press release

Spirit Energy 76 significantly expands Gulf of Mexico shelf and deepwater portfolio with 77 new Federal lease blocks

Sugar Land, Texas, Aug. 26, 1998 -- Spirit Energy 76, Unocal Corporation's U.S. Lower 48 exploration and production unit, today said that it is the apparent high bidder, solely or with partners, for interests in 62 Gulf of Mexico deepwater and 15 shelf blocks in the OCS Lease Sale No. 171 conducted today by the U.S. Minerals Management Service (MMS).

Spirit was the apparent high bidder, solely or with partners, on 62 out of 69 deepwater tracts, and on 15 of 15 shelf blocks. The company exposed a net total of $216 million, with apparent high bids amounting to $185 million. Total industry high bids in the sale are estimated by the MMS at $553 million.

The sale increased Spirit's deepwater portfolio by nearly 50 percent to a total of 188 blocks.

"This lease sale provides a solid underpinning for Spirit Energy's growth plans, and we are very pleased with our results," said Jack. W. Schanck, president of Spirit. "Our performance in this lease sale represents a solid investment in the foundation we are laying for our future reserve and production growth."

Prior to the sale, Spirit Energy 76 had a deepwater portfolio of 126 blocks. The company recorded its second deepwater discovery in July at prospect Leo and is currently participating in the drilling of three other deepwater wells.

"This success is an important milestone for Spirit Energy as we continue our transformation into a world-class exploration company," said Dave Johnson, Spirit's vice president for exploration. "Today's results show that we are an aggressive competitor that is serious about building a distinctive exploration position with significant resource potential."

Addressing the company's deepwater bids, Johnson said: "We have secured a dominant place in the emerging subsalt trend, which plays to our technological strengths. We are strongly positioned in the highly contested Perdido Fold Belt Trend, which, though not without risks, holds a real possibility for major fields. In addition, we've added two low-risk, high-potential, near-term drillable prospects to our existing portfolio."

Johnson said the company's goal is to find 400 million barrels of oil equivalent in the Gulf of Mexico's deepwater by 2002.

He added that Spirit has the land position and employee team in place to achieve finding and development costs of about $4.50-$5.00 per barrel of oil equivalent (BOE) in the deepwater and $5.00-$5.50 per BOE overall by 2002.

All of the bids announced today are subject to final approval by the MMS.

Spirit Energy 76 has net production of about 180,000 BOE per day and operates 330 offshore platforms with 2,700 active wells in 355 fields in the Gulf of Mexico region. The unit employs approximately 1,300 people. Unocal is one of the world's largest independent oil and gas exploration and production companies, with major resource development, power plant and pipeline projects in Asia, the U.S. Gulf of Mexico region and Latin America.

Forward-looking statements regarding exploration activities, future production, drilling success and capital spending in this news release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.

Updated: August 1998