FALSEDec 31, 20192019FY12/3155,423,610467,332,16900007989492,3322,531115,000,0005,000,000000.20.2175,000,000175,000,00055,443,39354,055,600155000181394700000787.5471,387.7931,175.466598.2691813947224901950029900P3YP5Y39P5Y4.03.96.625May 15, 2021P1YP3Y2P3Y0000.275300000.455200000.21530000300002.502.202.800.39P7Y787,5471,2161,1162,33255,443,39355,443,393175,000,000175,000,0001,2051,3262,53154,055,60054,055,600175,000,000175,000,0004747181181393910101099.50.40.90.700007989492019-01-012019-12-31iso4217:USD00007989492019-06-30xbrli:shares00007989492020-02-2800007989492019-12-3100007989492018-12-31iso4217:USDxbrli:shares00007989492018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMember2018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMember2017-01-012017-12-310000798949us-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949us-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949us-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMember2017-01-012017-12-3100007989492017-01-012017-12-310000798949us-gaap:CommonStockMember2016-12-310000798949us-gaap:AdditionalPaidInCapitalMember2016-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2016-12-310000798949us-gaap:RetainedEarningsMember2016-12-310000798949us-gaap:NoncontrollingInterestMember2016-12-3100007989492016-12-310000798949us-gaap:CommonStockMember2017-01-012017-12-310000798949us-gaap:AdditionalPaidInCapitalMember2017-01-012017-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-01-012017-12-310000798949us-gaap:RetainedEarningsMember2017-01-012017-12-310000798949us-gaap:NoncontrollingInterestMember2017-01-012017-12-310000798949us-gaap:CommonStockMember2017-12-310000798949us-gaap:AdditionalPaidInCapitalMember2017-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310000798949us-gaap:RetainedEarningsMember2017-12-310000798949us-gaap:NoncontrollingInterestMember2017-12-3100007989492017-12-310000798949us-gaap:CommonStockMember2018-01-012018-12-310000798949us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-310000798949us-gaap:RetainedEarningsMember2018-01-012018-12-310000798949us-gaap:NoncontrollingInterestMember2018-01-012018-12-310000798949us-gaap:CommonStockMember2018-12-310000798949us-gaap:AdditionalPaidInCapitalMember2018-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000798949us-gaap:RetainedEarningsMember2018-12-310000798949us-gaap:NoncontrollingInterestMember2018-12-310000798949us-gaap:CommonStockMember2019-01-012019-12-310000798949us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310000798949us-gaap:RetainedEarningsMember2019-01-012019-12-310000798949us-gaap:NoncontrollingInterestMember2019-01-012019-12-310000798949us-gaap:CommonStockMember2019-12-310000798949us-gaap:AdditionalPaidInCapitalMember2019-12-310000798949us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000798949us-gaap:RetainedEarningsMember2019-12-310000798949us-gaap:NoncontrollingInterestMember2019-12-310000798949unt:LineOfCreditFacilityCommitmentAmountMemberus-gaap:SubsequentEventMemberunt:UnitCreditAgreementMember2020-01-170000798949unt:UnitCreditAgreementMember2019-12-310000798949srt:MinimumMember2019-01-012019-12-310000798949srt:MaximumMember2019-01-012019-12-31unt:contract0000798949us-gaap:LongTermContractWithCustomerMemberunt:DrillingMember2019-01-012019-12-31xbrli:pure0000798949unt:OilAndNaturalGasMemberunt:CVRRefiningLPMember2019-01-012019-12-310000798949unt:OilAndNaturalGasMemberunt:CVRRefiningLPMember2018-01-012018-12-310000798949unt:OilAndNaturalGasMemberunt:CVRRefiningLPMember2017-01-012017-12-310000798949unt:OilAndNaturalGasMemberunt:ValeroEnergyCorporationMember2019-01-012019-12-310000798949unt:OilAndNaturalGasMemberunt:ValeroEnergyCorporationMember2018-01-012018-12-310000798949unt:OilAndNaturalGasMemberunt:ValeroEnergyCorporationMember2017-01-012017-12-310000798949unt:OilAndNaturalGasMemberunt:SunocoLogisticsPartnersL.P.Member2019-01-012019-12-310000798949unt:OilAndNaturalGasMemberunt:SunocoLogisticsPartnersL.P.Member2018-01-012018-12-310000798949unt:OilAndNaturalGasMemberunt:SunocoLogisticsPartnersL.P.Member2017-01-012017-12-310000798949unt:EOGResourcesIncMemberunt:DrillingMember2019-01-012019-12-310000798949unt:EOGResourcesIncMemberunt:DrillingMember2018-01-012018-12-310000798949unt:EOGResourcesIncMemberunt:DrillingMember2017-01-012017-12-310000798949unt:QepResourcesIncMemberunt:DrillingMember2019-01-012019-12-310000798949unt:QepResourcesIncMemberunt:DrillingMember2018-01-012018-12-310000798949unt:QepResourcesIncMemberunt:DrillingMember2017-01-012017-12-310000798949unt:SlawsonExplorationCompanyIncMemberunt:DrillingMember2019-01-012019-12-310000798949unt:SlawsonExplorationCompanyIncMemberunt:DrillingMember2018-01-012018-12-310000798949unt:SlawsonExplorationCompanyIncMemberunt:DrillingMember2017-01-012017-12-310000798949unt:OneokMemberunt:MidStreamMember2019-01-012019-12-310000798949unt:OneokMemberunt:MidStreamMember2018-01-012018-12-310000798949unt:OneokMemberunt:MidStreamMember2017-01-012017-12-310000798949unt:MidStreamMemberunt:RangeResourcesCorporationMember2019-01-012019-12-310000798949unt:MidStreamMemberunt:RangeResourcesCorporationMember2018-01-012018-12-310000798949unt:MidStreamMemberunt:RangeResourcesCorporationMember2017-01-012017-12-310000798949unt:CenterpointEnergyServiceIncMemberunt:MidStreamMember2019-01-012019-12-310000798949unt:CenterpointEnergyServiceIncMemberunt:MidStreamMember2018-01-012018-12-310000798949unt:CenterpointEnergyServiceIncMemberunt:MidStreamMember2017-01-012017-12-310000798949unt:BankOfMontrealMember2019-12-310000798949exch:MLCO2019-12-310000798949us-gaap:SupportEquipmentAndFacilitiesMembersrt:MinimumMember2019-01-012019-12-310000798949us-gaap:SupportEquipmentAndFacilitiesMember2019-01-012019-12-310000798949us-gaap:BuildingMember2019-01-012019-12-310000798949us-gaap:PropertyPlantAndEquipmentOtherTypesMembersrt:MinimumMember2019-01-012019-12-310000798949us-gaap:PropertyPlantAndEquipmentOtherTypesMembersrt:MaximumMember2019-01-012019-12-31unt:rig0000798949us-gaap:SupportEquipmentAndFacilitiesMember2018-01-012018-12-310000798949us-gaap:SupportEquipmentAndFacilitiesMemberunt:MechanicalDrillingRigsMember2018-01-012018-12-310000798949us-gaap:SupportEquipmentAndFacilitiesMemberunt:SCRDieselelectricDrillingRigsMember2018-01-012018-12-310000798949unt:DrillingMember2018-01-012018-12-310000798949unt:DrillingMember2019-01-012019-12-310000798949us-gaap:SupportEquipmentAndFacilitiesMember2017-01-012017-12-310000798949us-gaap:SalvageValueMember2019-01-012019-12-310000798949srt:MinimumMember2019-12-310000798949srt:MaximumMember2019-12-31unt:Partnershipsutr:MMcf0000798949unt:UnderProducedPropertiesMember2019-12-310000798949unt:OverProducedPropertiesMember2019-12-310000798949unt:NaturalGasBalancingMember2019-12-310000798949unt:OilAndNaturalGasMember2019-01-012019-12-310000798949unt:OilAndNaturalGasMemberus-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Member2018-01-010000798949unt:DrillingMembersrt:MinimumMember2019-01-012019-12-310000798949srt:MaximumMemberunt:DrillingMember2019-01-012019-12-310000798949us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Memberunt:DrillingMember2018-01-010000798949us-gaap:LongTermContractWithCustomerMemberunt:DrillingMembersrt:MinimumMember2019-01-012019-12-310000798949unt:MidStreamMember2019-01-012019-12-310000798949unt:DemandFeeContractsMemberunt:MidStreamMemberunt:CurrentyearMember2019-12-310000798949unt:DemandFeeContractsMemberunt:Year2Memberunt:MidStreamMember2019-12-310000798949unt:DemandFeeContractsMemberunt:Year3Memberunt:MidStreamMember2019-12-310000798949unt:Year4Memberunt:DemandFeeContractsMemberunt:MidStreamMember2019-12-310000798949unt:DemandFeeContractsMemberunt:MidStreamMember2019-12-310000798949us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Memberunt:MidStreamMember2018-01-010000798949unt:MidStreamMember2018-01-012018-12-310000798949unt:MidStreamMember2019-12-310000798949unt:MidStreamMember2018-12-310000798949unt:MidStreamMembersrt:MinimumMember2019-01-012019-12-310000798949unt:MidStreamMembersrt:MaximumMember2019-01-012019-12-3100007989492019-12-31unt:MidStreamMembersrt:MinimumMember2019-12-3100007989492019-12-31unt:MidStreamMembersrt:MaximumMember2019-12-3100007989492019-12-31unt:DemandFeeContractsMemberunt:MidStreamMembersrt:MinimumMember2019-12-3100007989492019-12-31unt:DemandFeeContractsMemberunt:MidStreamMembersrt:MaximumMember2019-12-310000798949unt:EOGAcquisitionMember2017-04-032017-04-03utr:MBoe0000798949unt:EOGAcquisitionMember2017-04-03utr:acre0000798949unt:EOGAcquisitionMemberunt:HoxbarMember2017-04-03unt:wells0000798949unt:EOGAcquisitionMemberunt:HoxbarMember2017-04-032017-04-030000798949unt:EOGAcquisitionMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMember2017-12-310000798949unt:ExcaliburAcquisitionMember2018-12-062018-12-060000798949unt:ExcaliburAcquisitionMember2018-12-060000798949unt:PennSandsMemberunt:ExcaliburAcquisitionMember2018-12-06unt:numberOfDrillingLocations0000798949unt:ExcaliburAcquisitionMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMember2018-12-310000798949us-gaap:OilAndGasPropertiesMember2019-12-310000798949unt:MidStreamMember2019-12-31unt:milesOfPipeline0000798949unt:MidStreamMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMember2018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMember2017-01-012017-12-3100007989492018-04-032018-04-030000798949unt:SuperiorPipelineLLCMemberunt:OwnershipinterestinSuperiorPipelineCompanyL.L.C.Member2018-04-030000798949unt:OwnershipinterestinSuperiorPipelineCompanyL.L.C.Member2018-04-032018-04-030000798949unt:StockOptionsAndRestrictedStockMember2018-01-012018-12-310000798949unt:StockOptionsAndRestrictedStockMember2019-01-012019-12-310000798949us-gaap:EmployeeStockOptionMember2019-01-012019-12-310000798949us-gaap:EmployeeStockOptionMember2018-01-012018-12-310000798949us-gaap:EmployeeStockOptionMember2017-01-012017-12-310000798949unt:UnitCreditAgreementMember2018-12-310000798949unt:SuperiorCreditAgreementMember2019-12-310000798949unt:SuperiorCreditAgreementMember2018-12-310000798949unt:UnitCreditAgreementMember2019-01-012019-12-310000798949unt:UnitCreditAgreementMember2018-04-020000798949unt:LineOfCreditFacilityCommitmentAmountMemberunt:UnitCreditAgreementMember2019-09-260000798949unt:LineOfCreditFacilityLenderDeterminedAmountMemberunt:UnitCreditAgreementMember2019-09-260000798949unt:ProveddevelopedproducingtotalvalueofouroilandgaspropertiesMemberunt:UnitCreditAgreementMember2019-12-310000798949unt:ProveddevelopedproducingtotalvalueofouroilandgaspropertiesMemberunt:UnitCreditAgreementMember2019-01-012019-12-310000798949unt:UnitCreditAgreementMemberunt:PledgeAgreementMember2018-05-022018-05-020000798949unt:LineOfCreditFacilityCommitmentAmountMemberunt:UnitCreditAgreementMember2018-12-310000798949unt:UnitCreditAgreementMembersrt:MinimumMember2019-01-012019-12-310000798949unt:UnitCreditAgreementMembersrt:MaximumMember2019-01-012019-12-310000798949unt:SuperiorCreditAgreementMember2019-01-012019-12-310000798949unt:SeniorNotesSixPointSixTwoFivePercentDue2021Member2019-12-310000798949unt:SeniorNotesSixPointSixTwoFivePercentDue2021Member2019-01-012019-12-310000798949unt:EmployeeThriftPlanMember2019-01-012019-12-310000798949unt:EmployeeThriftPlanMember2018-01-012018-12-310000798949unt:EmployeeThriftPlanMember2017-01-012017-12-310000798949unt:SeparationPlanMember1997-01-011997-01-01unt:week0000798949unt:SeparationPlanMember1997-01-01utr:Y0000798949unt:SpecialSeparationBenefitPlanMember2004-05-050000798949unt:SpecialSeparationBenefitPlanMember2004-05-052004-05-050000798949unt:SeparationPlanMember2019-01-012019-12-310000798949unt:SeparationPlanMember2018-01-012018-12-310000798949unt:SeparationPlanMember2017-01-012017-12-310000798949unt:ChangeOfControlContractsMember2019-01-012019-12-310000798949unt:G.BaileyPeytonIVMemberunt:PeytonRoyaltiesLPMember2019-01-012019-12-310000798949unt:G.BaileyPeytonIVMember2019-01-012019-12-310000798949unt:G.BaileyPeytonIVMember2018-01-012018-12-310000798949unt:G.BaileyPeytonIVMember2017-01-012017-12-3100007989492016-01-012016-12-310000798949us-gaap:RestrictedStockMember2015-05-060000798949unt:IncentiveStockOptionsMember2015-05-060000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2016-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2016-12-310000798949unt:RestrictedStockEmployeeMember2016-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2017-01-012017-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2017-01-012017-12-310000798949unt:RestrictedStockEmployeeMember2017-01-012017-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2017-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2017-12-310000798949unt:RestrictedStockEmployeeMember2017-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2018-01-012018-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2018-01-012018-12-310000798949unt:RestrictedStockEmployeeMember2018-01-012018-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2018-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2018-12-310000798949unt:RestrictedStockEmployeeMember2018-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2019-01-012019-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2019-01-012019-12-310000798949unt:RestrictedStockEmployeeMember2019-01-012019-12-310000798949unt:RestrictedStockEmployeeMemberunt:TimeVestedMember2019-12-310000798949unt:RestrictedStockEmployeeMemberus-gaap:PerformanceSharesMember2019-12-310000798949unt:RestrictedStockEmployeeMember2019-12-310000798949unt:NonEmployeeDirectorsMember2016-12-310000798949unt:NonEmployeeDirectorsMember2017-01-012017-12-310000798949unt:NonEmployeeDirectorsMember2017-12-310000798949unt:NonEmployeeDirectorsMember2018-01-012018-12-310000798949unt:NonEmployeeDirectorsMember2018-12-310000798949unt:NonEmployeeDirectorsMember2019-01-012019-12-310000798949unt:NonEmployeeDirectorsMember2019-12-310000798949us-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:StockPerformanceMeasuresMemberus-gaap:RestrictedStockMembersrt:MinimumMember2019-01-012019-12-310000798949unt:StockPerformanceMeasuresMembersrt:MaximumMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberus-gaap:RestrictedStockMembersrt:MinimumMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMembersrt:MaximumMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberunt:A2019Memberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberunt:A2018Memberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberus-gaap:RestrictedStockMemberunt:TwoThousandSeventeenMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberunt:VestinginthenexttwelvemonthsMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949unt:CashflowtototalassetsperformanceMemberunt:VestingafterthenexttwelvemonthsMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000798949us-gaap:RestrictedStockMember2018-01-012018-12-310000798949us-gaap:RestrictedStockMember2017-01-012017-12-310000798949us-gaap:RestrictedStockMember2019-12-310000798949unt:DirectorsPlanMember2019-01-012019-12-310000798949unt:DirectorsPlanMember2016-12-310000798949unt:DirectorsPlanMember2017-01-012017-12-310000798949unt:DirectorsPlanMember2017-12-310000798949unt:DirectorsPlanMember2018-01-012018-12-310000798949unt:DirectorsPlanMember2018-12-310000798949unt:DirectorsPlanMember2019-12-310000798949unt:DirectorsPlanMemberunt:FortyOnePointTwoOneMember2019-12-310000798949unt:DirectorsPlanMemberunt:FortyOnePointTwoOneMember2019-01-012019-12-310000798949unt:DirectorsPlanMemberunt:FiftyThreePointEightOneMember2019-12-310000798949unt:DirectorsPlanMemberunt:FiftyThreePointEightOneMember2019-01-012019-12-310000798949us-gaap:StockAppreciationRightsSARSMember2019-12-310000798949us-gaap:StockAppreciationRightsSARSMember2018-12-310000798949us-gaap:StockAppreciationRightsSARSMember2017-12-310000798949us-gaap:StockAppreciationRightsSARSMember2019-01-012019-12-310000798949us-gaap:StockAppreciationRightsSARSMember2018-01-012018-12-310000798949us-gaap:StockAppreciationRightsSARSMember2017-01-012017-12-31iso4217:USDunt:Unit0000798949srt:NaturalGasReservesMemberunt:NGPLTexokMemberus-gaap:BasisSwapMemberunt:Jan20Dec20Member2019-01-012019-12-310000798949srt:NaturalGasReservesMemberus-gaap:BasisSwapMemberunt:PEPLMemberunt:Jan20Dec20Member2019-01-012019-12-310000798949srt:NaturalGasReservesMemberunt:NGPLTexokMemberus-gaap:BasisSwapMemberunt:Jan21Dec21Member2019-01-012019-12-310000798949us-gaap:CommodityContractMember2019-01-012019-12-310000798949us-gaap:CommodityContractMember2018-01-012018-12-31utr:MMBoe0000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberunt:IfNymexMemberunt:Jan20Dec20Member2019-01-012019-12-310000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberunt:IfNymexMemberunt:Jan20Dec20Member2019-12-310000798949us-gaap:FairValueInputsLevel2Memberus-gaap:CommodityContractMember2019-12-310000798949us-gaap:FairValueInputsLevel3Memberus-gaap:CommodityContractMember2019-12-310000798949unt:EffectOfNettingMemberus-gaap:CommodityContractMember2019-12-310000798949us-gaap:CommodityContractMember2019-12-310000798949us-gaap:FairValueInputsLevel2Memberus-gaap:CommodityContractMember2018-12-310000798949us-gaap:FairValueInputsLevel3Memberus-gaap:CommodityContractMember2018-12-310000798949unt:EffectOfNettingMemberus-gaap:CommodityContractMember2018-12-310000798949us-gaap:CommodityContractMember2018-12-310000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberus-gaap:FairValueInputsLevel3Member2019-12-310000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberus-gaap:FairValueInputsLevel3Member2019-01-012019-12-310000798949us-gaap:FairValueInputsLevel2Member2019-12-310000798949us-gaap:FairValueInputsLevel2Member2018-12-310000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberus-gaap:FairValueInputsLevel3Membersrt:MinimumMember2019-12-310000798949srt:NaturalGasReservesMemberunt:ThreewaycollarMemberus-gaap:FairValueInputsLevel3Membersrt:MaximumMember2019-12-310000798949us-gaap:AccountingStandardsUpdate201602Member2019-01-010000798949unt:OilAndNaturalGasMemberus-gaap:CapitalAdditionsMember2019-01-012019-12-310000798949unt:OilAndNaturalGasMember2019-12-310000798949unt:SuperiorPipelineCompanyLLCMember2019-01-012019-12-310000798949unt:SuperiorPipelineCompanyLLCMemberunt:SPInvestorHoldingsLLCMember2019-01-012019-12-310000798949unt:SPCMidstreamOperatingLLCMemberunt:SuperiorPipelineCompanyLLCMember2019-01-012019-12-310000798949us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2019-12-310000798949us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2018-12-310000798949unt:AttheMarketCommonStockProgramMember2017-04-040000798949unt:AttheMarketCommonStockProgramMember2018-05-020000798949unt:AttheMarketCommonStockProgramMember2019-09-300000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasPropertiesMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:DrillingMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:MidStreamMember2019-01-012019-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasPropertiesMember2019-01-012019-12-310000798949us-gaap:OilAndGasPropertiesMemberus-gaap:IntersubsegmentEliminationsMember2019-01-012019-12-310000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949unt:DrillingMemberus-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949unt:MidStreamMemberus-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949us-gaap:IntersubsegmentEliminationsMemberus-gaap:OilAndGasServiceMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:OilAndNaturalGasMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:DrillingMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:MidStreamMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:AllOtherSegmentsMember2019-01-012019-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:IntersubsegmentEliminationsMember2019-01-012019-12-310000798949us-gaap:AllOtherSegmentsMember2019-01-012019-12-310000798949us-gaap:IntersubsegmentEliminationsMember2019-01-012019-12-310000798949unt:DrillingMember2019-12-310000798949us-gaap:AllOtherSegmentsMember2019-12-310000798949us-gaap:IntersubsegmentEliminationsMember2019-12-310000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasPropertiesMember2018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:DrillingMember2018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:MidStreamMember2018-01-012018-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasPropertiesMember2018-01-012018-12-310000798949us-gaap:OilAndGasPropertiesMemberus-gaap:IntersubsegmentEliminationsMember2018-01-012018-12-310000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949unt:DrillingMemberus-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949unt:MidStreamMemberus-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949us-gaap:IntersubsegmentEliminationsMemberus-gaap:OilAndGasServiceMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:OilAndNaturalGasMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:DrillingMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:MidStreamMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:AllOtherSegmentsMember2018-01-012018-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:IntersubsegmentEliminationsMember2018-01-012018-12-310000798949unt:OilAndNaturalGasMember2018-01-012018-12-310000798949us-gaap:AllOtherSegmentsMember2018-01-012018-12-310000798949us-gaap:IntersubsegmentEliminationsMember2018-01-012018-12-310000798949unt:OilAndNaturalGasMember2018-12-310000798949unt:DrillingMember2018-12-310000798949us-gaap:AllOtherSegmentsMember2018-12-310000798949us-gaap:IntersubsegmentEliminationsMember2018-12-310000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasPropertiesMember2017-01-012017-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:DrillingMember2017-01-012017-12-310000798949us-gaap:OilAndGasPropertiesMemberunt:MidStreamMember2017-01-012017-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasPropertiesMember2017-01-012017-12-310000798949us-gaap:OilAndGasPropertiesMemberus-gaap:IntersubsegmentEliminationsMember2017-01-012017-12-310000798949unt:OilAndNaturalGasMemberus-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949unt:DrillingMemberus-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949unt:MidStreamMemberus-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949us-gaap:AllOtherSegmentsMemberus-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949us-gaap:IntersubsegmentEliminationsMemberus-gaap:OilAndGasServiceMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:OilAndNaturalGasMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:DrillingMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberunt:MidStreamMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:AllOtherSegmentsMember2017-01-012017-12-310000798949us-gaap:NaturalGasGatheringTransportationMarketingAndProcessingMemberus-gaap:IntersubsegmentEliminationsMember2017-01-012017-12-310000798949unt:OilAndNaturalGasMember2017-01-012017-12-310000798949unt:DrillingMember2017-01-012017-12-310000798949unt:MidStreamMember2017-01-012017-12-310000798949us-gaap:AllOtherSegmentsMember2017-01-012017-12-310000798949us-gaap:IntersubsegmentEliminationsMember2017-01-012017-12-310000798949unt:OilAndNaturalGasMember2017-12-310000798949unt:DrillingMember2017-12-310000798949unt:MidStreamMember2017-12-310000798949us-gaap:AllOtherSegmentsMember2017-12-310000798949us-gaap:IntersubsegmentEliminationsMember2017-12-3100007989492018-01-012018-03-3100007989492018-04-012018-06-3000007989492018-07-012018-09-3000007989492018-10-012018-12-3100007989492019-01-012019-03-3100007989492019-04-012019-06-3000007989492019-07-012019-09-3000007989492019-10-012019-12-310000798949us-gaap:ParentMember2019-12-310000798949srt:GuarantorSubsidiariesMember2019-12-310000798949srt:NonGuarantorSubsidiariesMember2019-12-310000798949srt:ConsolidationEliminationsMember2019-12-310000798949us-gaap:ParentMember2018-12-310000798949srt:GuarantorSubsidiariesMember2018-12-310000798949srt:NonGuarantorSubsidiariesMember2018-12-310000798949srt:ConsolidationEliminationsMember2018-12-310000798949us-gaap:ParentMember2019-01-012019-12-310000798949srt:GuarantorSubsidiariesMember2019-01-012019-12-310000798949srt:NonGuarantorSubsidiariesMember2019-01-012019-12-310000798949srt:ConsolidationEliminationsMember2019-01-012019-12-310000798949us-gaap:ParentMember2018-01-012018-12-310000798949srt:GuarantorSubsidiariesMember2018-01-012018-12-310000798949srt:NonGuarantorSubsidiariesMember2018-01-012018-12-310000798949srt:ConsolidationEliminationsMember2018-01-012018-12-310000798949us-gaap:ParentMember2017-01-012017-12-310000798949srt:GuarantorSubsidiariesMember2017-01-012017-12-310000798949srt:NonGuarantorSubsidiariesMember2017-01-012017-12-310000798949srt:ConsolidationEliminationsMember2017-01-012017-12-310000798949us-gaap:ParentMember2017-12-310000798949srt:GuarantorSubsidiariesMember2017-12-310000798949srt:NonGuarantorSubsidiariesMember2017-12-310000798949srt:ConsolidationEliminationsMember2017-12-310000798949us-gaap:ParentMember2016-12-310000798949srt:GuarantorSubsidiariesMember2016-12-310000798949srt:NonGuarantorSubsidiariesMember2016-12-310000798949srt:ConsolidationEliminationsMember2016-12-310000798949us-gaap:SubsequentEventMember2020-03-112020-03-110000798949unt:CurrentyearMember2019-12-310000798949unt:OneyearpriorMember2019-12-310000798949unt:TwoyearspriorMember2019-12-310000798949unt:ThreeormoreyearspriorMember2019-12-31utr:bbl0000798949srt:OilReservesMember2016-12-310000798949srt:NaturalGasLiquidsReservesMember2016-12-31utr:Mcf0000798949srt:NaturalGasReservesMember2016-12-310000798949srt:OilReservesMember2017-01-012017-12-310000798949srt:NaturalGasLiquidsReservesMember2017-01-012017-12-310000798949srt:NaturalGasReservesMember2017-01-012017-12-310000798949srt:OilReservesMember2017-12-310000798949srt:NaturalGasLiquidsReservesMember2017-12-310000798949srt:NaturalGasReservesMember2017-12-310000798949srt:OilReservesMember2018-01-012018-12-310000798949srt:NaturalGasLiquidsReservesMember2018-01-012018-12-310000798949srt:NaturalGasReservesMember2018-01-012018-12-310000798949srt:OilReservesMember2018-12-310000798949srt:NaturalGasLiquidsReservesMember2018-12-310000798949srt:NaturalGasReservesMember2018-12-310000798949srt:OilReservesMember2019-01-012019-12-310000798949srt:NaturalGasLiquidsReservesMember2019-01-012019-12-310000798949srt:NaturalGasReservesMember2019-01-012019-12-310000798949srt:OilReservesMember2019-12-310000798949srt:NaturalGasLiquidsReservesMember2019-12-310000798949srt:NaturalGasReservesMember2019-12-31

Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
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
unt-20191231_g1.jpg
UNIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware73-1283193
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
8200 South Unit Drive,  Tulsa,  Oklahoma  US  74132  
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code) (918) 493-7700
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.20 per shareUNTNYSE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes     No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes     No
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
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes   No
As of June 28, 2019, the aggregate market value of the voting and non-voting common equity (based on the closing price of the stock on the NYSE on June 28, 2019) held by non-affiliates was approximately $467,332,169. Determination of stock ownership by non-affiliates was made solely for the purpose of this requirement, and the registrant is not bound by these determinations for any other purpose.
As of February 28, 2020, 55,423,610 shares of the issuer's common stock were outstanding.
Portions of the information called for by Part III will be included in an amendment to this Form 10-K or incorporated by reference from the registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A.

Exhibit Index—See Page 140



Table of Contents
FORM 10-K
UNIT CORPORATION

TABLE OF CONTENTS
 
  Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.




Table of Contents
The following are explanations of some terms used in this report.
ARO – Asset retirement obligations.
ASC – FASB Accounting Standards Codification.
ASU – Accounting Standards Update.
Bcf – Billion cubic feet of natural gas.
Bbl – Barrel, or 42 U.S. gallons liquid volume.
Boe – Barrel of oil equivalent. Determined using the ratio of six Mcf of natural gas to one barrel of crude oil or NGLs.
BOKF – Bank of Oklahoma Financial Corporation.
Btu – British thermal unit, used in gas volumes. Btu is used to refer to the natural gas required to raise the temperature of one pound of water by one-degree Fahrenheit at one atmospheric pressure.
Development drilling – The drilling of a well within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
DD&A – Depreciation, depletion, and amortization.
FASB – Financial and Accounting Standards Board.
Finding and development costs – Costs associated with acquiring and developing proved natural gas and oil reserves capitalized under generally accepted accounting principles, including any capitalized general and administrative expenses.
Gross acres or gross wells – The total acres or wells in which a working interest is owned.
IF – Inside FERC (U.S. Federal Energy Regulatory Commission).
LIBOR – London Interbank Offered Rate.
MBbls – Thousand barrels of crude oil or other liquid hydrocarbons.
Mcf – Thousand cubic feet of natural gas.
Mcfe – Thousand cubic feet of natural gas equivalent. It is determined using the ratio of one barrel of crude oil or NGLs to six Mcf of natural gas.
MMBbls – Million barrels of crude oil or other liquid hydrocarbons.
MMBoe – Million barrels of oil equivalents.
MMBtu – Million Btu’s.
MMcf – Million cubic feet of natural gas.
MMcfe – Million cubic feet of natural gas equivalent. It is determined using the ratio of one barrel of crude oil or NGLs to six Mcf of natural gas.
Net acres or net wells – The total fractional working interests owned in gross acres or gross wells.
NGLs – Natural gas liquids.
NYMEX – The New York Mercantile Exchange.
Play – A term applied by geologists and geophysicists identifying an area with potential oil and gas reserves.
Producing property – A natural gas or oil property with existing production.
Proved developed reserves – Reserves expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and through



Table of Contents
installed extraction equipment and infrastructure operational at the time of the reserves estimate. For additional information, see the SEC’s definition in Rule 4-10(a)(3) of Regulation S-X.
Proved reserves – Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulations – before the time when the contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For additional information, see the SEC’s definition in Rule 4-10(a)(2)(i) through (iii) of Regulation S-X.
Proved undeveloped reserves – Proved reserves expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. For additional information, see the SEC’s definition in Rule 4-10(a)(4) of Regulation S-X.
Reasonable certainty (regarding reserves) – If deterministic methods are used, reasonable certainty means high confidence that the quantities will be recovered. If probabilistic methods are used, there should be at least a 90% probability that the quantities recovered will equal or exceed the estimate.
Reliable technology – A grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.
SARs – Stock appreciation rights.
Undeveloped acreage – Lease acreage on which wells have not been drilled or completed to the point that would permit the production of economic quantities of natural gas or oil regardless of whether the acreage contains proved reserves.




Table of Contents
UNIT CORPORATION
Annual Report
For The Year Ended December 31, 2019

PART I

Item 1.  Business

Unless otherwise indicated or required by the context, the terms “company,” “Unit,” “us,” “our,” “we,” and “its” refer to Unit Corporation or, as appropriate, one or more of its subsidiaries. References to our mid-stream segment refer to Superior Pipeline Company, L.L.C. (and its subsidiaries) of which we own 50%.

Our executive offices are at 8200 South Unit Drive, Tulsa, Oklahoma 74132; our telephone number is (918) 493-7700.

Information regarding our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, will be provided free in print to any shareholders who request them. They are also available on our internet website at www.unitcorp.com, as soon as reasonably practicable after we electronically file these reports with or furnish them to the Securities and Exchange Commission (SEC). The SEC maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information about us that we file electronically with the SEC.

Also, we post on our Internet website, www.unitcorp.com, copies of our corporate governance documents. Our corporate governance guidelines and code of ethics, and the charters of our Board’s Audit, Compensation, and Nominating and Governance Committees, are available for free on our website or in print to any shareholder who requests them. We may occasionally provide important disclosures to investors by posting them in the investor information section of our website, as allowed by SEC rules.

GENERAL

We were founded in 1963 as an oil and natural gas contract drilling company. Today, besides our drilling operations, we have operations in the exploration and production and mid-stream areas. We operate, manage, and analyze our results of operations through our three principal business segments:

Oil and Natural Gas – carried out by our subsidiary Unit Petroleum Company. This segment explores, develops, acquires, and produces oil and natural gas properties for our account.
Contract Drilling – carried out by our subsidiary Unit Drilling Company. This segment contracts to drill onshore oil and natural gas wells for others and our account.
Mid-Stream – carried out by our subsidiary Superior Pipeline Company, L.L.C., and its subsidiaries (Superior). This segment buys, sells, gathers, processes, and treats natural gas for third parties and our account.

Each company may conduct operations through subsidiaries of its own.

This table provides certain information about us as of February 28, 2020:
Oil and Natural Gas
Total number of wells in which we own an interest6,151  
Contract Drilling
Total number of drilling rigs available for use58  
Mid-Stream
Number of natural gas treatment plants we own 
Number of processing plants we own11  
Number of natural gas gathering systems we own
19  


1


Table of Contents
2019 SEGMENT OPERATIONS HIGHLIGHTS

Oil and Natural Gas
Increased oil production by 11.6% over 2018 while total equivalent production decreased 1.4% with the hold on drilling program in the second half of the year.
Initiated development drilling program of Red Fork horizontal play with outstanding results.
Cost cuts identified during the fourth quarter of 2019 expected to reduce lease operating expense by 10.0% during 2020.
Sold non-core assets with proceeds of $21.8 million.

Contract Drilling
Utilization cycle during 2019:
Began the year with 32 drilling rigs operating;
Placed two new BOSS drilling rigs into service in the first quarter and one new BOSS drilling rig in the fourth quarter; and
Averaged rig utilization between 30-32 drilling rigs operating through the middle of May 2019, as many operators front end loaded their drilling budgets in the first half of 2019. Utilization decreased to 18 drilling rigs at the end of August and remained at that level into early December finishing out the year at 20 drilling rigs operating.
All 14 BOSS drilling rigs were operating when placed in service during the year.
Average drilling rig dayrates increased 7.2% during the year primarily due to higher BOSS drilling rig concentration in drilling rigs operating.

Mid-Stream
Completed the acquisition of Central Oklahoma assets consisting of 572 miles of pipeline and related compressor stations in December 2019.
Increased average throughput volume to 436 MMcf per day during 2019, a 10.7% increase over 2018.
Increased average processed gas volumes to 164 MMcf per day during 2019, a 4.0% increase over 2018.
During 2019 connected a total of 69 new wells to our gathering and processing systems from various producers.
Connected seven new wells to the Pittsburgh Mills gathering system from a new well pad which increased gathered volume approximately 95 MMcf per day.
Connected 35 new wells to the Cashion system during 2019 from active producers with significant acreage dedications.
Completed the installation of a new 60 MMcf per day processing plant that was transferred from Bellmon at the Reeding location on the Cashion gathering system which increased our total processing capacity on the Cashion system to 105 MMcf per day.

FINANCIAL INFORMATION ABOUT SEGMENTS

See Note 20 of our Notes to Consolidated Financial Statements in Item 8 of this report for information regarding each of our segment’s revenues, profits or losses, and total assets.

2


Table of Contents
OIL AND NATURAL GAS

General. All our oil and natural gas properties are in the United States. Our producing oil and natural gas properties, unproved properties, and related assets are mainly in Oklahoma, Texas, and to a lesser extent Arkansas, Colorado, Kansas, Louisiana, Montana, New Mexico, North Dakota, Utah, and Wyoming.

When we are the operator of a property, we try to drill wells using a drilling rig owned by our contract drilling segment, and we use our mid-stream segment to gather our gas if it is economical to do so.

This table presents certain information regarding our oil and natural gas operations as of December 31, 2019:
Number
of
Gross
Wells
Number
of Net
Wells
Number
of Gross
Wells in
Process
Number
of Net
Wells in
Process
2019 Average Net Daily Production
Natural
Gas
(Mcf)
Oil
(Bbls)
NGLs (Bbls)
Total6,149  2,207.63  21  1.21  145,383  8,788  13,077  

As of December 31, 2019, we had no significant water floods, pressure maintenance operations, or any other material related activities in process.

Acquisitions. On April 3, 2017, we closed an acquisition of certain oil and natural gas assets located primarily in Grady and Caddo Counties in western Oklahoma. The final adjusted value of consideration given was $54.3 million. As of January 1, 2017, the effective date of the acquisition, the estimated proved oil and gas reserves of the acquired properties were 3.2 million barrels of oil equivalent (MMBoe). The acquisition added approximately 8,300 net oil and gas leasehold acres to our core Hoxbar area in southwestern Oklahoma including approximately 47 proved developed producing wells. This acquisition included 13 potential horizontal drilling locations not otherwise included in our existing acreage. Of the acreage acquired, approximately 71% was held by production. We also received one gathering system as part of the transaction.

In December 2018, we closed on an acquisition of certain oil and natural gas assets located primarily in Custer County, Oklahoma. The total preliminary adjusted value of consideration was $29.6 million. As of November 1, 2018, the effective date of the acquisition, the estimated proved oil and gas reserves for the acquired properties was 2.6 MMBoe net to us. The acquisition added approximately 8,667 net oil and gas leasehold acres to our Penn Sands area in Oklahoma including approximately 44 wells. The acquisitions included approximately 30 potential horizontal drilling locations which are anticipated to have a high percentage of oil relative to the total production stream. Of the acreage acquired, approximately 82% was held by production.

Dispositions. We had non-core asset sales, net of related expenses, of $21.8 million, $22.5 million, and $18.6 million, in 2019, 2018, and 2017, respectively. Proceeds from these sales reduced the net book value of the full cost pool with no gain or loss recognized.

We determined the value of some of our unproved oil and gas properties were diminished (in part or whole) based on an impairment evaluation and our anticipated future exploration plans. Those determinations resulted in $73.9 million and $10.5 million in 2019 and 2017, respectively of costs being added to the total of our capitalized costs being amortized. We did not have any impairment of unproved oil and natural gas properties in 2018. In 2019, we incurred non-cash ceiling test write-downs of our oil and natural gas properties of $559.4 million pre-tax ($422.4 million net of tax) due to the reduction of the 12-month average commodity prices and the removal of proved undeveloped reserves due to the uncertainty regarding our ability to finance future capital expenditures. We had no non-cash ceiling test write-downs during 2017 or 2018.




3


Table of Contents
Well and Leasehold Data. These tables identify certain information regarding our oil and natural gas exploratory and development drilling operations:
 Year Ended December 31,
 201920182017
 GrossNetGrossNetGrossNet
Wells drilled:
Development:
Oil16  9.98  52  9.18  45  10.98  
Natural Gas99  19.17  63  22.96  23  13.90  
Dry—  —   1.02   0.83  
Total development115  29.15  117  33.16  70  25.71  
Exploratory:
Oil—  —  —  —  —  —  
Natural gas—  —  —  —  —  —  
Dry—  —  —  —  —  —  
Total exploratory—  —  —  —  —  —  
Total wells drilled115  29.15  117  33.16  70  25.71  

 Year Ended December 31,
 2019
2018 (1)
2017
 GrossNetGrossNetGrossNet
Wells producing or capable of producing:
Oil1,534  604.79  1,533  598.50  1,554  632.85  
Natural gas4,601  1,598.32  4,775  1,734.96  4,887  1,797.66  
Total6,135  2,203.11  6,308  2,333.46  6,441  2,430.51  
_________________________ 
1.There were 56 gross wells with multiple completions.

We own interests in drilling two gross (0.002 net) wells started during 2020 as of February 28, 2020.

Cost for development drilling includes $77.2 million, $76.3 million, and $41.6 million in 2019, 2018, and 2017, respectively, to develop previously booked proved undeveloped oil and natural gas reserves.

This table summarizes our leasehold acreage at December 31, 2019:
 Year Ended December 31, 2019
 DevelopedUndevelopedTotal
 GrossNetGross
Net (1)
GrossNet
Total509,930  319,756  86,892  48,504  596,822  368,260  
_________________________ 
1.Approximately 79% of the net undeveloped acres are covered by leases that will expire in the years 2020—2022 unless drilling or production extends the terms of those leases.



4


Table of Contents
Price and Production Data. The following tables identify the average sales price, production volumes, and average production cost per equivalent barrel for our oil, NGLs, and natural gas production for the years indicated:
 Year Ended December 31,
 201920182017
Average sales price per barrel of oil produced:
Price before derivatives$55.13  $63.78  $48.98  
Effect of derivatives2.36  (8.00) 0.46  
Price including derivatives$57.49  $55.78  $49.44  
Average sales price per barrel of NGLs produced:
Price before derivatives$12.42  $22.58  $18.35  
Effect of derivatives—  (0.40) —  
Price including derivatives$12.42  $22.18  $18.35  
Average sales price per Mcf of natural gas produced:
Price before derivatives$1.88  $2.42  $2.49  
Effect of derivatives0.16  0.04  (0.03) 
Price including derivatives$2.04  $2.46  $2.46  


























5


Table of Contents
Year Ended December 31,
 201920182017
Oil production (MBbls):
Jazz Wilcox field417  418  533  
Buffalo Wallow field243  258  127  
All other fields2,548  2,198  2,055  
Total oil production3,208  2,874  2,715  
NGLs production (MBbls):
Jazz Wilcox field1,278  1,370  1,567  
Buffalo Wallow field1,237  1,235  728  
All other fields2,258  2,320  2,442  
Total NGLs production4,773  4,925  4,737  
Natural gas production (MMcf):
Jazz Wilcox field14,361  17,494  16,799  
Buffalo Wallow field11,843  9,428  6,228  
All other fields26,861  28,704  28,233  
Total natural gas production53,065  55,626  51,260  
Total production (MBoe):
Jazz Wilcox field4,089  4,703  4,900  
Buffalo Wallow field3,454  3,065  1,893  
All other fields9,282  9,302  9,203  
Total production16,825  17,070  15,996  
Average production cost per equivalent Bbl (1)
$5.71  $6.50  $6.24  
_______________________ 
1.Excludes ad valorem taxes and gross production taxes.

Our Jazz Wilcox field in South Texas, which includes our Gilly, Segno, and Wildwood prospects and several smaller prospects, contained 21%, 14%, and 18% of our total proved reserves in 2019, 2018, and 2017, respectively, expressed on an oil-equivalent barrels basis. Our Buffalo Wallow field in Hemphill County, Texas, contained 10%, 29%, and 24% of our total proved reserves for those same years also expressed on an oil-equivalent barrels basis. There are no other fields that accounted for more than 15% of our proved reserves.

Oil, NGLs, and Natural Gas Reserves. The following table identifies our estimated proved developed and undeveloped oil, NGLs, and natural gas reserves:
 Year Ended December 31, 2019
 
Oil
(MBbls)
NGLs (MBbls)
Natural
Gas
(MMcf)
Total
Proved
Reserves
(MBoe)
Total proved developed12,196  23,030  220,187  71,924  
Total proved undeveloped—  —  —  —  
Total proved12,196  23,030  220,187  71,924  

Oil, NGLs, and natural gas reserves cannot be measured exactly. Estimates of those reserves require extensive judgments of reservoir engineering data and are generally less precise than other estimates made in financial disclosures. We use Ryder Scott Company, L.P., (Ryder Scott), independent petroleum consultants, to audit the reserves prepared by our reservoir engineers. Ryder Scott has been providing petroleum consulting services throughout the world since 1937. Their summary report is attached as Exhibit 99.1 to this Form 10-K. The wells or locations for which reserve estimates were audited were taken from our reserve and income projections as of December 31, 2019, and comprised 86% of the total proved developed future net income discounted at 10% (based on the SEC's unescalated pricing policy).

Our Reservoir Engineering department is responsible for reserve determination for the wells in which we have an interest. Their primary objective is to estimate the wells' future reserves and future net value to us. Data is incorporated from multiple sources including geological, production engineering, marketing, production, land, and accounting departments. The engineers
6


Table of Contents
review this information for accuracy as it is incorporated into the reservoir engineering database. Our internal audit group reviews our internal controls to help provide assurance all the data has been provided. New well reserve estimates are provided to management and the respective operational divisions for additional scrutiny. Major reserve changes on existing wells are reviewed regularly with the operational divisions to confirm completeness and accuracy. As the external audit is being completed by Ryder Scott, the reservoir department reviews all properties for accuracy of forecasting.

Technical Qualifications

Ryder Scott – Mr. Robert J. Paradiso was the primary technical person responsible for overseeing the estimate of the reserves prepared by Ryder Scott.

Mr. Paradiso, an employee of Ryder Scott since 2008, is a Vice President and serves as Project Coordinator, responsible for coordinating and supervising staff and consulting engineers in ongoing reservoir evaluation studies worldwide. Before joining Ryder Scott, Mr. Paradiso served in several engineering positions with Getty Oil Company, Texaco, Union Texas Petroleum, Amax Oil and Gas, Inc., Norcen Explorer, Inc., Amerac Energy Corporation, Halliburton Energy Services, Santa Fe Snyder Corp., and Devon Energy Corporation.

Mr. Paradiso earned a Bachelor of Science degree in Petroleum Engineering from Texas Tech University in 1979 and is a registered Professional Engineer in the State of Texas. He is also a member of the Society of Petroleum Engineers (SPE).

Besides gaining experience and competency through prior work experience, the Texas Board of Professional Engineers requires at least fifteen hours of continuing education annually, including at least one hour in professional ethics, which Mr. Paradiso fulfills. As part of his 2019 continuing education hours, Mr. Paradiso attended 6 hours of formalized training during the 2019 RSC Reserves Conference relating to the definitions and disclosure guidelines in the United States Securities and Exchange Commission Title 17, Code of Federal Regulations, Modernization of Oil and Gas Reporting, Final Rule released January 14, 2009 in the Federal Register. Mr. Paradiso attended an additional 31 hours of formalized in-house training during 2019 covering such topics as the SPE/WPC/AAPG/SPEE Petroleum Resources Management System, reservoir engineering, geoscience and petroleum economics evaluation methods, procedures and software and ethics for consultants.

Based on his educational background, professional training and over 40 years of practical experience in the estimation and evaluation of petroleum reserves, Mr. Paradiso has attained the professional qualifications as a Reserves Estimator and Reserves Auditor in Article III of the “Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information” promulgated by the SPE as of February 19, 2007. For more information regarding Mr. Paradiso’s geographic and job-specific experience, please refer to the Ryder Scott Company website at http://www.ryderscott.com/Company/Employees.

The Company – Responsibility for overseeing the preparation of our reserve report is shared by our reservoir engineers Trenton Mitchell and Derek Smith.

Mr. Mitchell earned a Bachelor of Science degree in Petroleum Engineering from Texas A&M University in 1994. He has been an employee of Unit since 2002. Initially, he was the Outside Operated Engineer and since 2003 he has served in the capacity of Reservoir Engineer and in 2010 he was promoted to Manager of Reservoir Engineering. Before joining Unit, he served in several engineering field and technical support positions with Schlumberger Well Services in their pumping services segment (formerly Dowell Schlumberger). He obtained his Professional Engineer registration from the State of Oklahoma in 2004. He has been a member of SPE since 1991 and joined the Society of Petroleum Evaluation Engineers (SPEE) in 2017.

Mr. Smith received a Bachelor of Science in Petroleum Engineering with a Minor in Business from the University of Tulsa in 2005. He worked for Apache Corporation immediately after in Production Engineering, then Reservoir Engineering, followed by Drilling Engineering for approximately one year each before moving to Corporate Reserves in 2008. He joined Unit in 2009 as a Corporate Reserves Engineer involved in reserve evaluation, acquisition appraisals, and prospect reviews with increasing levels of responsibility. He has been a member of SPE since 2000 and joined the SPEE in 2018.

As part of their continuing education Mr. Mitchell and Mr. Smith have attended various seminars and forums to enhance their understanding of current standards and issues for reserves presentation. These forums have included those sponsored by various professional societies and professional service firms including Ryder Scott.

Definitions and Other. Proved oil, NGLs, and natural gas reserves, as defined in SEC Rule 4-10(a), are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs and under existing economic conditions,
7


Table of Contents
operating methods and government regulations – before the time the contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

The area of the reservoir considered as "proved" includes:

The area identified by drilling and limited by any fluid contacts, and
Adjacent undrilled portions of the reservoir that can, with reasonable certainty, be judged to be continuous with the reservoir and to contain economically producible oil or gas based on available geosciences and engineering data.

Absent data on fluid contacts, proved quantities in a reservoir are limited by the lowest known hydrocarbons as incurred in a well penetration unless geosciences, engineering, or performance data and reliable technology establish a lower contact with reasonable certainty.

Where direct observation from well penetrations has defined a highest known oil elevation and the potential exists for an associated gas cap, proved oil reserves may be assigned in the structurally higher portions of the reservoir only if geosciences, engineering, or performance data and reliable technology establish the higher contact with reasonable certainty.

Reserves which can be produced economically through application of improved recovery techniques (including, but not limited to, fluid injection) are included in the proved classification when:

Successful testing by a pilot project in an area of the reservoir with properties no more favorable than the reservoir as a whole;
The operation of an installed program in the reservoir or other evidence using reliable technology establishes reasonable certainty of the engineering analysis on which the project or program was based; and
The project has been approved for development by all necessary parties and entities, including governmental entities.

Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined. The price used is the average of the prices over the 12 months before the ending date of the period covered by the report and is an unweighted arithmetic average of the first day of the month price for each month within the period, unless prices are defined by contractual arrangements, excluding escalations based on future conditions.

"Proved developed" oil, NGLs, and natural gas reserves are proved reserves expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor to the cost of a new well. It can also be recovered through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

"Proved undeveloped" oil, NGLs, and natural gas reserves are proved reserves expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. Reserves on undrilled acreage are limited to those directly offsetting development spacing areas reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances, justify a longer time. Under no circumstances can estimates for proved undeveloped reserves be attributable to acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless those techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.

8


Table of Contents
Proved Undeveloped Reserves. As of December 31, 2019, we did not have any proved undeveloped reserves.

Below, we summarize changes to our proved undeveloped reserves during 2019:
Oil
(MMBbls)
NGLs
(MMBbls)
Natural Gas (Bcf)
Total
(MMBoe)
Proved undeveloped reserves, January 1, 20197.4  14.3  158.7  48.1  
Extensions and discoveries—  —  —  —  
Converted to developed(2.7) (2.2) (25.0) (9.1) 
Revisions of previous estimates(4.7) (12.1) (133.1) (38.9) 
Sale of reserves—  —  (0.6) (0.1) 
Proved undeveloped reserves, December 31, 2019—  —  —  —  

During 2019, we converted 39 proved undeveloped well locations into proved developed wells at a cost of approximately $77.2 million. The downward revision to previous estimates is primarily due to uncertainty regarding our ability to finance the development of our proved undeveloped reserves over a five-year period and from lower commodity prices. This resulted in the removal of 2.9 MMBbls of oil, 2.2 MMBbls of NGLs, and 20.0 Bcf of natural gas and the elimination of any extensions and disclosures.

Our estimated proved reserves and the standardized measure of discounted future net cash flows of the proved reserves at December 31, 2019, 2018, and 2017, the changes in quantities, and standardized measure of those reserves for the three years then ended, are shown in the Supplemental Oil and Gas Disclosures in Item 8 of this report.

Contracts. Our oil production is sold at or near our wells under purchase contracts at prevailing prices under arrangements customary in the oil industry. Our natural gas production is sold to intrastate and interstate pipelines and independent marketing firms under contracts with terms generally ranging from one month to a year. Few of these contracts contain provisions for readjustment of price as most are market sensitive.

Customers. During 2019, sales to CVR Refining, LP accounted for 14% of our oil and natural gas revenues. Besides our mid-stream segment, no other company accounted for over 10% of our oil and natural gas revenues. During 2019, our mid-stream segment purchased $40.6 million of our natural gas and NGLs production and provided gathering and transportation services of $6.9 million. Intercompany revenue from services and purchases of production between our mid-stream segment and our oil and natural gas segment has been eliminated in our consolidated financial statements. In 2018 and 2017, we eliminated intercompany revenues of $88.7 million and $69.9 million, respectively, attributable to the intercompany purchase of our production of natural gas and NGLs and gathering and transportation services.

CONTRACT DRILLING

General. Our contract drilling business is conducted through Unit Drilling Company. Through this company we drill onshore oil and natural gas wells for our account and others. Our drilling operations are mainly in Oklahoma, Texas, New Mexico, Wyoming, North Dakota, and to a lesser extent in Colorado.

9


Table of Contents
This table identifies certain information about our contract drilling segment:
 Year Ended December 31,
 201920182017
Number of drilling rigs available for use at year end (1)
58.0  55.0  95.0  
Average number of drilling rigs owned during the year56.9  95.5  94.5  
Average number of drilling rigs utilized24.6  32.8  30.0  
Utilization rate (2)
43 %34 %32 %
Average revenue per day (3)
$18,736  $16,429  $15,934  
Total footage drilled (feet in 1,000’s)7,615  8,386  6,864  
Number of wells drilled423  539  468  
_________________________
1.In December 2018, we removed from service 41 drilling rigs, tubulars, hydraulic top drives, mud pumps, and other drilling equipment.
2.Utilization rate is determined by dividing the average number of drilling rigs used by the average number of drilling rigs owned during the year.
3.Represents the total revenues from our contract drilling segment divided by the total days our drilling rigs were used during the year.

Description and Location of Our Drilling Rigs. An on-shore drilling rig is composed of major equipment components like engines, drawworks or hoists, derrick or mast, substructure, mud pumps, blowout preventers, top drives, and drill pipe. Because of the normal wear and tear from operating 24 hours a day, several of the major components, like engines, mud pumps, top drives, and drill pipe, must be replaced or overhauled periodically. Other major components, like the substructure, mast, and drawworks, can be used for extended periods with proper inspections and maintenance. We also own additional equipment used in operating our drilling rigs, including iron roughnecks, automated catwalks, skidding systems, large air compressors, trucks, and other support equipment. Our drilling rigs can be transferred between divisions.

The maximum depth capacities of our various drilling rigs range from 9,500 to 40,000 feet allowing us to cover a wide range of our customers drilling requirements. In 2019, 39 of our 58 drilling rigs were used in drilling services.

This table shows certain information about our drilling rigs as of February 28, 2020:
Contracted
Rigs
Non-Contracted
Rigs
Total
Rigs
Average
Rated
Drilling
Depth
(ft)
Drilling Rigs18  40  58  20,190  

Fluctuating commodity prices directly affect drilling rig utilization rates, both positively and negatively. In 2019, many operators planned their drilling budgets more toward the first half of the year. As commodity prices declined mid-year, so did drilling rig utilization. The volatility of commodity prices coupled with the supply and demand economic of oil, natural gas, and NGLs has caused a continued decline in US land drilling rig utilization.

At any given time the number of drilling rigs we can work depends on several conditions besides demand, including the availability of qualified labor and the availability of needed drilling supplies and equipment. The impact of these conditions affects the demand for our drilling rigs.

The following table shows the average number of our drilling rigs working by quarter for the years indicated:
201920182017
First quarter31.4  31.7  25.5  
Second quarter28.6  32.2  28.8  
Third quarter20.4  34.2  34.6  
Fourth quarter18.3  33.1  31.2  

10


Table of Contents
Drilling Rig Fleet. The following table summarizes the changes to our drilling rig fleet in 2019. A more complete discussion of changes over the last three years follows the table:
Drilling rigs available for use on January 1, 201955  
Drilling rigs constructed 
Total drilling rigs available for use on December 31, 201958  

Dispositions, Acquisitions, and Construction. During 2017, we built our tenth BOSS drilling rig and placed it into service for a third party operator under a long term contract.

During 2018, we built our 11th BOSS drilling rig and placed it into service for a third party operator under a long term contract.

In December 2018, our Board of Directors approved a plan to sell 41 drilling rigs (29 mechanical drilling rigs and 12 SCR diesel-electric drilling rigs) and other equipment. This plan satisfies the criteria of assets held for sale under ASC 360-10-45-9. The plan included a strategic decision to focus on our new BOSS drilling rigs and specific SCR drilling rigs and sell the other drilling rigs that we now choose not to market. We estimated the fair value of the 41 drilling rigs we will no longer use based on the estimated market value from third-party assessments (Level 3 fair value measurement) less cost to sell. Based on these estimates, in December 2018, we recorded a non-cash write-down of approximately $147.9 million, pre-tax ($111.7 million, net of tax). During 2019, we sold six of these drilling rigs and some of the other equipment to unaffiliated third parties. As of December 31, 2019, we determined that $10.8 million of the assets held for sale would not be sold in the next twelve months and were moved back to long-lived assets. Seven drilling rigs and equipment will be marketed for sale throughout the next twelve months and remain classified as assets held for sale. The net book value of those assets is $5.9 million.

During 2019, we completed construction and placed into service with third party operators under long-term contracts our 12th and 13th BOSS drilling rigs. Our 14th BOSS drilling rig was completed and placed into service in December of 2019 for a third party operator under a long-term contract.

Drilling Contracts. Our drilling contracts are generally obtained through competitive bidding on a well by well basis. Contract terms and payment rates vary depending on the type of contract used, the duration of the work, the equipment and services supplied, and other matters. We pay certain operating expenses, including the wages of our drilling rig personnel, maintenance expenses, and incidental drilling rig supplies and equipment. The contracts are usually subject to early termination by the customer subject to the payment of a fee. Our contracts also contain provisions regarding indemnification against certain types of claims involving injury to persons, property, and for acts of pollution. The specific terms of these indemnifications are negotiable on a contract by contract basis.

The type of contract used determines our compensation. All of our contracts in 2019, 2018, and 2017 were daywork contracts. Under a daywork contract, we provide the drilling rig with the required personnel and the operator supervises the drilling of the well. Our compensation is based on a negotiated rate to be paid for each day the drilling rig is used.

The majority of our contracts are under term contracts, with the rest on well-to-well contracts. Term contracts range from six months to three years and the rates can either be fixed throughout the term or allow for periodic adjustments.

Customers. During 2019, EOG Resources, Inc., QEP Resources, Inc., and Slawson Exploration Company, Inc. were our largest third-party drilling customers accounting for approximately 12%, 12%, and 11% of our total contract drilling revenues, respectively. Our work for these customers were under multiple contracts and our business was not substantially dependent on a single contract. None of these individual contracts were considered material. No other third-party customer accounted for 10% or more of our contract drilling revenues.

Our contract drilling segment also provides drilling services for our oil and natural gas segment. During 2019, 2018, and 2017, our contract drilling segment drilled 50, 45, and 27 wells, respectively, for our oil and natural gas segment, or 12%, 8%, and 6%, respectively, of the total wells drilled by our contract drilling segment. Depending on the timing of the drilling services performed on our properties, those services may be deemed, for financial reporting purposes, to be associated with acquiring an ownership interest in the property. Revenues and expenses for these services are eliminated in our statement of operations, with any profit recognized reducing our investment in our oil and natural gas properties. The contracts for these services are issued under similar terms and rates as the contracts signed with unrelated third parties. By providing drilling services for the oil and natural gas segment, we eliminated revenue of $15.8 million, $22.5 million, and $13.4 million during 2019, 2018, and 2017, respectively, from our contract drilling segment and eliminated the associated operating expense of $14.2 million, $19.5
11


Table of Contents
million, and $11.8 million during 2019, 2018, and 2017, respectively, yielding $1.6 million, $3.0 million, and $1.6 million during 2019, 2018, and 2017, respectively, as a reduction to the carrying value of our oil and natural gas properties.

MID-STREAM

General. Our mid-stream operations are conducted through Superior Pipeline Company, L.L.C. and its subsidiaries, for which we own a 50% interest. Its operations consist of buying, selling, gathering, processing, and treating natural gas. It operates three natural gas treatment plants, 11 processing plants, 19 active gathering systems, and approximately 2,080 miles of pipeline. Superior and its subsidiaries operate in Oklahoma, Texas, Kansas, Pennsylvania, and West Virginia.

This table presents certain information regarding our mid-stream segment for the years indicated:
 Year Ended December 31,
 201920182017
Gas gathered—Mcf/day435,646  393,613  385,209  
Gas processed—Mcf/day164,482  158,189  137,625  
NGLs sold—gallons/day625,873  663,367  534,140  

Dispositions and Acquisitions. This segment had no significant dispositions or acquisitions during 2017.

On April 3, 2018, we sold 50% of the ownership interest in our mid-stream segment, Superior. The purchaser is SP Investor Holdings, LLC, a holding company jointly owned by OPTrust and funds managed and/or advised by Partners Group, a global private markets investment manager. We received $300.0 million from this sale. A portion of the proceeds were used to pay down our bank debt and the remainder were used to accelerate the drilling program of our upstream subsidiary, Unit Petroleum Company and build additional BOSS drilling rigs. In connection with the sale of the interest in Superior, we took the necessary actions under the Indenture governing our outstanding senior subordinated notes to secure the ability to close the sale and have Superior released from the Indenture.

Superior is governed and managed under its Amended and Restated Limited Liability Company Agreement and the Master Services and Operating Agreement (MSA) signed by Superior and an affiliate of Unit, as both agreements may be amended occasionally. Further details are in Note 18 – Variable Interest Entity Arrangements.

In December 2019, we closed on an acquisition for $16.1 million that included approximately 572 miles of pipeline and related compressor stations. The transaction closed on December 30, 2019 with an effective date of December 1, 2019.

Contracts. Our mid-stream segment provides its customers with a full range of gathering, processing, and treating services. These services are usually provided to each customer under long-term contracts (more than one year), but we have short-term contracts. Our customer agreements include these types of contracts:

Fee-Based Contracts. These contracts provide for a set fee for gathering, transporting, compressing, and treating services. Our mid-stream’s revenue is a function of the volume of natural gas and is not directly dependent on the value of natural gas. For the year ended December 31, 2019, 76% of our mid-stream segment’s total volumes and 72% of its operating margins (as defined below) were under fee-based contracts.
Commodity-Based Contracts. These contracts consist of several contract structure types. Under these contract structures, our mid-stream segment purchases the raw well-head natural gas and settles with the producer at a stipulated price while retaining all sales proceeds from third parties or retains a negotiated percentage of the sales proceeds from the residue natural gas and NGLs it gathers and processes, with the remainder being paid to the producer. For the year ended December 31, 2019, 24% of our mid-stream segment’s total volumes and 28% of operating margins (as defined below) were under commodity-based contracts.

For each of the above contracts, operating margin is defined as total operating revenues less operating expenses and does not include depreciation, amortization, and impairment, general and administrative expenses, interest expense, or income taxes.

Customers. During 2019, ONEOK, Inc., Range Resources Corporation, and Centerpoint Energy Service, Inc. accounted for approximately 33%, 13%, and 10% of our mid-stream revenues, respectively. We believe that if we lost these customers, there are other customers available to purchase our gas and NGLs. During 2019, 2018, and 2017 our mid-stream segment purchased $40.6 million, $81.4 million, and $63.2 million, respectively, of our oil and natural gas segment's natural gas and
12


Table of Contents
NGLs production, and provided gathering and transportation services of $6.9 million, $7.3 million, and $6.7 million, respectively. Intercompany revenue from services and purchases of production between this business segment and our oil and natural gas segment has been eliminated in our consolidated financial statements.

VOLATILE NATURE OF OUR BUSINESS

The prevailing prices for oil, NGLs, and natural gas significantly affect our revenues, operating results, cash flow, and our ability to grow our operations. Oil, NGLs, and natural gas prices have been volatile, and they will probably continue to be so. For each period indicated, this table shows the highest and lowest average prices our oil and natural gas segment received for its sales of oil, NGLs, and natural gas without considering the effect of derivatives:
 Oil Price per BblNGLs Price per BblNatural Gas Price per Mcf
QuarterHighLowHighLowHighLow
2017
First$50.48  $46.85  $20.71  $15.04  $3.76  $2.14  
Second$48.73  $43.49  $15.33  $14.36  $2.95  $2.30  
Third$49.66  $44.54  $19.99  $16.17  $2.53  $2.04  
Fourth$57.38  $49.62  $22.39  $21.13  $2.58  $1.93  
2018
First$63.04  $58.74  $22.52  $20.03  $2.92  $2.08  
Second$68.61  $65.76  $23.46  $21.14  $2.23  $1.96  
Third$70.75  $68.38  $29.61  $25.15  $2.28  $2.19  
Fourth$69.88  $47.54  $25.12  $16.32  $3.72  $2.25  
2019
First$56.44  $50.04  $16.45  $15.81  $2.86  $2.16  
Second$61.75  $53.87  $15.75  $8.62  $1.98  $1.58  
Third$57.99  $51.41  $8.86  $7.89  $1.60  $1.44  
Fourth$57.71  $52.11  $13.49  $12.85  $1.94  $1.63  

Prices for oil, NGLs, and natural gas are subject to wide fluctuations in response to relatively minor changes in the actual or perceived supply of and demand for oil and natural gas, market uncertainty, and many additional factors beyond our control, including:

political conditions in oil producing regions;
the ability of the members of the Organization of Petroleum Exporting Countries (OPEC) and Russia to agree on prices and their ability or willingness to maintain production quotas;
actions taken by foreign oil and natural gas producing nations;
the price of foreign oil imports;
imports and exports of oil and liquefied natural gas;
actions of governmental authorities;
the domestic and foreign supply of oil, NGLs, and natural gas;
the level of consumer demand;
United States storage levels of oil, NGLs, and natural gas;
weather conditions;
domestic and foreign government regulations;
the price, availability, and acceptance of alternative fuels;
volatility in ethane prices causing rejection of ethane as part of the liquids processed stream; and
worldwide economic conditions.

13


Table of Contents
These factors and the volatile nature of the energy markets make it impossible to predict with any certainty the future prices of oil, NGLs, and natural gas. You are encouraged to read the Risk Factors discussed in Item 1A of this report for additional risks that can affect our operations.

Our contract drilling operations depend on the level of demand in our operating markets. Both short-term and long-term trends in oil, NGLs, and natural gas prices affect demand. Because oil, NGLs, and natural gas prices are volatile, the level of demand for our services is also volatile.

Our mid-stream operations provide us greater flexibility in delivering our (and third parties) natural gas and NGLs from the wellhead to major natural gas and NGLs pipelines. Margins received for the delivery of these natural gas and NGLs depend on the price for oil, NGLs, and natural gas and the demand for natural gas and NGLs in our area of operations. If the price of NGLs falls without a corresponding decrease in the cost of natural gas, it may become uneconomical to us to extract certain NGLs. The volumes of natural gas and NGLs processed depend highly on the volume and Btu content of the natural gas and NGLs gathered.

COMPETITION

All of our businesses are highly competitive and price sensitive. Competition in the contract drilling business traditionally involves factors such as demand, price, efficiency, the condition of equipment, availability of labor and equipment, reputation, and customer relations.

Our oil and natural gas operations likewise encounter strong competition from other oil and natural gas companies. Many competitors have greater financial, technical, and other resources than we do and have more experience than we do in the exploration for and production of oil and natural gas.

Our drilling success and the success of other activities integral to our operations will depend, in part, during times of increased competition on our ability to attract and retain experienced geologists, engineers, and other professionals. Competition for these professionals can be intense.

Our mid-stream segment competes with purchasers and gatherers of all types and sizes, including those affiliated with various producers, other major pipeline companies, and independent gatherers for the right to purchase natural gas and NGLs, build gathering and processing systems, and deliver the natural gas and NGLs once the gathering and processing systems are established. The principal elements of competition include the rates, terms, and availability of services, reputation, and the flexibility and reliability of service.

OIL AND NATURAL GAS PROGRAMS AND CONFLICTS OF INTEREST

Unit Petroleum Company served as the general partner of 13 oil and gas limited partnerships (the employee partnerships) which were formed to allow certain of our qualified employees and our directors to participate in Unit Petroleum’s oil and gas exploration and production operations. Effective January 1, 2019, we elected to terminate and wind down all of the remaining employee limited partnerships. In accordance with the partnership agreements, we, as the liquidating trustees, valued the interests of the limited partners using the formula provided in each partnership agreement and purchased those interests. Total purchase price for all of the limited partners' interests net of Unit's interest was $0.6 million. We have no plans to sponsor additional employee limited partnerships.

The employee partnerships each had a set annual percentage (ranging from 1% to 15%) of our interest that the partnership acquired in most of the oil and natural gas wells we drilled or acquired for our account during the year in which the partnership was formed. The total interest the participants had in our oil and natural gas wells by participating in these partnerships did not exceed one percent of our interest in the wells.

These partnerships are further described in Notes 3 and 12 to the Consolidated Financial Statements in Item 8 of this report.

EMPLOYEES

As of February 28, 2020, we had approximately 603 employees in our contract drilling segment, 237 employees in our oil and natural gas segment, 135 employees in our mid-stream segment, and 79 in our general corporate area. None of our
14


Table of Contents
employees are members of a union or labor organization nor have our operations ever been interrupted by a strike or work stoppage. We consider relations with our employees to be satisfactory.

GOVERNMENTAL REGULATIONS

General. Our business depends on the demand for services from the oil and natural gas exploration and development industry, and therefore our business can be affected by political developments and changes in laws and regulations that control or curtail drilling for oil and natural gas for economic, environmental, or other policy reasons.

Various state and federal regulations affect the production and sale of oil and natural gas. All states in which we conduct activities impose varying restrictions on the drilling, production, transportation, and sale of oil and natural gas. This discussion of certain laws and regulations affecting our operations should not be relied on as an exhaustive review of all regulatory considerations affecting us, due to the multitude of complex federal, state, and local regulations, and their susceptibility to change at any time by later agency actions and court rulings that may affect our operations.

Natural Gas Sales and Transportation. Under the Natural Gas Act of 1938, the Federal Energy Regulatory Commission (FERC) regulates the interstate transportation and the sale in interstate commerce for resale of natural gas. FERC’s jurisdiction over interstate natural gas sales has been substantially modified by the Natural Gas Policy Act under which FERC continued to regulate the maximum selling prices of certain categories of gas sold in “first sales” in interstate and intrastate commerce. Effective January 1, 1993, however, the Natural Gas Wellhead Decontrol Act (the Decontrol Act) deregulated natural gas prices for all “first sales” of natural gas. Because “first sales” include typical wellhead sales by producers, all natural gas produced from our natural gas properties is sold at market prices, subject to the terms of any private contracts which may be in effect. FERC’s jurisdiction over interstate natural gas transportation is not affected by the Decontrol Act.

Our sales of natural gas are affected by intrastate and interstate gas transportation regulation. Beginning in 1985, FERC adopted regulatory changes that have significantly altered the transportation and marketing of natural gas. These changes are intended by FERC to foster competition by, among other things, transforming the role of interstate pipeline companies from wholesale marketers of natural gas to the primary role of gas transporters. All natural gas marketing by the pipelines must divest to a marketing affiliate, which operates separately from the transporter and in direct competition with all other merchants. Because of the various omnibus rulemaking proceedings in the late 1980s and the later individual pipeline restructuring proceedings of the early to mid-1990s, interstate pipelines must provide open and nondiscriminatory transportation and transportation-related services to all producers, natural gas marketing companies, local distribution companies, industrial end users, and other customers seeking service. Through similar orders affecting intrastate pipelines that provide similar interstate services, FERC expanded the impact of open access regulations to certain aspects of intrastate commerce.

FERC has pursued other policy initiatives that affected natural gas marketing. Most notable are (1) the large-scale divestiture of interstate pipeline-owned gas gathering facilities to affiliated or non-affiliated companies; (2) further development of rules governing the relationship of the pipelines with their marketing affiliates; (3) the publication of standards relating to using electronic bulletin boards and electronic data exchange by the pipelines to make available transportation information timely and to enable transactions to occur on a purely electronic basis; (4) further review of the role of the secondary market for released pipeline capacity and its relationship to open access service in the primary market; and (5) development of policy and promulgation of orders pertaining to its authorization of market-based rates (rather than traditional cost-of-service based rates) for transportation or transportation-related services on the pipeline’s demonstration of lack of market control in the relevant service market.

Because of these changes, independent sellers and buyers of natural gas have gained direct access to the particular pipeline services they need and can better conduct business with a larger number of counter parties. These changes generally have improved the access to markets for natural gas while substantially increasing competition in the natural gas marketplace. However, we cannot predict what new or different regulations FERC and other regulatory agencies may adopt or what effect later regulations may have on production and marketing of natural gas from our properties.

Although in the past Congress has been very active in the area of natural gas regulation as discussed above, the more recent trend has been for deregulation and the promotion of competition in the natural gas industry. In addition to “first sales” deregulation, Congress also repealed incremental pricing requirements and natural gas use restraints previously applicable. There continually are legislative proposals pending in the Federal and state legislatures which, if enacted, would significantly affect the petroleum industry. It is impossible to predict what proposals might be enacted by Congress or the various state legislatures and what effect these proposals might have on the production and marketing of natural gas by us. Similarly, and
15


Table of Contents
despite the trend toward federal deregulation of the natural gas industry, whether or to what extent that trend will continue or what the ultimate effect will be on the production and marketing of natural gas by us cannot be predicted.

Oil and Natural Gas Liquids Sales and Transportation. Our sales of oil and natural gas liquids currently are not regulated and are at market prices. The prices received from the sale of these products are affected by the cost of transporting these products to market. Much of that transportation is through interstate common carrier pipelines. Effective as of January 1, 1995, FERC implemented regulations generally grandfathering all previously approved interstate transportation rates and establishing an indexing system for those rates by which adjustments are made annually based on the rate of inflation, subject to certain conditions and limitations. These regulations may increase the cost of transporting oil and natural gas liquids by interstate pipeline, although the annual adjustments could cause decreased rates in a given year. These regulations have generally been approved on judicial review. Every five years, FERC examines the relationship between the annual change in the index and the actual cost changes experienced by the oil pipeline industry and makes any necessary adjustment in the index to be used during the ensuing five years. We cannot predict with certainty what effect the periodic review of the index by FERC will have on us.

Exploration and Production Activities. Federal, state, and local agencies also have promulgated extensive rules and regulations applicable to our oil and natural gas exploration, production, and related operations. The states we operate in require permits for drilling operations, drilling bonds, and filing reports about operations and impose other requirements relating to the exploration of oil and natural gas. Many states also have statutes or regulations addressing conservation matters including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from oil and natural gas wells, and regulating spacing, plugging and, abandonment of such wells. The statutes and regulations of some states limit the rate at which oil and natural gas is produced from our properties. The federal and state regulatory burden on the oil and natural gas industry increases our cost of doing business and affects our profitability. Because these rules and regulations are amended or reinterpreted frequently, we cannot predict the future cost or impact of complying with these laws.

Environmental.

General. Our operations are subject to federal, state, and local laws and regulations governing protection of the environment. These laws and regulations may require acquisition of permits before certain of our operations may be commenced and may restrict the types, quantities, and concentrations of various substances that can be released into the environment. Planning and implementation of protective measures must prevent accidental discharges. Spills of oil, natural gas liquids, drilling fluids, and other substances may subject us to penalties and cleanup requirements. Handling, storage, and disposal of both hazardous and non-hazardous wastes are subject to regulatory requirements.

The federal Clean Water Act, as amended by the Oil Pollution Act, the federal Clean Air Act, the federal Resource Conservation and Recovery Act, and their state counterparts, are the primary vehicles for imposition of such requirements and for civil, criminal, and administrative penalties and other sanctions for violation of their requirements. In addition, the federal Comprehensive Environmental Response Compensation and Liability Act and similar state statutes impose strict liability, without regard to fault or the legality of the original conduct, on certain classes of persons considered responsible for the release of hazardous substances into the environment. Such liability, which may be imposed for the conduct of others and for conditions others have caused, includes the cost of remedial action and damages to natural resources.

The EPA in 2015 established publicly owned treatment works (POTWs) effluent guidelines and standards for oil and gas extraction facilities which reflected industry best practices for unconventional oil and gas extraction facilities.

The EPA and the U.S. Army Corp of Engineers (Army) in 2015 proposed a new expansive definition of the “waters of the United States,” which the United States Court of Appeals for the Sixth Circuit stayed nationally. On February 28, 2017, an Executive Order was issued and directed that the EPA and Army consider interpreting the term “navigable waters” in a manner consistent with Justice Scalia’s opinion in Rapanos v. United States (2006). On March 6, 2017, the EPA and Army announced their intention to review and rescind or revise the 2015 Clean Water Rule and on June 27, 2017 they issued a proposed rule and written recommendations (Obama rule). On January 22, 2018, the United States Supreme Court in National Association of Manufacturers v. Department of Defense, et al. vacated the Sixth Circuit’s nationwide stay. As a result, on January 31, 2018, the EPA and Army issued a rule providing that the 2015 definition of “waters of the United States” will not apply until two years following the date this rule is published in the Federal Register. In addition, Army includes wetlands within its definition of “waters of the United States.” However, due to ongoing litigation, the Obama rule only applies to 28 states, and is enjoined with respect to the other 22 states challenging the Obama rule until such time as the litigation is resolved. On December 1, 2018, the EPA and Army released a proposed rule which would restrict the definition of “waters of the United States” to
16


Table of Contents
traditional large navigable waters, rivers and lakes and territorial seas used in interstate or foreign commerce as well as the tributaries, navigable lakes and ponds and tributaries that provide perennial or intermittent flow to them, as well as ditches that are “artificial channels” used to carry water and meet the conditions of a tributary or are adjacent to wetlands, impoundments of jurisdictional waters, and wetlands which are adjacent to jurisdictional waters in a “typical year” or which are connected by a channel to “waters of the United States.” In 2016, the United States Supreme Court in U.S. Army Corps of Engineers v. Hawkes held that landowners can challenge in court an Army Corps of Engineers jurisdictional determination. It is anticipated this decision will provide landowners an important tool in negotiating and resolving conflicts with federal agencies over the extent of wetlands on a property. During 2018, the United States Courts of Appeals for the Fourth and Ninth Circuits applied the so-called “hydrological connection” theory to extend jurisdiction of the Clean Water Act to cover pollutants that reach surface waters via groundwater. The Sixth Circuit addressed the same issue, but rejected the Fourth and Ninth Circuits’ decisions and held the opposite, consistent with 1994 Fifth Circuit and 2001 Seventh Circuit decisions. In response to an early December 2018 United States Supreme Court invitation to comment on the Fourth and Ninth Circuit’s decisions, the United States Solicitor General asked the United States Supreme Court to resolve the Circuit Courts’ split on whether the Clean Water Act applies when pollutants from a point source reach navigable waters after traveling through the groundwater. Petitions for review of the Fourth and Ninth Circuits’ decision were filed with the United States Supreme Court in October and briefing completed in November 2018.

Endangered Species Act. The federal Endangered Species Act, called the “ESA,” and analogous state laws regulate many activities, including oil and gas development, which could have an adverse effect on species listed as threatened or endangered under the ESA or their habitats. Designating previously unidentified endangered or threatened species could cause oil and natural gas exploration and production operators and service companies to incur additional costs or become subject to operating delays, restrictions or bans in affected areas, which impacts could adversely reduce drilling activities in affected areas. All three of our business segments could be subject to the effect of one or more species being listed as threatened or endangered within the areas of our operations. Numerous species have been listed or proposed for protected status in areas in which we provide or could undertake operations. The U.S. Fish and Wildlife Service (FWS) and the National Marine Fisheries (NMFS) in 2016 issued final revised definitions relating to impacts on critical habitats for potentially endangered species allowing exclusion of certain areas if they will not result in the extinction of the species. In 2017, the Western Governor’s Association issued a Policy Resolution calling on Congress to amend and reauthorize the ESA based upon seven broad goals to make the act more workable and understandable. In December 2017, the Interior Department announced that it is working on possible changes to the ESA with the FWS to revise the regulations for listing endangered and threatened species and for designation of critical habitat. On July 19, 2018, the FWS and NMFS issued their proposals to revise the ESA regulations, to include: (1) reinstating the prior two-step approach to designating critical habitat, first considering designation of occupied habitat and then considering non-occupied habitat only if the existing inhabited area is inadequate to ensure conservation of the species; and (2) removal from the definition of “adverse modification” by deleting the second sentence in the definition which includes impact to land that “preclude or significantly delay development [physical or biological] features” essential to the conservation of the species. However, some of the new proposals may be impacted by the United States Supreme Court’s decision issued in late November 2018. In vacating a United States Court of Appeals for the Fifth Circuit decision involving an endangered species, in Weyerhaeuser Co. v. U.S. Fish & Wildlife Service, the Supreme Court held that (1) a proposed site must be “habitat” for an endangered species before the FWS can designate it as “habitat that is critical” and (2) federal courts should review for an abuse of discretion the FWS’s decision not to exclude a site from designation. In other words, only the actual habitat of an endangered species can be designated critical habitat, meaning that an uninhabited area that otherwise meets the definition of critical habitat should not be so designated. The presence of protected species in areas where we provide contract drilling or mid-stream services or conduct exploration and production operations could impair our ability to timely complete or carry out those services and, consequently, hurt our results of operations and financial position.

Climate Change. Recent scientific studies have suggested that emissions of certain gases, commonly called “greenhouse gases,” or GHGs, may be contributing to warming of the Earth’s atmosphere. As a result there have been many regulatory developments, proposals or requirements, and legislative initiatives introduced in the United States (and other parts of the World) that are focused on restricting the emission of carbon dioxide, methane, and other greenhouse gases.

In 2007, the United States Supreme Court in Massachusetts, et al. v. EPA, held that carbon dioxide may be regulated as an “air pollutant” under the federal Clean Air Act if it represents a health hazard to the public. On December 7, 2009, the U.S. Environmental Protection Agency (EPA) responded to the Massachusetts, et al. v. EPA decision and issued a finding that the current and projected concentrations of GHGs in the atmosphere threaten the public health and welfare of current and future generations, and that certain GHGs from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of GHG and hence to the threat of climate change. In addition, the EPA issued a final rule, effective in December 2009, requiring the reporting of GHG emissions from specified large (25,000 metric tons or more) GHG emission sources in the U.S., beginning in 2011 for emissions in 2010. During 2010, the EPA proposed revisions to these reporting
17


Table of Contents
requirements to apply to all oil and gas production, transmission, processing, and other facilities exceeding certain emission thresholds. On May 12, 2016, the EPA issued three final rules that together will curb emissions of methane, smog-forming volatile organic compounds (VOCs) and toxic air-pollutants such as benzene from new, reconstructed and modified oil and natural gas sources, while providing greater certainty about Clean Air Act permitting requirements for the industry (Methane Rule). First, the EPA issued updates to the New Source Performance Standards (NSPS) for the oil and natural gas industry to add requirements that the industry reduce emissions of GHGs and to cover additional equipment and activities in the oil and natural gas distribution chain by setting emissions limits for methane and to require owners/operators to find and repair methane and VOC leaks. Second, the EPA issued a source determination rule regarding the EPA’s air permitting rules as they apply to the oil and natural gas industry. The EPA clarified when multiple pieces of equipment and activities must be deemed a single source for determining whether (i) major source Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review requirements apply regarding preconstruction permitting and (ii) a Title V Operating permit is required. Third, the EPA issued a final rule to implement the Minor New Source Review Program in Indian Country for oil and natural gas production designed to limit emissions of harmful air pollution while making the preconstruction permitting process more streamlined and efficient. These regulations will cause additional costs to reduce emissions of GHGs associated with our operations and could hurt demand for the crude oil we gather, transport, store or otherwise handle in connection with our services. Although the EPA announced in April 2017 it will reconsider the GHG oil and gas emissions rule and delay its compliance, lawsuits have prevented such an effort. On September 1, 2018, the EPA proposed revisions to its Methane Rule, which the EPA estimates would “significantly reduce regulatory burden, saving the industry tens of millions of dollars in compliance each year.” The EPA proposes to revise (decrease) the monitoring frequencies for fugitive emissions (leaks) at non-low production well sites, low production well sites and compressor stations. The EPA also proposes to allow owners/operators up to 60 days after fugitive emissions are detected to complete repairs, provided that a first attempt at repair has to be made within the first 30 days.

Hydraulic Fracturing. Our oil and natural gas segment routinely applies hydraulic fracturing techniques to many of our oil and natural gas properties, including our unconventional resource plays in the Granite Wash of Texas and Oklahoma, the Marmaton of Oklahoma, the Wilcox of Texas, and the Mississippian of Kansas. On July 25, 2017, the Bureau of Land Management announced a proposal to rescind the 2015 Department of Interior final rule on hydraulic fracturing, a rule that was never in effect due to pending litigation. Multiple bills have been introduced in Congress that would (i) block federal regulation of hydraulic fracturing in favor of state rules, (ii) allow a state to regulate hydraulic fracturing on federal lands within that state, (iii) prevent federal regulation of hydraulic regulation to apply to any land held in trust or restricted status for the benefit of Indians without their express consent, (iv) repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act, and/or (v) require the disclosure of chemicals used in hydraulic fracturing. In addition, certain states in which we operate, including Texas, Oklahoma, Kansas, Colorado, and Wyoming have adopted, and other states and municipalities and other local governmental entities in some states, have and others are considering adopting regulations and ordinances that could impose more stringent permitting, public disclosure of fracking fluids, waste disposal, and well construction requirements on these operations, and even restrict or ban hydraulic fracturing in certain circumstances.

On December 31, 2016, the EPA released its scientific Final Report on Impacts from Hydraulic Fracturing Activities on Drinking Water. The EPA states the report, which was done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can affect drinking water resources in the United States under some circumstances. The EPA identifies six conditions under which impacts from hydraulic fracturing activities can be more frequent or severe and existing uncertainties and data gaps. Both the EPA and the United States Geological Survey (USGS) have made statements indicating that activities associated with hydraulic fracturing may be causing earthquakes, with the focus being on wastewater disposal wells rather than injection wells. In an August 2015 report sent to the Texas Railroad Commission, the EPA stated it believes there is a significant possibility that North Texas earthquake activity is associated with disposal wells. The USGS has stated that hydraulic fracturing causes small earthquakes, but they are almost always too small to be detected. Regarding disposal wells, the USGS has stated that the injection of wastewater and salt water by deep wells into the subsurface can cause earthquakes that are large enough to be felt and may cause damage. As a result, the USGS and its university partners have deployed seismometers at sites of known or possible injection induced earthquakes in Arkansas, Colorado, Kansas, Oklahoma, Ohio and Texas and that it is also developing methods to assess the earthquake hazard associated with wastewater injection wells.

Any new laws, regulation, or permitting requirements regarding hydraulic fracturing could lead to operational delay, or increased operating costs or third party or governmental claims, and could result in additional burdens that could delay or limit the drilling services we provide to third parties whose drilling operations could be affected by these regulations or increase our costs of compliance and doing business and delay the development of unconventional gas resources from shale formations which are not commercial without using hydraulic fracturing. Restrictions on hydraulic fracturing could also reduce the oil and natural gas we can ultimately produce from our reserves.

18


Table of Contents
Other; Compliance Costs. We cannot predict future legislation or regulations. It is possible that some future laws, regulations, and/or ordinances could increase our compliance costs and/or impose additional operating restrictions on us as well as those of our customers. Such future developments also might curtail the demand for fossil fuels which could hurt the demand for our services, which could hurt our future results of operations. Likewise we cannot predict with any certainty whether any changes to temperature, storm intensity or precipitation patterns because of climate change (or otherwise) will have a material impact on our operations.

Compliance with applicable environmental requirements has not, to date, had a material effect on the cost of our operations, earnings, or competitive position. However, as noted above in our discussion of the regulation of GHGs and hydraulic fracturing, compliance with amended, new or more stringent requirements of existing environmental regulations or requirements may cause us to incur additional costs or subject us to liabilities that may have a material adverse effect on our results of operations and financial condition.

Item 1A. Risk Factors

FORWARD-LOOKING STATEMENTS/CAUTIONARY STATEMENT AND RISK FACTORS

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 which addresses activities, events or developments which 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 SEC in the future will automatically update and supersede information in this report.

These forward-looking statements include, among others, such things as:

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 of the oil and natural gas industry;
our business strategy;
our plans to maintain or increase production of oil, NGLs, and natural gas;
the number of gathering systems and processing plants we plan to construct or acquire;
volumes and prices for natural gas gathered and processed;
expansion and growth of our business and operations;
demand for our drilling rigs and drilling rig rates;
our belief that the final 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 ability to transport or convey our oil, NGLs, or natural gas production to established pipeline systems;
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 impacting our facilities and systems;
our projected production guidelines for the year;
19


Table of Contents
our anticipated capital budgets;
our financial condition and liquidity (including our ability to refinance our senior subordinated notes);
the number of wells our oil and natural gas segment plans to drill during the year;
our estimates of the amounts of any ceiling test write-downs or other potential asset impairments we may have to record in future periods; and
our plans to restructure our debt and the costs related to those plans.

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

the risk factors discussed in this document and in the documents (if any) we incorporate by reference;
general economic, market, or business conditions;
the availability of and nature of (or lack of) business opportunities we pursue;
demand for our land drilling services;
changes in laws or regulations;
changes in the current geopolitical situation;
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 the Unit credit agreement and indentures;
the possibility that our common stock may be delisted;
our ability to continue as a going concern;
putative class action lawsuits that may result in substantial expenditures and divert management's attention; and
other factors, most of which are beyond our control.

You should not place undue reliance on these 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 the date of this document to reflect incorrect assumptions or unanticipated events.