Unit Corporation (UNT)

Bank of America/Merrill Lynch Leveraged Finance Conference

December 04, 2012, 07:30 a.m. ET

Executive

Larry Pinkston - President and CEO

David Merrill - CFO and Treasurer

Presentation

Unidentified Analyst

We have Unit Corp from Tulsa, Oklahoma. We have CEO, Larry Pinkston; and CFO, David Merrill here with us today. So, Larry go ahead.

Larry Pinkston

Thank you, George. I appreciate everyone joining this sunshine morning. We are very excited about, (inaudible) share some of those exciting things with you this morning.

We are somewhat unique in energy business. We have three segments; we have a contract drilling segment that we currently have 127 drilling rigs in. We have an E&P segment that we finished last year with 116 million barrels of oil equivalent reserves and we have a midstream segment that now has little over 1100 miles of mostly gas gathering pipelines, gas plants, processing plants and treating facilities.

We have always considered one of our major strengths is our corporate structure. What our corporate structure allows us to do is direct investment into whichever segment that we think we can achieve the best rate of return for our shareholders.

The cycles in the three segments are very same. We see cycles where operators are wanting drilling rigs very quickly and we build drilling rigs for them. We see cycles where they don't want any drilling rigs. We have the option if we don't want to add, if we don't need to add drilling rigs we can grow our oil and gas properties more aggressively or we can invest more into the midstream business. The oil and gas segment is really the segment that we can kind of control our growth. The other two segments are mostly opportunistic driven when operators don't need mid stream operations or when they don't need additional rigs. There is not much we can do to force [when they take it].

That our oil and gas segment is our most consistent growth story. We have a good long history to show them. In our drilling segment over the last 10 years we have grown into rig fleet on average on 69%. And our E&P segment we replaced over the last 10 years 195% of our annual production with new reserves. And our midstream segment which is our newest segment that we have gotten into really in 2004 our amount of natural gas process has grown by over 260% and amount of natural gas liquids that we have sold has grown over 660%.

In our E&P segment, really up until 2008, we have been primarily a natural gas company. It was because we preferred natural gas [over oil]. We just over as more opportunities to grow natural gas in United States and there was all of the economic or better to grow natural gas reserves that changed in 2008 with the meltdown. We began to focus almost entirely on growing our liquids production. Today we have three core plays, one is the Granite Wash and our acreage is mostly in the Texas Panhandle, the other is Marmaton play, a shallow oil play in Oklahoma Panhandle primarily in Beaver County. And the third is the Wilcox play which is in Southeast Texas.

In September, we closed on a biggest transaction in Unit’s history. We bought oil and gas properties of Noble Energy for about $617 million. The transaction was all cash. We paid for the transaction with add on to our public debt offering (inaudible). And the proceeds of some two properties non-core properties that we sold that always caused in September. The transaction is accretive on a cash flow per share it will be accretive on earnings and cash flow per share both in 2013 and going forward.

The primary reason why we bought it, we liked the properties. The properties we have in our backyard, there are an areas that we have been drilling both on a rig side and on our E&P side for the last 30 years. We are very aware of the risk. What we acquired with 44 million barrels of oil equivalent reserves. Production in April was about 10,000 barrels of oil equivalent per day and we acquired 84,000 net acres and most importantly in that 84,000 net acres 80,000 of those were HBP. So, we are not going to be in a position of having to drill the acreage in order to save it, we can drill it when it makes the most economic sense. And that’s very, very important in the volatile industry as the energy industry but it kind of shows where the acreage is most of the Granite Wash acreage of the play which is about 25,000 acres in this area this is our core area of the Granite Wash also, that was really although we analyze in the transaction those of Granite Wash acreage.

We come up with over 600 possible locations just on that part of the acreage the other 60,000 acres are spread out across Northwestern Oklahoma and Oklahoma Panhandle includes the (inaudible) some acreage that covers about all of the plays that’s been around forever in Western Oklahoma. But our focus was on the Granite Wash which was the most (inaudible) only a couple horizontal wells and there are 25,000 acres drilled many, many vertical wells which that’s important also, because it gives you well controlled helps you direct, helps you control the drilling process of the horizontal well. So, they are very underdeveloped from a horizontal perspective. It has about seven different formations in the Granite Wash primarily the two formations that Noble had produced was [AMB] formations. In our acreage we have production out of five additional zones from A all the way through the G now. So, we are very anxious to get started in the area.

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