounts borrowed under the Amended Superior credit agreement bear annual interest at a rate, at Superior’s option, equal to (a) SOFR plus the applicable margin of 2.75% to 3.75% or (b) the alternate base rate (greater of (i) the federal funds rate plus 0.5%, (ii) the prime rate, and (iii) SOFR plus 0.10%). The obligations under the Amended Superior credit agreement are secured by, among other things, mortgage liens on certain of Superior’s processing plants and gathering systems. Unit is not a party to and does not guarantee the Amended Superior credit agreement.

Other Long-Term Liabilities

The table below ~~provides~~presents ~~detail~~the oncomponents ~~our~~of other long-term liabilities as of the dates indicated:

	September 30,2022		December 31,2021
	March 31,2023		December 31,2022
	(In thousands)
Asset retirement obligation (ARO) liability	$	2223,~~518~~919	$	2523,~~688~~440
Workers’ compensation	78,~~435~~112		78,~~925~~344
Contract liability	~~421~~1,016		~~1,788~~200
Separation benefit plans	1,~~437~~074		21,~~022~~110
Gas balancing liability	4,256		14,~~090~~257
	36,067		38,513
Dividend equivalents payable	1,635		—
Less: current portion	4,144		5,574
	40,012		37,351
Total other long-term liabilities	$	31,923	$	32,939
Less: current portion	5,280		3,989
Total other long-term liabilities	$	34,732	$	33,362

Table of Contents

NOTE 10 – ASSET RETIREMENT OBLIGATIONS

We are required to record the estimated fair value of the liabilities relating to the future retirement of our long-lived assets. Our oil and natural gas wells are plugged and abandoned when the oil and natural gas reserves in those wells are depleted or the wells are no longer able to produce. The plugging and abandonment liability for a well is recorded when the well is drilled or acquired and the obligation is incurred. None of our assets are restricted for purposes of settling these AROs. All our AROs relate to the plugging costs associated with our oil and gas wells.

20The following table presents activity for our estimated AROs during the periods indicated:

Table of Contents


	Three Months Ended March 31,
	2023		2022
	(In thousands)
ARO liability, beginning of period	$	23,440	$	25,688
Accretion of discount	467		493
Liability incurred	10		—
Liability settled	(245)		(55)
Liability sold	(14)		(2,670)
Revision of estimates (1)	261		1,483
ARO liability, end of period	23,919		24,939
Less: current portion	2,631		2,654
Long-term ARO liability	$	21,288	$	22,285

1.Plugging ~~The~~liability ~~following~~estimates ~~table~~were ~~shows~~revised ~~certain~~in ~~information~~2023 ~~about~~and ~~our~~2022 ~~estimated~~for ~~AROs~~updates ~~for~~in the ~~periods~~cost ~~indicated:~~of services used to plug wells over the preceding year as well as estimated inflation and discount rates. We had various upward and downward adjustments.

	Nine Months Ended September 30,
	2022		2021
	(In thousands)
ARO liability, beginning of period	$	25,688	$	23,356
Accretion of discount	1,366		1,381
Liability incurred	22		4
Liability settled	(556)		(852)
Liability sold	(7,284)		(1,925)
Revision of estimates (1)	3,282		4,408
ARO liability, end of period	22,518		26,372
Less: current portion	2,532		2,455
Long-term ARO liability	$	19,986	$	23,917

1.Plugging liability estimates were revised in 2022 and 2021 for updates in the cost of services used to plug wells over the preceding year as well as estimated inflation and discount rates. We had various upward and downward adjustments.

NOTE 11 – WORKERS' COMPENSATION

We are liable for workers' compensation benefits for traumatic injuries through our self-insured program to provide income replacement and medical treatment for work-related traumatic injury claims as required by applicable state laws. Workers' compensation laws also compensate survivors of workers who suffer employment related deaths. Our liability for traumatic injury claims is the estimated present value of current workers' compensation benefits, based on our actuarial estimates. Our actuarial calculations are based on a blend of actuarial projection methods and numerous assumptions including claim development patterns, mortality, medical costs and interest rates.

The following table ~~summarizes~~presents activity for our workers' compensation liability during the periods indicated:

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021
	2023		2022
	(In thousands)
Workers' compensation liability, beginning of period	$	78,~~925~~344	$	107,~~164~~925
Claims and valuation adjustments	(~~150~~58)		~~1,403~~(160)
Payments	(~~340~~174)		(~~254~~92)
Workers' compensation liability, end of period	78,~~435~~112		117,~~313~~673
Less: current portion	~~967~~1,046		1,~~239~~169
Long-term workers' compensation liability	$	67,~~468~~066	$	106,~~074~~504

Our workers' compensation liability above is presented on a gross basis and does not include our expected receivables on our insurance policy. Our receivables for traumatic injury claims under these policies as of ~~September~~March 3031, ~~2022~~2023 and December 31, ~~2021~~2022 are $34.8 million and $4.08 million, respectively, and are included in other assets on our unaudited condensed consolidated balance sheets.

Table of Contents

NOTE 12 – DERIVATIVES

Commodity Derivatives

We have entered into various types of derivative transactions covering some of our projected natural gas, NGLs, and oil production. These transactions are intended to reduce our exposure to market price volatility by setting the price(s) we will receive for that production. Our decisions on the price(s), type, and quantity of our production subject to a derivative contract are based, in part, on our view of current and future market conditions as well as certain requirements stipulated in the Exit credit agreement. Our commodity derivative transactions consisted of the following types of hedges as of ~~September~~March 3031, ~~2022~~2023:

Table of Contents

•Swaps. We receive or pay a fixed price for the commodity and pay or receive a floating market price to the counterparty. The fixed-price payment and the floating-price payment are netted, resulting in a net amount due to or from the counterparty.

~~•Collars.~~We Ado ~~collar~~not ~~contains~~engage ain ~~fixed~~derivative ~~floor~~transactions ~~price~~for ~~(put)~~speculative purposes and ahave ~~ceiling~~not ~~price~~designated ~~(call).~~any Ifof ~~the~~our ~~market~~hedges ~~price~~for ~~exceeds~~hedge ~~the~~accounting ~~call~~purposes. ~~strike~~We ~~price~~are ornot ~~falls~~required ~~below~~to ~~the~~post ~~put~~any ~~strike~~cash ~~price,~~collateral wewith ~~receive~~our ~~the~~counterparties ~~fixed price~~ and ~~pay~~no ~~the~~collateral ~~market~~has ~~price.~~been Ifposted ~~the~~as ~~market~~of ~~price is between the call and the put strike price~~March 31, ~~no payments are due from either party~~2023.

WeThe dofollowing ~~not engage in derivative transactions for speculative purposes and have not~~ non-designated ~~any~~commodity ~~of our~~ hedges ~~for~~were ~~hedge~~outstanding ~~accounting purposes. We are not required to post any cash collateral with our counterparties and no collateral has been posted~~ as of ~~September~~March 3031, ~~2022.~~2023:

The following non-designated commodity hedges were outstanding as of September 30, 2022:

Remaining Term

Commodity

Contracted Volume

Weighted Average

Fixed Price for Swaps

Contracted Market

Apr'23 - Dec'23 (1)

Natural gas - swap

22,000 MMBtu/day

$2.46

IF - NYMEX (HH)

Apr'23 - Dec'23

Crude oil - swap

1,300 Bbl/day

$43.60

WTI - NYMEX

Term

Commodity

Contracted Volume

Weighted Average Fixed Price for Swaps

Contracted Market

Oct'22 - Dec'22

Natural gas - swap

5,000 MMBtu/day

$2.61

IF - NYMEX (HH)

Oct'22 - Feb'23

Natural gas - swap

21,656 MMBtu/day

$9.14

IF - NYMEX (HH)

Jan'23 - Dec'23

Natural gas - swap

22,000 MMBtu/day

$2.46

IF - NYMEX (HH)

Oct'22 - Dec'22

Natural gas - collar

35,000 MMBtu/day

$2.50 - $2.68

IF - NYMEX (HH)

Oct'22 - Dec'22

Crude oil - swap

2,300 Bbl/day

$42.25

WTI - NYMEX

Oct'22 - Dec'22

Crude oil - swap

495 Bbl/day

$103.98

WTI - NYMEX

Jan'23 - Feb'23

Crude oil - swap

1,339 Bbl/day

$95.40

WTI - NYMEX

Jan'23 - Dec'23

Crude oil - swap

1,300 Bbl/day

$43.60

WTI - NYMEX

1.During April 2023, we entered into NYMEX (HH) natural gas - swap agreements averaging 22,000 MMBtu/day for October 2023, November 2023, and December 2023 at a weighted average fixed price of $3.14 per MMBtu which effectively locked in the settlement price of our outstanding positions for those periods.

Warrants

Prior to the determination of the initial exercise price, we recognized the fair value of the warrants as a derivative liability on our unaudited condensed consolidated balance sheets with changes in the liability reported as gain (loss) on change in fair value of warrants in our unaudited condensed consolidated statements of operations. On April 7, 2022, the Company delivered notice of the initial $63.74 exercise price resulting in the warrants meeting the definition of an equity instrument. Accordingly, we recognized the change in the fair value of the warrant liability in our unaudited condensed consolidated statements of operations and reclassified the $49.1 million warrant liability to capital in excess of par value on the unaudited condensed consolidated balance sheets as of April 7, 2022. The warrants will continue to be reported as capital in excess of par value and are no longer subject to future fair value adjustments.

The following tables present the recognized derivative assets and liabilities on our unaudited condensed consolidated balance sheets as of the dates indicated:

		Balances as of September 30, 2022
		Balances as of March 31, 2023
	Balance Sheet Classification	PresentedGross		Effects ofNetting		PresentedNet
		(In thousands)
Assets:
Current Commodity Derivatives	Current derivative assets	$	9,507	$	(9,507)	$	—
Long-term Commodity Derivatives	Non-current derivative assets	—		—		—
Total derivative assets		$	9,507	$	(9,507)	$	—
Liabilities:
Current Commodity Derivatives	Current derivative liabilities	$	51,005	$	(9,507)	$	41,498
Current commodity derivatives	Current derivative liabilities	$	12,571	$	—	$	12,571
Long-term Commodity Derivatives	Non-current derivative liabilities	8,316		—		8,316
Total derivative liabilities		$	12,571	$	—	$	12,571
Total derivative liabilities		$	59,321	$	(9,507)	$	49,814

2218

Table of Contents

		Balances as of December 31, 2021
		Balances as of December 31, 2022
	Balance Sheet Classification	PresentedGross		Effects ofNetting		PresentedNet
		(In thousands)
Assets:
Current commodity derivatives	Current derivative assets	$	8,547	$	(8,547)	$	—
Total derivative assets		$	8,547	$	(8,547)	$	—
Liabilities:
Current Commodity Derivatives	Current derivative liabilities	$	40,876	$	—	$	40,876
Current commodity derivatives	Current derivative liabilities	$	32,113	$	(8,547)	$	23,566
Long-term Commodity Derivatives	Non-current derivative liabilities	17,855		—		17,855
Total derivative liabilities		$	32,113	$	(8,547)	$	23,566
Warrant Liability	Warrant liability	19,822		—		19,822
Total derivative liabilities		$	78,553	$	—	$	78,553

The following table shows the activity related to derivative instruments in the unaudited condensed consolidated statements of operations for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		2022		2021
	2023		2022
	(In thousands)
Loss on derivatives	$	(12,381)	$	(39,742)	$	(73,848)	$	(104,973)
Gain (loss) on derivatives, net	$	13,595	$	(64,076)
Cash settlements paid on commodity derivatives	(28,641)		(12,940)		(82,764)		(22,647)
Gain (loss) on commodity derivatives settled	2,601		(21,239)
Gain (loss) on derivatives less cash settlements paid on commodity derivatives	$	16,260	$	(26,802)	$	8,916	$	(82,326)
Gain (loss) on derivatives, net less gain (loss) on commodity derivatives settled	$	10,994	$	(42,837)
Loss on change in fair value of warrants	$	—	$	(936,~~054~~612)	$	~~(29,323)~~	$	~~(12,628)~~

NOTE 13 – FAIR VALUE MEASUREMENTS

This disclosure of the estimated fair value of financial instruments is made under accounting guidance for financial instruments. We have determined the estimated fair values by using market information and certain valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Using different market assumptions or valuation methodologies may have a material effect on our estimated fair value amounts.

The inputs available determine the valuation technique that we use to measure the fair value of the assets and liabilities presented in our unaudited condensed consolidated financial statements. Fair value measurements are categorized into one of three different levels depending on the observability of the inputs used in the measurement. The levels are summarized as follows:

•Level 1—observable inputs such as quoted prices in active markets for identical assets and liabilities.

•Level 2—other observable pricing inputs, such as quoted prices in inactive markets, or other inputs that are either directly or indirectly observable as of the reporting date, including inputs that are derived from or corroborated by observable market data.

•Level 3—generally unobservable inputs which are developed based on the best information available and may include our own internal data or estimates about how market participants would value such assets and liabilities.

2319

Table of Contents

Recurring Fair Value Measurements

The following tables ~~set~~present ~~forth~~ our recurring fair value measurements by level as of the dates indicated:

Balances as of September 30, 2022

Balances as of March 31, 2023

Level 1

Level 2

Level 3

Total

(In thousands)

Financial liabilities:

Commodity derivative liabilities

—

4912,~~814~~571

—

4912,~~814~~571

—

4912,~~814~~571

—

4912,~~814~~571

	Balances as of December 31, 2021
	Balances as of December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In thousands)
Financial liabilities:
Commodity derivative liabilities	$	—	$	5823,~~731~~566	$	—	$	5823,~~731~~566
Warrant liability	—		—		19,822		19,822
	$	—	$	23,566	$	—	$	23,566
	$	—	$	58,731	$	19,822	$	78,553

The carrying values on the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, other current assets, and current liabilities approximate their fair value because of their short-term nature. The following methods and assumptions were used to estimate the fair values of the assets and liabilities in the table above. There were no transfers between Level 2 and Level 3 financial liabilities.

Commodity Derivatives. We measure the fair values of our crude oil and natural gas swaps and collars using estimated discounted cash flow calculations based on the NYMEX futures index. We consider these Level 2 measurements within the fair value hierarchy as the inputs in the model are substantially observable over the term of the commodity derivative contract and there is a wide availability of quoted market prices for similar commodity derivative contracts.

We determined that the non-performance risk regarding our commodity derivative counterparties was immaterial based on our valuation at ~~September~~March 3031, ~~2022~~2023.

Warrant Liability. We used the Black-Scholes option pricing model to measure the fair value of the warrants. Key inputs for the Black-Scholes model include the stock price, exercise price, expected term, risk-free rate, volatility, and dividend yield. We consider this a Level 3 measurement within the fair value hierarchy as estimated volatility is generally unobservable and requires management's estimation.

The following table ~~summarizes~~presents the activity of our recurring Level 3 fair value measurements during the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		2022		2021
	2023		2022
	(In thousands)
Beginning of period	$	—	$	419,~~459~~822	$	~~19,822~~	$	~~885~~
Loss on change in warrant liability	—		936,~~054~~612		~~29,323~~		~~12,628~~
Reclassification of warrant liability to capital in excess of par value	—		—		(49,145)		—
End of period	$	—	$	56,434
End of period	$	—	$	13,513	$	—	$	13,513

Table of Contents

Nonrecurring Fair Value Measurements

ARO. The initial measurement of ARO at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with property and equipment. Significant Level 3 inputs used in the calculation of AROs include plugging costs and remaining reserve lives. A summary of the Company’s ARO activity is presented in Note 10 – Asset Retirement Obligations.

Stock-Based Compensation. We use the Black-Scholes option pricing model to estimate the fair value of stock option grants while the value of our restricted stock unit grants is based on the grant date closing stock price. Key assumptions for the Black-Scholes models include the stock price, exercise price, expected term, risk-free rate, volatility, and dividend yield. We consider this a Level 3 measurement within the fair value hierarchy as estimated volatility is generally unobservable and requires management's estimation. 20

Table of Contents

Stock-Based Compensation. We use the Black-Scholes option pricing model to estimate the fair value of stock option grants and modifications while the value of our restricted stock unit grants is based on the grant date closing stock price. Key assumptions for the Black-Scholes models include the stock price, exercise price, expected term, risk-free rate, volatility, and dividend yield. We consider this a Level 3 measurement within the fair value hierarchy as estimated volatility is generally unobservable and requires management's estimation.

See Note 15 - Superior Investment for discussion on the estimated fair value of our retained equity method investment in Superior as of March 1, 2022.

NOTE 14 – LEASES

Operating Leases. We are a lessee through noncancellable lease agreements for property and equipment consisting primarily of office space, land, vehicles, and equipment used in both our operations and administrative functions.

~~During~~The ~~the~~following ~~three~~table ~~months~~presents ~~ended~~the ~~September 30~~maturities, ~~2021,~~weighted weaverage ~~entered~~remaining ~~into an operating~~ lease ~~agreement~~term, ~~for~~and ~~our~~weighted ~~headquarters~~average ~~office~~discount ~~space~~rate ~~which generated right~~ of ~~use~~our ~~assets~~operating ~~and~~lease liabilities atas ~~lease inception~~ of ~~$8.4~~March ~~million.~~31, 2023:

The following table sets forth the maturities, the weighted average remaining lease term, and the weighted average discount rate of our operating lease liabilities as of September 30, 2022:


	Amount
	(In thousands)
Ending March 31,
2024	$	3,723
2025	3,342
2026	2,055
2027	954
2028	—
2029 and beyond	—
Total future payments	10,074
Less: Interest	973
Present value of future minimum operating lease payments	9,101
Less: Current portion	3,196
Total long-term operating lease payments	$	5,905

Weighted average remaining lease term (years)	3.0
Weighted average discount rate (1)	6.92		%

	Amount
	(In thousands)
Ending September 30,
2023	$	2,001
2024	1,999
2025	2,034
2026	1,990
2027	—
2028 and beyond	—
Total future payments	8,024
Less: Interest	994
Present value of future minimum operating lease payments	7,030
Less: Current portion	1,581
Total long-term operating lease payments	$	5,449
Weighted average remaining lease term (years)	4.0
Weighted average discount rate (1)	6.65		%

1.Our weighted average discount rates represent the rate implicit in the lease or our incremental borrowing rate for a term equal to the remaining term of the lease.

~~Finance~~The ~~Leases.~~following ~~During~~table ~~2014,~~presents ~~Superior~~our ~~entered~~operating ~~into finance~~ lease ~~agreements~~assets ~~for 20 compressors with initial terms of seven years~~ and anliabilities ~~option~~as ~~to purchase the assets at 10%~~ of ~~their then fair market value at~~ the ~~end~~dates of the term. These finance leases were discounted using annual rates of 4.0% and the underlying assets were included in gas gathering and processing equipment. Superior purchased the leased assets for $3.0 million in May 2021.indicated:


	Classification on the unaudited condensed consolidated balance sheets	March 31, 2023		December 31, 2022
		(In thousands)
Assets
Operating lease right of use assets	Right of use assets	$	9,002	$	6,551
Total right of use assets		$	9,002	$	6,551

Liabilities
Current liabilities:
Operating lease liabilities	Current operating lease liabilities	$	3,196	$	1,605
Non-current liabilities:
Operating lease liabilities	Operating lease liabilities	5,905		5,035
Total lease liabilities		$	9,101	$	6,640

Table of Contents

The following table ~~shows~~presents ~~information~~the ~~about~~components ~~our~~of total lease ~~assets~~costs ~~and~~for ~~liabilities~~operating onleases ~~our~~during ~~unaudited~~the ~~condensed~~periods ~~consolidated balance sheets~~indicated:

			Classification on the unaudited condensed consolidated balance sheets			September 30,2022		December 31,2021
	Three Months Ended March 31,
						(In thousands)
	2023			2022
Assets
	(In thousands)
Operating lease right of use assets			Right of use assets			$	6,951	$	12,445
Components of total lease cost:
Total right of use assets						$	6,951	$	12,445
Short-term lease cost (1)	$	2,181		$	3,536
Liabilities
Operating lease cost	920			1,308
Current liabilities:
Total lease cost	$	3,101		$	4,844
Operating lease liabilities			Current operating lease liabilities			$	1,581	$	3,791
Non-current liabilities:
Operating lease liabilities			Operating lease liabilities			5,449		8,677
Total lease liabilities						$	7,030	$	12,468

~~The~~1.Short-term ~~following~~lease ~~table~~cost ~~shows~~includes ~~certain~~amounts ~~information~~capitalized related to ~~the~~our ~~lease~~oil ~~costs~~and ~~for~~natural ~~our~~gas ~~finance~~segment of $0.6 million and ~~operating~~$0.5 ~~leases~~million ~~for~~during the ~~periods~~three ~~indicated:~~months ended March 31, 2023 and 2022, respectively.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Components of total lease cost:
Amortization of finance leased assets	$	—	$	—	$	—	$	1,248
Interest on finance lease liabilities	—		—		—		33
Operating lease cost	532		1,043		2,763		3,053
Short-term lease cost (1)	2,231		3,120		8,049		7,893
Variable lease cost	—		—		—		—
Total lease cost	$	2,763	$	4,163	$	10,812	$	12,227

The following table presents supplemental cash flow information related to our operating leases during the periods indicated:

1.Short-term lease cost includes amounts capitalized related to our oil and natural gas segment of $0.2 million and $0.8 million during the three months ended September 30, 2022 and 2021, respectively, and $1.4 million and $1.0 million during the nine months ended September 30, 2022 and 2021, respectively.


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Cash payments made on operating leases	$	920	$	1,284
Lease liabilities recognized in exchange for operating lease right of use assets	$	3,273	$	909

The following table shows supplemental cash flow information related to leases for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
	(In thousands)
Cash payments made on operating leases	$	2,705	$	3,125
Cash payments made on finance leases	$	—	$	3,216
Lease liabilities recognized in exchange for operating lease right of use assets	$	909	$	11,155

Table of Contents

NOTE 15 – SUPERIOR INVESTMENT

On April 3, 2018, we sold 50% of the ownership interest in Superior to SP Investor Holdings, LLC (SP Investor), a holding company jointly owned by OPTrust, and funds managed and/or advised by Partners Group, a global private markets investment manager. Superior is governed and managed under the Amended and Restated Limited Liability Company Agreement (Agreement) and Amended and Restated Master Services and Operating Agreement (MSA). The MSA was between our wholly-owned subsidiary, SPC Midstream Operating, L.L.C. (the Operator), and Superior. As the Operator, we provided services, such as operations and maintenance support, accounting, legal, and human resources to Superior for a monthly service fee of $0.3 million. Superior's creditors have no recourse to our general credit. Unit is not a party to and does not guarantee Superior's credit agreement. The obligations under Superior's credit agreement are secured by, among other things, mortgage liens on certain of Superior’s processing plants and gathering systems.

Distributions. The Agreement ~~specifies~~specified how future distributions ~~are~~were to be allocated among Unit Corporation and SP Investor (the Members). Distributions from Available Cash (as defined in the Agreement) were generally split evenly between the Members prior to December 31, 2021, when the three-year period for Unit's commitment to spend $150.0 million (Drilling Commitment Amount) to drill wells in the Granite Wash/Buffalo Wallow area ended. The total amount spent by Unit towards the Drilling Commitment Amount was $24.6 million. Accordingly, SP Investor ~~will~~was entitled to receive 100% of Available Cash distributions related to periods subsequent to December 31, 2021 until the $72.7 million Drilling Commitment Adjustment Amount (as defined in the Agreement) is satisfied.

~~Superior~~The ~~paid~~following ~~cash~~table ~~distributions~~presents ~~of $9.5 million to each of~~ the ~~Members~~distributions ~~in January 2022 representing Available Cash generated during the three months ended December 31, 2021, and~~ paid ~~distributions~~by Superior to ~~SP Investor of $10.5 million in April 2022 representing Available Cash generated during~~ the ~~three~~members ~~months ended March 31, 2022, $13.9 million in July 2022 representing Available Cash generated~~ during the ~~three~~periods months ended June 30, 2022, and $16.2 million in October 2022 representing Available Cash generated during the three months ended September 30, 2022. The distributions paid to SP Investor in October 2022 reduced the remaining Drilling Commitment Adjustment Amount to $32.0 million.indicated:

Superior paid cash distributions totaling $24.7 million in April 2021 related to cumulative available cash as of March 31, 2021, $7.7 million in July 2021 related to available cash generated during the three months ended June 30, 2021, and $13.9 million in October 2021 related to available cash generated during the three months ended September 30, 2021. Unit and SP Investor each received 50% of these distributions.


Date	Recipient	Amount
Three months ended March 31, 2023
January 31, 2023	SP Investor	$11.1 million
Three months ended March 31, 2022



January 31, 2022	Unit Corporation	$9.5 million
January 31, 2022	SP Investor	$9.5 million

~~Sale~~The ~~Event.~~January ~~After April 1,~~ 2023, ~~either~~distributions ~~Member~~paid ~~may~~by ~~initiate a sale process of~~ Superior toreduced ~~a third-party or a liquidation of Superior's assets (Sale Event). In a Sale Event,~~ the ~~Agreement~~remaining ~~generally~~Drilling ~~requires~~Commitment ~~cumulative~~Adjustment ~~distributions~~Amount to ~~SP Investor in excess of its original~~ $~~300~~20.~~0 million investment sufficient to provide SP Investor a 7% internal rate of return on its capital contributions to Superior before any liquidation distribution is made to Unit. As of September~~9 ~~30, 2022, liquidation distributions paid first to SP Investor of $345.6~~ million ~~would be required for SP Investor to reach its 7% Liquidation IRR Hurdle at which point Unit would then be entitled to receive up to $345~~.~~6 million of the remaining liquidation distributions to satisfy Unit's 7% Liquidation IRR Hurdle with any remaining liquidation distributions paid as outlined within the Agreement.~~

Table of Contents

After April 1, 2023, either Member had the right to initiate a sale process of Superior to a third-party or a liquidation of Superior's assets (Sale Event). In a Sale Event, the Agreement generally required cumulative distributions to SP Investor in excess of its original $300.0 million investment sufficient to provide SP Investor a 7% internal rate of return on its capital contributions to Superior before any liquidation distribution is made to Unit. As of March 31, 2023, liquidation distributions paid first to SP Investor of $329.5 million would have been required for SP Investor to reach its 7% Liquidation IRR Hurdle at which point Unit would then have been entitled to receive up to $329.5 million of the remaining liquidation distributions to satisfy Unit's 7% Liquidation IRR Hurdle with any remaining liquidation distributions paid as outlined within the Agreement.

Sale Event. On April 24, 2023 (the "Superior Sale Date"), we entered into a purchase and sale agreement (the "Superior PSA") with SP Investor under which the Company closed on the sale of its 50% ownership interest in Superior for $20.0 million. Unit received proceeds of $12.0 million at closing and is entitled to receive $8.0 million in deferred proceeds at the earlier of twelve months following the Superior Sale Date or the consummation of a Sale Transaction by SP Investor (as defined in the Superior PSA), subject to Unit's satisfaction of certain ongoing covenant obligations and other customary conditions.

Consolidation. From April 3, 2018 to March 1, 2022, we treated Superior as a variable interest entity (VIE) because the equity holders as a group (Unit Corporation and SP Investor) lacked the power to control without the Operator. The Agreement and MSA gave us the power to direct the activities that most significantly affect Superior's operating performance through common control of the Operator. Accordingly, Unit was considered the primary beneficiary and consolidated the financial position, operating results, and cash flows of Superior.

Effective March 1, 2022, the employees of the Operator were transferred to Superior and the MSA was amended and restated to remove the operating services the Operator was providing to Superior. There was no change to the monthly service fee for shared services. The power to direct the activities that most significantly affect Superior's operating performance is now shared by the equity holders (Unit Corporation and SP Investor) rather than held by the Operator. Superior no longer qualifies as a VIE subsequent to these amendments and we no longer consolidate the financial position, operating results, and cash flows of Superior as of, and subsequent to, March 1, 2022.

We subsequently ~~account~~accounted for our investment in Superior as an equity method investment using the hypothetical liquidation book value (HLBV) method, which is a balance sheet approach that calculates the change in the hypothetical amount Unit and SP Investor would be entitled to receive if Superior were liquidated at book value at the end of each period, adjusted for any contributions made and distributions received during the period. We recognized no equity earnings from our investment in Superior during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2022~~2023.

Table of Contents

Estimated Fair Value of Equity Method Investment in Superior. As of the Effective Date, in conjunction with fresh start accounting under ASC Topic 852, Reorganizations, the estimated fair value of the net equity attributable to Unit's ownership interest in Superior was $14.8 million. Since then, Unit has received cumulative distributions from Superior of $32.6 million, which were recognized as net income attributable to Unit under the HLBV method. As of March 1, 2022, upon deconsolidation of Superior, the fair value of our retained equity method investment in Superior was estimated at $1.7 million. To estimate this fair value, we simulated paths for Superior's total equity value through the potential sales process initiation date using a Geometric Brownian Motion. The expected value (i.e., average of all simulations) of each security class was then discounted to present value using the relevant risk-free rate. The simulations reflect forecasted future cash distributions as impacted by the Drilling Commitment Adjustment Amount described above, as well as the future liquidation preference of each investor in a potential Sale Event also as described above. We consider this a Level 3 measurement within the fair value hierarchy as the discounted simulation models require the use of significant unobservable inputs.

We recognized a $13.1 million loss on deconsolidation during the three months ended March 31, 2022 as the difference between the $1.7 million estimated fair value of our retained equity method investment in Superior as of March 1, 2022 and Superior's net equity attributable to Unit's ownership interest prior to deconsolidation.

28Affiliate Activity. The table below presents UPC's affiliate activity with Superior during the periods indicated:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Oil and natural gas revenues	$	9,757	$	16,298
Oil and natural gas operating costs	$	528	$	767

Table of Contents

~~Superior~~Portions ~~Balance~~of ~~Sheet Disclosure. The amounts below reflect~~ the ~~Superior~~affiliate ~~balance~~activity ~~sheet~~was ~~accounts,~~eliminated ~~without~~for ~~elimination of intercompany receivables from and payables to Unit, consolidated in our unaudited condensed consolidated balance sheets as of December 31, 2021 which was~~ the ~~last~~periods ~~reporting~~during ~~date as of~~ which weSuperior was consolidated ~~the~~by ~~financial position of Superior:~~ Unit.

	December 31,2021
	(In thousands)
Current assets:
Cash and cash equivalents	$	17,246
Accounts receivable	42,628
Prepaid expenses and other	1,263
Total current assets	61,137
Property and equipment:
Gas gathering and processing equipment	274,748
Transportation equipment	2,801
	277,549
Less accumulated depreciation, depletion, amortization, and impairment	53,792
Net property and equipment	223,757
Right of use asset	3,485
Other assets	2,226
Total assets	$	290,605
Current liabilities:
Accounts payable	$	34,010
Accrued liabilities	5,292
Current operating lease liability	1,450
Current portion of other long-term liabilities	1,548
Total current liabilities	42,300
Long-term debt	19,200
Operating lease liability	2,036
Total liabilities	$	63,536

Affiliate Activity. UPC's oil and natural gas revenues with Superior totaled $18.9 million and $13.3 million during the three months ended September 30, 2022 and 2021, respectively, and $38.5 million and $31.2 million during the nine months ended September 30, 2022 and 2021, respectively. UPC's gas gathering and processing expenses with Superior totaled $0.6 million and $0.8 million during the three months ended September 30, 2022 and 2021, respectively, and $1.4 million and $2.5 million during the nine months ended September 30, 2022 and 2021, respectively. Portions of this activity was eliminated for the periods during which Superior was consolidated by Unit.

NOTE 16 – COMMITMENTS AND CONTINGENCIES

Environmental

We manage our exposure to environmental liabilities on properties to be acquired by identifying existing problems and assessing the potential liability. We also conduct periodic reviews, on a company-wide basis, to identify changes in our environmental risk profile. These reviews evaluate whether there is a probable liability, its amount, and the likelihood that the liability will be incurred. Any potential liability is determined by considering, among other matters, incremental direct costs of any likely remediation and the proportionate cost of employees expected to devote significant time directly to any possible remediation effort. As it relates to evaluations of purchased properties, depending on the extent of an identified environmental problem, we may exclude a property from the acquisition, require the seller to remediate the property to our satisfaction, or agree to assume liability for the remediation of the property.

Table of Contents

We have not historically experienced significant environmental liability while being a contract driller since the greatest portion of that risk is borne by the operator. Any liabilities we have incurred have been small and were resolved while the drilling rig was on the location. Those costs were in the direct cost of drilling the well.

Litigation

The Company is subject to litigation and claims arising in the ordinary course of business which may include environmental, health and safety matters, commercial disputes with customers, or more routine employment related claims. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. As new information becomes available or because of legal or administrative rulings in similar matters or a change in applicable law, the Company's conclusions regarding the probability of outcomes and the amount of estimated loss, if any, may change. Although we are insured against various risks, there is no assurance that the nature and amount of that insurance will be adequate, in every case, to indemnify us against liabilities arising from future legal proceedings.

In February 2021, UPC finalized a settlement agreement for $2.1 million related to a well drilled in Beaver County, Oklahoma during 2013. Certain operational issues arose and one of the working interest owners in the well filed a lawsuit claiming that UPC’s actions violated its duties under the joint operating agreement and caused damages to the owners in the well. The case went to trial in January 2019 and the jury issued a verdict in favor of the working interest owner, awarding $2.4 million in damages, including pre- and post-judgment interest. UPC appealed the verdict and finalized the settlement agreement while the case was pending review in the Oklahoma Court of Civil Appeals.

NOTE 17 – INCOME TAXES

~~For~~The ~~the~~following ~~three~~table ~~and~~presents ~~nine~~a ~~months~~reconciliation ~~ended~~between ~~September 30, 2022 and 2021, respectively,~~ the ~~Company’s effective~~ income tax ~~rate~~provision ~~was~~computed ~~0.0%~~by ~~which~~applying ~~differs from~~ the federal statutory rate ofto ~~21.0%~~income ~~primarily~~before ~~due~~income totaxes ~~changes in,~~ and ~~continued need of,~~ our ~~full~~effective ~~valuation~~income ~~allowance,~~tax ~~changes~~expense in(benefit) during the ~~warrant~~periods ~~liability~~indicated: ~~valuation, and state income taxes.~~

We concluded that it is more likely than not that the net deferred tax asset will not be realized and have recorded a full valuation allowance, reducing the net deferred tax asset to zero. We maintained this conclusion as of September 30, 2022 and December 31, 2021. We will continue to evaluate whether the valuation allowance is needed in future reporting periods and it will remain until we can conclude that the net deferred tax assets are more likely than not to be realized. Future events or new evidence which may lead us to conclude that it is more likely than not our net deferred tax assets will be realized include, but are not limited to, cumulative historical pre-tax earnings, sustained significant improvements in commodity prices, a sustained significant increase in rig utilization and/or rates, a material and sizable asset acquisition or disposition, and taxable events that could result from one or more future potential transactions. The valuation allowance does not prohibit the Company from utilizing the tax attributes if the Company recognizes taxable income. As long as we continue to conclude that the valuation allowance against the net deferred tax assets is necessary, the Company will not have significant deferred income tax expense or benefit.


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Income tax expense at statutory rate	$	12,556	$	(9,844)
State income tax expense, net of federal benefit	1,685		(1,641)

Non-controlling interest in Superior	—		(850)
Change in valuation allowance (1)	(94,728)		17,974
Revaluation of deferred tax assets and liabilities due to state income tax rate change	5,698		—
Warrant liability revaluation	—		(5,339)
Other permanent items	143		(300)
Income tax expense (benefit)	$	(74,646)	$	—

As1. The Company reviews available positive and negative evidence to assess the need for a valuation allowance against the Company's deferred tax assets. On the basis of ~~December 31,~~this ~~2021~~assessment, a full valuation allowance was recorded against the Company's ~~had~~net andeferred ~~expected~~tax ~~federal~~assets in 2020 and maintained through December 31, 2022. The Company subsequently recorded net ~~operating~~income ~~loss~~attributable ~~carryforward~~to Unit Corporation of $~~386~~148.24 million ~~after~~and ~~consideration~~$60.6 ofmillion during 2022 and 2021, respectively. After considering these positive results, the ~~tax~~resulting ~~attribute~~significant ~~reductions~~three-year ofcumulative ~~IRC~~income ~~Section~~position, ~~108~~and other available positive and ~~finalization~~negative ofevidence, the Company’s ~~2021~~determined ~~federal~~that ~~income~~it ~~tax~~is ~~return. $191.2~~more ~~million~~likely than not that a portion of the net deferred tax assets would be realized. Accordingly, the Company's ~~expected~~released ~~federal~~a ~~net~~portion ~~operating~~of ~~loss~~its ~~carryforward~~valuation isallowance ~~subject~~contributing to ~~expiration~~a ~~between~~$94.7 ~~2036~~million ~~and~~net ~~2037.~~change Asin ofthe ~~December~~valuation allowance during the three months ended March 31, ~~2021,~~2023 ~~our~~with a corresponding income tax ~~basis~~benefit recorded in ~~UPC's~~our ~~properties~~unaudited ~~was~~condensed ~~approximately~~consolidated ~~$476.0~~statements ~~million~~of operations.

~~NOTE 18 – TRANSACTIONS WITH RELATED PARTIES~~24

One current director, Robert Anderson, also serves as an executive with GBK Corporation, a holding company with numerous energy and industry subsidiaries and affiliates, including Kaiser Francis Oil Company. The Company in the ordinary course of business made payments for working interests, joint interest billings, and product purchases to, and received payments for working interests, drilling services, and joint interest billings from, Kaiser Francis Oil Company. Payments made to Kaiser Francis Oil Company totaled $0.9 million and $0.5 million while payments received totaled $3.3 million and $0.3 million during the three months ended September 30, 2022 and 2021, respectively, and payments made to Kaiser Francis Oil Company totaled $5.1 million and $1.6 million while payments received totaled $10.8 million and $1.6 million during the nine months ended September 30, 2022 and 2021, respectively.

Table of Contents

~~One former director, G. Bailey Peyton IV, also serves as Manager and 99.5% owner of Peyton Royalties, LP, a family-controlled limited partnership that owns royalty rights in wells in several states.~~ The ~~Company~~following intable ~~the~~presents ~~ordinary course of business, paid royalties, or lease bonuses, primarily due to its status as successor in interest to prior transactions and as operator of~~ the ~~wells~~components ~~involved and, sometimes, as lessee, regarding certain wells in which Mr. Peyton, members~~ of ~~Mr.~~our ~~Peyton's~~deferred ~~family,~~tax ~~and~~assets ~~Peyton Royalties, LP have an interest. Such payments totaled $0.2 million~~ and ~~$0.1~~liabilities: ~~million during the three months ended September 30, 2022 and 2021, respectively, and $0.4 million and $0.3 million during the nine months ended September 30, 2022 and 2021, respectively.~~


	March 31, 2023		December 31, 2022
	(In thousands)
Deferred tax assets:
Allowance for losses and nondeductible accruals	$	14,048	$	15,662
Net operating loss carryforward (1)	71,519		81,199
Non-producing oil and natural gas properties	36,416		37,493
Producing oil and natural gas properties	10,495		17,044
Alternative minimum tax and research and development tax credit carryforward	1,738		1,738
Gross deferred tax assets	134,216		153,136
Valuation allowance (2)	(46,637)		(141,365)
Total deferred tax assets	87,579		11,771
Deferred tax liabilities:
Contract drilling and other equipment	(12,354)		(11,365)
Investment in Superior	(389)		(406)
Total deferred tax liabilities	(12,743)		(11,771)
Deferred tax assets, net	$	74,836	$	—

1.As of December 31, 2022, the Company had an expected federal net operating loss carryforward of $331.4 million of which $136.4 million is subject to expiration between 2036 and 2037.

2.The Company has retained a partial valuation allowance on its deferred tax assets as of March 31, 2023 primarily due to uncertainty in forecasting the timing of future tax benefit recognition related to certain non-producing oil and gas properties and allowance for losses and nondeductible accruals.

NOTE 18 – TRANSACTIONS WITH RELATED PARTIES

The table below presents the payment activity with this related party during the periods indicated:


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Payments made to:
Kaiser Francis Oil Company	$	1,166	$	3,382


Payments received from:
Kaiser Francis Oil Company	$	1,801	$	3,949

NOTE 19 – INDUSTRY SEGMENT INFORMATION

We have three main business segments offering different products and services within the energy industry:

•Oil and natural gas - the oil and natural gas segment is engaged in the acquisition, development, and production of oil, NGLs, and natural gas properties.

•Contract drilling - the contract drilling segment is engaged in the land contract drilling of oil and natural gas wells.

•Mid-Stream - the mid-stream segment buys, sells, gathers, processes, and treats natural gas and NGLs for third parties and for our own account. We ~~presently~~held ~~own~~a 50% ownership interest in Superior as of ~~this~~March ~~subsidiary~~31, ~~and~~2023, ~~subsequent~~but subsequently sold our interest as discussed in Note 15 - Superior Investment. Subsequent to the deconsolidation of Superior as of March 1, 2022 (as discussed in Note 2 - Summary Of Significant Accounting Policies and Note 15 - Superior Investment), we ~~will continue to~~ include our equity method investment in Superior and related earnings in our mid-stream segment.

Table of Contents

We evaluate each consolidated segment’s performance based on its operating income, which is defined as operating revenues less operating expenses and depreciation, depletion, amortization, and impairment. We have no oil and natural gas production or other operations outside the United States.

The following tables provide certain information about the operations of each of our segments:

	Three Months Ended September 30, 2022
	Three Months Ended March 31, 2023
	Oil and Natural Gas		Contract Drilling		Mid-Stream		Corporate and Other		Eliminations		Total Consolidated
	(In thousands)
Revenues: (1)
Oil and natural gas	$	8048,026	$	—	$	—	$	—	$	—	$	8048,026
Contract drilling	—		4045,~~256~~903		—		—		—		4045,~~256~~903
Total revenues	8048,026		4045,~~256~~903		—		—		—		~~120~~93,~~282~~929
Expenses:
Operating costs:
Oil and natural gas	2117,~~235~~164		—		—		—		—		2117,~~235~~164
Contract drilling	—		2526,~~823~~872		—		—		—		2526,~~823~~872
Total operating costs	2117,~~235~~164		2526,~~823~~872		—		—		—		4744,~~058~~036
Depreciation, depletion, and amortization	12,~~840~~136		1,~~590~~659		—		9196		—		3,~~521~~891
Total expenses	23,075		27,413		—		91		—		50,579
General and administrative	—		—		—		5,090		—		5,090
General and administrative	—		—		—		5,601		—		5,601
Gain on disposition of assets	(97)		(3,656)		—		—		—		(3,753)
(Gain) loss on disposition of assets	335		(2,528)		—		35		—		(2,158)
Total operating expenses	19,203		24,875		—		5,186		—		49,264
Income (loss) from operations	5628,~~616~~823		1521,~~371~~028		—		(5,~~727~~186)		—		6644,~~260~~665
Loss on derivatives	—		—		—		(12,381)		—		(12,381)
Other income (expense):
Gain on change in fair value of warrants	—		—		—		—		—		—
Interest income	—		—		—		1,757		—		1,757
Reorganization items, net	—		—		—		(48)		—		(48)
Interest expense	—		—		—		(39)		—		(39)
Interest, net	—		—		—		(37)		—		(37)
Gain on derivatives	—		—		—		13,595		—		13,595
Other	18		12		—		1,994		—		2,024
Reorganization items, net	—		—		—		(81)		—		(81)
Income (loss) before income taxes	$	56,634	$	15,383	$	—	$	(16,199)	$	—	$	55,818
Other	(20)		125		—		2		—		107
Total other income (expense)	(20)		125		—		15,234		—		15,339
Income before income taxes	$	28,803	$	21,153	$	—	$	10,048	$	—	$	60,004

1.The revenues for oil and natural gas occur at a point in time. The revenues for contract drilling ~~and gas gathering and processing~~ occur over time.

3126

Table of Contents

	Three Months Ended September 30, 2021
	Three Months Ended March 31, 2022
	Oil and Natural Gas		Contract Drilling		Mid-Stream (2)		Corporate and Other		Eliminations		Total Consolidated
	(In thousands)
Revenues: (1)
Oil and natural gas	$	6687,~~202~~582	$	—	$	—	$	—	$	(1310,~~322~~772)	$	5276,~~880~~810
Contract drilling	—		1928,~~158~~882		—		—		—		1928,~~158~~882
Gas gathering and processing	—		—		9283,~~022~~198		—		(~~812~~525)		9182,~~210~~673
Total revenues	6687,~~202~~582		1928,~~158~~882		9283,~~022~~198		—		(1411,~~134~~297)		~~163~~188,~~248~~365
Expenses:
Operating costs:
Oil and natural gas	2224,~~022~~000		—		—		—		(~~812~~525)		2123,~~210~~475
Contract drilling	—		1526,~~357~~237		—		—		—		1526,~~357~~237
Gas gathering and processing	—		—		7673,~~823~~771		—		(1411,~~202~~383)		62,~~621~~388
Total operating costs	2224,~~022~~000		1526,~~357~~237		7673,~~823~~771		—		(1511,~~014~~908)		99112,~~188~~100
Depreciation, depletion, and amortization	54,~~311~~048		1,~~576~~534		85,~~143~~614		~~264~~74		—		1511,~~294~~270
Total expenses	27,333		16,933		84,966		264		(15,014)		114,482
General and administrative	—		—		—		5,915		611		6,526
General and administrative	—		—		—		4,246		880		5,126
Gain on disposition of assets	(53)		(2,125)		—		3		—		(2,175)
Gain on disposition of assets	(14)		(3,091)		—		(926)		—		(4,031)
Total operating expenses	27,995		25,646		79,385		5,992		(11,297)		127,721
Income (loss) from operations	3859,~~883~~587		53,~~316~~236		73,~~056~~813		(35,~~584~~992)		—		4760,~~671~~644
Loss on derivatives	—		—		—		(39,742)		—		(39,742)
Other income (expense):
Loss on change in fair value of warrants	—		—		—		(9,054)		—		(9,054)
Interest income	—		—		—		10		—		10
Reorganization items, net	—		—		—		(971)		—		(971)
Interest expense	—		—		(178)		(96)		—		(274)
Interest, net	—		—		(250)		(452)		—		(702)
Loss on derivatives	—		—		—		(64,076)		—		(64,076)
Other	51		(34)		(24)		—		—		(7)
Loss on change in fair value of warrants	—		—		—		(36,612)		—		(36,612)
Income (loss) before income taxes	$	38,934	$	5,282	$	6,782	$	(53,803)	$	—	$	(2,805)
Loss on deconsolidation of Superior	—		—		—		(13,141)		—		(13,141)
Reorganization items, net	—		—		—		(3)		—		(3)
Other	708		20		17		2		—		747
Total other income (expense)	708		20		(161)		(113,916)		—		(113,349)
Income (loss) before income taxes	$	60,295	$	3,256	$	3,652	$	(119,908)	$	—	$	(52,705)

1.The revenues for oil and natural gas occur at a point in time. The revenues for contract drilling and gas gathering and processing occur over time.

Table of Contents

	Nine Months Ended September 30, 2022
	Oil and Natural Gas		Contract Drilling		Mid-Stream (2)		Corporate and Other		Eliminations (2)		Total Consolidated
	(In thousands)
Revenues: (1)
Oil and natural gas	$	268,504	$	—	$	—	$	—	$	(10,756)	$	257,748
Contract drilling	—		102,780		—		—				102,780
Gas gathering and processing	—				83,198		—		(525)		82,673
Total revenues	268,504		102,780		83,198		—		(11,281)		443,201
Expenses:
Operating costs:
Oil and natural gas	72,838		—		—		—		(509)		72,329
Contract drilling	—		77,823		—		—		—		77,823
Gas gathering and processing	—		—		73,771		—		(11,383)		62,388
Total operating costs	72,838		77,823		73,771		—		(11,892)		212,540
Depreciation, depletion, and amortization	9,915		4,682		5,614		241		—		20,452
Impairment	—		—		—		—		—		—
Total expenses	82,753		82,505		79,385		241		(11,892)		232,992
General and administrative	—		—		—		18,937		611		19,548
(Gain) loss on disposition of assets	257		(6,693)		—		37		—		(6,399)
Income (loss) from operations	185,494		26,968		3,813		(19,215)		—		197,060
Loss on derivatives	—		—		—		(73,848)		—		(73,848)
Loss on change in fair value of warrants	—		—		—		(29,323)		—		(29,323)
Loss on deconsolidation of Superior	—		—		—		(13,141)		—		(13,141)
Reorganization items, net	—		—		—		(90)		—		(90)
Interest, net	—		—		(179)		(229)		—		(408)
Other	738		40		17		2,161		—		2,956
Income (loss) before income taxes	$	186,232	$	27,008	$	3,651	$	(133,685)	$	—	$	83,206

1.The revenues for oil and natural gas occur at a point in time. The revenues for contract drilling and gas gathering and processing occur over time.

2.Includes Superior activity for the two months prior to the March 1, 2022 deconsolidation, as discussed in Note 2 - Summary Of Significant Accounting Policies and Note 15 - Superior Investment.

3327

Table of Contents

	Nine Months Ended September 30, 2021
	Oil and Natural Gas		Contract Drilling		Mid-Stream		Corporate and Other		Eliminations		Total Consolidated
	(In thousands)
Revenues: (1)
Oil and natural gas	$	181,003	$	—	$	—	$	—	$	(31,129)	$	149,874
Contract drilling	—		52,893		—		—		—		52,893
Gas gathering and processing	—		—		217,954		—		(2,519)		215,435
Total revenues	181,003		52,893		217,954		—		(33,648)		418,202
Expenses:
Operating costs:
Oil and natural gas	58,365		—		—		—		(2,519)		55,846
Contract drilling	—		41,308		—		—		—		41,308
Gas gathering and processing	—		—		181,109		—		(33,769)		147,340
Total operating costs	58,365		41,308		181,109		—		(36,288)		244,494
Depreciation, depletion, and amortization	19,442		4,721		24,238		768		—		49,169
Impairment	—		—		—		—		—		—
Total expenses	77,807		46,029		205,347		768		(36,288)		293,663
Loss on abandonment of assets	—		—		—		—		—		—
General and administrative	—		—		—		15,406		2,640		18,046
(Gain) loss on disposition of assets	(101)		(5,237)		75		(950)		—		(6,213)
Income (loss) from operations	103,297		12,101		12,532		(15,224)		—		112,706
Loss on derivatives	—		—		—		(104,973)		—		(104,973)
Loss on change in fair value of warrants	—		—		—		(12,628)		—		(12,628)
Reorganization items, net	—		—		—		(3,959)		—		(3,959)
Interest, net	—		—		(666)		(3,229)		—		(3,895)
Other	140		(17)		(863)		(22)		—		(762)
Income (loss) before income taxes	$	103,437	$	12,084	$	11,003	$	(140,035)	$	—	$	(13,511)

1.The revenues for oil and natural gas occur at a point in time. The revenues for contract drilling and gas gathering and processing occur over time.

Table of Contents

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

Introduction

The following discussion should be read together with the condensed consolidated financial statements included in Item 1 of Part I of this report and in Item 8 of our ~~2021~~2022 Form 10-K filed with the SEC on March 3117, ~~2022~~2023.

We operate, manage, and analyze the results of our operations through our three principal business segments:

•Oil and Natural Gas – carried out by our subsidiary ~~UPC~~Unit Petroleum Company. This segment ~~produces~~explores, develops, acquires, and ~~acquires~~produces oil and natural gas properties for our own account.

•Contract Drilling – carried out by our subsidiary ~~UDC~~Unit Drilling Company. This segment contracts to drill onshore oil and natural gas wells for others and for our ~~oil~~own ~~and natural gas segment~~account.

•Mid-Stream – carried out by Superior and its subsidiaries. This segment buys, sells, gathers, processes, and treats natural gas and NGLs for third parties and for our own account. We ~~hold~~held a 50% ~~investment~~ownership interest in Superior as of March 31, 2023, but subsequently sold our ownership interests on April 24, 2023 as discussed in Recent Developments below.

Oil and Natural Gas

In our oil and natural gas segment, we are optimizing production and converting non-producing reserves to producing with selective drilling activities. We also anticipate continuing to hedge a portion of our future production depending on future market pricing among other factors.

Contract Drilling

In our contract drilling segment, we are focused on maintaining utilization of our ~~BOSS and SCR~~ drilling rigs in a safe and efficient manner. All 14 of our BOSS drilling rigs are currently operating ~~in addition to three of our SCR drilling rigs as we continue to evaluate opportunities to place one or more of our four non-operating SCR drilling rigs back in service~~. ~~Given~~Most ~~the improving drilling rig dayrate environment, most~~ of our drilling rigs are contracted for periods of 12 months or less. During the ~~third~~first quarter of ~~2022~~2023, contracts on ~~eight~~four BOSS drilling rigs ~~and~~repriced ~~one~~at ~~SCR~~higher dayrates. Contracts on three BOSS drilling ~~rig~~rigs repriced at higher ~~dayrates.~~rates Weduring ~~expect~~April ~~that~~2023 ~~contracts~~and onfive 12 BOSS drilling rigs ~~and~~are ~~one~~up ~~SCR~~for ~~drilling~~renegotiation ~~rig~~during ~~will~~the besecond upquarter. Effective December 31, 2022, we reduced the number of total rigs available for ~~change~~use orfrom ~~renegotiation~~21 ~~between~~to ~~September 30~~18, ~~2022~~reflecting ~~and~~the ~~March~~current ~~31,~~market ~~2023~~outlook for utilization of SCR rigs.

Mid-Stream

~~In our mid-stream segment,~~ Superior is focused on ~~continuing~~generating ~~to generate~~ predictable free cash flows with limited exposure to commodity prices in addition to seeking business development opportunities in its core areas utilizing the Superior credit agreement (which Unit is not a party to and does not guarantee) or other financing sources that are available to it. We ~~hold~~held a 50% ~~investment~~ownership interest in Superior as of March 31, ~~and~~2023, ~~subsequent~~but tosubsequently ~~the~~sold ~~deconsolidation~~our ofownership interests on April 24, 2023 as discussed in Recent Developments below. We deconsolidated Superior as of March 1, 2022, weand ~~report~~subsequently reported our ownership interest as an equity method investment. The part of the following discussion of financial condition and results of operations pertaining to our mid-stream segment asduring of the ~~third~~ quarter ofended ~~2022~~March ~~relates~~31, to2022 includes the two months of consolidated results prior to deconsolidation as of March 1, 2022.

Recent Developments

Commodity Price Environment ~~and COVID-19 Pandemic~~

~~Our~~The ~~success depends, among other things, on~~ prices we receive for our oil and natural gas production, the demand for oil, natural gas, and NGLs, and the demand for our drilling rigs, which influences the amounts we can charge for those drilling rigs, are all significant drivers of our results. While our operations are all within the United States, events outside the United States affect us and our industry, including political and economic uncertainty asand ~~well as~~ geopolitical activity.

We are continuously monitoring the current and potential impacts of the COVID-19 pandemic, including any new variants, on our business. This includes how it has and may continue to impact our operations, financial results, liquidity, customers, employees, and vendors as new COVID-19 variants may have undetermined impacts to our business.28

Table of Contents

~~During~~Oil, natural gas, and NGL pricing generally improved during 2021 and much of 2022 as demand recovered from the ~~last~~COVID-19 ~~two~~pandemic ~~years~~while ~~commodity~~oil supply was negatively impacted by the conflict between Russia and Ukraine as well as restrained production growth from OPEC+, among other factors. Prices generally declined later in 2022 and into 2023 due to growing economic uncertainty and recession concerns, among other factors. Commodity prices have been volatile, in recent years and the outlook for future oil and gas prices remains uncertain and subject to many factors. The following chart reflects the significant fluctuations in the historical prices for oil and natural gas:

The following chart reflects the significant fluctuations in the prices for NGLs(1):

1.NGL prices reflect the monthly average Mont Belvieu price.

3629

Table of Contents

Common Stock ~~Repurchases~~Dividends

InOn ~~June~~January ~~2021~~5, we2023, ~~repurchased~~the anCompany ~~aggregate~~announced the declaration of ~~600,000~~a ~~shares~~special cash dividend of ~~our~~$10.00 ~~common~~per ~~stock~~share ~~from~~and ~~the~~has ~~Lenders~~approved ~~(as~~a ~~defined~~quarterly cash dividend policy beginning in ~~Note~~the 9Company’s -second ~~Long-Term~~quarter. ~~Debt~~The ~~and~~special ~~Other~~dividend ~~Long-Term~~was ~~Liabilities)~~paid ~~which~~on ~~received~~January ~~these~~31, ~~shares~~2023, to stockholders of record as anof ~~exit~~the ~~fee~~close ~~during~~of ~~our~~business ~~reorganization~~on January 20, 2023. The ~~Lenders~~initial ~~were~~quarterly ~~paid~~dividend will be $152.0050 per share ~~for~~to ~~their~~be ~~respective~~paid ~~shares,~~on ~~for~~a andate ~~aggregate~~in ~~cash~~the ~~purchase~~Company’s ~~price~~second ofquarter $9that is yet to be determined.0 ~~million~~Subsequent quarterly dividends will be issued on a variable rate per share basis as determined by the Company. The special and quarterly cash dividends will be funded by cash on the Company’s balance sheet.

InThe ~~June~~declaration ~~2021,~~and ~~the~~payment ~~Company's~~of ~~board~~any offuture ~~directors~~dividend, ~~(the~~whether ~~Board)~~fixed, ~~authorized~~special, ~~repurchasing~~or upvariable, towill ~~$25.0~~remain ~~million~~at the full discretion of the Company’s ~~outstanding common stock. The~~ Board ~~subsequently~~of ~~authorized~~Directors ~~increases to the authorized repurchases up to $50.0 million in October 2021~~ and ~~then~~will updepend toupon ~~$100.0~~the ~~million~~Company’s infinancial ~~June~~position, ~~2022.~~results ~~The~~of ~~repurchases~~operations, ~~are~~cash ~~made through open market purchases~~flows, ~~privately~~capital ~~negotiated transactions~~requirements, orbusiness other available means. The Company has no obligation to repurchase any shares under the repurchase program and may suspend or discontinue it at any time without prior notice. During the third quarter of 2022conditions, wefuture ~~repurchased 275~~expectations,~~000~~ ~~shares under~~ the ~~repurchase~~requirements ~~program at an average share price~~ of ~~$51.46~~applicable ~~for~~law, anand ~~aggregate~~other ~~purchase~~factors ~~price~~that ofthe ~~$14.2~~Company’s ~~million.~~Board As of ~~September 30,~~Directors ~~2022,~~finds werelevant ~~had~~at ~~repurchased a total of 1,794,392 shares under~~ the ~~repurchase~~time ~~program at an average share price~~ of ~~$38.37~~considering ~~for~~any anpotential ~~aggregate~~dividend ~~purchase price of $68~~declaration.~~9 million.~~

~~During~~Sale ~~the year ended December 31, 2021, we also repurchased 78,000 shares in a privately negotiated transaction at a share price~~ of ~~$19.07~~Superior ~~which was not part of the repurchase program.~~Investment

~~The~~On ~~cumulative~~April ~~number~~24, 2023, we entered into a purchase and sale agreement (the "Superior PSA") with SP Investor under which the Company closed on the sale of ~~shares~~its ~~repurchased~~50% asownership interest in Superior for $20.0 million. Unit received proceeds of ~~September 30,~~$12.0 ~~2022~~million ~~totaled~~at ~~2,472,392~~closing and is entitled to receive $8.0 million in deferred proceeds at the earlier of twelve months following the Superior Sale Date or the consummation of a Sale Transaction by SP Investor (as defined in the Superior PSA), subject to Unit's satisfaction of certain ongoing covenant obligations and other customary conditions.

~~Superior~~Officer ~~MSA~~Departure and ~~LLCA amendments~~Appointments

~~Effective~~On ~~March~~February 123, ~~2022~~2023, ~~the~~Philip ~~employees of the Operator were transferred to Superior and the MSA was amended and restated to remove the operating services the Operator was providing to Superior~~B. ~~There~~Smith ~~was~~notified ~~no change to~~ the ~~monthly~~Company’s ~~service~~Board ~~fee for shared services. We no longer consolidate the financial position, operating results, and cash flows~~ of ~~Superior~~Directors as of, ~~and~~his ~~subsequent~~decision to, ~~March~~step 1,down ~~2022. We recognized a $13.1 million loss on deconsolidation during the nine months ended September 30, 2022~~ as ~~the~~President ~~difference~~and ~~between~~Chief ~~the~~Executive ~~$1.7~~Officer ~~million estimated fair value~~ of ~~our~~the ~~retained~~Company ~~equity~~effective ~~method investment in Superior as of~~ March 131, ~~2022~~2023. ~~and~~His ~~Superior's~~decision ~~net equity attributable~~ to ~~Unit's~~step ~~ownership~~down ~~interest~~was ~~prior~~due to ~~deconsolidation.~~his Wedesire ~~subsequently~~to ~~account~~spend ~~for~~more ~~our~~time ~~investment~~working inon ~~Superior~~his asnonprofit anprojects ~~equity method investment using the hypothetical liquidation book value (HLBV) method which is a balance sheet approach that calculates the change in the hypothetical amount Unit~~ and SPother ~~Investor~~endeavors. ~~would~~Mr. beSmith ~~entitled~~will continue to ~~receive~~serve ifas ~~Superior~~Chairman ~~were~~of ~~liquidated at book value at~~ the ~~end~~Board of ~~each period, adjusted for any contributions made and distributions received during the period~~Directors.

~~Warrants~~In connection with Mr. Smith stepping down as President and CEO, the Board of Directors approved (i) a pro-rated vesting of his outstanding time-based equity awards scheduled to vest on the next applicable vesting date based on the number of days worked during the then-current vesting period, and (ii) extending the time that Mr. Smith can exercise his options to the expiration date set forth in his award agreement governing the options.

~~Each~~To ~~holder~~fill ~~of Unit common stock outstanding (Old Common Stock) before~~ the ~~Emergence~~vacancy ~~Date~~created ~~that~~by ~~did~~Mr. ~~not~~Smith’s ~~opt~~resignation, ~~out~~on ofFebruary ~~the~~28, ~~release~~2023, ~~under~~ the ~~Chapter~~Board ~~11 plan~~ of ~~reorganization~~Directors ~~filed~~appointed ~~with~~Phil ~~the~~Frohlich ~~bankruptcy~~as ~~court~~interim onChief ~~June~~Executive 9Officer, ~~2020~~effective isApril ~~entitled~~1, ~~to receive 0.03460447 warrants for every share of Old Common Stock owned. Each warrant is exercisable for one share of Company common stock~~2023, ~~subject~~until ~~to adjustment as provided in~~ the ~~Warrant~~Board ~~Agreement. The warrants expire on the earliest~~ of ~~(i)~~Directors ~~September~~names ~~3, 2027, (ii) consummation of~~ a ~~Cash~~successor. ~~Sale~~Mr. ~~(as~~Frohlich ~~defined~~has inbeen ~~the Warrant Agreement), or (iii) the consummation of~~ a ~~liquidation,~~member ~~dissolution or winding up~~ of the ~~Company.~~Board As of ~~September 30,~~Directors ~~2022,~~since ~~the~~September ~~Company had authorized 1~~3,~~822,203~~ ~~warrants and none had been exercised~~2020. ~~See Note 5 - Capital Stock for additional discussion on warrant provisions.~~

Financial Condition and Liquidity

Summary

Our near-term and long-term financial condition and liquidity primarily depend on the cash flow from our operations and credit agreement borrowings. The principal factors determining our cash flow from operations are:

•the ~~amount~~volume of natural gas, oil, and NGLs we produce;

•the prices we receive for our natural gas, oil, and NGLs production;

•the utilization of our drilling rigs ~~and the rates we receive for those drilling rigs~~; and

37•the dayrates we receive for utilization of our drilling rigs.

We currently expect that cash and cash equivalents, cash generated from operations, and available funds under our credit facility will be adequate to support our working capital, capital expenditures, dividend distributions, discretionary stock repurchases, and other cash requirements for at least the next 12 months and we are not aware of any indications that they will not be adequate for the foreseeable periods thereafter.

Table of Contents

•the fees and margins that Superior obtains from its natural gas gathering and processing contracts.

We expect that cash and cash equivalents, cash flow from operations, and available borrowing capacity under the Exit credit agreement will be adequate to support our working capital, capital expenditures, potential dividend distributions, discretionary stock repurchases, and other cash requirements for at least the next 12 months and we are not aware of any indications that they will not be adequate for the foreseeable periods thereafter.

The table below summarizes cash flow activity during the periods indicated:

	Nine Months Ended September 30,				PercentChange
	Three Months Ended March 31,				PercentChange
	2022		2021
	2023		2022
	(In thousands except percentages)
Net cash provided by operating activities	$	~~121~~57,~~310~~400	$	~~124~~45,~~426~~810	~~(3)~~25	%
Net cash provided by investing activities	31,095		50,233		(38)	%
Net cash used in investing activities	(4,089)		(12,212)		67	%
Net cash used in financing activities	(3796,~~482~~374)		(~~137~~9,~~807~~479)		73NM	%
Net increase in cash and cash equivalents	$	114,923	$	36,852
Net increase (decrease) in cash and cash equivalents	$	(43,063)	$	24,119

1.NM – A percentage calculation is not meaningful due to a zero-value denominator or a percentage change greater than 200.

Cash Flows from Operating Activities

Our operating cash flow is primarily influenced by the prices we receive for our oil, NGLs, and natural gas production, the volume of oil, NGLs, and natural gas we produce, settlements of commodity derivative contracts, and third-party dayrates and utilization of our drilling rigs ~~and Superior's mid-stream services, and the rates charged for those drilling and mid-stream services~~. Our cash flows from operating activities are also affected by changes in working capital.

Net cash provided by operating activities during the first ~~nine~~three months of ~~2022~~2023 ~~decreased~~increased by $311.16 million as compared to the first ~~nine~~three months of ~~2021~~2022 primarily due to ~~higher~~a ~~payments~~favorable onchange in derivative settlements, higher operating profit from our contract drilling segment, and favorable net changes in operating assets and liabilities related to the timing of cash receipts and disbursements, ~~and~~partially offset by lower operating profit from our ~~mid-stream~~oil ~~segment~~and ~~reflecting~~natural ~~the~~gas ~~March~~segment 1,and ~~2022~~the ~~deconsolidation~~absence of ~~Superior, partially offset by increased~~ operating profit from our ~~oil~~mid-stream ~~and~~segment ~~natural~~reflecting ~~gas~~the ~~and~~March ~~contract~~1, ~~drilling~~2022 ~~segments~~deconsolidation of Superior.

Cash Flows from Investing Activities

We anticipate using a portion of our free cash flows for capital expenditures related to our development and production of oil, NGLs, and natural gas as well as the maintenance of our existing drilling rig fleet.

Net cash ~~provided~~used byin investing activities decreased by $198.1 million during the first ~~nine~~three months of ~~2022~~2023 compared to the first ~~nine~~three months of ~~2021~~2022 primarily due to the absence of the 2022 deconsolidation of Superior's cash and cash equivalents, ~~higher~~partially ~~capital~~offset ~~expenditures,~~by ~~and~~ lower proceeds received from the disposition of non-core property and equipment.

Cash Flows from Financing Activities

Net cash used in financing activities ~~decreased~~increased by $~~100~~86.39 million ~~for~~during the first ~~nine~~three months of ~~2022~~2023 compared to the first ~~nine~~three months of ~~2021~~2022 primarily due to the ~~absence~~January of2023 ~~net~~special ~~payments~~dividend onand ~~credit~~dividend ~~agreements~~equivalents ~~and~~paid, ~~finance~~partially ~~leases~~offset asby ~~well~~the asabsence ~~lower~~of 2022 distributions made by Superior to non-controlling interests~~, partially offset by higher repurchases of common stock~~. A portion of future cash flows and cash and cash equivalents may be used for future shareholder return activities, including stock repurchases and cash ~~distributions~~dividends.

As of ~~September~~March 3031, ~~2022~~2023, we had unrestricted cash and cash equivalents totaling $~~179~~170.19 million and no outstanding borrowings under the Exit credit agreement.

Table of Contents

The following table summarizes certain financial condition and liquidity information as of the dates identified:

	September 30,2022		September 30,2021
	March 31,2023		March 31,2022
	(In thousands)
Working capital	$	~~160~~173,~~426~~362	$	(3037,~~367~~421)
Current portion of long-term debt	$	—	$	—
Long-term debt	$	—	$	~~3,100~~—
Shareholders’ equity attributable to Unit Corporation	$	~~303~~400,~~332~~675	$	~~149~~141,~~504~~558

Table of Contents

Working Capital

Our working capital balance ~~typically~~primarily fluctuates due to the increase or use of our cash and cash equivalents balance, the timing of our trade accounts receivable and accounts payable, and the fluctuation in current assets and liabilities associated with the fair values of our derivative positions. We had positive working capital of $~~160~~173.4 million as of ~~September~~March 3031, ~~2022~~2023 compared to negative working capital of $3037.4 million as of ~~September~~March 3031, ~~2021~~2022. The increase in working capital is primarily due to ~~increases~~higher in cash and cash equivalents, the absence of the warrant liability, lower current commodity derivative liabilities, and lower accrued liabilities and payables, partially offset by lower accounts receivable. ~~Our~~The ~~commodity~~Exit ~~derivative~~credit ~~contracts~~agreement ~~decreased~~may ~~working~~be ~~capital~~used byfor ~~$41.5 million as of September 30, 2022 and decreased~~ working capital ~~by $60~~.~~0 million as of September 30, 2021.~~

Credit ~~Agreements~~Agreement

Exit Credit Agreement. On the Effective Date, the Company entered into an amended and restated credit agreement (the Exit credit agreement), providing for a $140.0 million senior secured revolving credit facility (RBL Facility) and a $40.0 million senior secured term loan facility, among (i) the Company, UDC, and UPC (together, the Borrowers), (ii) the guarantors party thereto, including the Company and all of its subsidiaries existing as of the Effective Date (other than Superior ~~Pipeline Company, L.L.C.~~ and its subsidiaries), (iii) the lenders party thereto from time to time (Lenders), and (iv) BOKF, NA dba Bank of Oklahoma as administrative agent and collateral agent (in such capacity, the Administrative Agent). The maturity date of borrowings under this Exit credit agreement is March 1, 2024.

Our Exit credit agreement is primarily used for working capital purposes as it limits the amount that can be borrowed for capital expenditures. These limitations restrict future capital projects using the Exit credit agreement. The Exit credit agreement also requires that proceeds from the disposition of certain assets be used to repay amounts outstanding.

On April 6, 2021, the Company finalized the first amendment to the Exit credit agreement. Under the first amendment, the Company reaffirmed its borrowing base of $140.0 million of the RBL, amended certain financial covenants, and received less restrictive terms, among others, as it relates to the disposition of assets and the use of proceeds from those dispositions.

On October 19, 2021, the Company finalized the third amendment to the Exit credit agreement. Under the third amendment, the Company requested, and was granted, a reduction in the RBL borrowing base from $140.0 million to $80.0 million in addition to less restrictive terms as it relates to capital expenditures, required hedges, and the use of proceeds from the disposition of certain assets, while also amending certain financial covenants.

On March 30, 2022, the RBL Facility borrowing base of $80.0 million was reaffirmed.

Table of Contents

~~Superior Credit Agreement.~~ On ~~May~~March 1024, ~~2018~~2023, ~~Superior~~the ~~signed~~Company afinalized ~~five-year,~~the ~~$200.0~~fifth ~~million~~amendment ~~senior secured revolving credit facility with an option~~ to ~~increase~~ the ~~credit~~Exit ~~amount up to $250.0 million, subject to certain conditions (Superior~~ credit agreement). OnUnder ~~April~~the ~~29,~~fifth ~~2022~~amendment, ~~Superior~~the ~~entered~~RBL ~~into~~Facility anborrowing ~~Amended~~base ~~and~~of ~~Restated Credit Agreement for a four-year,~~ $~~135~~35.0 million ~~senior~~was ~~secured~~reaffirmed ~~revolving~~and ~~credit~~certain ~~facility~~references ~~with~~to anthe ~~option~~Company's toequity ~~increase~~ownership ~~the~~interests ~~credit~~in ~~amount~~Superior upwere toremoved ~~$200.0~~in ~~million,~~anticipation ~~subject~~of tothe ~~certain~~sale ~~conditions~~of ~~(Amended~~our ~~Superior~~ownership ~~credit~~interests ~~agreement)~~in Superior.

Table of Contents

Capital Requirements

Oil and Natural Gas Segment ~~Dispositions,~~ Acquisitions, ~~and~~ Capital Expenditures, and Dispositions. Most of our capital expenditures for this segment are discretionary and directed toward growth. Our decisions to increase our oil, NGLs, and natural gas reserves through acquisitions or through drilling depends on the prevailing or expected market conditions, potential return on investment, future drilling potential, and opportunities to obtain financing, which provide us flexibility in deciding when and if to incur these costs. We participated in the completion of 188 gross wells (10.0359 net wells) drilled by other operators during the first ~~nine~~three months of ~~2022~~2023 compared to 105 gross wells (0.7706 net wells) during the first ~~nine~~three months of ~~2021~~2022.

Oil and natural gas segment capital expenditures, including oil and gas properties on the full cost method, for the first ~~nine~~three months of ~~2022~~2023 totaled $151.2 million, excluding a $20.53 million increase in the ARO liability, compared to $76.14 million, excluding a $1.64 million increase in the ARO liability, during the first ~~nine~~three months of ~~2021~~2022.

OnNet ~~August~~proceeds ~~16,~~for ~~2021,~~ the ~~company closed on the~~ sale of ~~substantially~~other ~~all~~non-core ofoil ~~our wells~~ and ~~related~~natural ~~leases~~gas ~~located~~assets ~~near~~totaled ~~Oklahoma~~$0.7 ~~City,~~million ~~Oklahoma~~and ~~for~~ $160.15 million, ~~net~~during ofthe ~~customary~~three ~~closing~~months ~~and~~ended ~~post-closing~~March ~~adjustments~~31, ~~based~~2023 onand ~~an effective date of August 1~~2022, ~~2021~~respectively. These proceeds reduced the net book value of our full cost pool with no gain or loss recognized as the ~~sale~~sales did not result in a significant alteration of the full cost pool.

OnContract ~~May~~Drilling 6Segment Dispositions, ~~2021~~Acquisitions, ~~the~~and ~~Company~~Capital ~~closed~~Expenditures. onNear ~~the~~term ~~sale~~capital ofexpenditures ~~substantially~~are ~~all~~expected ofto ~~our~~primarily ~~wells~~be ~~and~~for ~~the~~maintenance ~~leases~~capital ~~related~~on ~~thereto~~operating ~~located~~drilling inrigs. ~~Reno~~We ~~and~~also ~~Stafford~~continue ~~Counties,~~to ~~Kansas~~pursue ~~for~~the ~~proceeds~~disposal ofor ~~$7.3~~sale ~~million, net~~ of ~~customary~~our ~~closing~~non-core, ~~and~~idle ~~post-closing~~drilling ~~adjustments~~rig fleet. ~~These~~Contract ~~proceeds~~drilling ~~reduced~~capital ~~the~~expenditures ~~net~~totaled ~~book~~$0.5 ~~value~~million ofduring ~~our~~the ~~full~~first ~~cost~~three ~~pool~~months ~~with~~of no2023 ~~gain~~compared orto ~~loss~~$1.0 ~~recognized~~million asduring the ~~sale~~first ~~did~~three ~~not~~months ~~result in a significant alteration~~ of ~~the full cost pool~~2022.

~~Net~~We ~~proceeds~~sold ~~for the sale of other~~ non-core ~~oil~~contract ~~and~~drilling ~~natural~~assets ~~gas~~for ~~assets~~proceeds ~~totaled~~of $64.62 million and $52.02 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 and ~~2021~~2022, respectively. These proceeds ~~reduced~~resulted ~~the~~in net ~~book~~gains ~~value~~ of ~~our~~$3.7 ~~full~~million ~~cost~~and ~~pool~~$2.1 ~~with~~million noduring ~~gain or loss recognized as~~ the ~~sales~~three ~~did~~months ~~not~~ended ~~result~~March in31, a2023 ~~significant~~and ~~alteration~~2022, ~~of the full cost pool~~respectively.

~~Contract~~Mid-Stream ~~Drilling~~Capital ~~Segment~~Expenditures ~~Dispositions, Acquisitions,~~ and ~~Capital Expenditures~~Acquisitions. ~~Near~~Superior ~~term~~incurred ~~capital expenditures are expected to primarily be for maintenance capital on operating drilling rigs~~$1.2 Wemillion ~~also continue to pursue the disposal or sale~~ of ~~our~~consolidated ~~non-core, idle drilling rig fleet. Contract drilling~~ capital expenditures ~~totaled $6.8 million~~ during the ~~first~~two ~~nine~~ months ofprior ~~2022 compared~~ to ~~$0.9~~its ~~million~~March ~~during~~1, ~~the~~2022 ~~first nine months of 2021~~deconsolidation.

Table of Contents

We sold non-core contract drilling assets for proceeds of $9.4 million and $8.2 million during the nine months ended September 30, 2022 and 2021, respectively. These proceeds resulted in net gains of $6.7 million and $5.2 million during the nine months ended September 30, 2022 and 2021, respectively.

Mid-Stream Dispositions, Acquisitions, and Capital Expenditures. Superior incurred $1.2 million in consolidated capital expenditures during the first nine months of 2022 compared to $8.6 million during the first nine months of 2021.

Derivative Activities

	2022	2023
Daily oil production	93%	50%
Daily natural gas production	97%	44%

Commodity Derivatives. Our commodity derivatives are intended to reduce our exposure to price volatility and manage price risks. Those contracts limit the risk of downward price movements for commodities subject to derivative contracts, but they also limit increases in future revenues that would otherwise result from price movements above the contracted prices. Our decision on the type and quantity of our production and the price(s) of our derivative(s) is based, in part, on our view of current and future market conditions. As of March 31, 2023, based on our first quarter 2023 average daily production, the approximated percentages of our production under derivative contracts are as follows:

Using derivative instruments involves the risk that the counterparties cannot meet the financial terms of the transactions. We considered this non-performance risk regarding our counterparties and our own non-performance risk in our derivative valuation at September 30, 2022 and determined there was no material risk at that time. The fair value of the net assets (liabilities) we had with Bank of Oklahoma, our only commodity derivative counterparty, was $49.8 million as of September 30, 2022.


	2023 (1)	2024 and beyond
Daily oil production	40%	—%
Daily natural gas production	38%	—%

~~Warrants~~1.During ~~Prior~~April ~~to the determination of the initial exercise price~~2023, we ~~recognized~~entered ~~the~~into ~~fair~~NYMEX ~~value of the warrants as a derivative liability on our unaudited condensed consolidated balance sheets with changes in the liability reported as gain~~ (~~loss~~HH) onnatural ~~change~~gas in- ~~fair~~swap ~~value~~agreements ofaveraging ~~warrants~~22,000 inMMBtu/day ~~our~~for ~~unaudited~~October ~~condensed~~2023, ~~consolidated~~November ~~statements of operations. On April 7~~2023, ~~2022,~~and ~~the~~December ~~Company~~2023 ~~delivered~~at ~~notice~~a ofweighted ~~the~~average ~~initial~~fixed ~~$63.74 exercise~~ price ~~resulting in the warrants meeting the definition~~ of ~~an equity instrument~~$3.14 ~~Accordingly,~~per weMMBtu ~~recognized~~which ~~the~~effectively ~~change~~locked in the ~~fair~~settlement ~~value~~price of ~~the warrant liability in~~ our ~~unaudited~~outstanding ~~condensed~~positions ~~consolidated~~for ~~statements~~those ~~of operations and reclassified the $49~~periods.1 million warrant liability to capital in excess of par value on the unaudited condensed consolidated balance sheets as of April 7, 2022. The warrants will continue to be reported as capital in excess of par and are no longer subject to future fair value adjustments. On or about April 25, 2022, the warrants began trading over-the-counter under the symbol "UNTCW".

Table of Contents

Using derivative instruments involves the risk that the counterparties cannot meet the financial terms of the transactions. We considered this non-performance risk regarding our counterparties and our own non-performance risk in our derivative valuation at March 31, 2023 and determined there was no material risk at that time. The fair value of the net liabilities we had with Bank of Oklahoma, our only commodity derivative counterparty, was $12.6 million as of March 31, 2023.

Warrants. Prior to the determination of the initial exercise price, we recognized the fair value of the warrants as a derivative liability on our unaudited condensed consolidated balance sheets with changes in the liability reported as loss on change in fair value of warrants in our unaudited condensed consolidated statements of operations. On April 7, 2022, the Company delivered notice of the initial $63.74 exercise price resulting in the warrants meeting the definition of an equity instrument. Accordingly, we recognized the change in the fair value of the warrant liability in our unaudited condensed consolidated statements of operations and reclassified the $49.1 million warrant liability to capital in excess of par value on the unaudited condensed consolidated balance sheets as of April 7, 2022. The warrants will continue to be reported as capital in excess of par and are no longer subject to future fair value adjustments. On or about April 25, 2022, the warrants began trading over-the-counter under the symbol "UNTCW". On March 31, 2023, the warrants began trading on the OTCQX Best Market.

Below is the effect of derivative instruments on the unaudited condensed consolidated statements of operations for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2022		2021		2022		2021
	2023		2022
	(In thousands)
Loss on derivatives	$	(12,381)	$	(39,742)	$	(73,848)	$	(104,973)
Gain (loss) on derivatives, net	$	13,595	$	(64,076)
Cash settlements paid on commodity derivatives	(28,641)		(12,940)		(82,764)		(22,647)
Gain (loss) on commodity derivatives settled	2,601		(21,239)
Gain (loss) on derivatives less cash settlements paid on commodity derivatives	$	16,260	$	(26,802)	$	8,916	$	(82,326)
Gain (loss) on derivatives, net less gain (loss) on commodity derivatives settled	$	10,994	$	(42,837)
Loss on change in fair value of warrants	$	—	$	(936,~~054~~612)	$	~~(29,323)~~	$	~~(12,628)~~

4134

Table of Contents

Results of Operations

Three months ended ~~September~~March 3031, ~~2022~~2023 versus three months ended ~~September~~March 3031, ~~2021~~2022

Provided below is a comparison of selected operating and financial data:

	Three Months Ended September 30,						Change			PercentChange (1)
	Three Months Ended March 31,						Change			PercentChange (1)
	2022			2021
	2023			2022
	(In thousands unless otherwise specified)
	(In thousands except rig and day amounts, and as otherwise specified)
Total revenue, before inter-segment eliminations	$	~~120~~93,~~282~~929		$	~~177~~199,~~382~~662		$	(57105,~~100~~733)		(3253)	%
Total revenue, after inter-segment eliminations	$	~~120~~93,~~282~~929		$	~~163~~188,~~248~~365		$	(4294,~~966~~436)		(2650)	%
Net income (loss)	$	55134,~~818~~650		$	(252,~~805~~705)		$	58187,~~623~~355		NM
Net income (loss) attributable to non-controlling interest	$	—		$	(95,~~100~~828)		$	95,~~100~~828		(100)	%
Net income attributable to Unit Corporation	$	55,818		$	6,295		$	49,523		NM
Net income (loss) attributable to Unit Corporation	$	134,650		$	(46,877)		$	181,527		NM
Oil and Natural Gas:
Revenue, before inter-segment eliminations	$	8048,026		$	6687,~~202~~582		$	13(39,~~824~~556)		21(45)	%
Operating costs, before inter-segment eliminations	$	2117,~~235~~164		$	2224,~~022~~000		$	(~~787~~6,836)		(428)	%
Average oil price (Bbl)	$	56.75		$	47.66		$	9.09		19	%
Average oil price ($/Bbl)	$	65.96		$	59.72		$	6.24		10	%
Average oil price excluding derivatives (Bbl)	$	91.81		$	70.53		$	21.28		30	%
Average oil price excluding derivatives ($/Bbl)	$	73.94		$	92.22		$	(18.28)		(20)	%
Average NGLs price (Bbl)	$	29.39		$	27.42		$	1.97		7	%
Average NGLs price ($/Bbl)	$	21.37		$	32.91		$	(11.54)		(35)	%
Average NGLs price excluding derivatives (Bbl)	$	29.39		$	27.42		$	1.97		7	%
Average NGLs price excluding derivatives ($/Bbl)	$	21.37		$	32.91		$	(11.54)		(35)	%
Average natural gas price (Mcf)	$	3.57		$	2.88		$	0.69		24	%
Average natural gas price ($/Mcf)	$	4.04		$	3.31		$	0.73		22	%
Average natural gas price excluding derivatives (Mcf)	$	7.04		$	3.69		$	3.35		91	%
Average natural gas price excluding derivatives ($/Mcf)	$	3.11		$	4.54		$	(1.43)		(31)	%
Oil production (MBbls)	~~276~~300			~~329~~406			(53106)			(1626)	%
NGL production (MBbls)	~~547~~419			~~649~~613			(~~102~~194)			(1632)	%
Natural gas production (MMcf)	5,~~452~~369			6,~~805~~514			(1,~~353~~145)			(2018)	%
Contract Drilling:
Revenue, before inter-segment eliminations	$	4045,~~256~~903		$	1928,~~158~~882		$	2117,~~098~~021		~~110~~59	%
Operating costs, before inter-segment eliminations	$	2526,~~823~~872		$	1526,~~357~~237		$	~~10,466~~635		682	%
Average number of drilling rigs in use	17.0			11.0			6.0			55	%
Total drilling rigs available for use at the end of the period	18			21			(3)			(14)	%
Total drilling rigs available for use at the end of the period	21			21			—			—	%
Average number of drilling rigs in use	16.8			15.5			1.3			8	%
Average dayrate on daywork contracts - BOSS Rigs	$	24,258		$	18,832		$	5,426		29	%
Average dayrate on daywork contracts ($/day)	$	29,592		$	19,756		$	9,836		50	%
Average dayrate on daywork contracts - SCR Rigs	$	19,370		$	14,007		$	5,363		38	%
Average dayrate on daywork contracts - BOSS Rigs ($/day)	$	30,845		$	20,661		$	10,184		49	%
Average dayrate on daywork contracts - SCR Rigs ($/day)	$	24,056		$	16,012		$	8,044		50	%
Mid-Stream: (2)
Revenue, before inter-segment eliminations	$	—		$	9283,~~022~~198		$	(9283,~~022~~198)		(100)	%
Operating costs, before inter-segment eliminations	$	—		$	7673,~~823~~771		$	(7673,~~823~~771)		(100)	%
Corporate and Other:
General and administrative expense, before inter-segment eliminations	$	5,~~601~~090		$	45,~~246~~915		$	~~1,355~~(825)		32(14)	%
Other income (expense):
Interest expense, net	$	(37)		$	(702)		$	665		(95)	%
Interest income	$	1,757		$	10		$	1,747		NM
Reorganization items, net	$	(48)		$	(971)		$	923		(95)	%
Interest expense	$	(39)		$	(274)		$	235		(86)	%
Loss on derivatives	$	(12,381)		$	(39,742)		$	27,361		69	%
Reorganization items, net	$	(81)		$	(3)		$	(78)		NM
Loss on change in fair value of warrants	$	—		$	(9,054)		$	9,054		(100)	%
Gain (loss) on derivatives	$	13,595		$	(64,076)		$	77,671		121	%
Income tax expense, net	$	—		$	—		$	—		—	%
Loss on change in fair value of warrants	$	—		$	(36,612)		$	36,612		100	%
Average interest rate on long-term debt outstanding	—		%	6.5		%	(6.5)		%	(100)	%
Loss on deconsolidation of Superior	$	—		$	(13,141)		$	13,141		100	%
Average long-term debt outstanding	$	—		$	18,393		$	(18,393)		(100)	%
Income tax benefit, net	$	(74,646)		$	—		$	(74,646)		—	%
Average interest rate on long-term debt outstanding	—		%	0.3		%	(0.3)		%	(100)	%
Average long-term debt outstanding	$	—		$	12,747		$	(12,747)		(100)	%

1.NM – A percentage calculation is not meaningful due to a zero-value denominator or a percentage change greater than 200.

2.Absence of mid-stream activity during the three months ended ~~September~~March 3031, ~~2022~~2023 reflects the March 1, 2022 deconsolidation of Superior.

4235

Table of Contents

Oil and Natural Gas

Oil and natural gas revenues ~~increased~~decreased $1339.86 million or 2145% during the ~~third~~first quarter of ~~2022~~2023 as compared to the ~~third~~first quarter of ~~2021~~2022 primarily due to ~~higher commodity prices, partially offset by~~ lower production volumes. ~~Including derivatives settled, average oil prices increased 19% to $56.75 per barrel, average natural gas prices increased 24% to $3.57 per Mcf,~~ and ~~NGLs~~lower ~~prices~~commodity ~~increased~~realization 7%excluding ~~to $29~~derivatives.39 ~~per barrel.~~ Oil production decreased 1626%, natural gas production decreased 2018%, and NGLs production decreased 1632%. The decrease in volumes was primarily due to ~~normal~~the ~~well~~divestiture ~~production~~of ~~declines~~certain ~~and~~producing ~~divestitures~~properties ofduring ~~producing~~2022 ~~properties~~as well as normal well production declines which have not been offset by new drilling or acquisitions. Excluding derivatives settled, average oil prices decreased 20% to $73.94 per barrel, average natural gas prices decreased 31% to $3.11 per Mcf, and NGLs prices decreased 35% to $21.37 per barrel.

Oil and natural gas operating costs ~~increased~~decreased $06.8 million or 428% between the comparative ~~third~~first quarters of ~~2022~~2023 and ~~2021~~2022 primarily due to ~~higher~~lower ~~production~~lease ~~taxes~~operating expenses on ~~increased~~lower ~~revenues~~production ~~and employee compensation and separation benefits~~volumes, ~~partially offset by~~ lower ~~lease~~production ~~operating~~taxes ~~expenses~~ on lower ~~volumes~~revenues, asand ~~described~~lower ~~above~~employee compensation.

Contract Drilling

Drilling revenues increased $2117.10 million or ~~110~~59% during the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021~~2022 primarily due to aan 558% increase in the average number of rigs in use to 1716.08 induring the ~~third~~first quarter of ~~2022~~2023 as well as increases to the average dayrates on daywork contracts of 2949% and 3850% on BOSS rigs and SCR rigs, respectively.

Drilling operating costs increased $100.56 million or 682% between the comparative ~~third~~first quarters of ~~2022~~2023 and ~~2021~~2022 primarily due to an increase in the average number of operating rigs, partially offset by lower transportation and start up costs associated with bringing stacked rigs back into service.

Mid-Stream

Our mid-stream revenues decreased $9283.02 million or 100% during the ~~third~~first quarter of ~~2022~~2023 as compared to the ~~third~~first quarter of ~~2021~~2022 due to the absence of activity as a result of the March 1, 2022 deconsolidation of Superior.

Operating costs decreased $7673.8 million or 100% during the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021~~2022 due to the absence of activity as a result of the March 1, 2022 deconsolidation of Superior.

General and Administrative

Corporate general and administrative expenses ~~increased~~decreased $10.48 million or 3214% during the ~~third~~first quarter of ~~2022~~2023 compared to the ~~third~~first quarter of ~~2021~~2022 primarily due to ~~higher~~lower employee compensation, partially offset by higher stock compensation expense.

Interest ~~Expense, Net~~Income

Interest ~~expense,~~income ~~net~~increased ~~decreased~~ $01.7 million ~~between~~during the ~~comparative~~first ~~third~~quarter ~~quarters~~ of ~~2022~~2023 ~~and~~compared ~~2021 primarily due~~ to athe ~~100%~~first ~~decrease~~quarter inof ~~average~~2022 ~~long-term~~primarily ~~debt~~due ~~outstanding.~~to ~~Our~~higher average ~~debt~~cash ~~outstanding~~equivalents ~~decreased~~held ~~$18.4~~as ~~million~~well ~~during~~as ~~the~~higher ~~third~~average ~~quarter~~interest ofrates ~~2022~~during ~~compared to~~ the ~~third~~ quarter ofended ~~2021~~March ~~primarily~~31, ~~due~~2023 compared to ~~payments made under~~ the ~~Exit~~quarter ~~credit~~ended ~~agreement~~March ~~and~~31, ~~the deconsolidation of Superior's outstanding long-term debt~~2022.

Interest Expense

Interest expense decreased $0.2 million between the comparative first quarters of 2023 and 2022 primarily due to a decrease in average long-term debt outstanding. Our average debt outstanding decreased $12.7 million during the first quarter of 2023 compared to the first quarter of 2022 primarily due to the deconsolidation of Superior's outstanding long-term debt.

Reorganization Items, Net

Reorganization items, net represent any of the expenses, gains, and losses incurred subsequent to and as a direct result of the Chapter 11 proceedings.

~~Loss on Derivatives~~36

The $27.4 million favorable change in loss on derivatives between the comparative third quarters of 2022 and 2021 is primarily due to favorable pricing changes on unsettled commodity derivative positions and new commodity derivative positions executed during the third quarter of 2022, partially offset by higher settlement payments driven by higher average pricing.

Table of Contents

Gain (Loss) on Derivatives

The $77.7 million favorable change in gain (loss) on derivatives between the comparative first quarters of 2023 and 2022 is primarily due to market pricing changes on unsettled commodity derivative positions and net receipts from commodity derivative settlements driven by lower average market pricing.

Loss on Change in Fair Value of Warrants

The $936.16 million favorable change in loss on change in fair value of warrants between the comparative ~~third~~first quarters of ~~2022~~2023 and ~~2021~~2022 is due to the absence of ~~gain or~~ loss on change in the fair value of the warrants during the ~~third~~first quarter of ~~2022~~2023 following the second quarter 2022 warrant ~~strike~~exercise price determination and reclassification of the warrant liability to shareholders' equity.

Income Tax Expense, Net

We did not record any income tax expense, net during the third quarter of 2022 or during the third quarter of 2021 due to the Company's full valuation allowance against our net deferred tax asset.

Table of Contents

Nine months ended September 30, 2022 versus nine months ended September 30, 2021

	Nine Months Ended September 30,						Change			PercentChange (1)
	2022			2021
	(In thousands unless otherwise specified)
Total revenue, before inter-segment eliminations	$	454,482		$	451,850		$	2,632		1	%
Total revenue, after inter-segment eliminations	$	443,201		$	418,202		$	24,999		6	%
Net income (loss)	$	83,206		$	(13,511)		$	96,717		NM
Net loss attributable to non-controlling interest	$	(5,828)		$	(4,875)		$	(953)		20	%
Net income (loss) attributable to Unit Corporation	$	89,034		$	(8,636)		$	97,670		NM
Oil and Natural Gas:
Revenue, before inter-segment eliminations	$	268,504		$	181,003		$	87,501		48	%
Operating costs, before inter-segment eliminations	$	72,838		$	58,365		$	14,473		25	%
Average oil price (Bbl)	$	57.82		$	47.77		$	10.05		21	%
Average oil price excluding derivatives (Bbl)	$	97.74		$	63.15		$	34.59		55	%
Average NGLs price (Bbl)	$	32.46		$	21.10		$	11.36		54	%
Average NGLs price excluding derivatives (Bbl)	$	32.46		$	21.10		$	11.36		54	%
Average natural gas price (Mcf)	$	3.72		$	2.87		$	0.85		30	%
Average natural gas price excluding derivatives (Mcf)	$	6.02		$	3.12		$	2.90		93	%
Oil production (MBbls)	991			1,130			(139)			(12)	%
NGL production (MBbls)	1,781			1,952			(171)			(9)	%
Natural gas production (MMcf)	18,788			21,750			(2,962)			(14)	%
Contract Drilling:
Revenue, before inter-segment eliminations	$	102,780		$	52,893		$	49,887		94	%
Operating costs, before inter-segment eliminations	$	77,823		$	41,308		$	36,515		88	%
Average number of drilling rigs in use	16.3			10.1			6.2			61	%
Total drilling rigs available for use at the end of the period	21			21			—			—	%
Average dayrate on daywork contracts - BOSS Rigs	$	22,378		$	19,682		$	2,696		14	%
Average dayrate on daywork contracts - SCR Rigs	$	17,900		$	13,774		$	4,126		30	%
Mid-Stream: (2)
Revenue, before inter-segment eliminations	$	83,198		$	217,954		$	(134,756)		(62)	%
Operating costs, before inter-segment eliminations	$	73,771		$	181,109		$	(107,338)		(59)	%
Gas gathered--Mcf/day	348,859			300,484			48,375			16	%
Gas processed--Mcf/day	146,368			124,263			22,105			18	%
Gas liquids sold--gallons/day	456,700			431,474			25,226			6	%
Corporate and Other:
General and administrative expense, before inter-segment eliminations	$	18,937		$	15,406		$	3,531		23	%
Other income (expense):
Interest expense, net	$	(229)		$	(3,895)		$	3,666		(94)	%
Reorganization items, net	$	(90)		$	(3,959)		$	3,869		98	%
Loss on derivatives	$	(73,848)		$	(104,973)		$	31,125		30	%
Loss on change in fair value of warrants	$	(29,323)		$	(12,628)		$	(16,695)		132	%
Loss on deconsolidation of Superior	$	(13,141)		$	—		$	(13,141)		—	%
Income tax expense, net	$	—		$	—		$	—		—	%
Average interest rate on long-term debt outstanding	2.2		%	6.7		%	(4.5)		%	(67)	%
Average long-term debt outstanding	$	4,202		$	57,815		$	(53,613)		(93)	%

1.NM – A percentage calculation is not meaningful due to a zero-value denominator or a percentage change greater than 200.

2.Mid-Stream activity and metrics shown in this table for the nine months ended September 30, 2022 reflect Superior activity on a consolidated basis for the two months prior to March 1, 2022.

Table of Contents

Oil and Natural Gas

Oil and natural gas revenues increased $87.5 million or 48% during the first nine months of 2022 as compared to the first nine months of 2021 primarily due to higher commodity prices, partially offset by lower production volumes. Including derivatives settled, average oil prices increased 21% to $57.82 per barrel, average natural gas prices increased 30% to $3.72 per Mcf, and NGLs prices increased 54% to $32.46 per barrel. Oil production decreased 12%, natural gas production decreased 14%, and NGLs production decreased 9%. The decrease in volumes was due to normal well production declines and divestitures of producing properties which have not been offset by new drilling or acquisitions.

Oil and natural gas operating costs increased $14.5 million or 25% between the comparative first nine months of 2022 and 2021 primarily due to higher production taxes on increased revenues, higher lease operating expenses, and higher employee compensation and separation benefits.

Contract Drilling

Drilling revenues increased $49.9 million or 94% during the first nine months of 2022 compared to the first nine months of 2021 primarily due to a 61% increase in the average number of rigs in use to 16.3 during the first nine months of 2022 as well as increases to the average dayrates on daywork contracts of 14% and 30% on BOSS rigs and SCR rigs, respectively.

Drilling operating costs increased $36.5 million or 88% between the comparative first nine months of 2022 and 2021 primarily due to an increase in the average number of operating rigs as well as $6.7 million of transportation and start up costs associated with bringing stacked rigs back into service.

Mid-Stream

Our mid-stream revenues decreased $134.8 million or 62% during the first nine months of 2022 as compared to the first nine months of 2021 primarily due to the absence of activity subsequent to March 1, 2022 as a result of the deconsolidation of Superior, partially offset by higher gas, NGL, and condensate prices as well as higher volumes during the consolidated period. Gas processed volumes per day increased 18% while gas gathered volumes per day increased 16% between the comparative first nine months of 2022 and 2021 primarily due to connecting new wells as well as new volumes from the processing plant and gathering system acquired in November 2021.

Operating costs decreased $107.3 million or 59% during the first nine months of 2022 compared to the first nine months of 2021 primarily due to the absence of activity subsequent to March 1, 2022 as a result of the deconsolidation of Superior, partially offset by higher gas, NGL, and condensate prices as well as higher purchase volumes related to the processing plant and gathering system acquired in November 2021.

General and Administrative

Corporate general and administrative expenses increased $3.5 million or 23% during the first nine months of 2022 as compared to the first nine months of 2021 primarily due to higher employee and director compensation.

Interest Expense, Net

Interest expense, net decreased $3.7 million between the comparative first nine months of 2022 and 2021 primarily due to a 93% decrease in average long-term debt outstanding and a decrease in the average interest rate from 6.7% during the first nine months of 2021 to 2.2% during the first nine months of 2022. Our average debt outstanding decreased $53.6 million during the first nine months of 2022 compared to the first nine months of 2021 primarily due to payments made under the Exit credit agreement and the deconsolidation of Superior's outstanding long-term debt, partially offset by borrowings under the Superior credit agreement prior to deconsolidation.

Reorganization Items, Net

Reorganization items, net represent any of the expenses, gains, and losses incurred subsequent to and as a direct result of the Chapter 11 proceedings.

Table of Contents

Loss on Derivatives

The $31.1 million favorable change in loss on derivatives between the comparative first nine months of 2022 and 2021 is primarily due to favorable pricing changes on unsettled commodity derivative positions and new commodity derivative positions executed during the second quarter of 2022, partially offset by higher settlement payments driven by higher average pricing.

Loss on Change in Fair Value of Warrants

The $16.7 million unfavorable change in loss on change in fair value of warrants between the comparative first nine months of 2022 and 2021 is primarily due to changes in the underlying assumptions used to estimate the fair value, including entity value, volatility, duration to exercise, and other inputs.

Loss on Deconsolidation of Superior

~~Loss~~The ~~on deconsolidation of~~ $13.1 million ~~during~~favorable change in loss on deconsolidation between the comparative first ~~nine~~quarters ~~months~~ of 2023 and 2022 ~~represents~~is due to the absence of the loss recognized on the March 1, 2022 deconsolidation of Superior.

Income Tax ~~Expense~~Benefit, Net

WeThe ~~did~~$74.6 ~~not~~million ~~record~~favorable change in income tax ~~expense~~benefit, net ~~during~~between ~~first~~the ~~nine~~comparative ~~months~~first quarters of 2023 and 2022 oris primarily due to a $94.7 million decrease in the deferred tax asset valuation allowance primarily driven by a partial valuation allowance release during the first ~~nine~~quarter ~~months~~of 2023, partially offset by income tax expense of ~~2021~~$14.2 million, and a $5.7 million revaluation of deferred tax assets and liabilities due to state income tax rate change. We did not record any income tax expense, net during the first quarter of 2022 due to the Company's full valuation allowance against our net deferred tax ~~asset~~assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our operations are exposed to market risks primarily because of changes in commodity prices and interest rates.

Commodity Price Risk. Our major market risk exposure is in the prices we receive for our oil, NGLs, and natural gas production. These prices are primarily driven by the prevailing worldwide price for crude oil and market prices applicable to our NGLs and natural gas production. Historically, these prices have fluctuated and we expect this to continue. The prices for oil, NGLs, and natural gas also affect the demand for our drilling rigs and the amount we can charge for the use of our drilling rigs. Based on our first ~~nine~~three months of ~~2022~~2023 production, a $0.10 per Mcf change in what we are paid for our natural gas production, without the effect of hedging, would result in a corresponding $0.2 million per month ($2.2 million annualized) change in our pre-tax operating cash flow. A $1.00 per barrel change in our oil price, without the effect of hedging, would have a $0.1 million per month ($1.2 million annualized) change in our pre-tax operating cash flow and a $1.00 per barrel change in our NGLs prices, without the effect of hedging, would have a $0.21 million per month ($21.37 million annualized) change in our pre-tax operating cash flow.

We use derivative transactions to manage the risk associated with price volatility. Our decisions regarding the amount and prices at which we choose to enter into a contract for certain of our products is based, in part, on our view of current and future market conditions. The transactions we use include financial price swaps under which we will receive a fixed price for our production and pay a variable market price to the contract counterparty. We do not hold or issue derivative instruments for speculative trading purposes.

47As of March 31, 2023, we had the following commodity derivatives outstanding:

Remaining Term

Commodity

Contracted Volume

Weighted Average

Fixed Price for Swaps

Contracted Market

Apr'23 - Dec'23 (1)

Natural gas - swap

22,000 MMBtu/day

$2.46

IF - NYMEX (HH)

Apr'23 - Dec'23

Crude oil - swap

1,300 Bbl/day

$43.60

WTI - NYMEX

Table of Contents

AsInterest ofRate ~~September~~Risk. ~~30,~~Our ~~2022~~interest rate exposure primarily relates to our cash equivalents held in money market funds comprised of U.S. Government and U.S. Treasury securities and our long-term debt under our credit agreement. Our money market fund holdings accrue interest at variable interest rates. Based on our average cash equivalents subject to a variable rate during the first quarter of 2023, wea ~~had~~1% change in the ~~following~~average ~~commodity~~effective ~~derivatives~~interest rate on these holdings would change our annual pre-tax cash flow by approximately $1.5 million. Borrowings under our Exit credit agreement also bear interest at variable interest rates. We had no outstanding: borrowings under this facility as of March 31, 2023.

Term

Commodity

Contracted Volume

Weighted Average Fixed Price for Swaps

Contracted Market

Oct'22 - Dec'22

Natural gas - swap

5,000 MMBtu/day

$2.61

IF - NYMEX (HH)

Oct'22 - Feb'23

Natural gas - swap

21,656 MMBtu/day

$9.14

IF - NYMEX (HH)

Jan'23 - Dec'23

Natural gas - swap

22,000 MMBtu/day

$2.46

IF - NYMEX (HH)

Oct'22 - Dec'22

Natural gas - collar

35,000 MMBtu/day

$2.50 - $2.68

IF - NYMEX (HH)

Oct'22 - Dec'22

Crude oil - swap

2,300 Bbl/day

$42.25

WTI - NYMEX

Oct'22 - Dec'22

Crude oil - swap

495 Bbl/day

$103.98

WTI - NYMEX

Jan'23 - Feb'23

Crude oil - swap

1,339 Bbl/day

$95.40

WTI - NYMEX

Jan'23 - Dec'23

Crude oil - swap

1,300 Bbl/day

$43.60

WTI - NYMEX

Interest Rate Risk. Our interest rate exposure relates to our long-term debt under our Exit credit agreement as its borrowings carry variable interest rates. We had no outstanding borrowings under this facility as of September 30, 2022. See Note 9 – Long-Term Debt and Other Long-Term Liabilities for more information on the Exit credit agreement.

Item 4. Controls and Procedures

Our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), does not expect that our disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) (Disclosure Controls) or our internal control over financial reporting (as defined in Rules 13a - 15(f) and 15d - 15(f) of the Exchange Act) will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part on certain assumptions about the likelihood of future events, and there is no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to an error or fraud may occur and not be detected. We monitor our Disclosure Controls and internal control over financial reporting and make modifications as necessary; our intent in this regard is that the Disclosure Controls and internal control over financial reporting will be modified as systems change, and conditions warrant.

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures under Exchange Act Rule 13a-15. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~September~~March 3031, ~~2022~~2023.

Changes in Internal Controls. There were no changes in our internal control over financial reporting during the quarter ended ~~September~~March 3031, ~~2022~~2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4838

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For further information about the outstanding legal proceedings, please see Note 16 – Commitments ~~And~~and Contingencies.

Item 1A. Risk Factors

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed below, if any, and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

There have been no material changes to the risk factors disclosed in Item 1A in our Form 10-K for the year ended December 31, ~~2021~~2022.

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

InAs ~~June~~of ~~2021~~March 31, 2023, we had repurchased ana ~~aggregate~~total of ~~600~~2,~~000~~472,392 shares at an average share price of ~~our~~$32.09 ~~common~~for ~~stock~~an ~~from~~aggregate ~~the~~purchase ~~Lenders~~cost ~~(as~~of ~~defined~~$79.3 inmillion ~~Note~~through 9privately -negotiated ~~Long-Term~~transactions, ~~Debt~~the ~~and~~repurchase ~~Other~~program ~~Long-Term~~authorized ~~Liabilities)~~by ~~which~~the ~~received~~Board ~~these~~of ~~shares~~Directors asin anJune ~~exit~~2021, ~~fee~~and ~~during~~open ~~our~~market ~~reorganization~~purchases. The ~~Lenders~~purchase ~~were~~cost ~~paid~~and ~~$15.00~~any ~~per~~direct ~~share~~acquisition ~~for~~costs ~~their~~are ~~respective~~reflected ~~shares,~~as ~~for~~treasury anstock ~~aggregate~~on ~~cash~~the ~~purchase~~unaudited ~~price~~condensed ofconsolidated ~~$9.0~~balance ~~million~~sheets.

InThe ~~June~~remaining ~~2021,~~value ~~the Company's board~~ of ~~directors~~shares ~~(the~~that ~~Board)~~may ~~authorized~~yet ~~repurchasing~~be uppurchased tounder ~~$25.0 million of~~ the ~~Company’s~~repurchase ~~outstanding~~program ~~common~~authorization ~~stock.~~was ~~The Board subsequently authorized increases to the authorized repurchases up to~~ $5031.01 million inas ~~October~~of ~~2021~~March ~~and~~31, ~~then up to $100~~2023.0 ~~million in June 2022.~~ The repurchases ~~are~~may be made through open market purchases, privately negotiated transactions, or other available means. The Company has no obligation to repurchase any shares under the repurchase program and may suspend or discontinue it at any time without prior notice. During the third quarter of 2022, we repurchased 275,000 shares under the repurchase program at an average share price of $51.46 for an aggregate purchase price of $14.2 million. As of September 30, 2022, we had repurchased a total of 1,794,392 shares under the repurchase program at an average share price of $38.37 for an aggregate purchase price of $68.9 million.

~~During~~The ~~the~~table ~~year~~below ~~ended~~shows ~~December 31, 2021, we also repurchased 78,000 shares in a privately negotiated transaction at a~~ share ~~price~~repurchase ofactivity ~~$19.07~~for ~~which~~the ~~was~~three ~~not~~months ~~part~~ended ofMarch 31, ~~the repurchase program.~~2023:


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced program	Approximate dollar value of shares that may yet be purchased under the program
					(in thousands)
January 1, 2023 through January 31, 2023	—	$	—	—	$	31,149
February 1, 2023 through February 28, 2023	—	$	—	—	$	31,149
March 1, 2023 through March 31, 2023	—	$	—	—	$	31,149

The table below shows share repurchase activity for the three months ended September 30, 2022:

Period	Total number of shares purchased	Average price paid per share		Total number ofshares purchasedas part of publiclyannounced program	Approximate dollarvalue of shares thatmay yet be purchasedunder the program
					(in thousands)
July 1, 2022 through July 31, 2022	75,000	$	50.00	75,000	$	41,549
August 1, 2022 through August 31, 2022	—	$	—	—	$	41,549
September 1, 2022 through September 30, 2022	200,000	$	52.00	200,000	$	31,149

Item 3. Defaults Upon Senior Securities

Not applicable.

Table of Contents

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Table of Contents

Item 6. Exhibits

Exhibits:

10.1			~~Fourth~~Fifth Amendment to Amended and Restated Credit Agreement.
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.
101.INS			XBRL Instance Document.
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).

5040

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Unit Corporation
Date:	~~November~~May 1011, ~~2022~~2023	By: /s/ ~~Philip~~Phil ~~B. Smith~~Frohlich
		PHILIP B. SMITH
		PHIL FROHLICH
		President and Chief Executive Officer
		Chief Executive Officer
Date:	~~November~~May 1011, ~~2022~~2023	By: /s/ Thomas D. Sell
		THOMAS D. SELL
		Chief Financial Officer

5141

Filing Compare · UNIT CORP