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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-9260
UNIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-1283193
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Kensington Tower I, 7130 South Lewis, Tulsa, Oklahoma 74136
(Address of principal executive offices)
(Zip Code)
(918) 493-7700
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
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 X No _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.20 par value 24,123,109
Class Outstanding at November 1, 1996
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UNIT CORPORATION
INDEX
Page
PART I. Financial Information: Number
Item 1 - Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
September 30, 1996 and December 31, 1995 2
Consolidated Condensed Statements of Operations
Three and Nine Months
Ended September 30, 1996 and 1995 3
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995 4
Notes to Consolidated Condensed Financial Statements 5
Report of Review by Independent Accountants 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information:
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters to a Vote of 13
Security Holders
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
1
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Item 1. Financial Statements
UNIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, December 31,
1996 1995
---------- ----------
ASSETS (Unaudited)
- ------ (In thousands)
Current Assets:
Cash and cash equivalents $ 478 $ 534
Accounts receivable 12,003 10,398
Other 3,495 3,094
---------- ----------
Total current assets 15,976 14,026
---------- ----------
Property and Equipment:
Total cost 285,855 260,771
Less accumulated depreciation, depletion,
amortization and impairment 172,301 164,752
---------- ----------
Net property and equipment 113,554 96,019
---------- ----------
Other Assets 137 877
---------- ----------
Total Assets $ 129,667 $ 110,922
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current portion of long-term debt $ - $ 20
Accounts payable 8,755 6,701
Accrued liabilities 4,336 4,386
---------- ----------
Total current liabilities 13,091 11,107
---------- ----------
Natural Gas Purchaser Prepayments (Note 3) 2,007 2,109
---------- ----------
Long-Term Debt 37,700 41,100
---------- ----------
Deferred Income Taxes 2,292 -
---------- ----------
Shareholders' Equity:
Preferred stock, $1.00 par value, 5,000,000
shares authorized, none issued - -
Common stock $.20 par value, 40,000,000
shares authorized, 24,013,497 and
20,976,090 shares issued, respectively 4,803 4,195
Capital in excess of par value 62,714 50,181
Retained Earnings 7,125 2,418
Treasury stock, at cost, 23,755 and
68,441 shares, respectively (65) (188)
---------- ----------
Total shareholders' equity 74,577 56,606
---------- ----------
Total Liabilities and Shareholders' Equity $ 129,667 $ 110,922
========== ==========
The accompanying notes are an integral part of the
consolidated condensed financial statements.
2
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UNIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Revenues: (In thousands except per share amounts)
Contract drilling $ 7,420 $ 6,003 $ 20,216 $ 14,074
Oil and natural gas 9,682 7,160 29,867 22,236
Other 184 954 181 1,700
--------- --------- --------- ---------
Total revenues 17,286 14,117 50,264 38,010
--------- --------- --------- ---------
Expenses:
Contract drilling:
Operating costs 5,999 5,260 17,328 13,034
Depreciation 735 624 2,105 1,656
Oil and natural gas:
Operating costs 3,111 3,052 9,937 8,601
Depreciation, depletion
and amortization 2,574 2,506 7,803 7,604
General and administrative 943 942 3,072 2,840
Interest 828 813 2,442 2,388
--------- --------- --------- ---------
Total expenses 14,190 13,197 42,687 36,123
--------- --------- --------- ---------
Income From Continuing Operations
Before Income Taxes 3,096 920 7,577 1,887
--------- --------- --------- ---------
Income Tax Expense:
Current 21 4 48 12
Deferred 1,176 - 2,822 -
--------- --------- --------- ---------
Total income tax expense 1,197 4 2,870 12
--------- --------- --------- ---------
Income From Continuing Operations 1,899 916 4,707 1,875
Income (Loss) From Operations of
Discontinued Segment - (35) - (17)
--------- --------- --------- ---------
Net Income $ 1,899 $ 881 $ 4,707 $ 1,858
========= ========= ========= =========
Income Per Common Share:
Continuing Operations $ .08 $ .04 $ .21 $ .09
========= ========= ========= =========
Net Income $ .08 $ .04 $ .21 $ .09
========= ========= ========= =========
Weighted Average Shares
Outstanding:
Primary 23,708 20,896 22,322 20,884
========= ========= ========= =========
Fully Diluted 23,708 20,896 22,326 20,884
========= ========= ========= =========
The accompanying notes are an integral part of the
consolidated condensed financial statements.
3
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UNIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
1996 1995
---------- ----------
Cash Flows From Operating Activities: (In thousands)
Income From Continuing Operations $ 4,707 $ 1,875
Adjustments to reconcile income from continuing
operations to net cash provided (used) by
operating activities:
Depreciation, depletion and amortization 10,150 9,488
Other-net 33 (511)
Deferred income tax expense 2,822 -
Changes in operating assets and liabilities
increasing (decreasing) cash:
Accounts receivable (1,605) (1,523)
Accounts payable (2,939) (2,069)
Natural gas purchaser
prepayments (Note 3) (102) (1,312)
Other-net (203) 587
---------- ----------
Net cash provided by continuing
operating activities 12,863 6,535
Net cash flow provided by discontinued operations
including changes in working capital - 634
---------- ----------
Net cash provided by
operating activities 12,863 7,169
---------- ---------
Cash Flows From (Used In) Investing Activities:
Capital expenditures (23,352) (14,931)
Proceeds from disposition of assets 871 4,335
Other-net 210 (136)
---------- ----------
Net cash used in investing activities (22,271) (10,732)
---------- ----------
Cash Flows From (Used In) Financing Activities:
Net (payments) borrowings under line of credit (3,400) 3,100
Net payments of notes payable
and long-term debt (20) (980)
Proceeds from stock options and warrants 12,772 -
Other-net - (230)
---------- ----------
Net cash provided by financing activities 9,352 1,890
---------- ----------
Net Decrease in Cash and Cash Equivalents (56) (1,673)
Cash and Cash Equivalents, Beginning of Year 534 2,749
---------- ----------
Cash and Cash Equivalents, End of Period $ 478 $ 1,076
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months ended September 30, for:
Interest $ 2,472 $ 2,101
Income taxes $ 50 $ -
The accompanying notes are an integral part of the
consolidated condensed financial statements.
4
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UNIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PREPARATION AND PRESENTATION
- ----------------------------------------------
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary (all
adjustments are of a normal recurring nature) to present fairly the financial
position of Unit Corporation as of September 30, 1996 and the results of its
operations for the three and nine month periods ended September 30, 1996 and
1995 and cash flows for the nine months ended September 30, 1996 and 1995.
Results for the three and nine months ended September 30, 1996 are not
necessarily indicative of the results to be realized during the full year. The
year end consolidated condensed balance sheet data was derived from audited
financial statements but does not include all disclosures required by generally
accepted accounting principles. The condensed financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
NOTE 2 - LONG-TERM DEBT
- -----------------------
Effective as of September 4, 1996, the Company's credit agreement was amended
extending the revolving credit facility through August 1, 1999 and the term loan
thereafter to a maturity on August 1, 2003. The total loan commitment remained
at $75 million with borrowings under the amended agreement limited to the amount
of a borrowing base which is determined semi-annually. As of September 30,
1996, the borrowing base was $50 million. The amendment also lowered the
interest rate on the portion of debt subject to the London Interbank Offered
Rates ("Libor Rate") to the Libor Rate plus 1.25 to 1.75 percent depending on
the level of debt as a percentage of the total borrowing base. Subsequent to
August 1, 1999, borrowings under the amended agreement subject to the Libor Rate
will bear interest at the Libor Rate plus 1.5 to 2.0 percent depending on the
level of debt as a percentage of the total borrowing base.
NOTE 3 - NATURAL GAS PURCHASER PREPAYMENTS
- -------------------------------------------
In March 1988, the Company entered into a settlement agreement with a natural
gas purchaser. During early 1991, the Company and the natural gas purchaser
superseded the original agreement with a new settlement agreement effective
retroactively to January 1, 1991. Under these settlement agreements, the
Company has a prepayment balance of $2.0 million at September 30, 1996
representing proceeds received from the purchaser as prepayment for natural gas.
This amount is net of natural gas recouped and net of certain amounts disbursed
to other owners (such owners, collectively with the Company are referred to as
the "Committed Interest") for their proportionate share of the prepayments. The
September 30, 1996 prepayment balance is subject to recoupment in volumes of
natural gas for a period ending the earlier of recoupment or December 31, 1997
(the "Recoupment Period"). Additionally, the purchaser is obligated to make
monthly payments on behalf of the Committed Interest in an amount calculated as
a percentage of the Committed Interest's share of the deliverability of the
wells subject to the settlement agreement, up to a maximum of $180,000 or a
minimum of $90,000 per month for the year 1996 and up to a maximum of $156,000
or a minimum of $80,000 per month for the year 1997. Both the maximum and
minimum monthly payments decline annually through the Recoupment Period. The
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prepayment amounts are being recorded as liabilities and reflected in revenues
as recoupment occurs. The portion of the prepayments that are estimated to be
recouped in the next twelve months are classified as current liabilities. At
December 31, 1997, the Committed Interest's prepayment balance, if any, that has
not been fully recouped in natural gas is subject to a cash repayment limited to
a maximum of $3 million to be made in equal annual installments over a five year
period. The Company anticipates the maximum balance of $3 million will be
unrecouped at December 31, 1997. At the end of the Recoupment Period, the terms
of the settlement agreement and the natural gas purchase contracts which are
subject to the settlement agreement will terminate.
NOTE 4 - INCOME TAXES
- ---------------------
Income tax expense for the three and nine month periods ended September 30,
1995 differs from income tax expense computed by applying the statutory rate due
principally to the utilization of the Company's net operating loss carryforward.
All of the financial statement benefit related to the Company's net operating
loss carryforward was recognized at December 31, 1995. As such, income tax
expense for the three and nine month periods ended September 30, 1996
approximates the statutory rate (federal and state).
6
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REPORT OF REVIEW BY INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Unit Corporation
We have reviewed the accompanying consolidated condensed balance sheet of Unit
Corporation and subsidiaries as of September 30, 1996, and the related consoli-
dated condensed statements of operations for the three and nine month periods
ended September 30, 1996 and 1995 and cash flows for the nine month periods
ended September 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Unit Corporation and subsidiaries
at December 31, 1995, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for the year then ended (not
presented herein); and our report dated February 20, 1996 expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated condensed balance
sheet at December 31, 1995, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L. L. P.
Tulsa, Oklahoma
October 29, 1996
7
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
FINANCIAL CONDITION
- -------------------
On September 4, 1996 the Company amended its loan agreement. The amended
loan agreement (the "Loan Agreement") provides for a total commitment of $75
million, consisting of a revolving credit facility through August 1, 1999 and a
term loan thereafter, maturing on August 1, 2003. Borrowings under the
revolving credit facility are limited to a borrowing base which is subject to a
semi-annual redetermination. The latest borrowing base determination indicated
$50 million of the commitment is available to the Company. At September 30,
1996, borrowings under the Loan Agreement totaled $37.7 million and the average
interest rate in the third quarter of 1996 was 8.0 percent compared to the
average interest rate of 8.1 percent in the third quarter of 1995. A 1/2 of 1
percent facility fee is charged for any unused portion of the borrowing base.
The Company's shareholders' equity at September 30, 1996 was $74.6 million
resulting in a ratio of long-term debt-to-equity of .51 to 1. The Company's
primary source of liquidity and capital resources in the near- and long-term
will consist of cash flow from operating activities and available borrowings
under the Company's Loan Agreement. Net cash provided by continuing operating
activities for the first nine months of 1996 was $12.9 million as compared to
$6.5 million for the first nine months of 1995. The increase in 1996, as
compared to 1995, was primarily due to higher spot market natural gas and oil
prices received and increased rig utilization.
During the first nine months of 1996, the Company had capital expenditures
of $28.3 million. Approximately 72 percent of the expenditures were for oil and
natural gas exploration and development drilling and the remainder were
primarily for the Company's contract drilling operations. The Company plans to
continue its focus on development drilling during the remainder of 1996. A
majority of the contract drilling expenditures were for drill pipe as certain
grades of the Company's drill pipe are reaching the end of their useful life.
During September 1996, the Company acquired one 1,500 horsepower rig, one 2,500
horsepower rig and 36,000 feet of drill pipe for $1.7 million. Expenditures for
the remainder of 1996 and into the early portion of 1997 are anticipated to be
within the constraints of available cash to be provided by operating activities
and the Company's Loan Agreement. A large portion of the Company's capital
expenditures are discretionary; therefore, current operations should not be
adversely affected by any inability to obtain funds outside of the Company's
Loan Agreement.
At December 31, 1995, the Company had 2.873 million common stock warrants
outstanding. The warrants entitled the holders to purchase one share of common
stock at a price of $4.375 per share. Subsequent to March 31, 1996 and prior to
the warrants expiration on August 30, 1996, 2.86 million warrants were exercised
providing $12.5 million in additional capital to the Company.
The Company continued to receive monthly payments on behalf of itself and
other parties (collectively the "Committed Interest") from a natural gas
purchaser pursuant to a settlement agreement, as amended (the "Settlement
Agreement"). As a result of the Settlement Agreement, the September 30, 1996
prepayment balance of $2.0 million paid by the purchaser for natural gas not
8
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taken (the "Prepayment Balance") is subject to recoupment in volumes of natural
gas through a period ending on the earlier of recoupment or December 31, 1997
(the "Recoupment Period"). Additionally, the purchaser is obligated to make
monthly payments on behalf of the Committed Interest based on their share of the
natural gas deliverability of the wells subject to the Settlement Agreement, up
to a maximum of $180,000 or a minimum of $90,000 per month for the year 1996 and
up to a maximum of $156,000 or a minimum of $80,000 per month for the year 1997.
Both the maximum and minimum monthly payments decline annually through the
Recoupment Period. If natural gas is taken during a month, the value of such
natural gas is credited toward the monthly amount the purchaser is required to
pay. In the event the purchaser takes volumes of natural gas valued in excess
of its monthly payment obligations, the value taken in excess is applied to
reduce any then outstanding Prepayment Balance. The Company currently believes
that sufficient natural gas deliverability is available to enable the Committed
Interest to receive substantially all of the maximum monthly payments during
1996. At the end of the Recoupment Period, the Settlement Agreement and the
natural gas purchase contracts which are subject to the Settlement Agreement
will terminate. If the Prepayment Balance is not fully recouped in natural gas
by December 31, 1997 then the unrecouped portion is subject to cash repayment,
limited to a maximum of $3 million, payable in equal annual installments over a
five year period. The Company anticipates the maximum balance of $3 million
will be unrecouped at December 31, 1997. Under the Settlement Agreement, the
purchaser is entitled to make a monthly determination of the volumes to be
purchased from the wells subject to the Settlement Agreement. Pursuant to the
terms of the Settlement Agreement, the purchaser notified the Company that
effective October 1, 1995 the purchaser planned to make seasonal takes of
natural gas by requesting the maximum deliverability subject to the Settlement
Agreement in certain months and no deliverability in other months. From October
1, 1995 and through the first quarter of 1996, the purchaser requested and
received the maximum deliverability subject to the Settlement Agreement. During
the second and third quarters of 1996 the purchaser elected to not take natural
gas under the Settlement Agreement and in the fourth quarter the purchaser has
elected to take minimum volumes as allowed while taking natural gas under the
terms of the contract. Because these month-to-month determinations, up to
certain maximum levels, are made by the purchaser, the Company is unable to
predict with certainty future natural gas sales from these wells. In addition,
future revenues to be received by the Company would be impacted by the failure
of the purchaser to meet its obligations, financially or otherwise, under the
terms of the Settlement Agreement or by the inability of the wells to maintain
certain projected deliverability requirements. In the event the wells are
unable to maintain such deliverability, the monthly payments to be received by
the Company under the Settlement Agreement would be decreased. The price per
Mcf under the Settlement Agreement is substantially higher than current spot
market prices. The impact of the higher price received under the Settlement
Agreement increased pre-tax income approximately $360,000 and $1,250,000 in the
first nine months of 1996 and 1995, respectively.
The average oil price of $21.19 received by the Company in the third
quarter of 1996 was $5.11 per barrel higher than the average oil price received
in the third quarter of 1995 while the average spot market natural gas price of
$2.00 was $.71 per Mcf higher than the average spot market natural gas prices
received in the same quarter of 1995. Oil prices within the industry remain
largely dependent upon world market developments for crude oil. Prices for
natural gas are influenced by weather conditions and supply imbalances,
particularly in the domestic market, and by world wide oil price levels. Since
natural gas comprises approximately 78 percent of the Company's reserves, large
9
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drops in spot market natural gas prices have a significant adverse effect on the
value of the Company's reserves. Such decreases also adversely effect the
Company's cash flow. Likewise, declines in natural gas or oil prices could
adversely effect the semi-annual borrowing base determination under the
Company's current Loan Agreement since this determination is calculated on the
value of the Company's oil and natural gas reserves.
The Company's ability to utilize its full complement of drilling rigs, is
restricted due to the lack of qualified labor and certain supporting equipment
not only within the Company but in the industry as a whole. In addition, the
Company's ability to utilize its drilling rigs at any given time is also
dependent on a number of other factors, including but not limited to, the price
of both oil and natural gas and the Company's ability to supply the type of
equipment required. The Company's management expects that these factors will
continue to influence the Company's rig utilization throughout 1996 and into
1997.
In the third quarter of 1994, the Company's Board of Directors authorized
the Company to purchase up to 1,000,000 shares of the Company's outstanding
common stock on the open market. Since that time, 115,100 shares have been
repurchased at prices ranging from $2 1/2 to $3 3/8 per share. During the first
quarters of 1996 and 1995, 44,686 and 46,659 of the purchased shares,
respectively, were used as the Company's matching contribution to its 401(K)
Employee Thrift Plan. At September 30, 1996, 23,755 treasury shares were held
by the Company.
Safe Harbor Statement. With the exception of historical information many
of the matters discussed in this report are forward looking statements that
involve risks and uncertainties and actual results could differ materially from
those discussed. Generally, these statements relate to projections involving the
anticipated revenues to be received from the Company's oil and natural gas
production, the utilization rate of its drilling rigs, growth of its oil and
natural gas reserves and well performance and the Company's anticipated bank
debt. As with any forward- looking statement, these statements are subject to a
number of factors that may tend to influence the accuracy of the statements and
the projections upon which the statements are based. All phases of the Company's
operations are subject to a number of influences outside the control of the
Company, any one of which, or a combination of which, could materially affect
the results of the Company's operations. A more thorough discussion of some of
these factors and their possible impact on the Company is provided in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 filed
with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 1996 versus Third Quarter 1995
- ----------------------------------------------
The Company reported income from continuing operations of $1,899,000 in
the third quarter of 1996 as compared to income from continuing operations of
$916,000 for the third quarter of 1995. Higher natural gas and oil prices along
with increased natural gas production, rig utilization and operating margins
between the comparative quarters all contributed to the rise in income.
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Oil and natural gas revenues increased 35 percent in the third quarter
of 1996 as compared to the third quarter of 1995. As a result of the
Company's producing property acquisitions and development drilling program,
natural gas production increased by 7 percent between the comparative quarters
while oil production decreased by 7 percent due to lower production from certain
wells. Average oil prices received by the Company increased 32 percent and the
average natural gas prices rose by 36 percent. The increase in natural gas
prices received was directly a result of higher spot market natural gas prices
since less than 1 percent of the Company's third quarter production came from
wells covered by the Settlement Agreement, which provides for prices higher than
current spot market prices, as discussed above. The impact of the higher price
received under the Settlement Agreement increased pre-tax income by
approximately $50,000 and $510,000 in the third quarters of 1996 and 1995,
respectively.
Oil and natural gas operating margins (revenues less operating costs)
increased from 57 percent in the third quarter of 1995 to 68 percent in the
third quarter of 1996 due to the increase in both oil and natural gas prices.
Total operating costs increased 2 percent between the comparative quarters.
Depreciation, depletion and amortization ("DD&A") increased 3 percent due to
increased natural gas production. The increase was partially offset by a
reduction in the Company's average DD&A rate to $3.90 for the third quarter of
1996 compared with $3.95 in the third quarter of 1995.
Contract drilling revenues increased 24 percent for the comparative
quarters due to the rise in rig utilization and increased drilling dayrates.
Rig utilization averaged 14.5 rigs in the third quarter of 1996 and averaged
12.4 rigs in the third quarter of 1995. Contract drilling operating margins
(revenues less operating costs) were 19 percent in the third quarter of 1996 as
compared to 12 percent in the third quarter of 1995.
General and administrative expenses were unchanged between the third
quarter of 1996 and the third quarter of 1995 while interest expense increased 2
percent. Average long-term bank debt outstanding increased 7 percent between the
comparative quarters as the average interest rate incurred by the Company
dropped from 8.1 to 8.0 percent.
Income tax expense for the third quarter of 1995 differs from income tax
expense computed by applying the statutory rate due principally to the
utilization of the Company's net operating loss carryforward. All of the
financial statement benefit related to the Company's net operating loss
carryforward was recognized at December 31, 1995. As such, income tax expense
for the third quarter of 1996 approximates the statutory rate (federal and
state).
Nine Months 1996 versus Nine Months 1995
- -------------------------------------------------
Income from continuing operations for the first nine months of 1996 was
$4,707,000 as compared to $1,875,000 for the first nine months of 1995. Higher
oil and natural gas prices along with increased production, rig utilization and
operating margins all contributed to the increase in income between the periods.
Oil and natural gas revenues increased 34 percent in the first nine
months of 1996 as compared to the first nine months of 1995. As a result of
the Company's producing property acquisitions and development drilling
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program, oil and natural gas production increased by 10 and 6 percent,
respectively, between the comparative periods. Average oil prices received by
the Company increased 18 percent during the first nine months while the average
natural gas prices rose by 31 percent. The increase in natural gas prices
was caused by a $.58 increase in average spot market prices partially offset by
a decline in production from wells covered by the Settlement Agreement, which
provides for prices higher than current spot market prices, as discussed
above. The impact of the higher price received under the Settlement Agreement
increased pre-tax income by approximately $360,000 and $1,250,000 in the first
nine months of 1996 and 1995, respectively.
Oil and natural gas operating margins (revenues less operating costs)
improved from 61 percent in the first nine months of 1995 to 67 percent in the
first nine months of 1996. While increased prices helped improve operating
margins, total operating costs increased 16 percent due to the additional costs
associated with producing properties acquired in 1995 and wells drilled in early
1996. Depreciation, depletion and amortization ("DD&A") increased 3 percent due
to increased production between the comparative periods. The increase in DD&A
from increased production was partially offset by a reduction in the Company's
average DD&A rate from $3.96 in the first nine months of 1995 to $3.81 in the
first nine months of 1996.
Contract drilling revenues increased 44 percent for the comparative nine
month periods as rig utilization increased from an average of 10.1 rigs
operating to 14.1 operating and as dayrates received by the Company improved.
As a result, contract drilling operating margins (revenue less operating costs)
were 14 percent in the first nine months of 1996 as compared to 7 percent in the
first nine months of 1995.
General and administrative expense increased 8 percent during the
comparative nine month periods as employee compensation and corporate office
related expenses increased as the Company continues to grow.
Interest expense increased 2 percent due to a 13 percent increase in the
average long-term bank debt outstanding in the first nine months of 1996
compared to the first nine months of 1995. While average long-term bank debt
increased, the average interest rate incurred by the Company dropped from 8.6 to
7.8 percent.
Income tax expense for the first nine months of 1995 differs from income
tax expense computed by applying the statutory rate due principally to the
utilization of the Company's net operating loss carryforward. All of the
financial statement benefit related to the Company's net operating loss
carryforward was recognized at December 31, 1995. As such, income tax expense
for the first nine months of 1996 approximates the statutory rate (federal and
state).
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Not applicable
Item 2. Changes in Securities
- ------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable
Item 5. Other Information
- --------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
10.1.21 First Amendment to the Loan Agreement effective as
of September 4, 1996, by an between Unit Corporation
and Bank of Oklahoma, N.A., The First National Bank
of Boston, Bank IV Oklahoma, N.A. and American
National Bank and Trust Company of Shawnee.
15 Letter re: Unaudited Interim Financial Information
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNIT CORPORATION
Date: November 8, 1996 By: /s/ John G. Nikkel
--------------------------- ------------------------
JOHN G. NIKKEL
President, Chief Operating
Officer and Director
Date: November 8, 1996 By: /s/ Larry D. Pinkston
--------------------------- ------------------------
LARRY D. PINKSTON
Vice President, Chief
Financial Officer
and Treasurer
14
<PAGE>
<PAGE>
FIRST AMENDMENT TO
LOAN AGREEMENT
Dated as of
September 4, 1996
between
UNIT CORPORATION
UNIT DRILLING AND EXPLORATION COMPANY
MOUNTAIN FRONT PIPELINE COMPANY, INC.
UNIT DRILLING COMPANY
UNIT PETROLEUM COMPANY
PETROLEUM SUPPLY COMPANY
"Borrowers"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
THE FIRST NATIONAL BANK OF BOSTON
BANK IV OKLAHOMA, N.A.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF SHAWNEE
"Banks"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"Agent"
<PAGE>
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT, dated as of September
4, 1996 ("First Amendment"), is entered into among UNIT CORPORA-
TION, a Delaware corporation ("Unit"), UNIT DRILLING AND EXPLORA-
TION COMPANY, a Delaware corporation, MOUNTAIN FRONT PIPELINE
COMPANY, INC., an Oklahoma corporation, UNIT DRILLING COMPANY, an
Oklahoma corporation, UNIT PETROLEUM COMPANY, an Oklahoma corpora-
tion and PETROLEUM SUPPLY COMPANY, an Oklahoma corporation, each
with its principal place of business at 1000 Galleria Tower 1, 7130
South Lewis, Tulsa, Oklahoma 74136 (collectively the "Borrowers")
and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national banking
association, with principal offices at Bank of Oklahoma Tower, 7
East 2nd Street, Tulsa, Oklahoma 74172 ("BOK"); THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, with principal
offices at 100 Federal Street, Boston, Massachusetts 02110 ("Bank
of Boston"); BANK IV OKLAHOMA, N.A., with principal offices at 515
South Boulder, Tulsa, Oklahoma, 74119 ("BANK IV"); and AMERICAN
NATIONAL BANK AND TRUST COMPANY OF SHAWNEE, a national banking
association, with principal offices at 201 N. Broadway, Shawnee,
Oklahoma 74801 ("ANB") (BOK, Bank of Boston, BANK IV and ANB each
being sometimes referred to herein, individually, as a "Bank", and
collectively as the "Banks"); and BOK as Agent for the Banks (in
such capacity, herein referred to as the "Agent").
WITNESSETH:
WHEREAS, the Borrowers and the Banks are parties to that
certain Loan Agreement dated as of August 3, 1995 (the "Prior Loan
Agreement"), pursuant to which the Banks extended to the Borrowers
a $75,000,000 revolving line of credit (the "Line Commitment") that
converts to a forty-eight (48) month term payment (the "Term
Commitment"); and
WHEREAS, the Borrowers have requested the Banks to (i) extend
the Line Commitment to August 1, 1999, and (ii) decrease the Libor
Rate Option; and
WHEREAS, subject to the terms and conditions hereinafter set
forth, the Banks are willing to extend the Line Commitment and
decrease the Libor Rate Option as described below.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants herein made, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Borrowers and the Banks agree as follows:
1. Amended Definitions. The following defined term in the
Prior Loan Agreement is hereby amended, as follows:
1.6 "Commitment Termination Date" shall
mean August 1, 1999 unless the Commitment is
<PAGE>
terminated at an earlier date pursuant to the
terms of this Agreement.
2. Revolving Line of Credit. The reference to "August 31,
1997" in Section 2.1 of the Prior Loan Agreement is hereby amended
to refer to "August 1, 1999."
3. Notes. The form of the Notes referenced in Section 2.2
of the Prior Loan Agreement and attached thereto as Exhibits A-1,
A-2, A-3 and A-4 are hereof replaced with the form of the Notes
attached hereto as Exhibits A-1, A-2, A-3 and A-4.
4. Principal. The references to "September 1, 1997" and
"August 1, 2001", respectively, in Section 2.4(a) of the Prior Loan
Agreement are hereby amended to refer to "September 1, 1999" and
"August 1, 2003", respectively.
5. Interest. Section 2.5(a) of the Prior Loan Agreement is
hereby amended to read as follows:
(a) Available Options. Except as hereinafter provided,
during the period commencing on September 1, 1996 and
continuing through the Commitment Termination Date, interest
shall accrue on any past due interest and on that portion of
the aggregate principal amount of the Notes from time to time
outstanding (collectively the "Debt") according to the
following matrix:
Percentage that
the Debt Bears
to the Borrowing Base Rate of Interest
------------------------- --------------------
Less than 50% Applicable Prime Rate or
Libor Rate plus 1.25%
50% - up to but Applicable Prime Rate or
not including 75% Libor Rate plus 1.50%
75% or more Applicable Prime Rate or
Libor Rate plus 1.75%
Except as hereinafter provided, during the period commencing
on August 2, 1999, and continuing through Maturity, interest
shall accrue on the Debt according to the following matrix:
2
<PAGE>
Percentage that
the Debt Bears
to the Borrowing Base Rate of Interest
------------------------- --------------------
Less than 50% Applicable Prime Rate plus .25%
or Libor Rate plus 1.50%
50% - up to but Applicable Prime Rate plus .25%
not including 75% or Libor Rate plus 1.75%
75% or more Applicable Prime Rate plus .25%
or Libor Rate plus 2.00%
In determining the percentage that the Debt bears to the
Borrowing Base, the "Debt" and the "Borrowing Base" shall be
the average of such respective amounts during the most recent
calendar month preceding such determination. The Applicable
Prime Rate option described above in the matrices is herein-
after referred to as the "Prime Rate Option" and the Libor
Rate interest option described above in the matrices is here-
inafter referred to as the "Libor Rate Option". The Prime
Rate Option shall be computed on the basis of a year of 365
or 366 days, as the case may be and the Libor Rate Option
shall be based on a year of 360 days and actual days elapsed.
The reference to "September 1, 1995" in Section 2.5(c) in the Prior
Loan Agreement is hereby amended to refer to "October 1, 1996."
6. Determination of Borrowing Base. The reference to
"October 31, 1995" in Section 3.1(a) of the Prior Loan Agreement is
hereby amended to refer to "October 31, 1996." The reference to
"November 1, 1995" in Section 3.1(b) of the Prior Loan Agreement is
hereby amended to refer to "November 1, 1996."
7. Financial Statements and Reports. Section 6.8(e) of the
Prior Loan Agreement is hereby amended to include the following
sentence:
"Prior to September 30 of each year commencing
September 30, 1996, Borrowers shall deliver to
each of the Banks all pertinent data regarding
Borrowers' new producing wells since the
preceding March 31, prepared by Borrowers' in-house
engineers, in form and substance satisfactory to Agent and based on the
best information available to Borrowers at that time."
8. Setoff. Section 9.3 of the Prior Loan Agreement is
hereby amended to include a reference to Account No. 2-083-0798-3
and references to the following Account Nos. are hereby deleted: 1-022-5426-5,
1-035-9028-1, 2-042-1333-2, 2-043-5134-9, 2-060-0786-1,
2-078-9622-0, 2-079-1080-6, 2-079-1087-2.
3
<PAGE>
9. Conditions Precedent. The effectiveness of this First
Amendment and the obligation of the Banks to extend the Line
Commitment and decrease the Libor Rate Option are subject to the
satisfaction of the following conditions precedent:
(a) No Default. There shall exist no
Event of Default or Default on the date hereof.
(b) No Material Adverse Change. From and
after August 3, 1995, no material adverse changes
in the properties, business prospects or financial conditions of the
Borrowers shall have
occurred.
(c) Representations and Warranties. The
representations and warranties set forth in the
Prior Loan Agreement shall be true and correct on
and as of the date hereof, with the same effect
as though made on and as of this date.
(d) Certificates. Each of the Borrowers
shall have delivered to the Agent a Certificate,
dated as of even date herewith, and signed by its
President or Vice President and its Secretary or
Assistant Secretary certifying (i) to the matters
covered by the conditions specified in subsections
(a), (b) and (c) of this Section 9, (ii)
that it has performed and complied with all
agreements and conditions required to be per-
formed or complied with by it prior to or as of
the date hereof, (iii) to the name and signature
of each officer authorized to execute and deliver
this First Amendment and any other documents,
certificates or writings and to borrow under the
Prior Loan Agreement, as amended by this First
Amendment (the "Agreement"), and (iv) to such
other matters in connection with this First
Amendment and the Agreement which the Banks shall
determine to be advisable. The Banks may conclu-
sively rely on such Certificates until it receives
notice in writing to the contrary.
(e) Proceedings. On or before the date
hereof, all corporate proceedings of each of the
Borrowers shall have been taken in connection
with the transactions contemplated by this First
Amendment and shall be satisfactory in form and
substance to the Agent and its counsel; and the
Banks shall have received certified copies, in
form and substance satisfactory to the Agent and
its counsel, of the resolutions of the Board of
Directors of the Borrowers, as adopted, authorizing
the execution and delivery of this First
Amendment and the borrowings under this First
Amendment.
4
<PAGE>
(f) Notes and First Amendment. The
Borrowers shall have delivered to the Agent this
First Amendment, appropriately executed by the
appropriate parties and dated as of the date
hereof. The Borrowers shall have delivered the
Notes to the order of the Banks, appropriately
executed.
10. Ratifications, Representations and Warranties. The terms
and provisions set forth in this First Amendment shall modify and
supersede all inconsistent terms and provisions set forth in the
Prior Loan Agreement and except as expressly modified and supersed-
ed by this First Amendment, the terms and provisions of the Prior
Loan Agreement are ratified and confirmed and shall continue in
full force and effect. The Borrowers and the Banks agree that the
Prior Loan Agreement as amended hereby shall continue to be legal,
valid, binding and enforceable in accordance with its terms.
11. Reference to Agreement. Each of the Loan Documents, in-
cluding the Prior Loan Agreement and any and all other agreements,
documents, or instruments now or hereafter executed and delivered
pursuant to the terms hereof or pursuant to the terms of the Prior
Loan Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Prior Loan Agreement shall
mean a reference to the Prior Loan Agreement as amended hereby.
12. Costs. Borrowers agree to pay to the Agent for the
benefit of the Banks on demand all reasonable costs and expenses
incurred by the Banks in connection with the preparation, execu-
tion, delivery, filing, recording and administration of this First
Amendment and any amendments and modifications thereto, including
without limitation the costs and fees of the Agent's and the Banks'
legal counsel, and all costs and expenses incurred by the Banks in
connection with the enforcement or preservation of any rights under
this First Amendment, or any other Loan Documents, including
without limitation the reasonable costs and fees of legal counsel
of the Banks.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above
written.
"Borrowers"
UNIT CORPORATION, a Delaware corporation
UNIT DRILLING AND EXPLORATION
COMPANY, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY,
INC., an Oklahoma corporation
UNIT PETROLEUM COMPANY, an Oklahoma
corporation
UNIT DRILLING COMPANY, an Oklahoma
corporation
PETROLEUM SUPPLY COMPANY, an Oklahoma
corporation
By____________________________________
John G. Nikkel, President of UNIT
CORPORATION, UNIT DRILLING AND
EXPLORATION COMPANY, MOUNTAIN
FRONT PIPELINE COMPANY, INC., UNIT
PETROLEUM COMPANY, UNIT DRILLING
COMPANY, PETROLEUM SUPPLY COMPANY
"Banks"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By__________________________________
Pam Schloeder, Vice President
P. O. Box 2300
Tulsa, Oklahoma 74192
6
<PAGE>
"Agent"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By__________________________________
Pam Schloeder, Vice President
P. O. Box 2300
Tulsa, Oklahoma 74192
7
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By___________________________________
________________, _______________
P.O. Box 2016
100 Federal Street
Energy & Utility Division 01-08-02
Boston, Massachusetts 02110
8
<PAGE>
BANK IV OKLAHOMA, N.A.
By_______________________________
Glenn A. Elrod
Senior Vice President
P. O. Box 2360
Tulsa, Oklahoma 74101-2360
9
<PAGE>
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF SHAWNEE
By
Tony M. McMurry
Executive Vice President
P. O. Box 1089
Shawnee, Oklahoma 74801-1089
10
<PAGE>
EXHIBIT "A-1"
PROMISSORY NOTE
$25,000,000 September 4, 1996
Tulsa, Oklahoma
FOR VALUE RECEIVED, the undersigned, UNIT CORPORATION, a
Delaware corporation, UNIT DRILLING AND EXPLORATION COMPANY, a
Delaware corporation, MOUNTAIN FRONT PIPELINE COMPANY, INC., an
Oklahoma corporation, UNIT DRILLING COMPANY, an Oklahoma corpora-
tion, UNIT PETROLEUM COMPANY (formerly Sunshine Development Corpor-
ation), an Oklahoma corporation and PETROLEUM SUPPLY COMPANY, an
Oklahoma corporation (individually and collectively the "Borrow-
ers"), jointly and severally promise to pay to the order of BANK OF
OKLAHOMA, NATIONAL ASSOCIATION ("BOK"), with interest, the princi-
pal sum of TWENTY FIVE MILLION and no/100ths DOLLARS ($25,000,000)
or, if less, the aggregate principal amount of all advances made by
BOK to Borrowers pursuant to the Loan Agreement dated as of August
3, 1995 among Borrowers, BOK, BANK IV Oklahoma, N.A., The First
National Bank of Boston and American National Bank and Trust
Company of Shawnee (collectively the "Banks"), with BOK as Agent,
as amended by that First Amendment to Loan Agreement among
Borrowers, the Banks and BOK as Agent (the Loan Agreement, as
amended, referred to as the "Loan Agreement"), which are outstand-
ing as of August 1, 1999 (the "Commitment Termination Date"). Such
outstanding principal shall be payable in forty-eight (48)
consecutive monthly installments commencing September 1, 1999, and
continuing on the first (1st) day of each month thereafter through
August 1, 2003 ("Maturity"). Each of the first forty-seven (47) of
such principal installments shall be in the amount derived by
dividing the principal amount hereof outstanding on the Commitment
Termination Date by forty-eight (48). The forty-eighth (48th) and
final installment shall be in the amount of the remaining principal
balance of this Note at Maturity plus all accrued but unpaid
interest hereon.
Except as hereinafter provided in connection with a default,
interest shall accrue on the outstanding principal balance hereof
and on any past due interest through Maturity at the rate or rates
per annum determined pursuant to the Loan Agreement, payable as
provided therein, and shall be calculated as provided in the Loan
Agreement.
The rate of interest payable upon the indebtedness evidenced
by this Note shall not at any time exceed the maximum rate of
interest permitted under the laws of the State of Oklahoma or
federal laws to the extent they apply for loans of the type and
character evidenced by this Note.
All payments under this Note shall be made in legal tender of
the United States of America or in other immediately available
funds at the offices of the Agent at Bank of Oklahoma Tower, 7 East
<PAGE>
2nd Street, Tulsa, Oklahoma 74172, and no credit shall be given for
any payment received by check, draft or other instrument or item
until such time as the Agent or the holder hereof shall have
received credit therefor from the Agent's or the holder's collect-
ing agent or, in the event no collecting agent is used, from the
bank or other financial institution upon which said check, draft or
other instrument or item is drawn. If any payment is due upon a
Saturday or Sunday or upon any other day on which state or national
banks in the State of Oklahoma are closed for business by virtue of
a legal holiday for such banks, such payment shall be due and
payable on the next succeeding Business Day, and interest shall
accrue to such day.
Prior to the Commitment Termination Date, the Borrowers may
borrow, repay and reborrow hereunder at any time and from time to
time as provided in the Loan Agreement. From and after the
Commitment Termination Date, the Borrowers may prepay this Note in
whole or in part, subject to the prepayment limitations contained
in the Loan Agreement; provided, however, that any partial
prepayment shall be applied first to accrued interest, then to
unpaid principal installments in the inverse order of maturity.
From time to time the Borrowers and the Banks may agree to
extend the maturity date of this Note or to renew this Note, in
whole or in part, or a new note of different form may be substitut-
ed for this Note and/or the rate of interest may be changed, or
changes may be made in consideration of loan extensions, and the
holder, from time to time, may waive or surrender, either in whole
or in part, any rights, guarantees, security interests, or liens
given for the benefit of the holder in connection with the payment
and the securing the payment of this Note; but no such occurrences
shall in any manner affect, limit, modify or otherwise impair any
rights, guarantees or security of the holder not specifically
waived, released or surrendered in writing, nor shall the Borrowers
or any guarantor, endorser or any other person who is or might be
liable hereon, either primarily or contingently, be released from
such liability by reason of the occurrence of any such event. The
holder hereof, from time to time, shall have the unlimited right to
release any person who might be liable hereon; and such release
shall not affect or discharge the liability of any other person who
is or might be liable hereon.
If any payment required by this Note to be made is not made
within ten (10) Business Days after the same shall become due and
payable, or if any default occurs under the Loan Agreement, the
Security Agreement or under the provisions of any mortgage, deed of
trust, security agreement, assignment, pledge or other document or
agreement which provides security for the indebtedness evidenced by
this Note, the holder hereof may, at its option, without notice or
demand, declare this Note in default and all indebtedness due and
owing hereunder immediately due and payable. In the event of a
default the entire unpaid balance shall be immediately due and
payable, together with any past due interest at the rate of five
2
<PAGE>
percentage points (5%) per annum above the Applicable Prime Rate
("Default Rate"). The Borrowers and all endorsers, guarantors and
sureties hereby severally waive protest, presentment, demand, and
notice of protest and nonpayment in case this Note or any payment
due hereunder is not paid when due; and they agree to any renewal
of this Note or to any extension, acceleration or postponement of
the time of payment, or any other indulgence, to any substituting,
exchange or release of collateral and to the release of any party
or person primarily or contingently liable hereon without prejudice
to the holder and without notice to the Borrowers or any endorser,
guarantor or surety. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject
matter or performance of this Note, the prevailing party shall be
entitled to recover from the non-prevailing party all of its
reasonable costs, expenses, including reasonable attorneys' and
accountants' fees. In the event the Agent or BOK is the prevailing
party, the Borrowers, and any guarantor, endorser, surety or any
other person who is or may become liable hereon, will, on demand,
pay all such costs and expenses.
Upon the occurrence of any default hereunder, BOK shall have
the right, immediately and without further action by it, to set off
against this Note all money owed by BOK in any capacity (except for
balances in the following accounts with BOK: Account Nos. 1-01174868, 1-026-
5743-7, 1-035-7018-4, 1-038-4862-7, 1-038-4077-3, 2-079-1154-3, 2-079-2793-3, 2-
079-2310-4, 2-079-2353-3, 2-079-2860-4, 2-079-2861-5, 2-079-2862-6, 2-079-2864-
8, 2-079-3738-2, 2-083-0274-7 and 2-083-0798-3),
to each or any of the Borrowers, guarantor, endorser or any other person
who is or might be liable for payment hereof, whether or not due, and
also to set off against all other liabilities of each of the Borrowers
to BOK all money owed by BOK in any capacity to each or any of the Borrowers;
and BOK shall be deemed to have exercised such right of setoff and to
have made a charge against such money immediately upon the occurrence
of such default even though such charge is made or entered into the
books of BOK subsequently thereto.
This Note is issued pursuant to and subject to the terms of
the Loan Agreement and is secured by the Collateral described in
the Loan Agreement, which provides, among other things, for pre-payment of this
Note upon the occurrence of certain events and for
limitations on advances which may be made hereunder. This Note is
a renewal, extension, substitution and replacement of that certain
promissory note dated August 3, 1995, payable by Borrowers to the
order of BOK in the original principal amount of $25,000,000.
Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Loan Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of Oklahoma. Borrowers agree that all
suits or proceedings arising from or related to this Note or the
Loan Agreement may be litigated in courts, state or federal,
sitting in the State of Oklahoma. In furtherance of this provi-
sion, Borrowers hereby waive any objection to such venue.
3
<PAGE>
Notwithstanding the single execution of this Note by the
President of each of the Borrowers, each of the Borrowers is
jointly and severally bound by the terms of this Note.
"Borrowers"
UNIT CORPORATION, a Delaware
corporation
UNIT DRILLING AND EXPLORATION
COMPANY, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY,
INC., an Oklahoma corporation
UNIT PETROLEUM COMPANY, an Oklahoma
corporation
UNIT DRILLING COMPANY, an Oklahoma
corporation
PETROLEUM SUPPLY COMPANY, an Oklahoma
corporation
By___________________________________
John G. Nikkel, President of UNIT
CORPORATION, UNIT DRILLING AND
EXPLORATION COMPANY, MOUNTAIN FRONT
PIPELINE COMPANY, INC., UNIT PETRO-
LEUM COMPANY, UNIT DRILLING COMPA-
NY, PETROLEUM SUPPLY COMPANY
Due: August 1, 2003
(subject to conversion
to Term Loan payout on
August 1, 1999 per
Loan Agreement)
719303.055
4
<PAGE>
EXHIBIT "A-2"
PROMISSORY NOTE
$23,500,000 September 4, 1996
Tulsa, Oklahoma
FOR VALUE RECEIVED, the undersigned, UNIT CORPORATION, a
Delaware corporation, UNIT DRILLING AND EXPLORATION COMPANY, a
Delaware corporation, MOUNTAIN FRONT PIPELINE COMPANY, INC., an
Oklahoma corporation, UNIT DRILLING COMPANY, an Oklahoma corpora-
tion, UNIT PETROLEUM COMPANY (formerly Sunshine Development Corpor-
ation), an Oklahoma corporation and PETROLEUM SUPPLY COMPANY, an
Oklahoma corporation (individually and collectively the "Borrow-
ers"), jointly and severally promise to pay to the order of THE
FIRST NATIONAL BANK OF BOSTON ("Bank of Boston"), with interest,
the principal sum of TWENTY THREE MILLION FIVE HUNDRED THOUSAND and
no/100ths DOLLARS ($23,500,000) or, if less, the aggregate
principal amount of all advances made by Bank of Boston to
Borrowers pursuant to the Loan Agreement dated as of August 3, 1995
among Borrowers, Bank of Boston, Bank of Oklahoma, National
Association ("BOK"), BANK IV Oklahoma, N.A. and American National
Bank and Trust Company of Shawnee (collectively the "Banks"), with
BOK as Agent, as amended by that First Amendment to Loan Agreement
among Borrowers, the Banks and BOK as Agent (the Loan Agreement, as
amended, referred to as the "Loan Agreement"), which are outstand-
ing as of August 31, 1999 (the "Commitment Termination Date").
Such outstanding principal shall be payable in forty-eight (48)
consecutive monthly installments commencing September 1, 1999, and
continuing on the first (1st) day of each month thereafter through
August 1, 2003 ("Maturity"). Each of the first forty-seven (47) of
such principal installments shall be in the amount derived by
dividing the principal amount hereof outstanding on the Commitment
Termination Date by forty-eight (48). The forty-eighth (48th) and
final installment shall be in the amount of the remaining principal
balance of this Note at Maturity plus all accrued but unpaid
interest hereon.
Except as hereinafter provided in connection with a default,
interest shall accrue on the outstanding principal balance hereof
and on any past due interest through Maturity at the rate or rates
per annum determined pursuant to the Loan Agreement, payable as
provided therein, and shall be calculated as provided in the Loan
Agreement.
The rate of interest payable upon the indebtedness evidenced
by this Note shall not at any time exceed the maximum rate of
interest permitted under the laws of the State of Oklahoma or
federal laws to the extent they apply for loans of the type and
character evidenced by this Note.
All payments under this Note shall be made in legal tender of
the United States of America or in other immediately available
<PAGE>
funds at the offices of the Agent at Bank of Oklahoma Tower, 7 East
2nd Street, Tulsa, Oklahoma 74172, and no credit shall be given for
any payment received by check, draft or other instrument or item
until such time as the Agent or the holder hereof shall have
received credit therefor from the Agent's or the holder's collect-
ing agent or, in the event no collecting agent is used, from the
bank or other financial institution upon which said check, draft or
other instrument or item is drawn. If any payment is due upon a
Saturday or Sunday or upon any other day on which state or national
banks in the State of Oklahoma are closed for business by virtue of
a legal holiday for such banks, such payment shall be due and
payable on the next succeeding Business Day, and interest shall
accrue to such day.
Prior to the Commitment Termination Date, the Borrowers may
borrow, repay and reborrow hereunder at any time and from time to
time as provided in the Loan Agreement. From and after the
Commitment Termination Date, the Borrowers may prepay this Note in
whole or in part, subject to the prepayment limitations contained
in the Loan Agreement; provided, however, that any partial
prepayment shall be applied first to accrued interest, then to
unpaid principal installments in the inverse order of maturity.
From time to time the Borrowers and the Banks may agree to
extend the maturity date of this Note or to renew this Note, in
whole or in part, or a new note of different form may be substitut-
ed for this Note and/or the rate of interest may be changed, or
changes may be made in consideration of loan extensions, and the
holder, from time to time, may waive or surrender, either in whole
or in part, any rights, guarantees, security interests, or liens
given for the benefit of the holder in connection with the payment
and the securing the payment of this Note; but no such occurrences
shall in any manner affect, limit, modify or otherwise impair any
rights, guarantees or security of the holder not specifically
waived, released or surrendered in writing, nor shall the Borrowers
or any guarantor, endorser or any other person who is or might be
liable hereon, either primarily or contingently, be released from
such liability by reason of the occurrence of any such event. The
holder hereof, from time to time, shall have the unlimited right to
release any person who might be liable hereon; and such release
shall not affect or discharge the liability of any other person who
is or might be liable hereon.
If any payment required by this Note to be made is not made
within ten (10) Business Days after the same shall become due and
payable, or if any default occurs under the Loan Agreement, the
Security Agreement or under the provisions of any mortgage, deed of
trust, security agreement, assignment, pledge or other document or
agreement which provides security for the indebtedness evidenced by
this Note, the holder hereof may, at its option, without notice or
demand, declare this Note in default and all indebtedness due and
owing hereunder immediately due and payable. In the event of a
default the entire unpaid balance shall be immediately due and
2
<PAGE>
payable, together with any past due interest at the rate of five
percentage points (5%) per annum above the Applicable Prime Rate
("Default Rate"). The Borrowers and all endorsers, guarantors and
sureties hereby severally waive protest, presentment, demand, and
notice of protest and nonpayment in case this Note or any payment
due hereunder is not paid when due; and they agree to any renewal
of this Note or to any extension, acceleration or postponement of
the time of payment, or any other indulgence, to any substituting,
exchange or release of collateral and to the release of any party
or person primarily or contingently liable hereon without prejudice
to the holder and without notice to the Borrowers or any endorser,
guarantor or surety. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject
matter or performance of this Note, the prevailing party shall be
entitled to recover from the non-prevailing party all of its
reasonable costs, expenses, including reasonable attorneys' and
accountants' fees. In the event the Agent or Bank of Boston is the
prevailing party, the Borrowers, and any guarantor, endorser,
surety or any other person who is or may become liable hereon,
will, on demand, pay all such costs and expenses.
Upon the occurrence of any default hereunder, Bank of Boston
shall have the right, immediately and without further action by it,
to set off against this Note all money owed by Bank of Boston in
any capacity, to each or any of the Borrowers, guarantor, endorser
or any other person who is or might be liable for payment hereof,
whether or not due, and also to set off against all other liabili-
ties of each of the Borrowers to Bank of Boston all money owed by
Bank of Boston in any capacity to each or any of the Borrowers; and
Bank of Boston shall be deemed to have exercised such right of
setoff and to have made a charge against such money immediately
upon the occurrence of such default even though such charge is made
or entered into the books of Bank of Boston subsequently thereto.
This Note is issued pursuant to and subject to the terms of
the Loan Agreement and is secured by the Collateral described in
the Loan Agreement, which provides, among other things, for
prepayment of this Note upon the occurrence of certain events and
for limitations on advances which may be made hereunder. This Note
is a renewal, extension, substitution and replacement of that
certain promissory note dated August 3, 1995, payable by Borrowers
to the order of Bank of Boston in the original principal amount of
$23,500,000. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Loan
Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of Oklahoma. Borrowers agree that all
suits or proceedings arising from or related to this Note or the
Loan Agreement may be litigated in courts, state or federal,
sitting in the State of Oklahoma. In furtherance of this provi-
sion, Borrowers hereby waive any objection to such venue.
3
<PAGE>
Notwithstanding the single execution of this Note by the
President of each of the Borrowers, each of the Borrowers is
jointly and severally bound by the terms of this Note.
"Borrowers"
UNIT CORPORATION, a Delaware
corporation
UNIT DRILLING AND EXPLORATION
COMPANY, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY,
INC., an Oklahoma corporation
UNIT PETROLEUM COMPANY, an Oklahoma
corporation
UNIT DRILLING COMPANY, an Oklahoma
corporation
PETROLEUM SUPPLY COMPANY, an Oklahoma
corporation
By___________________________________
John G. Nikkel, President of UNIT
CORPORATION, UNIT DRILLING AND
EXPLORATION COMPANY, MOUNTAIN FRONT
PIPELINE COMPANY, INC., UNIT PETRO-
LEUM COMPANY, UNIT DRILLING COMPA-
NY, PETROLEUM SUPPLY COMPANY
Due: August 1, 2003
(subject to conversion
to Term Loan payout on
August 1, 1999 per
Loan Agreement)
719303.056
4
<PAGE>
EXHIBIT "A-3"
PROMISSORY NOTE
$25,000,000 September 4, 1996
Tulsa, Oklahoma
FOR VALUE RECEIVED, the undersigned, UNIT CORPORATION, a
Delaware corporation, UNIT DRILLING AND EXPLORATION COMPANY, a
Delaware corporation, MOUNTAIN FRONT PIPELINE COMPANY, INC., an
Oklahoma corporation, UNIT DRILLING COMPANY, an Oklahoma corpora-
tion, UNIT PETROLEUM COMPANY (formerly Sunshine Development Corpor-
ation), an Oklahoma corporation and PETROLEUM SUPPLY COMPANY, an
Oklahoma corporation (individually and collectively the "Borrow-
ers"), jointly and severally promise to pay to the order of BANK IV
Oklahoma, N.A. ("Bank IV"), with interest, the principal sum of
TWENTY FIVE MILLION and no/100ths DOLLARS ($25,000,000) or, if
less, the aggregate principal amount of all advances made by BANK
IV to Borrowers pursuant to the Loan Agreement dated as of August
3, 1995 among Borrowers, BANK IV, Bank of Oklahoma, National
Association ("BOK"), The First National Bank of Boston and American
National Bank and Trust Company of Shawnee (collectively the
"Banks"), with BOK as Agent, as amended by that First Amendment to
Loan Agreement among Borrowers, the Banks and BOK as Agent (the
Loan Agreement, as amended, referred to as the "Loan Agreement"),
which are outstanding as of August 31, 1999 (the "Commitment
Termination Date"). Such outstanding principal shall be payable in
forty-eight (48) consecutive monthly installments commencing
September 1, 1999, and continuing on the first (1st) day of each
month thereafter through August 1, 2003 ("Maturity"). Each of the
first forty-seven (47) of such principal installments shall be in
the amount derived by dividing the principal amount hereof
outstanding on the Commitment Termination Date by forty-eight (48).
The forty-eighth (48th) and final installment shall be in the
amount of the remaining principal balance of this Note at Maturity
plus all accrued but unpaid interest hereon.
Except as hereinafter provided in connection with a default,
interest shall accrue on the outstanding principal balance hereof
and on any past due interest through Maturity at the rate or rates
per annum determined pursuant to the Loan Agreement, payable as
provided therein, and shall be calculated as provided in the Loan
Agreement.
The rate of interest payable upon the indebtedness evidenced
by this Note shall not at any time exceed the maximum rate of
interest permitted under the laws of the State of Oklahoma or
federal laws to the extent they apply for loans of the type and
character evidenced by this Note.
All payments under this Note shall be made in legal tender of
the United States of America or in other immediately available
funds at the offices of the Agent at Bank of Oklahoma Tower, 7 East
<PAGE>
2nd Street, Tulsa, Oklahoma 74172, and no credit shall be given for
any payment received by check, draft or other instrument or item
until such time as the Agent or the holder hereof shall have
received credit therefor from the Agent's or the holder's collect-
ing agent or, in the event no collecting agent is used, from the
bank or other financial institution upon which said check, draft or
other instrument or item is drawn. If any payment is due upon a
Saturday or Sunday or upon any other day on which state or national
banks in the State of Oklahoma are closed for business by virtue of
a legal holiday for such banks, such payment shall be due and
payable on the next succeeding Business Day, and interest shall
accrue to such day.
Prior to the Commitment Termination Date, the Borrowers may
borrow, repay and reborrow hereunder at any time and from time to
time as provided in the Loan Agreement. From and after the
Commitment Termination Date, the Borrowers may prepay this Note in
whole or in part, subject to the prepayment limitations contained
in the Loan Agreement; provided, however, that any partial
prepayment shall be applied first to accrued interest, then to
unpaid principal installments in the inverse order of maturity.
From time to time the Borrowers and the Banks may agree to
extend the maturity date of this Note or to renew this Note, in
whole or in part, or a new note of different form may be substitut-
ed for this Note and/or the rate of interest may be changed, or
changes may be made in consideration of loan extensions, and the
holder, from time to time, may waive or surrender, either in whole
or in part, any rights, guarantees, security interests, or liens
given for the benefit of the holder in connection with the payment
and the securing the payment of this Note; but no such occurrences
shall in any manner affect, limit, modify or otherwise impair any
rights, guarantees or security of the holder not specifically
waived, released or surrendered in writing, nor shall the Borrowers
or any guarantor, endorser or any other person who is or might be
liable hereon, either primarily or contingently, be released from
such liability by reason of the occurrence of any such event. The
holder hereof, from time to time, shall have the unlimited right to
release any person who might be liable hereon; and such release
shall not affect or discharge the liability of any other person who
is or might be liable hereon.
If any payment required by this Note to be made is not made
within ten (10) Business Days after the same shall become due and
payable, or if any default occurs under the Loan Agreement, the
Security Agreement or under the provisions of any mortgage, deed of
trust, security agreement, assignment, pledge or other document or
agreement which provides security for the indebtedness evidenced by
this Note, the holder hereof may, at its option, without notice or
demand, declare this Note in default and all indebtedness due and
owing hereunder immediately due and payable. In the event of a
default the entire unpaid balance shall be immediately due and
payable, together with any past due interest at the rate of five
2
<PAGE>
percentage points (5%) per annum above the Applicable Prime Rate
("Default Rate"). The Borrowers and all endorsers, guarantors and
sureties hereby severally waive protest, presentment, demand, and
notice of protest and nonpayment in case this Note or any payment
due hereunder is not paid when due; and they agree to any renewal
of this Note or to any extension, acceleration or postponement of
the time of payment, or any other indulgence, to any substituting,
exchange or release of collateral and to the release of any party
or person primarily or contingently liable hereon without prejudice
to the holder and without notice to the Borrowers or any endorser,
guarantor or surety. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject
matter or performance of this Note, the prevailing party shall be
entitled to recover from the non-prevailing party all of its
reasonable costs, expenses, including reasonable attorneys' and
accountants' fees. In the event the Agent or BANK IV is the
prevailing party, the Borrowers, and any guarantor, endorser,
surety or any other person who is or may become liable hereon,
will, on demand, pay all such costs and expenses.
Upon the occurrence of any default hereunder, BANK IV shall
have the right, immediately and without further action by it, to
set off against this Note all money owed by BANK IV in any
capacity, to each or any of the Borrowers, guarantor, endorser or
any other person who is or might be liable for payment hereof,
whether or not due, and also to set off against all other liabili-
ties of each of the Borrowers to BANK IV all money owed by BANK IV
in any capacity to each or any of the Borrowers; and BANK IV shall
be deemed to have exercised such right of setoff and to have made
a charge against such money immediately upon the occurrence of such
default even though such charge is made or entered into the books
of BANK IV subsequently thereto.
This Note is issued pursuant to and subject to the terms of
the Loan Agreement and is secured by the Collateral described in
the Loan Agreement, which provides, among other things, for
prepayment of this Note upon the occurrence of certain events and
for limitations on advances which may be made hereunder. This Note
is a renewal, extension, substitution and replacement of that
certain promissory note dated August 3, 1995, payable by Borrowers
to the order of BANK IV Oklahoma, N.A. in the original principal
amount of $25,000,000. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in the Loan
Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of Oklahoma. Borrowers agree that all
suits or proceedings arising from or related to this Note or the
Loan Agreement may be litigated in courts, state or federal,
sitting in the State of Oklahoma. In furtherance of this provi-
sion, Borrowers hereby waive any objection to such venue.
3
<PAGE>
Notwithstanding the single execution of this Note by the
President of each of the Borrowers, each of the Borrowers is
jointly and severally bound by the terms of this Note.
"Borrowers"
UNIT CORPORATION, a Delaware
corporation
UNIT DRILLING AND EXPLORATION
COMPANY, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY,
INC., an Oklahoma corporation
UNIT PETROLEUM COMPANY, an Oklahoma
corporation
UNIT DRILLING COMPANY, an Oklahoma
corporation
PETROLEUM SUPPLY COMPANY, an Oklahoma
corporation
By___________________________________
John G. Nikkel, President of UNIT
CORPORATION, UNIT DRILLING AND
EXPLORATION COMPANY, MOUNTAIN FRONT
PIPELINE COMPANY, INC., UNIT PETRO-
LEUM COMPANY, UNIT DRILLING COMPA-
NY, PETROLEUM SUPPLY COMPANY
Due: August 1, 2003
(subject to conversion
to Term Loan payout on
August 1, 1999 per
Loan Agreement)
719303.057
4
<PAGE>
EXHIBIT "A-4"
PROMISSORY NOTE
$1,500,000 September 4, 1996
Tulsa, Oklahoma
FOR VALUE RECEIVED, the undersigned, UNIT CORPORATION, a
Delaware corporation, UNIT DRILLING AND EXPLORATION COMPANY, a
Delaware corporation, MOUNTAIN FRONT PIPELINE COMPANY, INC., an
Oklahoma corporation, UNIT DRILLING COMPANY, an Oklahoma corpora-
tion, UNIT PETROLEUM COMPANY (formerly Sunshine Development Corpor-
ation), an Oklahoma corporation and PETROLEUM SUPPLY COMPANY, an
Oklahoma corporation (individually and collectively the "Borrow-
ers"), jointly and severally promise to pay to the order of
AMERICAN NATIONAL BANK AND TRUST COMPANY OF SHAWNEE ("ANB"), with
interest, the principal sum of ONE MILLION FIVE HUNDRED THOUSAND
and no/100ths DOLLARS ($1,500,000) or, if less, the aggregate
principal amount of all advances made by ANB to Borrowers pursuant
to the Loan Agreement dated as of August 3, 1995 among Borrowers,
ANB, Bank of Oklahoma, National Association ("BOK"), The First
National Bank of Boston and BANK IV Oklahoma, N.A. (collectively
the "Banks"), with BOK as Agent, as amended by that First Amendment
to Loan Agreement among Borrowers, the Banks and BOK as Agent (the
Loan Agreement, as amended, referred to as the "Loan Agreement"),
which are outstanding as of August 31, 1999 (the "Commitment
Termination Date"). Such outstanding principal shall be payable in
forty-eight (48) consecutive monthly installments commencing
September 1, 1999, and continuing on the first (1st) day of each
month thereafter through August 1, 2003 ("Maturity"). Each of the
first forty-seven (47) of such principal installments shall be in
the amount derived by dividing the principal amount hereof
outstanding on the Commitment Termination Date by forty-eight (48).
The forty-eighth (48th) and final installment shall be in the
amount of the remaining principal balance of this Note at Maturity
plus all accrued but unpaid interest hereon.
Except as hereinafter provided in connection with a default,
interest shall accrue on the outstanding principal balance hereof
and on any past due interest through Maturity at the rate or rates
per annum determined pursuant to the Loan Agreement, payable as
provided therein, and shall be calculated as provided in the Loan
Agreement.
The rate of interest payable upon the indebtedness evidenced
by this Note shall not at any time exceed the maximum rate of
interest permitted under the laws of the State of Oklahoma or
federal laws to the extent they apply for loans of the type and
character evidenced by this Note.
All payments under this Note shall be made in legal tender of
the United States of America or in other immediately available
funds at the offices of the Agent at Bank of Oklahoma Tower, 7 East
<PAGE>
2nd Street, Tulsa, Oklahoma 74172, and no credit shall be given for
any payment received by check, draft or other instrument or item
until such time as the Agent or the holder hereof shall have
received credit therefor from the Agent's or the holder's collect-
ing agent or, in the event no collecting agent is used, from the
bank or other financial institution upon which said check, draft or
other instrument or item is drawn. If any payment is due upon a
Saturday or Sunday or upon any other day on which state or national
banks in the State of Oklahoma are closed for business by virtue of
a legal holiday for such banks, such payment shall be due and
payable on the next succeeding Business Day, and interest shall
accrue to such day.
Prior to the Commitment Termination Date, the Borrowers may
borrow, repay and reborrow hereunder at any time and from time to
time as provided in the Loan Agreement. From and after the
Commitment Termination Date, the Borrowers may prepay this Note in
whole or in part, subject to the prepayment limitations contained
in the Loan Agreement; provided, however, that any partial
prepayment shall be applied first to accrued interest, then to
unpaid principal installments in the inverse order of maturity.
From time to time the Borrowers and the Banks may agree to
extend the maturity date of this Note or to renew this Note, in
whole or in part, or a new note of different form may be substitut-
ed for this Note and/or the rate of interest may be changed, or
changes may be made in consideration of loan extensions, and the
holder, from time to time, may waive or surrender, either in whole
or in part, any rights, guarantees, security interests, or liens
given for the benefit of the holder in connection with the payment
and the securing the payment of this Note; but no such occurrences
shall in any manner affect, limit, modify or otherwise impair any
rights, guarantees or security of the holder not specifically
waived, released or surrendered in writing, nor shall the Borrowers
or any guarantor, endorser or any other person who is or might be
liable hereon, either primarily or contingently, be released from
such liability by reason of the occurrence of any such event. The
holder hereof, from time to time, shall have the unlimited right to
release any person who might be liable hereon; and such release
shall not affect or discharge the liability of any other person who
is or might be liable hereon.
If any payment required by this Note to be made is not made
within ten (10) Business Days after the same shall become due and
payable, or if any default occurs under the Loan Agreement, the
Security Agreement or under the provisions of any mortgage, deed of
trust, security agreement, assignment, pledge or other document or
agreement which provides security for the indebtedness evidenced by
this Note, the holder hereof may, at its option, without notice or
demand, declare this Note in default and all indebtedness due and
owing hereunder immediately due and payable. In the event of a
default the entire unpaid balance shall be immediately due and
payable, together with any past due interest at the rate of five
2
<PAGE>
percentage points (5%) per annum above the Applicable Prime Rate
("Default Rate"). The Borrowers and all endorsers, guarantors and
sureties hereby severally waive protest, presentment, demand, and
notice of protest and nonpayment in case this Note or any payment
due hereunder is not paid when due; and they agree to any renewal
of this Note or to any extension, acceleration or postponement of
the time of payment, or any other indulgence, to any substituting,
exchange or release of collateral and to the release of any party
or person primarily or contingently liable hereon without prejudice
to the holder and without notice to the Borrowers or any endorser,
guarantor or surety. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject
matter or performance of this Note, the prevailing party shall be
entitled to recover from the non-prevailing party all of its
reasonable costs, expenses, including reasonable attorneys' and
accountants' fees. In the event the Agent or ANB is the prevailing
party, the Borrowers, and any guarantor, endorser, surety or any
other person who is or may become liable hereon, will, on demand,
pay all such costs and expenses.
Upon the occurrence of any default hereunder, ANB shall have
the right, immediately and without further action by it, to set off
against this Note all money owed by ANB in any capacity, to each or
any of the Borrowers, guarantor, endorser or any other person who
is or might be liable for payment hereof, whether or not due, and
also to set off against all other liabilities of each of the
Borrowers to ANB all money owed by ANB in any capacity to each or
any of the Borrowers; and ANB shall be deemed to have exercised
such right of setoff and to have made a charge against such money
immediately upon the occurrence of such default even though such
charge is made or entered into the books of ANB subsequently
thereto.
This Note is issued pursuant to and subject to the terms of
the Loan Agreement and is secured by the Collateral described in
the Loan Agreement, which provides, among other things, for
prepayment of this Note upon the occurrence of certain events and
for limitations on advances which may be made hereunder. This Note
is a renewal, extension, substitution and replacement of that
certain promissory note dated August 3, 1995, payable by Borrowers
to the order of ANB in the original principal amount of $1,500,000.
Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Loan Agreement.
This Note shall be governed by and construed in accordance
with the laws of the State of Oklahoma. Borrowers agree that all
suits or proceedings arising from or related to this Note or the
Loan Agreement may be litigated in courts, state or federal,
sitting in the State of Oklahoma. In furtherance of this provi-
sion, Borrowers hereby waive any objection to such venue.
3
<PAGE>
Notwithstanding the single execution of this Note by the
President of each of the Borrowers, each of the Borrowers is
jointly and severally bound by the terms of this Note.
"Borrowers"
UNIT CORPORATION, a Delaware
corporation
UNIT DRILLING AND EXPLORATION
COMPANY, a Delaware corporation
MOUNTAIN FRONT PIPELINE COMPANY,
INC., an Oklahoma corporation
UNIT PETROLEUM COMPANY, an Oklahoma
corporation
UNIT DRILLING COMPANY, an Oklahoma
corporation
PETROLEUM SUPPLY COMPANY, an Oklahoma
corporation
By___________________________________
John G. Nikkel, President of UNIT
CORPORATION, UNIT DRILLING AND
EXPLORATION COMPANY, MOUNTAIN FRONT
PIPELINE COMPANY, INC., UNIT PETRO-
LEUM COMPANY, UNIT DRILLING COMPA-
NY, PETROLEUM SUPPLY COMPANY
Due: August 1, 2003
(subject to conversion
to Term Loan payout on
August 1, 1999 per
Loan Agreement)
719303.058
4
<PAGE>
<PAGE>
Exhibit 15
----------
November 6, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Unit Corporation
Registration on Form S-8 and S-3
We are aware that our report dated October 29, 1996 on our review of interim
financial information of Unit Corporation for the three and nine month periods
ended September 30, 1996 and 1995 and included in the Company's quarterly report
on Form 10-Q for the quarter ended September 30, 1996 is incorporated by
reference in the Company's registration statements on Form S-8 (File No.'s 33-
19652, 33-44103, 33-49724, 33-64323 and 33-53542). Pursuant to Rule 436(c) under
the Securities Act of 1933, this report should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
COOPERS & LYBRAND L. L. P.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Condensed Financial Statements of Unit Corporation and Subsidiaries
under cover of Form 10-Q for the nine months ended September 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000798949
<NAME> UNIT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 478
<SECURITIES> 0
<RECEIVABLES> 12,003<F1>
<ALLOWANCES> 0
<INVENTORY> 0<F2>
<CURRENT-ASSETS> 15,976
<PP&E> 285,855
<DEPRECIATION> 172,301
<TOTAL-ASSETS> 129,667
<CURRENT-LIABILITIES> 13,091
<BONDS> 0
0
0
<COMMON> 4,803
<OTHER-SE> 69,774
<TOTAL-LIABILITY-AND-EQUITY> 129,667
<SALES> 0
<TOTAL-REVENUES> 50,264<F3>
<CGS> 0
<TOTAL-COSTS> 37,173<F3>
<OTHER-EXPENSES> 3,072
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,442
<INCOME-PRETAX> 7,577
<INCOME-TAX> 2,870
<INCOME-CONTINUING> 4,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,707
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
<FN>
<F1>Accounts Receivable is presented net in the Consolidated Condensed Balance
Sheet.
<F2>Inventory is presented as a portion of Other Current Assets in the
Consolidated Condensed Balance Sheet.
<F3>On April 1, 1995 the Company completed a business combination between the
Company's natural gas marketing operations and a third party also involved
in natural gas marketing activities forming a new company called GED Gas
Services, L.L.C. ("GED"). The Company owns a 34 percent interest in GED.
Effective November 1, 1995, GED sold its natural gas marketing operations to
<PAGE>
a third party. This sale removed the Company from the third party natural
gas marketing business. The discontinuation of the Company's natural gas
marketing segment has been accounted for as a discontinued operation and
accordingly, the 1995 consolidated condensed financial information has been
restated to reflect this treatment.
</FN>
</TABLE>
