Unit Corporation

Attn: Investor Relations

7130 South Lewis, Suite 1000

Tulsa, Oklahoma 74136

(918) 493-7700

http://www.unitcorp.com

We will also furnish any exhibit to the 2008 Form 10-K if specifically requested.

The enclosed proxy card contains instructions for mail voting or for voting by way of telephone or the Internet. The proxies identified on the proxy card will vote the shares of which you are the stockholder of record in accordance with your instructions. If you submit a proxy card without giving specific voting instructions, the proxies will vote those shares as recommended by the board.

Abstentions and broker non-votes count toward the quorum. “Broker non-votes” occur when nominees (such as banks and brokers) that hold shares on behalf of beneficial owners do not receive voting instructions from the beneficial owners by 15 days before the meeting and do not have discretionary voting authority to vote those shares.

Stockholder of Record. If your shares are registered directly in your name with the transfer agent, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you. As the stockholder of record, you have the right to grant your voting proxy directly to the company or to vote in person at the meeting. We have enclosed or sent a proxy card for you to use.

Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the annual meeting.

Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee

has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

Corporate Secretary

Unit Corporation

7130 South Lewis, Suite 1000

Tulsa, Oklahoma 74136

Fax: (918) 493-7711

For a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to approve that proposal, provide the information required by our bylaws and give timely notice to our corporate

secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary:

If the date of the stockholder meeting is moved more than 30 days before or 70 days after the anniversary of our annual meeting for the previous year, then notice of a stockholder proposal that is not intended to be included in the company’s proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days before the meeting and no later than the close of business on the later of the following two dates:

Nomination of director candidates. You may propose director candidates for consideration by the board’s nominating and governance committee. Any recommendations should include the nominee’s name and qualifications for board membership and should be directed to our corporate secretary at the address of our principal executive offices set forth above. In addition, our bylaws permit a stockholder to nominate directors for election at an annual stockholder meeting. To nominate a director, a stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to elect the nominee and provide the information required by our bylaws, including a statement by the stockholder identifying (i) the name and address of the stockholder, as they appear on the company’s books, and of the beneficial owner, if any, on behalf of who the nomination or proposal is made, (ii) the class and number of shares of our capital stock which are owned beneficially and of record by the stockholder (and such beneficial owner, if

any), (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short positions or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss or manage risk of a stock price change for or to increase the voting power of such stockholder or beneficial owner with respect to any shares of stock of the corporation, (iv) a representation that the stockholder is a holder of record of our stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the nomination, and (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of the nomination. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary within the January 6, 2010 through February 5, 2010 time period described above.

Copy of Bylaw Provisions. You may contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our bylaws are also available on our website at http://www.unitcorp.com.

Our corporate governance webpage also has a link for reporting on any accounting, internal controls, or auditing matters that pertain to us.

General governance information

We are committed to having sound corporate governance principles. Our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website at http://www.unitcorp.com/corpgov.html and copies of these documents may also be obtained from our corporate secretary. These provisions apply to our employees, including our principal executive officer, principal financial officer and principal accounting officer. We will post any amendments or waivers to our Code of Business Conduct and Ethics (to the extent applicable to our chief executive officer, principal financial officer or principal accounting officer) on our website.

Each year, our directors and executive officers are obligated to complete a director and officer questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Our chief executive officer and general counsel are charged with resolving any conflict of interests not otherwise resolved under one of our other policies.

Director independence criteria

The board has defined an independent director as a director who the board has determined has

no material relationship with the company, either directly, or as a partner, shareholder, or executive officer of an organization that has a relationship with the company. A relationship is “material” if, in the judgment of the board, the relationship would interfere with the director’s independent judgment. Based on the materiality guidelines adopted by the board, a director is not deemed to be independent if:

Any person who, or whose immediate family member(s), has within the prior three years had any of the following relationships with the company does not qualify as an independent director.

Additional requirements for audit committee members. In addition to the guidelines set forth above, a director is not considered independent for purposes of serving on the audit committee, and may not serve on the audit committee, if the director:

Additional requirements for compensation committee members. In addition to the guidelines set forth above, a director is not considered independent for purposes of serving on the compensation committee, and may not serve on the compensation committee, if the director:

Director independence determinations

The board has determined that William B. Morgan, John H. Williams, J. Michael Adcock, Gary R. Christopher, Robert J. Sullivan Jr. and Steven B. Hildebrand have no material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company) and is independent within the meaning of our director independence standards, which satisfy the NYSE director independence standards, as currently in effect. Don Cook, who served as a director until his death in 2008, was considered to be independent. The board has also determined that each of the members of its standing committees has no material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company) and is “independent” within the meaning of our director independence standards.

Board structure and committees

As of the date of this proxy statement, our board has nine directors and the following three standing committees:

Our board is divided into three classes with each class consisting of three directors. Directors serve for a three year term.

Each of the board’s three standing committees operates under the committee’s adopted written charter. The charter of each committee is available at our website at http://www.unitcorp.com/corpgov.html. In addition, copies of these charters may also be obtained from our corporate secretary.

During 2008, the board and its committees held a total of 18 meetings. Our board met seven times, all regularly scheduled meetings. There were 11 committee meetings held in 2008. All directors attended 100% of the board meetings with the exception that one director missed one of the meetings. Each committee member attended 100% of his respective committee meetings, except one audit committee member who missed one meeting thereby attending 83% of that committee’s meetings. All directors are encouraged to attend our annual meeting of stockholders. All directors attended our last annual meeting of stockholders. In addition to its meetings, the board and its various committees act, from time to time, by unanimous consent.

Audit Committee

The responsibilities of our audit committee include:

and takes any action with respect to these matters that it deems appropriate;

The committee has the authority to form and delegate authority to one or more of its members.

The audit committee has the authority to obtain advice and assistance from, and receive appropriate funding from the company for, outside legal, accounting or other advisors as the committee deems necessary to carry out its duties.

In addition, the audit committee has established procedures for the receipt, retention and treatment (on a confidential basis) of complaints received by the company, the board or the audit committee, regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. These procedures are described in the Accounting and Auditing Complaint Procedures posted on our website.

The report of the audit committee is included on page 43.

Compensation Committee

Our compensation committee has overall responsibility for approving and evaluating director and executive officer compensation plans, policies and programs. In carrying out these responsibilities the committee:

The committee has the authority to form and delegate authority to subcommittees and to delegate authority to one or more of its members. For additional information on the operations of the committee, including the role of our executive officers in determining executive and director compensation, see “Compensation discussion and analysis – Administration of our executive compensation program,” page 20.

The report of the compensation committee is included at page 16.

Nominating and Governance Committee

The responsibilities of this committee include:

Consideration of nominees for director

Stockholder nominees. The policy of the nominating and governance committee is to consider properly submitted stockholder nominations for candidates for membership on the board as described below under “Identifying and evaluating nominees for directors.” In evaluating nominations, the committee seeks to achieve a balance of knowledge, experience and diversity on the board. Any stockholder nominations proposed for consideration by the committee should include the nominee’s name and qualifications for board membership and should be addressed to:

Corporate Secretary

Unit Corporation

7130 South Lewis, Suite 1000

Tulsa, Oklahoma 74136

In addition, our bylaws permit stockholders to nominate directors for consideration at an annual stockholders meeting. For a description of the process for nominating directors in accordance with our bylaws, see “Questions and Answers – What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?” on page 3.

Director qualifications. Our Corporate Governance Guidelines contain board membership criteria that apply to nominating and governance committee-recommended nominees for a position on the board. Under these criteria, members of the board should meet the board’s qualifications as independent (as applicable) and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of the company and its stockholders.

Identifying and evaluating nominees for directors. The nominating and governance committee uses a variety of methods for identifying and evaluating nominees for director. The committee assesses the appropriate size of

the board, and whether any vacancies on the board are expected due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the committee considers various potential candidates for director. Candidates may come to the attention of the committee through current board members, professional search firms, stockholders or other persons. These candidates are evaluated at regular or special meetings of the committee and may be considered at any point during the year. As described above, the committee considers properly-submitted stockholder nominations for candidates for the board. Following verification of the stockholder status of persons proposing candidates, recommendations are considered by the committee. If any materials are provided by a stockholder in connection with the nomination of a director candidate, those materials are forwarded to the nominating and governance committee. The committee may also review materials provided by a professional search firm or other party in connection with a nominee who is not proposed by a stockholder.

Executive sessions

Executive sessions of non-management directors are held periodically during the year. The sessions are scheduled and presided over by Mr. J. Michael Adcock who was elected by the board to chair each executive session. Meetings are also held from time to time with the board chairman and our chief executive officer for a general discussion of relevant subjects. Any non-management director can request that an executive session be scheduled. Executive sessions of the independent directors only are held at least once a year.

Any interested party may communicate directly with the presiding director by writing to the following:

Mr. J. Michael Adcock

c/o Corporate Secretary

Unit Corporation

7130 South Lewis, Suite 1000

Tulsa, Oklahoma 74136

Communications with the board

Individuals may communicate with the board by submitting an e-mail to the board in care of the company’s corporate secretary at mark.schell@unitcorp.com or sending a letter to: Board of Directors, c/o Corporate Secretary, Unit Corporation, 7130 S. Lewis, Suite 1000, Tulsa, Oklahoma 74136.

The chair of the nominating and governance committee has been designated as the person to receive communications directed to non-management directors. Our stockholders may write to the chairman of this or any other board committee or to the outside directors as a group c/o Mark E. Schell, Senior Vice President and General Counsel, Unit Corporation, 7130 South Lewis, Suite 1000, Tulsa, Oklahoma 74136.

Stockholder communications are distributed to the board, or to the appropriate individual director or directors, depending on the facts and circumstances of the communication. However, at the request of the board, certain items that are not related to the duty and responsibilities of the board are excluded, such as advertisements, junk mail, mass mailings, spam and surveys.

Board and committee evaluations

Each year the board evaluates its performance and effectiveness. Each director completes a board evaluation form to solicit feedback on specific aspects of the board’s role, organization and meetings. The collective ratings and comments are compiled by or for the chairman of the nominating and governance committee and presented by him to the full board. Additionally, each of the three standing board committees conducts an annual self-evaluation of its performance through a committee evaluation form.

Under a plan approved by our stockholders, each non-employee director automatically receives an option to purchase 3,500 shares of our common stock on the first business day following each annual meeting of our stockholders. The option exercise price is the fair market value of our common stock on that date. Payment of the exercise price may be made in cash or in shares

of common stock that have been held by the director for at least one year. No stock option may be exercised during the first six months of its term except in the case of death. Each option has a ten-year term. In 2008, stock options were granted for a total of 28,000 shares at $73.26 per share. As of March 9, 2009, 147,000 shares were subject to outstanding options held by non-employee directors.

Compensation committee report

The compensation committee of the board has reviewed and discussed with our management the following compensation discussion and analysis. Based on that review and discussion, the compensation committee recommended to the board that the compensation discussion and analysis be included in this proxy statement and incorporated into our annual report on Form 10-K for fiscal year 2008 by reference to this proxy statement.

Members of the Compensation Committee:

J. Michael Adcock - Chairman

William B. Morgan

John H. Williams

Compensation discussion and analysis

Historically the compensation decisions that pertain to our executive officers are made at the end of each year. The result is that any annual bonus awards and adjustments to salaries are determined at the end of the year but are not paid (in the case of cash bonuses) or effective (in the

case of salaries) until the following year. Long term incentive awards (generally in the form of equity awards) are effective the date they are approved.

To assist in reviewing our compensation discussion and analysis, we have broken our discussion into the following sections, each of which may have its own subsections:

Our general compensation objectives

The primary goals of our compensation program, both for executives and non-executives, is to attract, motivate, reward and retain competent employees. We try to apply our program in a way that joins our employees’ interests with that of our business and financial objectives as well as the interests of our stockholders. To accomplish this we:

Elements of our compensation program

Our executives’ compensation consists of base salary, annual cash bonus, equity awards, health, disability and life insurance, indemnification protection, retirement and separation benefits, and certain perquisites. We use each of these elements because we believe they provide the compensation mix required to attract and retain talented executives, reward them for quality performance, and motivate them to focus on both the short-term and long-term performance of the company. Specifically, we believe an adequate base salary is required to attract and retain qualified executives based on competitive salaries. When authorized, annual salary increases and cash bonuses provide executives with potential earnings that can be based on annual financial and operating results and reward them for short-term successes. Equity awards are used to motivate our executives to achieve both long-term and short-term results and aid long-term retention of our executives. Compensating our executives for positive company performance in both the short term and the long term serves our goal of aligning our executives’ compensation with the interests of our stockholders. Indemnification protections, retirement and separation benefits and general perquisites are commonly included in executive compensation packages offered by our competitors, and we believe that providing them helps achieve our compensation goals.

October 2008 adoption of Unit Corporation Annual Performance Bonus Plan. Our compensation committee has worked to develop a performance based plan that the committee could use to link participants’ annual cash bonus awards with the attainment of predetermined performance goals. The committee initially undertook this effort starting in late 2006. Since that time the committee members along with management have evaluated a number of issues associated with identifying performance measures that would take into account the differences in the company’s business segments as well as various structural and implementation issues. As part of that effort the committee initially used the assistance of Longnecker and Associates in its undertaking and then more recently Mercer and Associates in

2008. Throughout the summer of 2008, Mercer worked with the committee to develop the plan, helping to narrow the focus and goals of the plan. Mercer recommended that an annual incentive bonus plan balance the company’s need to maximize the motivational aspects of a bonus award while also encouraging and rewarding maximized corporate performance. Mercer suggested that any plan drafted include performance metrics at both the corporate and business unit level, and that it also allow for a measure of discretion by the committee.

On October 21, 2008, the compensation committee and the company’s board of directors approved and adopted a new annual bonus plan, the Unit Corporation Annual Performance Bonus Plan (the “performance bonus plan”). The plan is to be

administered by the compensation committee.

Under the terms of the plan, employees are selected by the committee for each “performance period,” defined as the period beginning January 1^st and ending December 31^st each year. Before the performance period commences (or as soon thereafter as practicable), the committee is to determine the corporate and individual performance goals for the period, and to designate the total bonus pool for that period. For a given performance period, “performance objectives” are to be identified. Corporate performance objectives are defined as one or more financial or operating performance objectives of the company and/or operating units, and may be expressed in a number of terms, including:

The above terms, or company and operating segment objectives, may be expressed in

combination, and they may be absolute or relative to designated measures, and may be expressed in terms of a progression within a specified range. Performance objectives for individual performance will be performance ratings, as determined by the committee in its annual performance review process for the applicable performance period.

Any awards under the performance bonus plan will be payable in cash and only to employees employed with the company at the time for payout for a given performance period, unless specified exceptions exist. The committee may, at the time objectives for a performance period are determined or at any time during the period before the final determination of awards, make adjustments to the manner in which performance will be measured against the performance objectives, or it may adjust the performance objectives to reflect the impact of specified corporate transactions, special charges, accounting or tax law changes, or other extraordinary or non-recurrent events. The board may modify, amend or terminate the plan at any time, subject to any other agreements with employees, except that the plan cannot be modified during the calendar year in which a change in control of the company occurs (See details of the change of control provisions of this plan under “Potential Payments on Termination or Change-in-Control” section, at page 35.)

As of year end 2008, the committee had not issued any awards under this plan.

Administration of our executive compensation program

Our executive compensation program is administered by our compensation committee. Additional details about that committee are located in the corporate governance provisions of this proxy statement, under “Compensation Committee,” on page 8.

The committee meets each year in December to review, approve and recommend (where appropriate or required) to the board the compensation for our named executive officers. The committee’s chairman meets with management before the December meeting and reviews the recommendations to be presented at

that meeting. The committee’s salary and bonus determinations, once approved by the board, are generally implemented as of January 1st of the following year. Equity awards are effective as of the date of the committee’s decision to award them.

By holding its meeting in December the committee can take into account the full annual performance of the company, both financially and operationally. If, during the year, circumstances warrant that the committee makes adjustments to its previously-approved compensation decisions, the committee will evaluate those needs at one or more meetings scheduled throughout the year. An example of a situation when the committee might make an adjustment to salary before the December meeting would be in the event of a pre-December promotion or material increase in responsibility, or perhaps in the event of a severe downturn in the oil and natural gas industry. The decision to make any salary adjustments would be made on an ad hoc basis, and any or all elements of compensation could be adjusted based on the actual circumstances involved.

In making its determinations, the committee considers the financial and operational results of the company for the year, generally taking into account:

In addition, the committee will also take into account any significant changes in or to the

industry in which we operate and/or general economic conditions.

Other than its view of future industry and economic conditions, the committee’s review of these items is a retrospective review, and to date it has not used pre-established performance targets or goals.

Individual performances are also taken into account, as are the individual’s responsibilities, experience, potential and length of service. Currently, the process by which individual performance is taken into account is a very informal one, not subject to a specific policy, and applies to all our named executive officers without regard to their position. Individual contributions are noted in the context of reviewing the overall operational and financial results of the company. For our chief executive officer, those results are the committee’s primary measure of performance; as to the other named executive officers, the chief executive officer’s recommendations to the committee (as described more under “Role of chief executive officer,” page 22), within the context of the overall operating and financial results, are the primary basis on which the committee addresses their individual performance. To date, the committee’s evaluation has always been subjective and the committee has not used any specific written criteria or formulas under which an executive officer’s annual compensation is determined or calculated. The factors considered in compensation decisions are not weighted, but are viewed collectively, and, with few exceptions, there are no material differences in how we approach these decisions with respect to individual named executive officers. At this point in time, there have been no formulaic decisions on how to allocate the various types of compensation or forms of awards, how to specifically tie company or individual achievement to the awards, whether prior compensation should be considered in making compensation decisions or whether or how to incorporate other such criteria-based measures into the compensation-setting process.

As more fully discussed above under “Elements of our compensation program – October 2008 adoption of Unit Corporation Annual

Performance Bonus Plan” on page 17 the committee has adopted a performance bonus plan which the committee could use in the future to adopt specific performance measures to determine the annual cash bonus awards to our executive officers.

Role of compensation consultants and CEO

Role of compensation consultants. In both 2006 and 2007, the committee used the services of Longnecker & Associates, a Houston, Texas-based independent outside compensation consultant. The committee’s charter grants it the authority to retain consultants to assist it. Longnecker had no prior relationship with the company, its executive officers, or the compensation committee, and it has never advised management of the company. Longnecker received no compensation from the company other than its fee for consulting with the committee on executive compensation matters. Longnecker assisted the committee in:

Longnecker performed a study of our senior management executive compensation structure compared to a group of peer companies in the oil and gas exploration and drilling industry. The Longnecker data provided a background for the committee to use in benchmarking, or comparing, our programs with other independent exploration and production companies as well as certain drilling contractors.

The committee chose not to extend the engagement of Longnecker for 2008. This was due to the committee’s belief that it should find a consultant more familiar with the nature of the company’s differing business segments and therefore a better fit with the committee and the company, and was not due to any specific

disagreement over the direction of the recommended compensation program or the quality of Longnecker’s services. During the first quarter of 2008, the committee interviewed several different compensation consultants and, in March 2008, the committee hired Mercer Human Resources Consulting, LLC (“Mercer”). Mercer was engaged primarily to assist the committee in the development of a performance-based plan focusing on the annual bonus incentive component of the compensation package for the named executive officers. A more thorough discussion of Mercer’s engagement is discussed above at “Elements of our compensation program – October 2008 adoption of Unit Corporation Annual Performance Bonus Plan” on page 19. In the area of compensation, Mercer had no prior relationship with the company, its executive officers, or the compensation committee, and it has never advised management of the company. For its services to the committee, Mercer received no compensation other than its fee for consulting with the committee on executive compensation matters.

Role of chief executive officer. At the annual December committee meeting, committee members review the information and recommendations submitted to them before the meeting by our chief executive officer regarding the compensation of our other named executive officers. Additionally, our chief executive officer meets with the committee and discusses his recommendations. The chief executive officer does not make a recommendation regarding his compensation. The executives subject to the chief executive officer’s recommendations are not present at the time of these deliberations. Following the chief executive officer’s review and departure from the meeting, the committee members then discuss the recommendations, review the financial and operational results of the company for the year and also discuss their opinions regarding the compensation for the chief executive officer. The compensation committee has the authority to accept, reject or adjust the recommendations made to it by the chief executive officer. The committee then makes its

determinations regarding the compensation for the executive officers (which may or may not involve the grant of an equity award). The committee’s determinations are then submitted to the full board at its meeting held immediately following the committee’s December meeting. The full board then ratifies (and approves, if required) the committee’s determination regarding the compensation for the named executive officers.

Salaries for 2008

Salaries for the named executive officers for fiscal year 2008 were determined by the compensation committee at its December 2007 meeting. In addition, at that meeting the committee also awarded an annual cash bonus for 2007 and long-term incentive awards to our named executive officers.

Salaries for 2008 were determined by reference to data provided by Longnecker in its December 2007 report, along with input from our chief executive officer. In the Longnecker report, information was presented about the compensation arrangements for executives at 14 companies in the oil and gas exploration and drilling industry. The Longnecker data provided a background for the committee to use in benchmarking, or comparing, our programs with other independent exploration and production companies as well as certain drilling contractors. The 14 companies that served as our peer group in the study are:

Cabot Oil & Gas Corporation (COG)

Cimarex Energy Co. (XEC)

Denbury Resources Inc. (DNR)

Forest Oil Corporation (FST)

Grey Wolf, Inc. (GW)

Helmerich & Payne, Inc. (HP)

Newfield Exploration Co. (NFX)

Parker Drilling Company (PKD)

Patterson-UTI Energy, Inc (PTEN)

Pioneer Drilling Company (PDC)

St. Mary Land & Exploration Co. (SM)

Stone Energy Corporation (SGY)

Whiting Petroleum Corporation (WLL)

W&T Offshore, Inc. (WTI).

Longnecker selected these companies for comparison because they were publicly traded companies similar to us in industry, projected revenues, assets, and market capitalization.

Additionally, information from the following published surveys was incorporated into Longnecker’s 2007 study:

Results of Longnecker study. Results of the Longnecker’s study regarding our named executive officers’ 2007 salaries, individually and as a group, as compared to the peer group’s 50^th and 75^th percentiles, is set forth in the table below.

Recommendations of compensation consultant. The Longnecker report recommended that the committee increase the named executive officer’s salaries to a level consistent with at least that for the 50^th Percentile contained in its report.

Recommendations of chief executive officer. As set forth in “Role of chief executive officer,” at page 22, our chief executive officer makes recommendations to the committee as to the compensation packages for the named executive officers other than himself. At the December 2007 committee meeting, Mr. Pinkston presented a schedule of recommended compensation that differed from that recommended by Longnecker. The primary basis for Mr. Pinkston’s recommendation was his view that the underlying data used by Longnecker did not adequately

match the comparable responsibilities of certain of our named executive officers. For example, Mr. Guidry, the company’s fourth-highest ranking executive and the head of the company’s exploration and operation segment, could not accurately be compared to the fourth-highest ranked person at a company that operates only as an oil and gas exploration company. In other words, Mr. Pinkston believed that the Longnecker results did not fully take into account the multi-segmented operation of the company as compared to single segment peer companies.

Consequently, our chief executive officer recommended that the salaries awards for the other named executive officers, as compared to the 50% of market set forth in the Longnecker study, be as follows:

Mr. Pinkston’s recommendations were based on the general constraints of the total amount of the compensation recommended by Longnecker but reflected a reallocation of that compensation. In the aggregate, Mr. Pinkston’s recommendations fell generally within the 50^th and 75^th percentiles of the Longnecker peer group, though within the group certain individuals were above and below those percentiles. Mr. Pinkston recommended that Mr. Guidry and Mr. Cromling receive a more significant proportion of the total aggregate recommended increase than that proposed by Longnecker, based on his belief that their specific compensation recommendations were still below market when compared to data of persons whose responsibilities actually reflected that of Mr. Guidry and Cromling. The recommendation provided a level of internal consistency in the relative salaries of the named executive officers, with Mr. Schell at a salary of $300,000 and each of the other named executive officers at a salary of $290,000. The committee adopted Mr. Pinkston’s recommendation regarding the salaries for our other named executive officers for 2008. Mr. Adcock recommended to the committee that Mr. Pinkston’s salary for 2008 be set at $600,000. This was in between the 50^th percentile ($572,207) and 75^th percentile ($666,734) figures cited in Longnecker’s report. The committee agreed and approved Mr. Pinkston’s salary increase to $600,000 for 2008. As a result, the salaries for our named executive officers for 2008 were set as follows:

2008 compensation decisions pertaining to annual bonus awards and incentive awards for 2008 and salaries for 2009

In the wake of the dramatic downturn in both the national and global economies and the drop in oil and natural gas prices during the fourth quarter of 2008, the company’s senior management

recommended, and the compensation committee and the board of directors concurred in their respective meetings in December, 2008, that the named executive officers, like all other company employees, would be subject to a freeze on salary, such that 2009 salaries would not change from those paid in 2008. Accordingly, the salaries of the named executive officers for 2009 are as follows: Mr. Pinkston – $600,000; Mr. Schell – $300,000; Mr. Merrill – $290,000; Mr. Cromling – $290,000; and Mr. Guidry – $290,000. In addition, it was determined that no annual bonuses or long term incentive awards would be authorized.

The decisions to take no action with regard to the compensation of the named executive officers was based solely as a result of the significant economic conditions and was not tied to the company’s overall 2008 performance which the committee noted was in many respects very good.

Company-wide revenues for 2008 reached an all-time record and, excluding the ceiling test write down required due to commodity price decreases industry-wide, the company would have achieved record net income and earnings per share. During 2008, the company’s drilling segment added three new 1,500 hp diesel-electric drilling rigs to its fleet. It averaged 103.1 drilling rigs working, an increase of 4% from the 99.4 rigs working during 2007. Drilling rig utilization for 2008 was 79% compared to 80% at year-end 2007. The company’s exploration and production segment had a record total proved reserves of 569.4Bcfe of natural gas as of year-end 2008, reflecting an 11% increase over 2007 reserves, even including the negative price revision of approximately 23 Bcfe taken due to significantly lower commodity prices at the end of 2008 compared to 2007. For its 25^th consecutive year, the company exceeded its annual goal of replacing at least 150% of the year’s production with new reserves. The 2008 production replacement was 186%, or 223% excluding the impact of the negative price revision. The company’s mid-stream segment completed the installation of one natural gas processing plant and added two new gathering systems during 2008. Additionally, the

mid-stream segment increased processing volumes by 35% and liquid sold volumes by 51%, respectively, over 2007. Gathering volumes were down 10% in 2008 compared to 2007, but operating profits increased 66%, to $31.3 million compared to 2007. The company added an additional 94 miles of pipeline in 2008, increasing by 14% the total miles of its pipeline and connecting an additional 99 wells to its gathering systems.

Executive stock ownership policy

Although we encourage our named executive officers to own stock or other equity interests in the company, we do not require them to own stock or other equity interests in the company. During the course of their employment, all named executive officers have received compensation in the form of stock or other equity interests. We have a policy of prohibiting our executive officers (and directors) from engaging in short-term or speculative transactions in our securities, including hedging activities.

No backdating, springloading or repricing of options

We do not backdate options, grant options retroactively or reprice existing options. In addition, we do not coordinate grants of options so that they are made before announcement of favorable information, or after announcement of unfavorable information. Option and stock awards are granted at fair market value on the date the award is approved. The company’s general practice is to grant awards only on an annual grant basis, although there are occasions when grants have been made on other dates, such as in connection with a newly-hired employee.

Director compensation

In setting non-employee director compensation, the compensation committee recommends the form and amount of compensation to the Board of Directors and the Board of Directors makes the final determination. In considering and recommending the compensation of non-employee directors, the compensation committee considers such factors as it deems appropriate, including historical compensation information, level of compensation necessary to

attract and retain non-employee directors meeting our desired qualifications and market data. To date, the compensation committee has not used a consultant to aid it in its determination of these fees.

Accounting and tax considerations

Before 2006, the primary form of equity compensation that we awarded consisted of stock options. We selected this form of award because of the favorable accounting and tax treatment and the expectation of employees in our industry. However, beginning in 2006, the accounting treatment of stock options changed as a result of Statement of Financial Accounting Standards No. 123(R), making the accounting treatment of stock options less attractive. As a result, since 2006 we have used stock appreciation rights, restricted stock or a mix of the two.

Section 162(m)

The committee considers the potential effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our named executive officers. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for certain executive officers, unless the compensation is performance-based.

The committee has examined our current executive compensation program and understands that most of the compensation paid to our named executive officers may not be deductible under Section 162(m). However, the committee does not believe that the loss of any deductions will be likely to have a material negative financial impact on the company. The estimated net impact on the company for 2008 was approximately $401,135. The committee also believes that it is important to retain the flexibility to motivate performance through awards or programs that do not meet all of the requirements of Section 162(m). The committee will continue to monitor the issue of deductibility, and make adjustments to our executive compensation programs as it feels appropriate and warranted.

Nonqualified deferred compensation

On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law

changing the tax rules applicable to nonqualified deferred compensation arrangements. A more detailed discussion of our nonqualified deferred compensation program is provided on page 33 under the heading “Non-qualified deferred compensation.”

No employment agreements

We currently do not have any employment agreements with our named executive officers.