Unless otherwise indicated or required by the context, as used in this report, the terms “corporation”, “company”, “Unit”, “us”, “our”, “we” and “its” refer to Unit Corporation and, as appropriate, Unit Corporation and/or one or more of its subsidiaries.

Our executive offices are at 7130 South Lewis, Suite 1000, Tulsa, Oklahoma 74136; our telephone number is (918) 493-7700. In addition to our executive offices, we have offices in Houston, Humble, Borger, Booker, Midland, Pampa and Weatherford, Texas; Casper, Wyoming; Oklahoma City, Panola and Woodward, Oklahoma; and Denver, Colorado.

Information regarding our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports, will be made available in print, free of charge, to any shareholder who request them, or at our internet website at www.unitcorp.com, as soon as reasonably practicable after we electronically file these reports with or furnish them to the Securities and Exchange Commission (SEC). Materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F. Street, N.E. Room 1580, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

In addition, we post on our Internet website, www.unitcorp.com , copies of the various corporate governance documents that we have adopted. We may from time to time provide important disclosures to investors by posting them in the investor relations section of our website, as allowed by SEC rules. Information regarding our corporate governance guidelines and code of ethics, and the charters of our Board's Audit, Compensation and Nomination and Governance Committees, are available free of charge on our website listed above or in print to any shareholder who request them.

GENERAL

We were founded in 1963 as a contract drilling company. Today, our operations are generally conducted through our three principal wholly owned subsidiaries:

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The following table provides certain information about us as of February 15, 2008:

At various times, and from time to time, each of these three principal subsidiaries may conduct operations through subsidiaries of their own.

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2007 HIGHLIGHTS

Unit Drilling Company

Unit Petroleum Company

Superior Pipeline Company

FINANCIAL INFORMATION ABOUT SEGMENTS

See Note 14 of our Notes to Consolidated Financial Statements in Item 8 of this report for information with respect to each segment’s revenues, profits or losses and total assets.

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LAND CONTRACT DRILLING

General.     Our land contract drilling business is conducted through Unit Drilling Company and its two subsidiaries Unit Texas Drilling L.L.C. and Leonard Hudson Drilling Co., Inc. Through these companies we drill onshore natural gas and oil wells for our own account as well as for a wide range of other oil and natural gas companies. Our operations are mainly located in the Oklahoma and Texas areas of the Anadarko and Arkoma Basins, the North Texas Barnett Shale, the Texas and Louisiana Gulf Coast, East Texas and the Rocky Mountain regions of Wyoming, Colorado, Utah and Montana.

The table below identifies certain information concerning our land contract drilling operations:

Description and Location of Our Drilling Rigs.     A land drilling rig consists, in part, of engines, drawworks or hoists, derrick or mast, substructure, pumps to circulate the drilling fluid, blowout preventers and drill pipe. As a result of the normal wear and tear of operating 24 hours a day, several of the major components of a drilling rig, such as engines, mud pumps and drill pipe, must be replaced or rebuilt on a periodic basis. Other components, such as the substructure, mast and drawworks, can be used for extended periods of time with proper maintenance. We also own additional equipment used in the operation of our drilling rigs, including large air compressors, trucks and other support equipment.

The maximum depth capacities of our various drilling rigs range from 5,000 to 40,000 feet. In 2007, 124 of our 129 drilling rigs performed contract drilling services.

The following table shows certain information about our drilling rigs (including their distribution) as of February 8, 2008:

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At present, we do not have a shortage of drilling rig related equipment. However, at any given time, our ability to use all of our drilling rigs is dependent on a number of conditions, including the availability of qualified labor, drilling supplies and equipment as well as demand. Demand for our drilling rigs increased throughout 2005 and our utilization rate remained above 95% throughout the first three quarters of 2006. In the fourth quarter of 2006 and throughout 2007, demand for our drilling rigs declined to the point that as of December 2007 our utilization rate was approximately 80%. Despite this decrease in demand, we continue to experience certain difficulties in finding qualified labor to work on our drilling rigs. If demand for our drilling rigs increases above 80% and the industry rig count grows, we expect competition for qualified labor to continue which will result in higher operating costs.

The following table shows the average number of our drilling rigs working by quarter for the years indicated:

Drilling Rig Fleet.     The following table summarizes the changes to our drilling rig fleet during 2007. A more complete discussion of these changes follows the table:

Acquisitions and Construction.     In June 2007, we acquired a privately owned drilling company operating primarily in the Texas Panhandle. This acquisition included nine drilling rigs ranging from 800 to 1,000 horsepower. Eight of the nine drilling rigs were operational immediately after the purchase; the last drilling rig is being refurbished and is anticipated to become operational during March of 2008. During the first six months of 2007, we completed the construction of two 1,500 horsepower drilling rigs for approximately $19.4 million and placed one of them into each of our Rocky Mountain and Anadarko divisions. In the fourth quarter of 2007, we completed the construction of a third 1,500 horsepower drilling rig for an estimated $12.0 million which was also moved into our Rocky Mountain division. The addition of these drilling rigs brought our drilling rig fleet to 129 at December 31, 2007.

During 2007, we paid approximately $16.0 million for the purchase of major components to be used in the construction of two 1,500 horsepower drilling rigs. These two new drilling rigs are anticipated to be placed in service sometime during the second quarter of 2008.

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

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The type of contract used determines our compensation. Contracts are generally one of three types: daywork; footage; or turnkey. Additional compensation may be acquired for special risks and unusual conditions. Under a daywork contract, we provide the drilling rig with the required personnel and the operator supervises the drilling of the well. Our compensation is based on a negotiated rate to be paid for each day the drilling rig is used. Footage contracts usually require us to bear some of the drilling costs in addition to providing the drilling rig. We are paid on completion of the well at a negotiated rate for each foot drilled. Under turnkey contracts we drill the well to a specified depth for a set amount and provide most of the required equipment and services. We bear the risk of drilling the well to the contract depth and are paid when the contract provisions are completed.

Under turnkey contracts we may incur losses if we underestimate the costs to drill the well or if unforeseen events occur. To date, we have not experienced significant losses in performing turnkey contracts. In 2007, 2006 and 2005, we did not drill any turnkey wells. All of our work in 2007 was under daywork contracts to the exclusion of footage or turnkey contracts. Because market demand for our drilling rigs as well as the desires of our customers determine the types of contracts we use, we cannot predict when and if a part of our drilling will be conducted under footage or turnkey contracts.

Most of our current contracts are not long-term and generally provide for the drilling of one well. We do have some contracts that have terms ranging from one to two years. These longer term contracts may contain a fixed rate for the duration of the contract or provide for the periodic renegotiation of the rate within a specific range from the existing rate.

Customers.     During 2007, Questar Corporation was our largest customer providing approximately 13% of our total contract drilling revenues. No other third party customer accounted for 10% or more of our contract drilling revenues. During 2007, 2006 and 2005, we drilled 77, 72 and 53 wells, respectively, for our exploration and production subsidiary. As required by the SEC, the profit received by our contract drilling subsidiary when we drill wells for our exploration and production subsidiary reduced the carrying value of our oil and natural gas properties by $22.7 million, $22.2 million and $8.6 million during 2007, 2006 and 2005, respectively, rather than being included in our operating profit.

Additional Information.     Further information relating to our contract drilling operations can be found in Notes 2, 3 and 14 of the Notes to Consolidated Financial Statements in Item 8 of this report.

OIL AND NATURAL GAS EXPLORATION

General.     In 1979, we began to develop our exploration and production operations to diversify our contract drilling revenues. Today, our wholly owned subsidiary, Unit Petroleum Company, conducts our exploration and production activities. Our producing oil and natural gas properties, undeveloped leaseholds and related assets are located mainly in Oklahoma, Texas, Louisiana and New Mexico and, to a lesser extent, in Arkansas, North Dakota, Colorado, Wyoming, Montana, Alabama, Kansas, Mississippi, Michigan and a small portion in Canada.

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The following table presents certain information regarding our oil and natural gas operations as of December 31, 2007:

When we are the operator of a property, we generally attempt to use a drilling rig owned by one of our subsidiaries.

Acquisitions.     On October 13, 2006, we completed the acquisition of Brighton Energy, L.L.C., a privately owned oil and natural gas company. On February 1, 2008, Brighton Energy, L.L.C. was merged with and into Unit Petroleum Company.

Our oil and natural gas exploration segment did not make any significant acquisitions during 2007, however, on January 18, 2008, we purchased a 50% interest in a 6,800 gross-acre leasehold that we did not already own in our Segno area of operations located in Hardin County, Texas. Included in this purchase were five producing wells with 4.9 Bcfe of estimated proved reserves and current production of 2.8 MMcf of natural gas per day and 88.2 barrels of condensate. The purchase price was $16.8 million of which $15.8 million was allocated to the reserves of the wells and $1.0 million was allocated to the undeveloped leasehold. The production and reserves acquired in this purchase will be included in our 2008 results.

Well and Leasehold Data.     The tables below identify certain information regarding our oil and natural gas exploratory and development drilling operations: