UNIT: Dialogue and evaluation by administration of the monetary place and working outcomes (Kind 10-Okay)

Please learn this dialogue of our monetary situation and outcomes of operations
with the consolidated monetary statements and associated notes in Merchandise 8 of this
report.

Common

We have been based in 1963 as a contract drilling firm. In the present day, we function, handle and analyze our working outcomes throughout our three primary enterprise segments:

•Oil and Pure Gasoline - carried out by our subsidiary Unit Petroleum Firm.
This phase explores, develops, acquires, and produces oil and pure fuel
properties for our personal account.
•Contract Drilling - carried out by our subsidiary Unit Drilling Firm. This
phase contracts to drill onshore oil and pure fuel wells for others and for
our personal account.
•Mid-Stream - carried out by our subsidiary Superior Pipeline Firm, L.L.C.
and its subsidiaries. This phase buys, sells, gathers, processes, and treats
pure fuel for third events and for our personal account. We personal 50% of this
subsidiary.

Latest developments

Emergence of a voluntary reorganization below Chapter 11 of the Chapter Code

On Might 22, 2020, the Debtors filed petitions for reorganization below Chapter 11
of Title 11 of the USA Code within the United States Chapter Court docket for
the Southern District of Texas, Houston Division. The Chapter 11 proceedings
have been collectively administered below the caption In re Unit Company, et al., Case
No. 20-32740 (DRJ) (Chapter 11 Instances). Through the pendency of the Chapter 11
Instances, the Debtors operated their enterprise as "debtors-in-possession" below the
authority of the chapter court docket and below the Chapter Code.

The Debtors filed their Plan and the associated disclosure assertion with the
chapter court docket on June 9, 2020. On August 6, 2020, the chapter court docket
entered the "Findings of Reality, Conclusions of Regulation, and Order (I) Approving the
Disclosure Assertion on a Remaining Foundation and (II) Confirming the Debtors' Amended
Joint Chapter 11 Plan of Reorganization" [Docket No. 340] (Affirmation Order)
confirming the Plan. On the Efficient Date, the Debtors emerged from the Chapter
11 Instances. For extra data relating to the Chapter 11 Instances and different associated
issues, please learn Notice 2 - Emergence From Voluntary Reorganization Below
Chapter 11.

New begin accounting

On the Efficient Date, we certified for and adopted recent begin accounting below
the provisions set forth in FASB Subject ASC 852 as (i) the reorganization worth
of the corporate's property instantly earlier than the date of affirmation was much less
than the post-petition liabilities and allowed claims, and (ii) the holders of
the prevailing voting shares of the Predecessor previous to emergence acquired much less
than 50% of the voting shares of the rising entity. Because of the
utility of recent begin accounting and the results of the implementation of
the Plan, the Successor monetary statements is not going to be corresponding to the
monetary statements ready earlier than the Efficient Date.

Modifications in accounting strategies

On the Efficient Date, we elected to alter the accounting insurance policies associated to
depreciation of mounted property of our Contract Drilling phase and the allocation
of earnings and losses between Unit and its companions in Superior.
•Relating to our Contract Drilling phase, we elected to depreciate all drilling
property utilizing the straight-line technique over the helpful lives of the property
starting from 4 to 10 years.
•We elected to start allocating earnings and losses between Unit and the
companions in Superior utilizing the Hypothetical Liquidation at E-book Worth (HLBV)
technique of accounting.

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Enterprise Outlook

Technique

Following our exit from chapter, we’re targeted on growing worth via free money move era, debt reimbursement and selective investments in every of our enterprise strains. Investments must be financed utilizing free money move from operations, the proceeds from divestments of non-core property and the capability accessible below the exit credit score settlement, all topic to the varied phrases and situations. and phrases of the exit credit score settlement as indicated in Notice 9 – Lengthy-term debt and different long-term liabilities.

In our oil and pure fuel phase, we're optimizing manufacturing from our
current reserves and changing non-producing reserves to producing, with no
exploratory drilling at present deliberate. We plan to divest non-core properties
and use these proceeds together with free money flows to amass producing
properties in our core areas.

In our contract drilling phase, we're targeted on growing using our
BOSS drilling rigs, in addition to upgrading sure of our SCR drilling rigs. We
additionally plan to proceed searching for alternatives to divest non-core, idle drilling
tools.

In our mid-stream phase, we're targeted on producing predictable free money
flows with restricted publicity to commodity costs. We additionally plan to proceed
searching for enterprise growth alternatives in our core areas utilizing the Superior
credit score settlement (which Unit shouldn't be a celebration to nor ensures) or different
financing sources which might be accessible to it.

COVID-19 pandemic surroundings and commodity costs

As mentioned in different elements of this report, amongst different issues, our success
relies upon, to a big diploma, on the costs we obtain for our oil and pure fuel
manufacturing, the demand for oil, pure fuel, and NGLs, and the demand for our
drilling rigs which influences the quantities we will cost for these drilling
rigs. Whereas our operations are all inside the USA, occasions outdoors the
United States have an effect on us and our trade.

We're constantly monitoring the present and potential impacts of the COVID-19
pandemic on our enterprise. This consists of the way it has and should proceed to affect
our operations, monetary outcomes, liquidity, prospects, workers, and distributors.
In response to the pandemic, we now have carried out varied measures to make sure we
are conducting our enterprise in a secure and safe method. COVID-19 and the
response of governments around the globe to include the pandemic have
contributed to an financial downturn, diminished demand for oil and pure fuel, and
along with a worth battle between Saudi Arabia and Russia, depressed oil and
pure fuel costs in 2020. The worldwide oil and pure fuel provide and demand
imbalance continues to be unsure, with potential on-going and future antagonistic
results on the oil and fuel trade.

Over the past two years, commodity costs have been unstable. We diminished our
operated rig depend within the first quarter of 2019 earlier than getting as excessive as six
drilling rigs within the second quarter of 2019. On account of declining costs, we shut
down our personal drilling program in July 2019 and used no drilling rigs for the
the rest of 2019 and 2020.

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The next chart displays the numerous fluctuations within the costs for oil
and pure fuel:

[[Image Removed: unt-20201231_g2.jpg]]The next graph displays the numerous fluctuations in NGL costs:

[[Image Removed: unt-20201231_g3.jpg]]
_________________________
1.NGLs costs replicate a weighted-average, based mostly on manufacturing, of Mont Belvieu
and Conway costs.



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Govt Abstract

Oil and Pure Gasoline

Fourth quarter 2020 manufacturing from our oil and pure fuel phase was 2,592
MBoe, a lower of 9% and 38% from the third quarter of 2020 and the fourth
quarter of 2019, respectively. The decreases got here from fewer internet wells being
drilled in 2020 to exchange the declines in current drilled wells. Oil and NGLs
manufacturing through the fourth quarter of 2020 and the fourth quarter of 2019 have been
every 48% of our complete manufacturing.

Fourth quarter 2020 oil and pure fuel revenues elevated 6% over the third
quarter of 2020 and decreased 48% from the fourth quarter of 2019. The rise
over the third quarter of 2020 was primarily due a rise in commodity costs
partially offset by a lower in equal manufacturing. The lower from the
fourth quarter of 2019 was primarily as a result of a lower in equal manufacturing
and oil and NGLs costs.

Our hedged pure fuel costs for the fourth quarter of 2020 elevated 56% over
third quarter of 2020 and elevated 1% over fourth quarter of 2019. Our hedged
oil costs for the fourth quarter of 2020 elevated 43% over the third quarter
of 2020 and decreased 29% from the fourth quarter of 2019, respectively. Our
hedged NGLs costs for the fourth quarter of 2020 elevated 21% over the third
quarter of 2020 and decreased 24% from the fourth quarter of 2019.

Direct revenue (oil and pure fuel revenues much less oil and pure fuel working
expense) elevated 35% over the third quarter of 2020 and decreased 52% from the
fourth quarter of 2019. The rise over the third quarter of 2020 was
primarily as a result of a rise in commodity costs and a discount in saltwater
disposal expense and G&{A partially} offset by a lower in equal
manufacturing. The lower from the fourth quarter of 2019 was primarily as a result of
decrease revenues as a result of decrease commodity costs and volumes partially offset by
decrease LOE and G&A.

Working price per Boe produced for the fourth quarter of 2020 decreased 10%
from the third quarter of 2020 and decreased 3% from the fourth quarter of 2019.
The lower from the third quarter of 2020 was primarily as a result of decrease G&A and
saltwater disposal expense. The lower from the fourth quarter of 2019 was
primarily as a result of decrease LOE and G&{A partially} offset by not capitalizing
immediately associated overhead prices in 2020 because of the absence of drilling in 2020.

AT December 31, 2020, these unnamed covers have been in progress:

                                                                                                          Weighted Common
         Time period                            Commodity                       Contracted Quantity              Mounted Worth for Swaps              Contracted Market
Jan'21 - Dec'21              Pure fuel - foundation swap                30,000 MMBtu/day                $(0.215)                          NGPL TEXOK
Jan'21 - Oct'21              Pure fuel - swap                      50,000 MMBtu/day                $2.82                             IF - NYMEX (HH)
Nov'21 - Dec'21              Pure fuel - swap                      45,000 MMBtu/day                $2.90                             IF - NYMEX (HH)
Jan'22 - Dec'22              Pure fuel - swap                      5,000 MMBtu/day                 $2.61                             IF - NYMEX (HH)
Jan'23 - Dec'23              Pure fuel - swap                      22,000 MMBtu/day                $2.46                             IF - NYMEX (HH)
Jan'22 - Dec'22              Pure fuel - collar                    35,000 MMBtu/day                $2.50 - $2.68                     IF - NYMEX (HH)
Jan'21 - Dec'21              Crude oil - swap                        3,000 Bbl/day                   $44.65                            WTI - NYMEX
Jan'22 - Dec'22              Crude oil - swap                        2,300 Bbl/day                   $42.25                            WTI - NYMEX
Jan'23 - Dec'23              Crude oil - swap                        1,300 Bbl/day                   $43.60                            WTI - NYMEX



In western Oklahoma, annual manufacturing averaged 73 MMcfe per day (31% oil, 22%
NGLs, 47% pure fuel) which was a lower of roughly 24% in comparison with
2019. Throughout 2020, we didn't drill any operated wells on this space and
participated in a single internet non-operated effectively.

Within the Texas panhandle, annual manufacturing averaged 67 MMcfe per day (8% oil, 37%
NGLs, 55% pure fuel) which was a lower of roughly 27% in comparison with
2019. Throughout 2020, we didn't drill any operated wells on this space, nor did we
take part in any non-operated wells.

In our Wilcox play situated primarily in Polk, Tyler, Hardin and Goliad Counties,
Texas, annual manufacturing averaged 45 MMcfe per day (9% oil, 29% NGL's, 62%
pure fuel) which is a lower of roughly 41% in comparison with 2019. Throughout
2020, we didn't drill any operated wells on this space, nor did we take part
in any non-operated wells.

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Through the Successor Interval and Predecessor Interval of 2020, we participated in
the drilling of three wells (0.30 internet wells) and 16 wells (0.35 internet wells),
respectively.
Contract Drilling

The typical variety of drilling rigs we operated within the fourth quarter of 2020
was 7.6 in comparison with 5.1 and 18.3 within the third quarter of 2020 and fourth quarter
of 2019, respectively. As of December 31, 2020, 9 of our drilling rigs have been
working.

Income for the fourth quarter of 2020 elevated 24% over the third quarter of
2020 and decreased 59% from the fourth quarter of 2019. The rise over the
third quarter of 2020 was as a result of extra drilling rigs working and growing
dayrates. The lower from the fourth quarter of 2019 was as a result of much less drilling
rigs working and decrease dayrates.

Dayrates for the fourth quarter of 2020 averaged $17,923, which was a 6%
improve over the third quarter of 2020 and a 7% lower from the fourth
quarter of 2019. The rise over the third quarter of 2020 was primarily due
to extra drilling rigs working. The lower from the fourth quarter of 2019
was primarily as a result of much less drilling rigs working.

Working prices for the fourth quarter of 2020 elevated 29% over the third
quarter of 2020 and decreased 59% from the fourth quarter of 2019. The rise
over the third quarter of 2020 was primarily as a result of extra drilling rigs
working. The lower from the fourth quarter of 2020 was primarily as a result of
much less drilling rigs working. Working price per day for the fourth quarter of
2020 decreased 15% from the third quarter of 2020 and decreased 2% from the
fourth quarter of 2019. Income days for the fourth quarter of 2020 elevated
51% over the third quarter of 2020 and decreased 58% from the fourth quarter of
2019.

Direct revenue (contract drilling income much less contract drilling working
expense) for the fourth quarter of 2020 elevated 13% over the third quarter of
2020 and decreased 59% from the fourth quarter of 2019. The rise over the
third quarter of 2020 was primarily as a result of extra drilling rigs working. The
lower from the fourth quarter of 2019 was primarily as a result of much less drilling rigs
working.

The contract drilling phase has operations in Oklahoma, Texas, New Mexico,
Wyoming, and North Dakota. As of December 31, 2020, three drilling rigs have been
working in Oklahoma, three within the Permian Basin of West Texas, two in Wyoming
and one drilling rig within the Bakken Shale of North Dakota.

Throughout 2020, nearly all our working drilling rigs have been drilling horizontal or
directional wells for oil and NGLs. The longer term demand for and the supply
of drilling rigs to satisfy that demand will have an effect on our future dayrates.

As of December 31, 2020, we had 5 time period drilling contracts with unique phrases
starting from two months to 1 yr. Three of those contracts are up for renewal
in 2021, (two within the first quarter and one within the second quarter) and two are up
for renewal in 2022 and past. Time period contracts might include a set charge throughout
the contract or present for charge changes inside a selected vary from the
current charge. Some operators who had signed time period contracts have opted to
launch the drilling rig and pay an early termination penalty for the remaining
time period of the contract. We recorded $9.2 million and $4.8 million in early
termination charges in 2020 and 2019, respectively.

Six of our 14 current BOSS drilling rigs have been below contract to December 31, 2020.

All of our contracts are each day employment contracts.

For 2021, capital expenditures for this phase are anticipated to primarily be for
upkeep capital on working drilling rigs and the potential conversion of
sure SCR drilling rigs to AC drilling rigs if practicable. We additionally plan to
pursue the disposal or sale of our non-core, older drilling rig fleet.

Mid-Stream

Fourth quarter 2020 liquids bought per day decreased 31% from the third quarter of
2020 and decreased 24% from the fourth quarter of 2019. The decreases have been
primarily as a result of declining volumes and fewer wells linked to our main
methods leading to decrease liquids manufacturing. For the fourth quarter of 2020,
fuel processed per day decreased 11% from the third quarter of 2020 and decreased
19% from the fourth quarter of 2019. The decreases have been primarily as a result of
declining volumes and fewer wells linked to our main methods. For the fourth
quarter of 2020, fuel gathered per day decreased 11% from the third
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quarter of 2020 and decreased 20% from the fourth quarter of 2019. The decreases
have been primarily as a result of decrease volumes from our main gathering and processing
methods ensuing from fewer wells linked and declining wellhead volumes.

NGLs costs within the fourth quarter of 2020 elevated 35% over the costs acquired
within the third quarter of 2020 and elevated 5% over the costs acquired within the
fourth quarter of 2019. As a result of sure of the contracts utilized by our mid-stream
phase for NGLs transactions are commodity-based contracts - below which we
obtain a share of the proceeds from the sale of the NGLs - our revenues from
these commodity-based contracts fluctuate based mostly on NGLs costs.

Direct revenue (mid-stream revenues much less mid-stream working expense) for the
fourth quarter of 2020 decreased 45% from the third quarter of 2020 and
decreased 12% from the fourth quarter of 2019, respectively. The lower from
the third quarter of 2020 was primarily as a result of recognizing a shortfall price in
the third quarter of 2020 within the quantity of $5.3 million and as a result of declining
volumes on our main methods. The lower from the fourth quarter of 2019 was
primarily as a result of decrease quantity on our main methods and decrease condensate costs.
Whole working price for this phase for the fourth quarter of 2020 elevated
17% over the third quarter of 2020 and decreased 3% from the fourth quarter of
2019. The rise over the third quarter of 2020 was primarily as a result of an
improve in fuel buy price as a result of larger buy costs. The lower from
the fourth quarter of 2019 was primarily as a result of declining wellhead volumes and
fewer wells linked leading to decrease bought volumes.

On the Cashion processing facility in central Oklahoma, complete throughput quantity
for the fourth quarter of 2020 averaged roughly 64.2 MMcf per day and
complete manufacturing of pure fuel liquids averaged roughly 252,000 gallons
per day. For 2020, we continued to attach new wells to this method for third
get together producers. Because the first of 2020, we linked 18 new wells to this
system from producers. The full processing capability of the Cashion system is
105 MMcf per day.

Within the Appalachian area on the Pittsburgh Mills assortment system, the common quantity collected for the fourth quarter of 2020 was 131.7 MMcf per day and the common quantity collected for 2020 was 152.3 MMcf per day. In 2020, we linked 4 new infill wells to an current effectively pad.

Additionally, within the Appalachian space at our Snow Shoe gathering system, the common
gathering quantity for the fourth quarter was 2.5 MMcf per day and the common
gathered quantity for 2020 was 3.0 MMcf per day. In 2020, we didn't join any
new wells to this method. At Snow Shoe for 2020, we additionally charged a requirement price
based mostly on a quantity of 55 MMcf per day. This demand price quantity might be diminished in
2021 to 51 MMcf per day. Moreover, in 2020, we acknowledged a shortfall price
from a producer on this method for $5.3 million. This price might be invoiced in
the primary quarter of 2021.

On the Hemphill processing facility situated within the Texas panhandle, common
complete throughput quantity for the fourth quarter of 2020 was 46.6 MMcf per day and
common complete throughput quantity for 2020 was 51.3 MMcf per day. Whole common
manufacturing of pure fuel liquids for the fourth quarter of 2020 decreased to
roughly 110,000 gallons per day as a result of working in ethane rejection.
Whole manufacturing of pure fuel liquids for 2020 averaged roughly 152,000
gallons per day. The full processing capability of the Hemphill system is 135
MMcf per day. In 2020, we didn't join any new wells to this method.
At present there aren't any energetic rigs within the space, and we don't anticipate any new
effectively connects for this method.

On the Segno gathering system situated in East Texas, the common throughput
quantity for the fourth quarter of 2020 decreased to roughly 31.0 MMcf per
day as a result of declining manufacturing quantity together with no new drilling exercise in
the realm. For 2020, the common throughput quantity for this method was
roughly 40 MMcf per day. Throughout 2020, we didn't join any new wells to
this method.

The deliberate capital spending for 2021 for this phase might be roughly
$ 15.0 million, a rise of 61% in comparison with 2020.

Accounting insurance policies and significant estimates

abstract

On this part, we determine these vital accounting insurance policies we comply with in
making ready our monetary statements and associated disclosures. Many insurance policies
require us to make tough, subjective, and complicated judgments whereas making
estimates of issues inherently imprecise. Some accounting insurance policies contain
judgments and uncertainties to such an extent that there's a affordable
probability that materially totally different quantities may have been reported below
totally different situations, or had totally different assumptions been used. We consider our
estimates and assumptions usually. We base our estimates on historic
expertise and varied different assumptions we consider are affordable below the
circumstances, the outcomes of which assist making judgments concerning the carrying
values of property and liabilities not readily obvious from different sources. Precise
outcomes might differ from these estimates and assumptions utilized in preparation of
our monetary statements. On this dialogue we clarify the character of those
estimates,
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assumptions and judgments, and the probability that materially totally different quantities
can be reported in our monetary statements below totally different situations or
utilizing totally different assumptions.

Important estimates and assumptions

Full Price Technique of Accounting for Oil, NGLs, and Pure Gasoline Properties.
Figuring out our oil, NGLs, and pure fuel reserves is a subjective course of. It
entails estimating underground accumulations of oil, NGLs, and pure fuel that
can't be measured in an actual method. Accuracy of those estimates is determined by
a number of components, together with, the standard and availability of geological and
engineering knowledge, the precision of the interpretations of that knowledge, and
particular person judgments. Every year, we rent an unbiased petroleum engineering
agency to audit our inside analysis of our reserves. That audit as of
December 31, 2020 lined these reserves we projected to comprise 85% of the
complete proved developed future internet revenue discounted at 10% (based mostly on the SEC's
unescalated pricing coverage). Included in Half I, Merchandise 1 of this report are the
{qualifications} of our unbiased petroleum engineering agency and our workers
chargeable for making ready our reserve studies.

The accuracy of estimating oil, NGLs, and pure fuel reserves varies with the
reserve classification and the associated accumulation of accessible knowledge, as proven
on this desk:
Kind of Reserves                         Nature of Out there Information                             Diploma of Accuracy

Proved undeveloped                       Information from offsetting wells, seismic knowledge             Much less correct

Proved developed non-producing           The above and logs, core samples, 

many checks,

                                         stress knowledge                                        Extra correct

Proved developed producing               The above and manufacturing historical past, stress
                                         knowledge over time                                       Most correct



Assumptions of future oil, NGLs, and pure fuel costs and working and
capital prices additionally play a big function in estimating these reserves and the
estimated current worth of the money flows to be acquired from the longer term
manufacturing of these reserves. Volumes of recoverable reserves are influenced by
the assumed costs and prices because of the financial restrict (that time when the
projected prices and bills of manufacturing recoverable oil, NGLs, and pure fuel
reserves are better than the projected revenues from the oil, NGLs, and pure
fuel reserves). However extra considerably, the estimated current worth of the longer term
money flows from our oil, NGLs, and pure fuel reserves is delicate to costs
and prices and should fluctuate materially based mostly on totally different assumptions. Corporations,
like ours, utilizing full price accounting use the unweighted arithmetic common of
the commodity costs current on the primary day of every of the 12 months earlier than
the top of the reporting interval to calculate discounted future revenues, until
costs have been in any other case decided below contractual preparations.

We calculate DD&A on a manufacturing unit technique. Every quarter, we use these formulation to calculate the DD&A allowance for our producing properties:

•DD&A Charge = Unamortized Price / Finish of Interval Reserves Adjusted for Present
Interval Manufacturing
•Provision for DD&A = DD&A Charge x Present Interval Manufacturing

Unamortized price consists of all capitalized prices, estimated future expenditures
to be incurred in creating proved reserves and estimated dismantlement and
abandonment prices, internet of estimated salvage values much less collected
amortization, unproved properties, and tools not positioned in service.

Oil, NGLs, and pure fuel reserve estimates have a big affect on our
DD&A charge. If future reserve estimates for a property or group of properties are
revised downward, the DD&A charge will improve due to the revision. If
reserve estimates are revised upward, the DD&A charge will lower.

DD&A costs on our oil and fuel properties are calculated quarterly utilizing end-of-period reserve quantities adjusted for interval manufacturing.

We account for our oil and pure fuel exploration and growth actions
utilizing the total price technique of accounting. Below this technique, we capitalize all
prices incurred within the acquisition, exploration, and growth of oil and
pure fuel properties. On the finish of every quarter, the online capitalized prices of
our oil and pure fuel properties are restricted to that quantity which is the decrease
of unamortized prices or a ceiling. The ceiling is outlined because the sum of the
current worth (utilizing a ten% low cost charge) of the estimated future internet revenues
from our proved reserves (based mostly on the unescalated 12-month common worth
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on our oil, NGLs, and pure fuel adjusted for any money move hedges), plus the
price of properties not being amortized, plus the decrease of the price or estimated
honest worth of unproved properties included within the prices being amortized, much less
associated revenue taxes. If the online capitalized prices of our oil and pure fuel
properties exceed the ceiling, we're required to write-down the surplus quantity.
A ceiling check write-down is a non-cash cost to earnings. If required, it
reduces earnings and impacts shareholders' fairness within the interval of prevalence
and leads to decrease DD&A expense in future durations. As soon as incurred, a write-down
can't be reversed.

The chance we might be required to write-down the carrying worth of our oil and
pure fuel properties will increase when the costs for oil, NGLs, and pure fuel
are depressed or if we now have massive downward revisions in our estimated proved
oil, NGLs, and pure fuel reserves. Utility of those guidelines in periods
of comparatively low costs, even when non permanent, will increase the prospect of a ceiling
check write-down. At December 31, 2020, our reserves have been calculated based mostly on
making use of 12-month 2020 common unescalated costs of $39.57 per barrel of oil,
$18.70 per barrel of NGLs, and $1.98 per Mcf of pure fuel (then adjusted for
worth differentials) over the estimated life of every of our oil and pure fuel
properties.

Depreciation of the successor interval

As of September 1, 2020, we adopted recent begin accounting and adjusted our
property to honest worth. Though below recent begin accounting we recorded our
property at honest worth on emergence, the applying of the total price accounting
guidelines resulted in non-cash ceiling check write-downs of $26.1 million pre-tax
through the Successor Interval of 2020, primarily as a result of using common
12-month historic commodity costs for the ceiling check versus ahead costs
for our Recent Begin honest worth estimates.

Below full price accounting guidelines we should assessment the carrying worth of our oil
and pure fuel properties on the finish of every quarter. Below these guidelines, the
most quantity allowed because the carrying worth is known as the ceiling. The ceiling
is the sum of the current worth (utilizing a ten% low cost charge) of the estimated
future internet revenues from our proved reserves (utilizing the newest unescalated
historic 12-month common worth of our oil, NGLs, and pure fuel), plus the
price of properties not being amortized, plus the decrease of price or estimated honest
worth of unproved properties within the prices being amortized, much less associated revenue
taxes. If the online ebook worth of the oil, NGLs, and pure fuel properties being
amortized exceeds the total price ceiling, the surplus quantity is charged to expense
within the interval throughout which the surplus happens, even when costs are depressed for
solely a short time. As soon as incurred, a write-down of oil and pure fuel
properties shouldn't be reversible.

We don't anticipate a non-cash ceiling check write-down within the first quarter of
2021 of our proved reserves. It's onerous to foretell with any certainty the necessity
for or quantity of any future impairments given the various components that go into the
ceiling check calculation together with, however not restricted to, future pricing,
working prices, drilling and completion prices, upward or downward oil and fuel
reserve revisions, oil and fuel reserve additions, and tax attributes. Topic to
these inherent uncertainties, if we maintain these identical components fixed as they
existed at December 31, 2020, and solely alter the 12-month common worth as of
March 2021, our forward-looking expectation is that we'll not acknowledge an
impairment within the first quarter of 2021. Given the uncertainty related to
the components utilized in calculating our estimate of our future interval ceiling check
write-down, these estimates shouldn't essentially be construed as indicative of
our future plans or monetary outcomes and the precise quantity of any write-down
might fluctuate considerably from this estimate relying on the ultimate future
dedication.

Impairments from the earlier interval

Oil and Pure Gasoline. Through the Predecessor Interval of 2020, we incurred non-cash
ceiling check write-downs of our oil and pure fuel properties of $393.7 million
pre-tax ($346.6 million internet of tax) because of the discount within the 12-month common
commodity costs and the impairment of our unproved oil and fuel properties
described under. In 2019, we incurred non-cash ceiling check write-downs of our
oil and pure fuel properties of $559.4 million pre-tax ($422.4 million internet of
tax) because of the discount of the 12-month common commodity costs and the
removing of proved undeveloped reserves because of the uncertainty relating to our
capability to finance future capital expenditures.

Along with the impairment evaluations of our proved and unproved oil and fuel
properties within the first quarter of 2020, we additionally evaluated the carrying worth of
our salt water disposal property. Based mostly on our revised forecast of asset
utilization, we decided sure property have been not anticipated for use and
wrote off sure salt water disposal property that we not thought of
deserted. We recorded expense of $17.6 million associated to the write-down of our
salt water disposal property within the first quarter of 2020.

Mid-stream. We decided that the carrying worth of sure long-lived asset
teams in our mid-stream phase, the place decrease pricing is predicted to affect
drilling and manufacturing ranges, should not recoverable and exceeded their estimated
honest worth.
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Desk of contents Based mostly on the estimated honest worth of the teams of property, we acknowledged non-cash impairment costs of $ 64.0 million. These costs are included in impairment costs in our Consolidated Assertion of Earnings.

Contract Drilling. On a periodic foundation, we consider our fleet of drilling rigs
for marketability based mostly on the situation of inactive rigs, the expenditures
essential to carry them into working situation and the anticipated demand for
drilling companies by rig kind. The parts comprising inactive rigs are
evaluated, and people parts with persevering with utility to our different marketed
rigs are transferred to rigs or to our yards for use as spare tools. The
remaining parts of those rigs are retired.

At March 31, 2020, as a result of market situations, we carried out impairment testing on
two asset teams which have been comprised of our SCR diesel-electric drilling rigs
and our BOSS drilling rigs. We concluded that the online ebook worth of the SCR
drilling rigs asset group was not recoverable via estimated undiscounted
money flows and recorded a non-cash impairment cost of $407.1 million within the
first quarter of 2020. We additionally recorded a further non-cash impairment
costs of $3.0 million for different miscellaneous drilling tools.

We used the revenue strategy to find out the honest worth of the SCR drilling rigs
asset group. This strategy makes use of vital assumptions together with administration's
greatest estimates of the anticipated future money flows and the estimated helpful life
of the asset group. Truthful worth dedication requires a substantial quantity of
judgement and is delicate to adjustments in underlying assumptions and financial
components. In consequence, there is no such thing as a assurance the honest worth estimates made for
the impairment evaluation might be correct sooner or later.

We concluded that no impairment was wanted on the BOSS drilling rigs asset group
because the undiscounted money flows exceeded the carrying worth of the asset group.
The carrying worth of the asset group was roughly $242.5 million at March
31, 2020. The estimated undiscounted money flows of the BOSS drilling rigs asset
group exceeded the carrying worth by a comparatively minor margin, which suggests
minor adjustments in sure key assumptions in future durations might lead to
materials impairment costs in future durations. Among the extra delicate
assumptions utilized in evaluating the contract drilling rigs asset teams for
potential impairment embrace forecasted utilization, gross margins, salvage
values, low cost charges, and terminal values.

We recorded bills of $ 1.1 million associated to the depreciation of sure tools within the third quarter of 2020 that we contemplate deserted.

Prices Withheld from Amortization. Prices related to unproved properties are
excluded from our amortization base till we now have evaluated the properties. The
prices related to unevaluated leasehold acreage and associated seismic knowledge,
the drilling of wells, and capitalized curiosity are initially excluded from our
amortization base. Leasehold prices are transferred to our amortization base with
the prices of drilling a effectively on the lease or are assessed at the least yearly for
potential impairment or discount in worth. Leasehold prices are transferred to
our amortization base to the extent a discount in worth has occurred.

Our determination to withhold prices from amortization and the timing of transferring
these prices into the amortization base contain vital judgment
determinations which can change over time based mostly on a number of components, together with
our drilling plans, availability of capital, undertaking economics and outcomes of
drilling on adjoining acreage. Through the first quarter of 2020, we decided
that, due to the elevated uncertainty in our enterprise, our undeveloped
acreage wouldn't be totally developed and thus sure unproved oil and fuel
properties carrying values weren't recoverable. This resulted in an impairment
of $226.5 million, which had a corresponding improve to our depletion base and
contributed to our full price ceiling impairment recorded through the first
quarter of 2020. In 2019, we decided the worth of sure unproved oil and
fuel properties have been diminished (partially or in entire) based mostly on an impairment
analysis and our anticipated future exploration plans. These determinations
resulted in $73.9 million of prices being added to the whole of our capitalized
prices being amortized. At December 31, 2020, we had roughly $1.6 million
of prices excluded from the amortization of our full price pool.

Accounting for ARO for Oil, NGLs, and Pure Gasoline Properties. We file the honest
worth of liabilities related to the longer term plugging and abandonment of
wells. In our case, when the reserves in every of our oil or fuel wells deplete or
the wells in any other case turn into uneconomical, we should incur prices to plug and abandon
the wells. These prices are recorded within the interval during which the legal responsibility is
incurred (on the time the wells are drilled or acquired). We've got no property
restricted to settle these ARO liabilities. Our engineering workers makes use of
historic expertise to find out the estimated plugging prices contemplating the
kind of effectively (both oil, pure fuel, or each), the depth of the effectively, the
bodily location of the effectively, and the final word productive life to find out the
estimated plugging prices. A risk-adjusted low cost charge and an inflation issue
are used on these estimated prices to
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decide the present current worth of this obligation. To the extent any change
in these assumptions have an effect on future revisions and impacts the current worth of
the prevailing ARO, a corresponding adjustment is made to the total price pool.

Drilling Contracts. The kind of contract used determines our compensation. All
our contracts in 2020 and 2019 have been daywork contracts. Below a daywork contract,
we offer the drilling rig with the required personnel and the operator
supervises the drilling of the effectively. Our compensation is predicated on a negotiated
charge to be paid for every day the drilling rig is used.

Accounting for Worth of Inventory Compensation Awards. To account for stock-based
compensation, compensation price is measured on the grant date based mostly on the honest
worth of an award and is acknowledged over the service interval, which is normally
the vesting interval. We elected to make use of the modified potential technique, which
requires compensation expense to be recorded for all unvested inventory choices and
different equity-based compensation starting within the first quarter of adoption.
Figuring out the honest worth of an award requires vital estimates and
subjective judgments relating to the suitable possibility pricing mannequin, the
anticipated lifetime of the award and efficiency vesting standards assumptions. As
there are inherent uncertainties associated to those components and our judgment in
making use of them to the honest worth determinations, there may be threat that the recorded
inventory compensation might not precisely replicate the quantity in the end earned by
the worker. All our beforehand reported awards have been terminated due to our
Chapter 11 Instances and no awards have been excellent as of December 31, 2020.

Accounting for By-product Devices and Hedging. All derivatives are
acknowledged on the stability sheet and measured at honest worth. Any adjustments in our
derivatives' honest worth earlier than their maturity (i.e., non permanent fluctuations in
worth) together with any derivatives settled are reported in acquire (loss) on
derivatives in our Consolidated Statements of Operations.

Chapter Reorganization. We've got utilized Accounting Requirements Codification
(ASC) 852, Reorganizations (ASC 852) in making ready our consolidated monetary
statements. ASC 852 requires that the monetary statements, for durations
subsequent to the Chapter 11 Instances, distinguish transactions and occasions which might be
immediately related to the reorganization from the continuing operations of the
enterprise. Accordingly, sure bills, realized good points and losses and
provisions for losses which might be realized or incurred within the chapter
proceedings, are recorded in reorganization objects, internet on our accompanying
consolidated statements of operations.

Recent Begin. The corporate certified for and adopted recent begin accounting below
the provisions of ASC 852. When making use of ASC 852, an entity determines its
reorganization worth and enterprise worth. Reorganization worth, as decided
below ASC 820, Truthful Worth Measurement, represents the honest worth of the entity's
complete property earlier than the consideration of liabilities and is meant to
approximate the quantity a prepared purchaser would pay for the property instantly
after a restructuring. The entity's enterprise worth represents the estimated
honest worth of an entity's long-term debt and fairness. The assumptions utilized in
estimating these values are inherently unsure and require vital
judgment.

New accounting requirements

Reference Charge Reform (Subject 848)-Facilitation of the Results of Reference Charge
Reform on Monetary Reporting. The FASB issued ASU 2020-04 which offers
elective expedients and exceptions for making use of typically accepted accounting
ideas to contract modifications, topic to assembly sure standards, that
reference LIBOR or one other reference charge anticipated to be discontinued. The ASU
ought to assist stakeholders through the international market-wide reference charge transition
interval. The amendments inside this ASU might be in impact for a restricted time
starting March 12, 2020, and an entity might elect to use the amendments
prospectively via December 31, 2022. The amendments is not going to have a fabric
affect on our consolidated monetary statements.

Earnings Taxes (Subject 740)-Simplifying the Accounting for Earnings Taxes. The FASB
issued ASU 2019-12 to simplify the accounting for revenue taxes by eradicating
sure exceptions to the final ideas in Subject 740. The amendments additionally
enhance constant utility of and simplify GAAP for different areas of Subject 740
by clarifying and amending current steering. The amendments might be efficient
for reporting durations starting after December 15, 2020. Early adoption is
permitted. This commonplace is not going to have a fabric affect on our consolidated
monetary statements.

Adopted Requirements

Measurement of Credit score Losses on Monetary Devices (Subject 326). The FASB
issued ASU 2016-13 which replaces present strategies for evaluating impairment of
monetary devices not measured at honest worth, together with commerce accounts
receivable, and sure debt securities, with a present anticipated credit score loss
mannequin (CECL). The CECL mannequin is predicted to end result
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in additional well timed recognition of credit score losses. The modification was efficient for
reporting durations after December 15, 2019. The adoption of this steering didn't
have a fabric affect on our consolidated monetary statements or associated
disclosures.

Truthful Worth Measurement (Subject 820): Disclosure Framework-Modifications to the
Disclosure Necessities for Truthful Worth Measurement. The FASB issued ASU 2018-13
to change the disclosure necessities in Subject 820. A part of the disclosures have been
eliminated or modified, and different disclosures have been added. The modification was
efficient for reporting durations starting after December 15, 2019. The adoption
of this steering didn't have a fabric affect on our consolidated monetary
statements or associated disclosures.

Monetary scenario and liquidity

abstract

Our monetary situation and liquidity primarily rely on the money move from our
operations and borrowings below our credit score agreements. The principal components
figuring out our money move are:

•the quantity of pure fuel, oil, and NGLs we produce;
•the costs we obtain for our pure fuel, oil, and NGLs manufacturing;
•using our drilling rigs and the dayrates we obtain for these drilling
rigs; and
•the charges and margins we get hold of from our pure fuel gathering and processing
contracts.

Our Chapter 11 Instances allowed us to considerably cut back our stage of
indebtedness and our future money curiosity obligations. We at present count on that
money and money equivalents, money generated from operations, and accessible funds
below the Exit Credit score Settlement and the Superior credit score settlement are ample
to cowl our liquidity necessities for at the least the following 12 months.

Beneath is a abstract of sure monetary data for the durations indicated:
                                                         Successor                           Predecessor
                                                           Interval
                                                        September 1,                  Interval
                                                            2020                    January 1,         For the 12 months
                                                          via                  2020 via            Ended
                                                        December 31,                August 31,         December 31,
                                                            2020                       2020                2019
                                                                              (In 1000's)
Internet money offered by working actions              $    29,807$    44,956$  269,396
Internet money utilized in investing actions                       (2,258)                   (20,139)           (394,563)

Internet money offered by (utilized in) financing actions (47,775)

             7,552             119,286
Internet improve (lower) money, restricted money, and
money equivalents                                       $   (20,226)$    32,369$   (5,881)

Money move from working actions

Our working money move is primarily influenced by the costs we obtain for our
oil, NGLs, and pure fuel manufacturing, the oil, NGL, and pure fuel we produce,
settlements of by-product contracts, third-party use for our drilling rigs and
mid-stream companies, and the charges we will cost for these companies. Our money
flows from working actions are additionally affected by adjustments in working capital.

Internet money offered by working actions decreased by $194.6 million in 2020
in comparison with 2019 primarily as a result of decrease revenues as a result of decrease commodity costs
and decrease drilling rig utilization partially offset by a rise in working
property and liabilities associated to the timing of money receipts and disbursements.

Money move from investing actions

We've got traditionally devoted a considerable portion of our capital budgets to
our exploration for and manufacturing of oil, NGLs, and pure fuel. These
expenditures are essential to off-set the inherent manufacturing declines usually
skilled in oil and fuel wells. Though we curtailed our spending in 2020, we
count on that any future capital budgets can be targeted on growth or
acquisitions of manufacturing oil and fuel properties, however not exploration.

Money move utilized in investing actions decreased by $ 372.2 million in 2020 in comparison with 2019. The change was due

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primarily to a lower in capital expenditures as a result of a lower in operated
wells drilled and a lower in oil and fuel property acquisitions partially
offset by a lower within the proceeds acquired from the disposition of property.
See extra data on capital expenditures under below Capital
Necessities.

Money move from financing actions

Money move generated by (utilized in) financing actions decreased by $ 159.5 million in 2020 in comparison with 2019. The lower is especially defined by a lower in internet borrowings and a lower in financial institution overdrafts.

At December 31, 2020, we had unrestricted money and money equivalents totaling
$12.1 million and had borrowed $99.0 million of the quantities accessible below the
Exit Credit score Settlement. We didn't have any excellent borrowings below our
Superior credit score settlement.

Beneath is a abstract of sure monetary data at the thirty first of December:

                                                         Successor         Predecessor
                                                           2020               2019
                                                                (In 1000's)
Working capital                                         $   2,575$  (154,998)
Present portion of long-term debt                       $     600         $ 

108,200

Lengthy-term debt (1)                                      $  98,400         $ 

663,216

Fairness attributable to Unity company$ 179,222 $

853 878

_________________________

1.Lengthy-term debt is internet of the unamortized low cost and debt issuance prices for the prior interval.

Working Capital

Usually, our working capital stability fluctuates, partially, due to the
timing of our commerce accounts receivable and accounts payable and the fluctuation
in present property and liabilities related to the mark to market worth of
our by-product exercise. We had constructive working capital of $2.6 million at
December 31, 2020 and detrimental working capital of $155.0 million as of December
31, 2019. The rise in working capital is primarily as a result of more money and money
equivalents and decrease accounts payable and accrued liabilities from to the
settlement of the liabilities topic to compromise partially offset by decrease
accounts receivable. Each the Superior credit score settlement and the Exit Credit score
Settlement are used for working capital. At December 31, 2020, we had borrowed
$99.0 million below the Exit Credit score Settlement and we didn't have any
excellent borrowings below our Superior credit score settlement. The impact of our
derivatives decreased working capital by $1.0 million as of December 31, 2020
and elevated working capital by $0.6 million as of December 31, 2019.

Lengthy-term debt

Our Exit Credit score Settlement is primarily used for working capital functions because it
limits the quantity that may be borrowed for capital expenditures. These
limitations prohibit future capital initiatives utilizing the Exit Credit score Settlement.
The Exit Credit score Settlement additionally requires that any proceeds from the disposition
of sure property be used to repay quantities excellent.

Oil and fuel operations

Any vital change in oil, NGLs, or pure fuel costs has a fabric impact
on our revenues, money move, and the worth of our oil, NGLs, and pure fuel
reserves. Typically, costs and demand for home pure fuel are influenced
by climate situations, provide imbalances, by worldwide oil worth ranges, and
not too long ago by the worldwide financial affect from the coronavirus. Home oil
costs are primarily influenced by world oil market developments. These components
are past our management and we can not predict nor measure their future affect
on the costs we are going to obtain.

Contract drilling operations

Many components affect the variety of drilling rigs we now have working, and the
prices and revenues related to that work. These components embrace the demand
for drilling rigs in our areas of operation, competitors from different drilling
contractors,
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the prevailing costs for oil, NGLs, and pure fuel, availability and price of
labor to run our drilling rigs, and our capability to produce the tools wanted.

Competitors to maintain certified labor continues. Our drilling rig personnel are a
key element to the general success of our drilling companies. With the current
situations within the drilling trade, we don't anticipate will increase within the
compensation paid to these personnel within the close to time period.

Throughout 2020, most of our working drilling rigs have been drilling horizontal or
directional wells for oil and NGLs. The continual fluctuations in commodity
costs for oil and pure fuel adjustments demand for drilling rigs. These components
in the end have an effect on the demand and mixture of the kind of drilling rigs utilized by our
prospects. The longer term demand for and the supply of drilling rigs to satisfy
that demand will have an effect on our future dayrates. For the Successor Interval and
Predecessor Interval of 2020, our common dayrate was $17,807 and $18,911 per day,
respectively, in comparison with $18,762 per day for 2019. Our common variety of
drilling rigs used (utilization %) for the Successor Interval and Predecessor
Interval of 2020 have been 7.2 (12%) and 11.5 (20%), respectively, in contrast with 24.6
(43%) in 2019. Based mostly on the common utilization of our drilling rigs throughout
2020, a $100 per day change in dayrates has a $1,010 per day ($0.4 million
annualized) change in our pre-tax working money move.

Our contract drilling phase offers drilling companies for our exploration and
manufacturing phase. Among the drilling companies we carry out on our properties
are, relying on the timing of these companies, deemed related to buying
an possession curiosity within the property. In these circumstances, revenues and bills for
these companies are eradicated in our assertion of operations, with any revenue
acknowledged as a discount in our funding in our oil and pure fuel
properties. The contracts for these companies are issued below the identical
situations and charges because the contracts entered into with unrelated third events.
By offering drilling companies for the oil and pure fuel phase, we
eradicated income of $15.8 million throughout 2019 from our contract drilling
phase and eradicated the related working expense of $14.2 million
yielding $1.6 million as a discount to the carrying worth of our oil and
pure fuel properties. We didn't get rid of any income or expense in 2020.

No impairment set off occasions have been recognized through the 2020 substitute interval for our contract drilling property.

Mid-term operations

This phase is engaged primarily within the shopping for, promoting, gathering, processing,
and treating of pure fuel. It operates three pure fuel remedy crops, 11
processing crops, 17 gathering methods, and roughly 2,090 miles of
pipeline. Its operations are in Oklahoma, Texas, Kansas, Pennsylvania, and West
Virginia. This phase enhances our capability to collect and market not solely our
personal pure fuel and NGLs but in addition pure fuel and NGLs owned by third events
and serves as a mechanism via which we will assemble or purchase current
pure fuel gathering and processing amenities. Through the Successor Interval of
2020, Predecessor Interval of 2020, and the yr 2019, Superior bought $10.6
million, $11.8 million, and $40.6 million, respectively, of our oil and pure
fuel phase's pure fuel and NGLs manufacturing, and offered gathering and
transportation companies of $1.2 million, $2.8 million, and $6.9 million,
respectively. Intercompany income from companies and purchases of manufacturing
between this enterprise phase and our oil and pure fuel phase has been
eradicated in our consolidated monetary statements.

Our mid-stream phase gathered a mean of 367,302 Mcf per day in 2020
in comparison with 435,646 Mcf per day in 2019. It processed a mean of 150,559 Mcf
per day in 2020 in comparison with 164,482 Mcf per day in 2019, and bought NGLs of
555,454 gallons per day in 2020 in comparison with 625,873 gallons per day in 2019. Gasoline
gathering volumes per day in 2020 decreased primarily as a result of decrease volumes from
most of our main gathering and processing methods ensuing from declining
wellhead volumes and fewer wells linked besides from the Cashion facility.
Volumes processed and NGLs bought in 2020 decreased primarily as a result of decrease volumes
from our processing facility within the Texas panhandle ensuing from declines and
not connecting any new wells in 2020.

Our credit score agreements and former debt

Exit Credit score Settlement. On the Efficient Date, below the Plan, we entered into an
amended and restated credit score settlement (the Exit Credit score Settlement), offering for
a $140.0 million senior secured revolving credit score facility and a $40.0 million
senior secured time period mortgage facility, amongst (i) the corporate, UDC, and UPC, (ii) the
guarantors, together with the corporate and all its subsidiaries current as of the
Efficient Date (apart from Superior Pipeline Firm, L.L.C. and its
subsidiaries), (iii) the lenders below the settlement, and (iv) BOKF, NA dba Financial institution
of Oklahoma as administrative agent and collateral agent (the Administrative
Agent).

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The maturity date of borrowings below the Exit Credit score Settlement is March 1,
2024. Revolving Loans and Time period Loans (every as outlined within the Exit Credit score
Settlement) could also be Eurodollar Loans or ABR Loans (every as outlined within the Exit
Credit score Settlement). Revolving loans which might be Eurodollar Loans will bear curiosity
at a charge every year equal to the Adjusted LIBO Charge (as outlined within the Exit
Credit score Settlement) for the relevant curiosity interval plus 525 foundation factors.
Revolving Loans which might be ABR Loans will bear curiosity at a charge every year equal
to the Alternate Base Charge (as outlined within the Exit Credit score Settlement) plus 425
foundation factors. Time period Loans which might be Eurodollar Loans will bear curiosity at a charge
every year equal to the Adjusted LIBO Charge for the relevant curiosity interval
plus 625 foundation factors. Time period Loans which might be ABR Loans will bear curiosity at a
charge every year equal to the Alternate Base Charge plus 525 foundation factors.

The Exit Credit score Settlement requires that we adjust to sure monetary ratios,
together with a covenant that we'll not allow the Internet Leverage Ratio (as outlined
within the Exit Credit score Settlement) as of the final day of the fiscal quarters ending
(i) December 31, 2020 and March 31, 2021, to be better than 4.00 to 1.00, (ii)
June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, and June
30, 2022, to be better than 3.75 to 1.00, and (iii) September 30, 2022 and any
fiscal quarter thereafter, to be better than 3.50 to 1.00. As well as,
starting with the fiscal quarter ending December 31, 2020, we might not (a)
allow the Present Ratio (as outlined within the Exit Credit score Settlement) as of the
final day of any fiscal quarter to be lower than 0.50 to 1.00 or (b) allow the
Curiosity Protection Ratio (as outlined within the Exit Credit score Settlement) as of the final
day of any fiscal quarter to be lower than 2.50 to 1.00. The Exit Credit score
Settlement additionally comprises provisions, amongst others, that restrict sure capital
expenditures, prohibit sure asset gross sales and the associated use of proceeds, and
require sure hedging actions. The Exit Credit score Settlement additional requires
that we offer quarterly monetary statements inside 45 days after the top of
every of the primary three quarters of every fiscal yr and annual monetary
statements inside 90 days after the top of every fiscal yr. For the quarter
ended September 30, 2020, the syndicate banks allowed for an extension.

The Exit Credit score Settlement is secured by first-priority liens on considerably
all the non-public and actual property property of the debtors and the guarantors,
together with our possession pursuits in Superior Pipeline Firm, L.L.C.

On the Efficient Date, we had (i) $40.0 million in principal quantity of Time period
Loans excellent, (ii) $92.0 million in principal quantity of Revolving Loans
excellent, and (iii) roughly $6.7 million of excellent letters of
credit score. At December 31, 2020, we had $0.6 million and $98.4 million excellent
present and long-term borrowings, respectively, below the Exit Credit score Settlement.

Predecessor's Credit score Settlement. Earlier than the submitting of the Chapter 11 Instances, the
Unit credit score settlement had a scheduled maturity date of October 18, 2023 that
would have accelerated to November 16, 2020 if, by that date, all of the Notes have been
not repurchased, redeemed, or refinanced with indebtedness having a maturity
date at the least six months following October 18, 2023 (Credit score Settlement Extension
Situation). The Debtors' submitting of the Chapter 11 Instances constituted an occasion of
default that accelerated the Debtors' obligations below the Unit credit score
settlement and the indenture governing the Notes. As a result of Credit score Settlement
Extension Situation, our debt related to the Unit credit score settlement is
mirrored as a present legal responsibility in our Consolidated Steadiness Sheets as of
December 31, 2019. The classification as a present legal responsibility because of the Credit score
Settlement Extension Situation was based mostly on the uncertainty relating to our capability
to repay or refinance the Notes earlier than November 16, 2020. As well as, on Might
22, 2020, the lenders' remaining commitments below the Unit credit score settlement
have been terminated.

Earlier than submitting the Chapter 11 Instances, we have been charged a dedication price of 0.375%
on the quantity accessible however not borrowed. That price assorted based mostly on the quantity
borrowed as a proportion of the whole borrowing base. Whole modification charges of
$3.3 million in origination, company, syndication, and different associated charges have been
being amortized over the lifetime of the Unit credit score settlement. As a result of
termination of the remaining commitments of the lenders below the Unit credit score
settlement, the unamortized debt issuance prices of $2.4 million have been written off
through the second quarter of 2020. Below the Unit credit score settlement, we pledged
as collateral 80% of the proved developed producing (discounted as current price
at 8%) complete worth of our oil and fuel properties. Below the mortgages overlaying
these oil and fuel properties, UPC additionally pledged sure objects of its private
property.

Earlier than submitting the Chapter 11 Instances, any a part of the excellent debt below the
Unit credit score settlement could possibly be mounted at a London Interbank Provided Charge (LIBOR).
LIBOR curiosity was computed because the LIBOR base for the time period plus 1.50% to 2.50%
relying on the extent of debt as a proportion of the borrowing base and was
payable on the finish of every time period, or each 90 days, whichever is much less. Borrowings
not below LIBOR bear curiosity equal to the upper of the prime charge laid out in
the Unit credit score settlement and the sum of the Federal Funds Efficient Charge (as
outlined within the Unit credit score settlement) plus 0.50%, however in no occasion would the
curiosity on these borrowings be lower than LIBOR plus 1.00% plus a margin.
Curiosity was payable on the finish of every month or on the finish of every LIBOR
contract and the principal could also be repaid in entire or partially at any time,
and not using a premium or penalty.

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Submitting the chapter petitions on Might 22, 2020 constituted an occasion of default
that accelerated our obligations below the Unit credit score settlement, and the
lenders' rights of enforcement below the Unit credit score settlement have been
routinely stayed due to the Chapter 11 Instances.

On the Efficient Date, every lender below the Unit credit score settlement and the DIP
Credit score Settlement acquired its professional rata share of revolving loans, time period loans and
letter-of-credit participations below the Exit Credit score Settlement, in alternate for
that lender's allowed claims below the Unit credit score settlement or the DIP Credit score
Settlement.

Superior Credit score Settlement. On Might 10, 2018, Superior entered right into a five-year,
$200.0 million senior secured revolving credit score facility with an choice to
improve the credit score quantity as much as $250.0 million, topic to sure situations
(the Superior credit score settlement). The quantities borrowed below the Superior credit score
settlement bear annual curiosity at a charge, at Superior's possibility, equal to (a)
LIBOR plus the relevant margin of two.00% to three.25% or (b) the alternate base
charge (better of (i) the federal funds charge plus 0.5%, (ii) the prime charge, and
(iii) third day LIBOR plus 1.00%) plus the relevant margin of 1.00% to 2.25%.
The obligations below the Superior credit score settlement are secured by mortgage
liens on sure of Superior's processing crops and gathering methods. The
credit score settlement offers that if ICE Benchmark Administration not studies
the LIBOR or Administrative Agent determines in good religion that the speed so
reported not precisely displays the speed accessible to Lender within the
London Interbank Market or if that index not exists or precisely displays
the speed accessible to the Administrative Agent within the London Interbank Market,
the Administrative Agent might choose a substitute index.

Superior is charged a dedication price of 0.375% on the quantity accessible however not
borrowed which varies based mostly on the quantity borrowed as a proportion of the whole
borrowing base. Superior paid $1.7 million in origination, company, syndication,
and different associated charges. These charges are being amortized over the lifetime of the
Superior credit score settlement.

The Superior credit score settlement requires that Superior keep a Consolidated
EBITDA to curiosity expense ratio for the most-recently ended rolling 4
quarters of at the least 2.50 to 1.00, and a funded debt to Consolidated EBITDA
ratio of not better than 4.00 to 1.00. Moreover, the Superior credit score
settlement comprises a number of customary covenants that, amongst different issues,
prohibit (topic to sure exceptions) Superior's capability to incur extra
indebtedness, create extra liens on its property, make investments, pay
distributions, enter into sale and leaseback transactions, interact in sure
transactions with associates, interact in mergers or consolidations, enter into
hedging preparations, and purchase or get rid of property. As of December 31, 2020,
Superior was in compliance with the Superior credit score settlement covenants.

Superior’s credit score settlement borrowings might be used to fund capital expenditures and acquisitions, to supply common working capital and to safe letters of credit score for Superior.

Unit shouldn’t be a celebration and doesn’t assure Superior’s credit score settlement. Superior and its subsidiaries weren’t debtors within the Chapter 11 issues, and Superior’s credit score settlement was not affected by Unit’s chapter.

6.625% Senior Subordinated Notes. The Notes have been issued below an Indenture dated
as of Might 18, 2011, between the corporate and Wilmington Belief, Nationwide
Affiliation (successor to Wilmington Belief FSB), as Trustee (Trustee), as
supplemented by the First Supplemental Indenture dated as of Might 18, 2011,
between us, the Guarantors, and the Trustee, and as additional supplemented by the
Second Supplemental Indenture dated as of January 7, 2013, between us, the
Guarantors, and the Trustee (as supplemented, the 2011 Indenture), establishing
the phrases of and offering for issuing the Notes.

Because of Unit's emergence from chapter, the Notes have been cancelled and
our legal responsibility below the Notes was discharged as of the Efficient Date. Holders
of the Notes have been issued shares of New Widespread Inventory in accordance with the Plan.

DIP Credit score Settlement. As contemplated by the Restructuring Assist Settlement
between the corporate and sure of the Notice holders and our lenders, the corporate
and the opposite Debtors entered right into a Superpriority Senior Secured
Debtor-in-Possession Credit score Settlement dated Might 27, 2020 ( DIP credit score
settlement), among the many Debtors, the lenders below the ability (the DIP lenders),
and BOKF, NA dba Financial institution of Oklahoma, as administrative agent, below which the DIP
lenders agreed to supply us with the $36.0 million multiple-draw mortgage facility
(DIP credit score facility). The chapter court docket entered an interim order on Might 26,
2020 approving the DIP credit score facility, allowing the Debtors to borrow as much as
$18.0 million on an interim foundation. On June 19, 2020, the chapter court docket
granted closing approval of the DIP credit score facility.

Earlier than its reimbursement and termination on the Efficient Date, borrowings below the
DIP credit score facility matured on the earliest of (i) September 22, 2020 (topic
to a two-month extension to be authorized by the DIP Lenders), (ii) the sale of
all or considerably all of the property of the Debtors below Part 363 of the
Chapter Code or in any other case, (iii) the efficient date of a
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plan of reorganization or liquidation within the Chapter 11 Instances, (iv) the entry of
an order by the chapter court docket dismissing any of the Chapter 11 Instances or
changing such Chapter 11 Instances to a case below Chapter 7 of the Chapter
Code and (v) the date of termination of the DIP lenders' commitments and the
acceleration of any excellent extensions of credit score, in every case, below the
DIP credit score facility below and topic to the DIP Credit score Settlement and the
chapter court docket's orders.

On the Efficient Date, the DIP credit score facility was paid in full and terminated.
On the Efficient Date, every holder of an allowed declare below the DIP credit score
facility acquired its professional rata share of revolving loans, time period loans, and
letter-of-credit participations below the Exit Credit score Settlement. As well as,
every holder acquired (or was entitled to obtain) its professional rata share of an
fairness price below the Exit Credit score Settlement equal to five% of the New Widespread Inventory
(topic to dilution by shares reserved for issuance below a administration
incentive plan and on train of the Warrants).

For extra data on the DIP credit score settlement, please see Notice 2 – Emergence of a voluntary reorganization in chapter 11.

Mandates

Every holder of the Previous Widespread Inventory excellent earlier than the Efficient Date that
didn't choose out of the discharge below the Plan, is entitled to obtain its professional
rata share of seven-year warrants (Warrants) to buy an mixture of 12.5%
of the shares of New Widespread Inventory, at an mixture train worth equal to the
$650.0 million principal quantity of the Notes plus curiosity thereon to the Might
15, 2021 maturity date of the Notes. On the Efficient Date, we entered right into a
Warrant Settlement (Warrant Settlement) with American Inventory Switch & Belief
Firm, LLC. The Warrants expire on the earliest of (i) September 3, 2027, (ii)
consummation of a Money Sale (as outlined within the Warrant Settlement) or (iii) the
consummation of a liquidation, dissolutions or winding up of the corporate (such
earliest date, the Expiration Date). Every Warrant that isn't exercised on or
earlier than the Expiration Date will expire, and all rights below that Warrant and
the Warrant Settlement will stop on the Expiration Date. On December 21, 2020,
we issued roughly 1.8 million Warrants to the holders of the Previous Widespread
Inventory that didn't choose out of the releases below the Plan and owned their shares
of Previous Widespread Inventory in road identify via the amenities of the DTC. On
February 11, 2021, we issued 42,511 Warrants to sure holders of the Previous
Widespread Inventory that didn't choose out of the releases below the Plan and owned their
shares via direct registration with the corporate's switch agent (Direct
Registration). We count on to subject roughly 37,000 extra Warrants to
the holders of the Previous Widespread Inventory that didn't choose out of the releases below
the Plan and owned their shares via Direct Registration. Below the Plan,
extra Warrants might be issued in book-entry kind via the amenities of
the DTC, and every holder proudly owning shares of Previous Widespread Inventory via Direct
Registration should present that holder's brokerage account data to the
firm to obtain such holder's distribution of Warrants. Holders of shares of
the Previous Widespread Inventory that owned shares via Direct Registration ought to
contact Prime Clerk, LLC at (877) 720-6581 (Toll Free) or (646) 979-4412 (Native)
to acquire the types essential to obtain their distribution. Any distribution
not made might be deemed forfeited on the first anniversary of the Efficient
Date.

Capital necessities

Oil and Pure Gasoline Inclinations, Acquisitions, and Capital Expenditures. Most
of our capital expenditures in our oil and pure fuel are discretionary and
directed towards progress. Any determination to extend our oil, NGLs, and pure fuel
reserves via acquisitions or via drilling is determined by the prevailing or
anticipated market situations, potential return on funding, future drilling
potential, and alternatives to acquire financing, which give us flexibility
in deciding when and if to incur these prices. Through the Successor Interval and
Predecessor Interval of 2020, we participated within the drilling of three wells (0.30
internet wells) and 16 wells (0.35 internet wells), respectively, in comparison with 115 gross
wells (29.15 internet wells) in 2019.

Through the Successor Interval of 2020, capital expenditures by this phase for
oil and fuel properties on the total price technique, excluding a $1.7 million
discount within the ARO legal responsibility and no acquisitions, totaled $4.0 million. Throughout
the Predecessor Interval of 2020, capital expenditures, excluding a $29.2 million
discount within the ARO legal responsibility and $0.4 million in acquisitions (together with
related ARO), totaled $5.4 million in comparison with 2019 capital expenditures of
$264.9 million (excluding a $0.1 million discount within the ARO legal responsibility and $3.7
million in acquisitions).

For 2021, we plan to focus our capital expenditures on the event of confirmed properties and the acquisition of confirmed and producing properties.

We bought non-core oil and pure fuel property, internet of associated bills, for $0.4
million, $1.2 million and $21.8 million through the Successor Interval, and
Predecessor Interval of 2020, and the yr 2019, respectively. Proceeds from these
inclinations
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The desk of contents has diminished the online ebook worth of our full price pool with no acquire or loss acknowledged. We plan to make extra disposals of non-core property in 2021.

Contract Drilling Inclinations, Acquisitions, and Capital Expenditures. Throughout
2019, we accomplished development and positioned into service our twelfth, thirteenth, and 14th
BOSS drilling rigs. These drilling rigs have been topic to long-term contracts with
third get together operators.

We’ve got not constructed any new BOSS drilling rigs in 2020. We’ve got no commitments or present plans to construct extra BOSS drilling rigs in 2021.

For 2021, capital expenditures are anticipated to primarily be for upkeep
capital on working drilling rigs and the potential conversion of sure SCR
drilling rigs to AC drilling rigs if practicable. We additionally plan to pursue the
disposal or sale of our non-core, idle drilling rig fleet. For 2020, we incurred
$0.6 million through the Successor Interval and $2.4 million through the Predecessor
Interval in capital expenditures, in comparison with $40.6 million in 2019.

Mid-Stream Inclinations, Acquisitions, and Capital Expenditures. On the Cashion
processing facility in central Oklahoma, complete throughput quantity for the fourth
quarter of 2020 averaged roughly 64.2 MMcf per day and complete manufacturing of
pure fuel liquids averaged roughly 252,000 gallons per day. For 2020, we
continued to attach new wells to this method for third get together producers. Since
the primary of 2020, we linked 18 new wells to this method from producers. The
complete processing capability of the Cashion system is 105 MMcf per day.

Within the Appalachian area on the Pittsburgh Mills assortment system, the common quantity collected for the fourth quarter of 2020 was 131.7 MMcf per day and the common quantity collected for 2020 was 152.3 MMcf per day. In 2020, we linked 4 new infill wells to an current effectively pad.

Additionally, within the Appalachian space at our Snow Shoe gathering system, the common
gathering quantity for the fourth quarter was 2.5 MMcf per day and the common
gathered quantity for 2020 was 3.0 MMcf per day. In 2020, we didn't join any
new wells to this method. At Snow Shoe for 2020, we additionally charged a requirement price
based mostly on a quantity of 55 MMcf per day. This demand price quantity might be diminished in
2021 to 51 MMcf per day. Moreover, in 2020, we acknowledged a shortfall price
from a producer on this method for $5.3 million. This price might be invoiced in
the primary quarter of 2021.

On the Hemphill processing facility situated within the Texas panhandle, common
complete throughput quantity for the fourth quarter of 2020 was 46.6 MMcf per day and
common complete throughput quantity for 2020 was 51.3 MMcf per day. Whole common
manufacturing of pure fuel liquids for the fourth quarter of 2020 decreased to
roughly 110,000 gallons per day as a result of working in ethane rejection.
Whole manufacturing of pure fuel liquids for 2020 averaged roughly 152,000
gallons per day. The full processing capability of the Hemphill system is 135
MMcf per day. In 2020, we didn't join any new wells to this method.
At present there aren't any energetic rigs within the space, and we don't anticipate any new
effectively connects for this method.

On the Segno gathering system situated in East Texas, the common throughput
quantity for the fourth quarter of 2020 decreased to roughly 31.0 MMcf per
day as a result of declining manufacturing quantity together with no new drilling exercise in
the realm. For 2020, the common throughput quantity for this method was
roughly 40 MMcf per day. Throughout 2020, we didn't join any new wells to
this method.

Our mid-stream phase incurred $1.3 million through the Successor Interval and
$9.3 million through the Predecessor Interval in capital expenditures as in contrast
to $64.4 million in 2019, which included $16.1 million for an acquisition. For
2021, our estimated capital expenditures might be roughly $15.0 million
which we count on to be primarily for the upkeep and operation of our property
and connection of latest wells.

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Contractual Commitments

AT December 31, 2020, we had these contractual obligations:

                                                                    Funds Due by Interval
                                                       Much less Than             2-3                4-5                After
                                     Whole              1 12 months              Years              Years              5 Years
                                                                        (In 1000's)
Lengthy-term debt (1)                $ 118,637$    6,494$  12,696$  99,447          $        -
Working leases (2)                  5,520               4,075              1,376                 16                  53
Finance lease curiosity and
upkeep (3)                         558                 558                  -                  -                   -
Agency transportation commitments
(4)                                   1,379               1,020                359                  -                   -
Whole contractual obligations     $ 126,094$   12,147$  14,431$  99,463$       53


_________________________
1.See earlier dialogue in MD&A relating to our long-term debt. This obligation
is introduced in accordance with the phrases of the Exit Facility and consists of
curiosity calculated utilizing our December 31, 2020 rates of interest of 6.6% for our
Exit Credit score Settlement. The Exit Credit score Settlement has a maturity date of March 1,
2024 and had an impressive stability as of December 31, 2020 of $99.0 million
($0.6 million is mirrored as a present legal responsibility in our Consolidated Steadiness
Sheets). The Superior credit score settlement has a maturity date of Might 10, 2023 and
had no excellent stability as of December 31, 2020.
2.We lease sure workplace house, land, and tools, together with pipeline
tools and workplace tools below the phrases of working leases below ASC 842
expiring via March 2031. We even have short-term lease commitments of $0.2
million. That is lease workplace house or yards in Oklahoma Metropolis, Oklahoma; Houston
and Odessa, Texas; Englewood, Colorado; and Pinedale, Wyoming below the phrases of
working leases expiring via January 2022. Moreover, we now have a number of
tools leases and lease house on short-term commitments to stack extra
drilling rig tools and manufacturing stock.
3.Upkeep and curiosity funds are included in our finance lease
agreements. The finance leases are discounted utilizing annual charges of 4.0%. Whole
upkeep and curiosity remaining are $0.5 million and fewer than $0.1 million,
respectively.
4.We've got agency transportation commitments to move our pure fuel from
varied methods for roughly $1.0 million over the following twelve months and
$0.4 million for the one yr thereafter.

Through the second quarter of 2018, as a part of the Superior transaction (see Notice
19 - Variable Curiosity Entity Preparations), we entered right into a contractual
obligation committing us to spend $150.0 million to drill wells within the Granite
Wash/Buffalo Wallow space over three years beginning January 1, 2019. For every
greenback of the $150.0 million we don't spend (over the three-year interval), we
would forgo receiving $0.58 of future distributions from our possession curiosity
in our consolidated mid-stream subsidiary. At December 31, 2020, if we elected
to not drill or spend any extra cash within the designated space earlier than
December 31, 2021, the utmost quantity we may forgo from distributions can be
$72.6 million. The full quantity spent in direction of the $150.0 million as of
December 31, 2020 was $24.8 million. We don't anticipate assembly the
contractual obligation over the remaining dedication interval.

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At December 31, 2020, we additionally had these commitments and contingencies that might
create, improve or speed up our liabilities:
                                                          Estimated Quantity 

expiration of the dedication by interval

                                                                 Much less
                                            Whole               Than 1              2-3                4-5              After 5
Different Commitments                          Accrued               12 months              Years              Years              Years
                                                                             (In 1000's)

Separation profit plans (1)           $      4,201$   1,543               Unknown            Unknown            Unknown
ARO legal responsibility (2)                      $     23,356$   2,121

$ 3,240$ 3,159$ 14,836
Gasoline balancing duty (3)

            $      3,997               Unknown            Unknown            Unknown            Unknown

Employee’s Compensation Legal responsibility (4) $ 10,164$ 1,705

          Unknown            Unknown            Unknown

Finance lease obligations (5) $ 3,216$ 3,216

$ – $ – $ – Contractual legal responsibility (6)

                 $      4,172$   2,583

$ 1,560$ 12$ 18
Different long-term liabilities (7) $ 1,321 $ –

          $   1,321          $       -          $       -
By-product liabilities-commodity
hedges                                 $      5,706$   1,047$   4,659          $       -          $       -


_________________________
1.As of the Efficient Date, the Board adopted (i) the Amended and Restated
Separation Profit Plan of Unit Company and Taking part Subsidiaries
(Amended Separation Profit Plan), (ii) the Amended and Restated Particular
Separation Profit Plan of Unit Company and Taking part Subsidiaries
(Amended Particular Separation Profit Plan) and (iii) the Separation Profit Plan
of Unit Company and Taking part Subsidiaries (New Separation Profit
Plan). In accordance with the Plan, the Amended Separation Profit Plan and the
Amended Particular Separation Profit Plan permit former workers or retained
workers with vested severance advantages below both plan to obtain sure
money funds in full satisfaction for his or her allowed separation declare below the
Chapter 11 Instances. In accordance with the Plan, the New Separation Profit Plan
is a complete severance plan for retained workers, together with retained
workers whose severance didn't already vest below the Amended Separation
Profit Plan or the Amended Particular Separation Profit Plan. The New Separation
Profit Plan offers that eligible workers might be entitled to 2 weeks of
severance pay per yr of service, with a minimal of 4 weeks and a most of
13 weeks of severance pay.
2.When a effectively is drilled or acquired, below ASC 410 "Accounting for Asset
Retirement Obligations," we file the honest worth of liabilities related to
the retirement of long-lived property (primarily plugging and abandonment prices for
our depleted wells).
3.We've got recorded a legal responsibility for these properties we consider do not need
enough oil, NGLs, and pure fuel reserves to permit the under-produced
homeowners to get well their under-production from future manufacturing volumes.
4.We've got recorded a legal responsibility for future estimated funds associated to staff'
compensation claims primarily related to our contract drilling phase.
5.This quantity consists of commitments below finance lease preparations for
compressors in our mid-stream phase.
6.We've got recorded a legal responsibility associated to the timing of the income acknowledged
on sure demand charges in our mid-stream phase.
7.As a result of issuance of the Coronavirus Assist, Aid, and Financial Safety Act
(CARES Act), we now have deferred our FICA tax cost.

By-product actions

Periodically we enter into by-product transactions locking within the costs to be
acquired for a portion of our oil, NGLs, or pure fuel manufacturing. Any change
within the honest worth of all our derivatives are mirrored in our Consolidated
Statements of Operations.

Commodity Derivatives. Our commodity derivatives cut back our publicity to cost
volatility and handle worth dangers. Our determination on the sort and amount of our
manufacturing and the value(s) of our by-product(s) is predicated, partially, on our view
of present and future market situations. As of December 31, 2020, based mostly on our
fourth quarter 2020 common each day manufacturing, the approximated percentages of
our manufacturing below by-product contracts have been as follows:

                                  2021      2022      2023
Every day oil manufacturing              66  %     46  %     26  %
Every day pure fuel manufacturing      55  %     45  %     25  %



For commodities topic to by-product contracts, these contracts restrict the danger
of downward worth actions. However additionally they restrict will increase in future revenues
that may in any other case end result from worth actions above the contracted costs.

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By-product transactions carry with them the danger that the counterparties might not
be capable to meet their monetary obligations below the transactions. Based mostly on our
analysis at December 31, 2020, we consider the danger of non-performance by our
counterparties shouldn't be materials. At December 31, 2020, the honest values of the online
property we had with every of the counterparties to our commodity by-product
transactions was:
                         December 31, 2020
                           (In thousands and thousands)
Financial institution of Oklahoma        $             (5.4)
Financial institution of Montreal                      (0.3)
Whole internet liabilities   $             (5.7)



If a authorized proper of set-off exists, we internet the worth of the by-product
preparations we now have with the identical counterparty in our Consolidated Steadiness
Sheets. At December 31, 2020, we recorded the honest worth of our commodity
derivatives on our stability sheet as present by-product liabilities of $1.0
million and long-term by-product liabilities of $4.7 million. At December 31,
2019, we recorded the honest worth of our commodity derivatives on our stability
sheet as present by-product property of $0.6 million and long-term by-product
liabilities of lower than $0.1 million.

 All derivatives are acknowledged on the stability sheet and measured at honest worth.
Any adjustments in our derivatives' honest worth earlier than their maturity (i.e.,
non permanent fluctuations in worth) are reported in acquire (loss) on derivatives in
our Consolidated Statements of Operations.
These good points (losses) as of the durations indicated have been:
                                                               Successor                              Predecessor

                                                                                               Interval
                                                                Interval                       January 1,         For the 12 months
                                                           September 1, 2020                2020 via            Ended
                                                                via                      August 31,         December 31,
                                                           December 31, 2020                    2020                2019
                                                                           

(In 1000’s) Achieve (loss) on derivatives, together with quantities settled through the interval of ($ 1,133), ($ 4,244), and $ 16,196, respectively

                                             $             (985)               $   (10,704)$    4,225

Compensation for stock and premiums

Throughout 2020, we didn't grant any awards. We acknowledged compensation expense of
$6.1 million for all our prior restricted inventory awards together with the
acceleration of the unrecorded inventory compensation expense. We didn't capitalize
any compensation price to grease and pure fuel properties since we're at present
not drilling.

Throughout 2019, we granted awards overlaying 1,500,213 shares of restricted inventory.
These awards have been granted as retention incentive awards and are being acknowledged
over the awards' three-year vesting interval. These awards have been granted as
retention incentive awards and are being acknowledged over their two- and
three-year vesting durations.

On the Efficient Date, all equity-based awards that have been excellent instantly
earlier than the Efficient Date have been cancelled. The cancellation of the awards
resulted in an acceleration of unrecorded inventory compensation expense through the
Predecessor Interval.

Insurance coverage

We're self-insured for sure losses regarding staff' compensation,
common legal responsibility, management of effectively, and worker medical advantages. Insured
insurance policies for different protection include deductibles or retentions per prevalence
that vary from zero to $1.0 million. We've got bought stop-loss protection to
restrict, to the extent possible, per prevalence and mixture publicity to sure
varieties of claims. There isn't any assurance that the insurance coverage protection we now have will
shield us towards legal responsibility from all potential penalties. If insurance coverage
protection turns into dearer, we might select to self-insure, lower our
limits, increase our deductibles, or any mixture of those somewhat than pay
larger premiums.

Oil and Pure Gasoline Restricted Partnerships and Different Entity Relationships.

We have been the final accomplice of 13 oil and pure fuel partnerships shaped
privately or publicly. Every partnership's revenues and prices have been shared below
formulation set out in that partnership's settlement. The partnerships repaid us for
contract
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drilling, effectively supervision, and common and administrative expense. Associated
get together transactions for contract drilling and effectively supervision charges have been the
associated get together's share of such prices. These prices have been billed the identical as
billings to unrelated third events for related companies. Common and
administrative reimbursements consisted of direct common and administrative
expense incurred on the associated get together's behalf and oblique bills assigned to
the associated events. Allocations are based mostly on the associated get together's stage of
exercise and have been thought of by us to be affordable. Our proportionate share of
property, liabilities, and internet revenue regarding the oil and pure fuel
partnerships is included in our consolidated monetary statements for the years
previous to termination. The partnerships have been terminated through the second quarter
of 2019 with an efficient date of January 1, 2019 at a repurchase price of $0.6
million, internet of Unit's curiosity.

Results of inflation

The impact of inflation within the oil and pure fuel trade is primarily pushed
by the costs for oil, NGLs, and pure fuel. Will increase in these costs improve
the demand for our contract drilling rigs and companies. This improve in demand
impacts the dayrates we will get hold of for our contract drilling companies. Throughout
durations of upper demand for our drilling rigs we now have skilled will increase in
labor prices and the prices of companies to assist our drilling rigs.
Traditionally, throughout this identical interval, when oil, NGLs, and pure fuel costs
declined, labor charges didn't come again all the way down to the degrees current earlier than the
will increase. If commodity costs improve considerably for an extended interval,
shortages in assist tools (like drill pipe, third get together companies, and
certified labor) could cause extra will increase in our materials and labor prices.
Will increase in dayrates for drilling rigs additionally improve the price of drilling our
oil and pure fuel properties. How inflation will have an effect on us sooner or later will
rely on will increase, if any, realized in our drilling rig charges, the costs we
obtain for our oil, NGLs, and pure fuel, and the charges we obtain for
gathering and processing pure fuel.

Off-balance sheet preparations

We don't at present make the most of any off-balance sheet preparations with
unconsolidated entities to boost liquidity and capital useful resource positions, or
for some other goal. Nevertheless, as is customary within the oil and fuel trade, we
are topic to numerous contractual commitments.

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Outcomes of Operations
Offered under is a comparability of chosen working and monetary knowledge after
eliminations (in 1000's until in any other case specified):
                                                Successor                              Predecessor
                                                 Interval                        Interval
                                            September 1, 2020              January 1, 2020         12 months Ended
                                                 via                       via            December 31,             P.c
                                            December 31, 2020              August 31, 2020            2019                Change (1)
Whole income                              $        133,528$    276,957$   674,634                      (39) %
Internet loss                                   $        (13,988)$   (890,624)$  (553,828)                     (63) %
Internet revenue attributable to non-controlling
curiosity                                   $          4,152                $     40,388$        51                          NM
Internet loss attributable to Unit Company  $        (18,140)$   (931,012)$  (553,879)                     (71) %

Oil and Pure Gasoline:
Income                                    $         57,578                $    103,439$   325,797                      (51) %
Working prices excluding depreciation,
depletion, amortization, and impairment    $         25,256                $    117,691$   135,124                        6  %
Depreciation, depletion, and amortization  $         14,869                $     68,762$   168,651                      (50) %
Impairment of oil and pure fuel
properties                                 $         26,063                $    393,726$   559,867                      (25) %
Common oil worth acquired (Bbl)           $          37.29                $      31.98$     57.49                      (45) %
Common oil worth per barrel acquired
excluding derivatives                      $          39.23                $      35.14$     55.13                      (36) %
Common NGL worth acquired (Bbl)           $           9.28                $       4.83$     12.42                      (59) %
Common NGLs worth per barrel acquired
excluding derivatives                      $           9.28                $       4.83$     12.42                      (59) %
Common pure fuel worth acquired (Mcf)   $           1.92                $       1.14$      2.04                      (41) %
Common pure fuel worth per mcf acquired
excluding derivatives                      $           1.91                $       1.11$      1.88                      (38) %
Oil manufacturing (MBbls)                                  626                       1,562                3,208                      (32) %
NGLs manufacturing (MBbls)                               1,045                       2,399                4,773                      (28) %
Pure fuel manufacturing (MMcf)                        11,006                      26,563               53,065                      (29) %
Depreciation, depletion, and amortization
charge (Boe)                                 $           4.21                $       7.77$      9.66                      (30) %

Contract Drilling:
Income                                    $         19,413                $     73,519$   168,383                      (45) %
Working prices excluding depreciation     $         13,852                $     51,810$   115,998                      (43) %
Depreciation                               $          2,102                $     15,544$    51,552                      (66) %
Impairment of contract drilling tools  $              -                $    410,126          $         -                        -  %
Impairment of goodwill                     $              -                $          -          $    62,809                     (100) %
Proportion of income from daywork
contracts                                               100  %                      100  %               100  %                     -  %
Common variety of drilling rigs in use                  7.2                        11.5                 24.6                      (59) %
Whole drilling rigs accessible to be used at
the top of the interval                                    58                          58                   58                        -  %
Common dayrate on daywork contracts       $         17,807                $     18,911$    18,762                       (1) %


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                                                 Successor                              Predecessor

                                                                                Interval
                                                  Interval                      January 1,           12 months Ended
                                             September 1, 2020               2020 via
                                                  via                     August 31,          December 31,             P.c
                                             December 31, 2020                   2020                 2019                Change (1)
Mid-Stream:
Income                                     $         56,537                $    99,999$   180,454                      (13) %
Working prices excluding depreciation and
amortization                                $         42,169                $    68,045$   133,606                      (18) %
Depreciation and amortization               $         10,659                $    29,371$    47,663                      (16) %
Impairment of fuel gathering and processing
tools and line fill                     $              -                $    63,962$     3,040                          NM
Gasoline gathered-Mcf/day                                 324,892                    388,506              435,646                      (16) %
Gasoline processed-Mcf/day                                135,615                    158,031              164,482                       (8) %
Gasoline liquids sold-gallons/day                         441,761                    612,301              625,873                      (11) %
Variety of pure fuel gathering methods                   17                         18                   19                       (7) %
Variety of processing crops                               11                         11                   11                        -  %

Company and different:
Loss on abandonment of property               $              -                $    18,733          $         -                        -  %
Common and administrative expense          $          6,702                $    42,766$    38,246                       29  %
Different depreciation                          $            332                $     1,819$     7,707                      (72) %
Achieve (loss) on disposition of property        $            619                $        89$    (3,502)                     120  %
Different revenue (expense):
Curiosity revenue                             $              -                $        58$        49                       18  %
Curiosity expense, internet                       $         (3,275)               $   (22,882)$   (37,061)                     (29) %

Reorganization prices, internet                   $         (2,273)               $   133,975          $         -                        -  %
Write-off debt issuance prices               $              -                $    (2,426)         $         -                        -  %
Achieve (loss) on derivatives                  $           (985)              

$   (10,704)$     4,225                          NM
Different                                       $            100                $     2,034$      (236)                         NM
Earnings tax profit                          $           (302)               $   (14,630)$  (132,326)                      89  %
Common rate of interest                                    6.8  %                     5.5  %               6.4  %                   (14) %
Common long-term debt excellent          $        121,740$   526,167$   744,978                      (35) %

_________________________

1.NM – A proportion calculation shouldn’t be significant as a result of a denominator of zero worth or a proportion change better than 200.

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Oil and Pure Gasoline

Oil and pure fuel revenues decreased $164.8 million or 51% in 2020 as in contrast
to 2019 due primarily to decrease commodity costs and manufacturing. Oil manufacturing
decreased 32%, NGLs manufacturing decreased 28%, and pure fuel manufacturing
decreased 29%. Common oil costs between the comparative years decreased 45% to
$31.61 per barrel, NGLs costs decreased 59% to $5.10 per barrel, and pure
fuel costs decreased 41% to $1.20 per Mcf.

Oil and pure fuel working prices elevated $7.8 million or 6% between the
comparative years of 2020 and 2019 primarily as a result of larger G&A bills from the
litigation settlements and not capitalizing immediately associated overhead
prices in 2020 partially offset by decrease LOE and gross manufacturing taxes.

DD&A decreased $85.0 million or 50% primarily as a result of a 30% lower in our DD&A
charge and a 29% lower in equal manufacturing. The lower in our DD&A charge
resulted primarily from the impact of the ceiling check write-downs throughout 2020.

Through the Successor Interval of 2020, we recorded non-cash ceiling check
write-downs of $26.1 million pre-tax primarily as a result of using common
12-month historic commodity costs for the ceiling check versus ahead costs
for our Recent Begin honest worth estimates. Through the Predecessor Interval of 2020,
we recorded non-cash ceiling check write-downs of $393.7 million, pre-tax ($346.6
million, internet of tax) because of the discount for the 12-month common commodity
costs and the impairment of our unproved oil and fuel properties. We additionally
recorded an expense of $17.6 million associated to the write-down of our salt water
disposal asset that we thought of deserted. Throughout 2019, we recorded non-cash
ceiling check write-downs of $559.4 million, pre-tax ($422.4 million, internet of tax)
because of the discount of the 12-month common commodity costs and the removing of
proved undeveloped reserves because of the uncertainty relating to our capability to
finance future capital expenditures. We additionally recorded in 2019 a $0.5 million
impairment on gathering methods with wells not producing.

Contract drilling

Drilling revenues have declined $ 75.5 million or 45% in 2020 in comparison with 2019. The lower is especially attributable to a 59% lower within the common variety of rigs used in comparison with 2019. Common use of rigs fell from 24.6 rigs drilling in 2019 to 10.1 drilling rigs in 2020.

Drilling working prices decreased $50.3 million or 43% in 2020 in comparison with
2019. The lower was due primarily to much less drilling rigs working. Contract
drilling depreciation decreased $33.9 million or 66% additionally due primarily to much less
drilling rigs working and from decrease depreciable internet ebook worth as a result of
impairments acknowledged within the first half of 2020.

At March 31, 2020, as a result of market situations, we carried out impairment testing on
two asset teams which have been comprised of the SCR diesel-electric drilling rigs
and the BOSS drilling rigs. We concluded that the online ebook worth of the SCR
drilling rigs asset group was not recoverable via estimated undiscounted
money flows and recorded a non-cash impairment cost of $407.1 million within the
first quarter of 2020. We additionally recorded a further non-cash impairment cost
of $3.0 million for different drilling tools. These costs are included inside
impairment costs in our Consolidated Statements of Operations. No impairment
was wanted on the BOSS drilling rigs asset group because the undiscounted money flows
exceeded the carrying worth of the asset group.

In 2019, we acknowledged goodwill impairment costs of $62.8 million, pre-tax
($59.8 million, internet of tax) representing all our goodwill which is said to
our contract drilling phase.

Mid-Stream

Our mid-stream revenues decreased $23.9 million or 13% in 2020 as in comparison with
2019 primarily as a result of decreased NGLs, fuel, and condensate gross sales because of
decrease costs and decrease volumes ensuing from fewer wells linked and
declining wellhead volumes. Gasoline processing volumes per day decreased 8% between
the comparative years primarily as a result of decrease bought volumes from our
processing facility within the Texas panhandle. Gasoline gathering volumes per day
decreased 16% primarily as a result of decrease volumes from most of our main gathering
and processing methods ensuing from fewer wells linked and declining
wellhead volumes besides from the Cashion facility.

Working prices decreased $23.4 million or 18% in 2020 in comparison with 2019
primarily as a result of a lower in buy costs. Depreciation and amortization
decreased $7.6 million or 16% primarily as a result of decrease depreciable internet ebook worth
from the impairment acknowledged within the first quarter of 2020.
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Through the first quarter of 2020, we decided that the carrying worth of
sure long-lived asset teams situated in southern Kansas and central Oklahoma,
the place decrease pricing is predicted to affect drilling and manufacturing ranges, are
not recoverable and exceeded their estimated honest worth. Based mostly on the estimated
honest worth of the asset teams, we recorded non-cash impairment costs of $64.0
million. In 2019, we recorded a $3.0 million impairment as a result of decreased worth
of line fill as a result of decrease costs and from the retirement of two older methods.

Loss on abandonment of property

Through the first quarter of 2020, we evaluated the carrying worth of our salt
water disposal property. Based mostly on our revised forecast of asset utilization, we
decided sure property have been not anticipated for use and wrote off
sure salt water disposal property that we now contemplate deserted. We recorded
expense of $17.6 million associated to the write-down of our salt water disposal
asset within the first quarter of 2020. Within the third quarter of 2020, we recorded
expense of $1.2 million associated to the write-down of our drilling line asset.

Common and administrative

Common and administrative bills elevated $11.2 million or 29% in 2020
in comparison with 2019 primarily as a result of consulting charges paid previous to submitting for
chapter and prices incurred for separation advantages offered to workers that
have been a part of our discount in drive in April 2020. We incurred $20.2 million in
advisory and restructuring charges.

Achieve (loss) on disposal of property

(Achieve) loss on disposition of property decreased $4.2 million in 2020 in comparison with
2019. The loss in 2020 was primarily associated to the sale of automobiles, drilling
rigs, and different drilling tools, whereas the acquire in 2019 was primarily from
the retirement of previous rig stock.

Different revenue (bills)

Curiosity expense, internet of capitalized curiosity, decreased $10.9 million between
the comparative years of 2020 and 2019. We capitalized curiosity based mostly on the web
ebook worth related to unproved properties not being amortized, the
development of extra drilling rigs, and the development of fuel gathering
methods. As a result of we aren't at present present process any capital initiatives, we had no
capitalized curiosity for 2020 in comparison with $16.2 million in 2019 that was netted
towards our gross curiosity of $53.2 million for 2019. Our common rate of interest
elevated because of the new Exit Credit score Settlement phrases and our common debt
excellent was decreased primarily because of the Notes being settled with the
Plan.

Parts of reorganization, internet

Reorganization objects, internet symbolize any of the bills, good points, and losses
incurred subsequent to and as a direct results of the Chapter 11 proceedings. For
extra element, see Notice 2 - Emergence From Voluntary Reorganization Below Chapter
11.

Cancellation of debt issuance prices

As a result of remaining commitments of the Unit credit score settlement being terminated
by the lenders, the unamortized debt issuance prices of $2.4 million have been written
off through the second quarter of 2020.

Achieve (loss) on derivatives

Achieve (loss) on derivatives decreased $ 15.9 million primarily as a result of fluctuations in futures costs used to estimate honest worth in mark-to-market accounting.

Earnings tax profit

Earnings tax profit decreased $117.4 million in 2020 in comparison with 2019. We
acknowledged an revenue tax advantage of $14.9 million in 2020 in comparison with an revenue
tax advantage of $132.6 million in 2019. The 2020 revenue tax profit was decrease
primarily because of the recognition of a full valuation allowance towards our internet
deferred tax property as a result of our emergence from chapter in 2020 and recent begin
accounting ideas.

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Our efficient tax charge was 1.6% for 2020 in comparison with 19.3% for 2019. The
efficient tax charge for the present yr was decrease as in comparison with 2019 due to
the popularity of a full valuation allowance as described above. The rise
in our valuation allowance was as a result of figuring out it was extra probably than not
that the online deferred tax property wouldn't be totally realizable. We paid no
federal or state revenue taxes throughout 2020.

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