NOTE 12 – STOCK-BASED COMPENSATION

For restricted stock awards, stock options and SARs, we had:


	2011		2010		2009
	(In millions)
Recognized stock compensation expense	$	10.0	$	10.8	$	9.2
Capitalized stock compensation cost for our oil and natural gas properties		2.5		2.7		2.1
Tax benefit on stock based compensation		3.9		4.1		2.6

The remaining unrecognized compensation cost related to unvested awards at December 31, 2011 is approximately $8.4 million with $1.7 million of this amount anticipated to be capitalized. The weighted average period of time over which this cost will be recognized is 0.8 years.

The following table estimates the fair value of each option and SARs granted under all of our plans during the twelve month periods ending December 31, using the Black-Scholes model applying the estimated values presented in the table:


	2011			2010			2009
Options granted		31,500			52,504	⁽¹⁾		3,496
Stock appreciation rights		0			0			0
Estimated fair value (in millions)	$	0.7		$	0.8		$	0.1
Estimate of stock volatility		0.48			0.45			0.41
Estimated dividend yield		0	%		0	%		0	%
Risk free interest rate		2	%		2	%		2	%
Expected life range based on prior experience (in years)		5			5			5
Forfeiture rate		0	%		0	%		5	%

(1)	On May 29, 2009, eight of our directors were each issued 3,063 options contingent on shareholder approval, which was received at the May 5, 2010 annual shareholders' meeting. These 24,504 options granted and vested simultaneously with that approval.

Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate option exercise and employee termination rates within the model and aggregate groups of employees that have similar historical exercise behavior for valuation purposes. To date, we have not paid dividends on our stock. The risk free interest rate is computed from the United States Treasury Strips rate using the term over which it is anticipated the grant will be exercised.

At our annual meeting on May 3, 2006, our shareholders approved the Unit Corporation Stock and Incentive Compensation Plan. This plan allows for the issuance of 2.5 million shares of common stock with 2.0 million shares being the maximum number of shares that can be issued as "incentive stock options." Awards under this plan may be granted in any one or a combination of the following:

•

incentive stock options under Section 422 of the Internal Revenue Code;

•

non-qualified stock options;

•

performance shares;

•

performance units;

•

restricted stock;

•

restricted stock units;

•

stock appreciation rights;

•

cash based awards; and

•

other stock-based awards.

This plan also contains various limits as to the amount of awards that can be given to an employee in any fiscal year. All awards are generally subject to the minimum vesting periods, as determined by our Compensation Committee and included in the award agreement.

During 2009, there were 116,826 shares of other stock-based awards issued under this plan. These shares vested immediately and the fair value on the grant date was $3.3 million.

Activity pertaining to SARs granted under the Unit Corporation Stock and Incentive Compensation Plan is as follows:


	Number of Shares		Weighted Average Grant Date Price
Outstanding at January 1, 2009		145,901	$	46.59
Granted		0		0
Exercised		0		0
Forfeited		0		0

Outstanding at December 31, 2009		145,901		46.59
Granted		0		0
Exercised		0		0
Forfeited		0		0

Outstanding at December 31, 2010		145,901		46.59
Granted		0		0
Exercised		0		0
Forfeited		0		0

Outstanding at December 31, 2011		145,901	$	46.59

There were no SARs granted in 2011, 2010 or 2009. The SARs expire after 10 years from the date of the grant. In 2011, 2010 and 2009, 33,745, 48,632 and 48,633 shares vested. The aggregate intrinsic value of the 145,901 shares outstanding subject to vesting at December 31, 2011 was $0.2 million with a weighted average remaining contractual term of 5.7 years.

Activity pertaining to restricted stock awards granted under the Unit Corporation Stock and Incentive Compensation Plan is as follows:


	Number of Shares			Weighted Average Grant Date Price
Nonvested at January 1, 2009		617,148		$	47.40
Granted		0			0
Vested		(68,836	)		46.18
Forfeited		(41,241	)		48.69

Nonvested at December 31, 2009		507,071			47.46
Granted		450,355			41.09
Vested		(496,497	)		47.09
Forfeited		(14,804	)		44.25

Nonvested at December 31, 2010		446,125			47.39
Granted		211,050			55.91
Vested		(190,262	)		43.32
Forfeited		(18,952	)		44.55

Nonvested at December 31, 2011		447,961		$	47.44

The restricted stock awards vest in periods ranging from one to three years, except for a portion of those granted to certain executive officers in the first quarter of 2011. Thirty percent of the shares granted to the designated executive officers, or 20,062 shares (the performance shares), will cliff vest in the first half of 2014. The actual number of performance shares that vest in 2014 will be based on the company's achievement of certain performance criteria over a three-year period, and will range from 50% to 150% of the 20,062 restricted shares granted as performance shares. The fair value of the restricted stock granted in 2011 and 2010 at the grant date was $10.8 million and $16.9 million, respectively. There was no restricted stock granted in 2009. The aggregate intrinsic value of the 190,262 shares of restricted stock on their 2011 vesting date was $10.1 million. The aggregate intrinsic value of the 447,961 shares outstanding subject to vesting at December 31, 2011 was $20.8 million with a weighted average remaining life of 1.0 year.

We also have a Stock Option Plan, which provided for the granting of options for up to 2,700,000 shares of common stock to officers and employees. The option plan permitted the issuance of qualified or nonqualified stock options. Options granted typically become exercisable at the rate of 20% per year one year after being granted and expire after 10 years from the original grant date. The exercise price for options granted under this plan is the fair market value of the common stock on the date of the grant. As a result of the approval of the adoption of the Unit Corporation Stock and Incentive Compensation Plan, no further awards will be made under this plan.

Activity pertaining to the Stock Option Plan is as follows:


	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2009		228,290		$	29.68
Granted		0			0
Exercised		(4,065	)		23.45
Forfeited		(4,600	)		38.60

Outstanding at December 31, 2009		219,625			29.61
Granted		0			0
Exercised		(32,360	)		20.35
Forfeited		(2,500	)		37.83

Outstanding at December 31, 2010		184,765			31.11
Granted		0			0
Exercised		(42,285	)		28.29
Forfeited		(3,500	)		53.90

Outstanding at December 31, 2011		138,980		$	31.39

There were no shares that vested in 2011. The total grant date fair value of the 6,200, and 27,100 shares vesting in 2010 and 2009 was $0.2 million and $1.0 million. The intrinsic value of options exercised in 2011 was $1.3 million. Total cash received from the options exercised in 2011 was $0.4 million.


	Outstanding and Exercisable Options at December 31, 2011
Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$19.04		16,400		1.0 years	$	19.04
$21.50 - $22.95		38,810		1.9 years	$	22.76
$37.69 - $37.83		83,770		3.0 years	$	37.80

Options for 138,980, 184,065 and 212,725 shares were exercisable with weighted average exercise prices of $31.39, $31.02 and $29.25 at December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of the 138,980 shares outstanding subject to options at December 31, 2011 was $2.1 million with a weighted average remaining contractual term of 2.5 years.

On May 29, 2009, the compensation committee and board of directors, approved amendments to the existing Unit Corporation 2000 Non-Employee Directors' Stock Option Plan. The amendments extended the plan term from May 30, 2010 to May 30, 2017, and increased the aggregate number of shares that may be issued or delivered due to exercise of non-employee director option awards from 210,000 shares of common stock to 510,000 shares of common stock. Under the plan, on the first business day following each annual meeting of shareholders, each person who was then a member of our Board of Directors and who was not then an employee of the company or any of its subsidiaries was granted an option to purchase 3,500 shares of common stock. The option price for each stock option is the fair market value of the common stock on the date the stock options are granted. The term of each option is 10 years and cannot be increased and no stock options may be exercised during the first six months of its term except in case of death.

On the first day following the 2009 annual meeting, each non-employee director was granted 437 shares of common stock. Effective with the adoption of the amendments mentioned above, a contingent one-time grant of 3,063 shares to each non-employee director was made on May 29, 2009. These contingent option awards vested when the stockholders approved the amended plan at the May 5, 2010 annual meeting.

Activity pertaining to the Directors' Plan is as follows:


	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2009		153,000		$	46.85
Granted		3,496			31.30
Exercised		(13,000	)		14.74

Outstanding at December 31, 2009		143,496			49.38
Granted		52,504			37.62
Exercised		(3,500	)		17.54
Forfeited		(14,000	)		58.20

Outstanding at December 31, 2010		178,500			48.77
Granted		31,500			53.81
Exercised		(10,500	)		21.96
Forfeited		0			0

Outstanding at December 31, 2011		199,500		$	48.37

The total grant date fair value of the 31,500, 52,504 and 3,496 shares vesting in 2011, 2010 and 2009, respectively, was $0.7 million, $0.8 million and $0.1 million, respectively. The intrinsic value of options exercised in 2011 was $0.4 million. Total cash received from options exercised in 2011 was $0.2 million.


	Outstanding and Exercisable Options at December 31, 2011
Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$20.10 - $20.46		14,000		1.1 years	$	20.37
$28.23 - $41.21		80,500		6.4 years	$	36.45
$53.81 - $73.26		105,000		6.5 years	$	61.24

Options for 199,500, 178,500 and 143,496 shares were exercisable with weighted average exercise prices of $48.37, $45.86 and $49.38 at December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of the shares outstanding subject to options at December 31, 2011 was $1.2 million with a weighted average remaining contractual term of 6.1 years.