press release

Unocal reports 1Q 1998 earnings; higher oil and gas production levels forecast

Download the quarterly financial tables (MS Excel 5.0 workbook in .zip format - 49KB)

El Segundo, Calif., April 28, 1998 - Unocal Corporation today reported first quarter 1998 earnings from continuing operations, excluding special items (detailed in attached tables), of $72 million, or 30 cents per share (basic and diluted). This compares with first quarter 1997 earnings from continuing operations, excluding special items, of $190 million, or 76 cents per basic share (74 cents diluted).

"In this quarter, the company's worldwide oil and gas operations were impacted significantly by lower crude oil and natural gas prices, lower U.S. natural gas production, and higher dry hole costs and exploration expenses," said Roger C. Beach, Unocal chairman and chief executive officer.

"At the end of the quarter we saw natural gas prices start to rise again," Beach said. "In addition, net production of our Spirit Energy 76 unit averaged 182,000 barrels-of-oil-equivalent (BOE) per day in March. This compares with an average of 173,000 BOE per day in January and February when we had production curtailments arising from pipeline and mechanical well problems." For the full-year 1998, Spirit Energy 76 net production should average about 178,000 BOE per day.

"We are well on our way toward meeting our goal of replacing production with new reserves in the U.S. Lower 48," Beach said. He noted that Spirit Energy's capital expenditures totaled $120 million in the first quarter, up from only $30 million last year. "The higher capital expenditures reflect our increased exploration program in the Gulf Coast region that has already begun to yield success," he said.

In the second quarter 1998 and beyond Unocal expects to begin new international production. The AIOC consortium has started crude oil sales from the Caspian Sea (Unocal, 10% working interest), and Unocal expects to begin new gas production from Myanmar and Bangladesh beginning in the third quarter.

In Thailand, the company's gross natural gas production is currently running at a record level of more than 1.1 billion cubic feet per day (Unocal, 65% average net working interest) as the government there moves ahead with its plan to increase use of indigenous natural gas while reducing imports of fuel oil for electrical generation.

Beach noted that Unocal had higher earnings from geothermal operations, which reflected the new power plants that came on line in Indonesia in 1997. In addition, the company had lower corporate and unallocated expenses.

Unocal's reported net earnings for the first quarter, including special items (see attached tables) and discontinued operations, were $18 million, down from $144 million a year ago. Reported basic earnings per share were 7 cents, compared with 57 cents in the first quarter 1997. Reported diluted earnings per share were also 7 cents, compared with 56 cents last year.

Net cash provided from operating activities, excluding working capital changes, was $282 million, off from $415 million in 1997. The lower cash flow was primarily the result of lower commodity prices and reduced domestic production levels.

Unocal is a leading global oil and gas exploration and production company with significant pipeline and power plant project developments worldwide. Forward-looking statements, including estimates of future exploration and production activities other business plans and forecasts in this news release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.

CONDENSED CONSOLIDATED EARNINGS STATEMENT (UNAUDITED)   
                                                 For the Three Months   
                                                    Ended March 31   
    Millions of dollars except   
    per share amounts                             1998           1997    
     Total revenues                          $1,207         $1,456   
     Costs and other deductions               1,110          1,119   
     Earnings from continuing operations   
       before income taxes                       97            337   
     Income taxes                                79            149   
     Earnings from continuing operations         18            188   
     Earnings/(loss) from discontinued   
       operations (net of tax)                   --           (44)   
     Net earnings                               $18           $144    
     Basic earnings/(loss) per common share (a)   
        Continuing operations                 $0.07          $0.75   
        Discontinued operations                  --         (0.18)   
     Basic net earnings per share             $0.07          $0.57    
       Diluted earnings/(loss) per common   
        share (b) (c)   
          Continuing operations               $0.07          $0.73   
          Discontinued operations                --         (0.17)   
     Diluted net earnings per share           $0.07          $0.56    
     (a) Weighted average shares -   
          basic (millions).                     241            251   
     (b) Weighted average shares -   
          diluted (millions).                   243            265   
     (c) Distributions on preferred   
          securities (net of taxes)   
          excluded in numerator.                $--             $6   
          In 1998, the effect of assumed   
          conversion of preferred securities on   
          earnings per share is antidilutive.     
    
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)   
                                                 Mar. 31         Dec. 31   
    Millions of dollars                          1998          1997    
     Assets   
     Cash and cash equivalents                  $275          $338   
     Other current assets                      1,098         1,163   
     Investments and long-term receivables     1,128         1,113   
     Properties - net                          4,882         4,816   
     Other assets                                195           100   
         Total assets                         $7,578        $7,530    
     Liabilities and Equity   
     Current liabilities                        $982        $1,160   
     Long-term debt                            2,427         2,169   
     Deferred income taxes                       132           137   
     Other deferred credits and liabilities    1,269         1,228    
     Convertible preferred securities            522           522    
     Stockholders' equity                      2,246         2,314   
         Total liabilities and equity         $7,578        $7,530      
    
CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED)   
                                                   For the Three Months   
                                                    Ended March 31 (a)   
    Millions of dollars                          1998             1997    
    Cash flows from operating activities   
        Net earnings                          $18             $144   
        Adjustments to reconcile net   
          earnings to net cash provided   
          by operating activities   
             Loss on disposal of   
               discontinued   
               operations (before-tax)         --               71   
             Depreciation, depletion and   
               amortization                   181              211   
             Dry hole costs                    50               16   
             Deferred income taxes             13               10   
             Gain on sales of assets   
                (before-tax)                   --             (10)   
             Other                             20             (27)   
         Working capital and other changes   
           related to operations            (188)             (81)   
             Net cash provided by   
               operating activities            94              334    
    Cash flows from investing activities   
            Capital expenditures   
             (includes dry hole costs)      (326)            (286)   
            Proceeds from sale of   
             discontinued operations           --            1,390   
            Proceeds from asset sales           4               16   
            Net cash (used in)/provided by   
              investing activities          (322)            1,120    
    Cash flows from financing activities   
            Net increase in long-term debt    262              175   
            Dividends paid                   (48)             (50)   
            Repurchase of common stock       (48)             (46)   
            Other                             (1)              (1)   
            Net cash provided by   
             financing activities             165               78    
    Increase/(decrease) in cash and   
     cash equivalents                        (63)            1,532   
    Cash and cash equivalents at   
     beginning of period                      338              217   
    Cash and cash equivalents at   
     end of period                           $275           $1,749    
    (a) Cash flows related to discontinued operations have not been segregated  
     
CONDENSED CAPITAL EXPENDITURES (UNAUDITED)   
     Millions of dollars    
     United States Exploration & Production   $136              $33   
     International Exploration & Production    168              163   
     Geothermal Operations                       6               20   
     Diversified Business Group                 10                9   
     New Ventures (Non-E & P)                   --                5   
     Corporate & Unallocated                     6                7   
     Discontinued Operations                    --               49   
           Total (b)                          $326             $286    
     (b) Includes capitalized interest of:      $8              $ 5     
  
DISCRETIONARY CASH FLOW (UNAUDITED)   
                                                     For the Three Months   
                                                       Ended March 31 (a)   
    Millions of dollars                                1998          1997    
     Net earnings                                    $18        $144    
     Adjustments to net earnings
          Depletion, depreciation &   
            amortization                             181         211
  
          Dry hole costs                              50          16   
          Deferred income taxes                       13          10   
          (Gain) on sales of assets                   --        (10)   
          Exploration expenses                        47          28   
          Proceeds from asset sales                    4       1,406   
          Environmental and litigation provision      52          18   
          Environmental and litigation payments     (20)        (18)   
          Loss on disposal of discontinued   
            operations                                --          71   
          Other                                     (12)        (27)   
              Total discretionary cash flow         $333      $1,849    
    (a)  Cash flows related to discontinued operations have not been segregated 

The preceding table of discretionary cash flow is provided for analysts and others in the investment community as a supplement to conventional financial data prepared in accordance with generally accepted accounting principles. Discretionary cash flow does not give effect to significant uses of cash, including those for capital projects, debt reduction and regular dividends, some of which result from previous commitments, and should only be considered in conjunction with the full presentation of condensed consolidated cash flows on the preceding page.

  
RESULTS OF OPERATIONS FOR EXPLORATION AND PRODUCTION ACTIVITIES (UNAUDITED)   
                                            For the Three Months   
                                            Ended March 31, 1998   
                             Spirit                       Other   
                            Energy 76  Alaska   Far East  International  Total  
     Millions of dollars    
     Sales (includes intercompany sales)   
        Crude oil and   
         condensate             $55      $28      $93       $30      $206   
        Natural gas             143       18      141         9       311   
        Natural gas   
         liquids                 11        1        3         1        16   
        Other                     1       --       --        --         1   
        Total                   210       47      237        40       534   
        Other revenue             3        2      (8)         5         2   
          Total revenues        213       49      229        45       536   
     Production costs            44       19       26        21       110   
     Exploration   
      expenses                   14       --       20        11        45   
     Dry hole costs              39       --        3         5        47   
     Depreciation, depletion   
      & amortization             84        8       54        18       164   
     Other operating   
      expenses                   16        3       13         9        41   
         Results of operations   
           before income   
           tax                  $16      $19     $113     $(19)      $129      
                                
     Sales (includes intercompany sales)   
       Crude oil and   
        condensate        $91        $56    $117          $45        $309   
       Natural gas        224         18     165           14         421   
       Natural gas   
        liquids            16          1       9            1          27   
           Total          331         75     291           60         757   
     Other revenue          3         --       1           10          14   
     Gain on asset   
      sales                 3         --      --            1           4   
           Total   
            revenues      337         75     292           71         775   
     Production costs      48         24      30           19         121   
     Exploration   
      expenses             10         --       8            9          27   
     Dry hole costs         6         --       9            1          16   
     Depreciation, depletion   
      & amortization      102         15      61           17         195   
     Other operating   
      expenses             19          2      11            8          40   
     Results of operations   
      before income   
      tax                $152        $34    $173          $17        $376     
  
OPERATING HIGHLIGHTS (UNAUDITED)   
                                             For the Three Months   
                                                Ended March 31   
                                         1998                    1997    
     Net daily production   
     Crude oil and condensate (thousand barrels daily):   
     United States   
      Spirit Energy 76                 44                       48   
      Alaska                           30                       34   
         Total United States           74                       82   
     International   
      Far East (a)                     89                       93   
      Other                            31                       27   
         Total International          120                      120    
         Total Worldwide              194                      202    
     Natural gas (million cubic feet daily):   
       United States   
        Spirit Energy 76              788                      910   
        Alaska                        138                      156   
            Total United States       926                    1,066   
     International   
        Far East (a)                  826                      805   
        Other                          52                       67   
            Total International       878                      872    
            Total Worldwide         1,804                    1,938    
     Natural gas liquids   
      (thousand barrels daily)         18                       20   
     Geothermal   
      (million kilowatt-hours daily)   21                       16    
     Average sales prices (b)   
       Crude oil and condensate (per barrel):   
        United States   
         Spirit Energy 76          $13.94                   $20.79   
         Alaska                     10.84                    18.51   
           Total United States      12.66                    19.85   
        International   
         Far East                  $13.97                   $21.03   
         Other                      12.30                    20.07   
           Total International      13.50                    20.75   
           Total Worldwide         $13.15                   $20.32    
     Natural gas (per mcf):   
        United States   
          Spirit Energy 76          $2.14                    $2.78   
          Alaska                     1.47                     1.35   
           Total United States       2.03                     2.57   
     International   
        Far East                    $2.03                    $2.40   
        Other                        2.09                     2.22   
           Total International       2.04                     2.38   
           Total Worldwide          $2.04                    $2.49    
     (a) Includes host country share in Indonesia of:   
        Crude oil and condensate       18                       30   
        Natural gas                    33                       33   
     (b) Excludes Global Trade margins 
    Agricultural products production   
      volumes (thousand tons)   
       Ammonia                                  374            391   
       Urea                                     260            275   
       Other products                           175            207    
    Agricultural products sales volumes   
     (thousand tons)   
       Ammonia                                  220            156   
       Urea                                     325            210   
       Other products                           174            252     

EARNINGS BY BUSINESS SEGMENT (UNAUDITED)   
                                 1st Quarter of 1998     1st Quarter of 1997   
                              Before-tax  After-tax   Before-tax     After-tax  
    Millions of dollars    
     Exploration and Production   
       United States   
         Spirit Energy 76        $16        $10         $152        $95   
         Alaska                   19         12           34         21   
       International              94         13          190        102    
     Global Trade                  9          6           11          6    
     Geothermal and Power   
      Operations                  22         14           10          6   
     Diversified Business Group   
        Agricultural Products     13          9           30         20   
        Carbon and Minerals       18         15           12         10   
        Pipelines                 18         15           17         14   
        Other                     --         --            2          1   
     Corporate and Unallocated   
        Administrative and   
         general expense        (16)       (11)         (20)       (13)   
        Net interest expense    (33)       (26)         (54)       (42)   
        Environmental and   
         litigation expense     (52)       (33)         (18)       (11)   
        New Ventures            (11)        (7)         (11)        (7)   
        Other                     --          1         (18)       (14)   
      Earnings from continuing   
       operations                 97         18          337        188   
      Loss from discontinued   
       Operations                 --         --         (71)       (44)   
           Total                 $97        $18         $266       $144    
    Exploration and Production - involves the exploration for, and the
  production of crude oil and natural gas.   
    Global Trade - handles the company's worldwide crude oil, condensate and
  natural gas trading and marketing activities.  Global Trade also purchases
  crude oil, condensate and natural gas from the company's joint venture
  partners, royalty owners and other unaffiliated oil and gas producers for
  resale.
    Geothermal and Power Operations - involves the exploration for, and the
  production and sale of, geothermal resources, and the construction and
  operation of electrical power plants.   
    Diversified Business Group:
  
    Agricultural Products - involves the manufacture, transportation and
  marketing of nitrogen-based products for agricultural and industrial use.   
    Carbon and Minerals - involves the production and marketing of petroleum
  coke, graphites and specialty minerals.   
    Pipelines -principally includes the company's equity interests in affiliated
  pipeline companies.   
    Other - principally included the company's equity interest in The UNO-VEN
  Company, prior to its restructuring in May 1997.      

SPECIAL ADJUSTMENTS (UNAUDITED)   
                                 1st Quarter of 1998      1st Quarter of 1997   
    Millions of dollars         Before-tax  After-tax    Before-tax  After-tax  
     Reported earnings          $97        $18        $266        $144   
     Less: Special items   
       Exploration and Production   
        United States   
         Spirit Energy   
          Asset sales            --         --           3           2   
        International   
          Asset sales            --         --           1           1   
          Deferred tax   
           adjustment            --       (21)          --          --   
       Diversified Business Group   
        Carbon and Minerals   
          Environmental and   
           litigation           (1)        (1)          --          --   
      Corporate and Unallocated   
          Asset sales            --         --           6           4   
          Environmental and   
           litigation          (51)       (32)        (14)         (9)   
      Discontinued Operations   
          Net loss on disposal   --         --        (71)        (44)   
      Total special items      (52)       (54)        (75)        (46)   
     Adjusted earnings from   
      continuing operations    $149        $72        $341        $190    
   
 EARNINGS BY BUSINESS SEGMENT EXCLUDING SPECIAL ADJUSTMENTS (UNAUDITED)   
                              1st Quarter of 1998         1st Quarter of 1997   
                             Before-tax    After-tax     Before-tax  After-tax  
     Millions of dollars except share amounts    
     Exploration and Production   
        United States   
          Spirit Energy 76      $16        $10         $149        $93   
          Alaska                 19         12           34         21   
        International            94         34          189        101    
     Global Trade                 9          6           11          6   
     Geothermal and Power   
      Operations                 22         14           10          6   
     Diversified Business Group   
        Agricultural Products    13          9           30         20   
        Carbon and Minerals      19         16           12         10   
        Pipelines                18         15           17         14   
        Other                    --         --            2          1   
     Corporate and Unallocated   
        Administrative and   
         general expense       (16)       (11)         (20)       (13)   
        Net interest expense   (33)       (26)         (54)       (42)   
        Environmental and   
         litigation expense     (1)        (1)          (4)        (2)   
        New Ventures           (11)        (7)         (11)        (7)   
        Other                    --          1         (24)       (18)    
     Earnings from continuing   
      operations                149         72          341        190    
     Basic adjusted earnings from continuing operations   
      per share of common stock          $0.30                   $0.76   
     Diluted adjusted earnings from continuing operations   
      per share of common stock (a)      $0.30                   $0.74   
     Distributions on preferred securities (net of tax) excluded   
      in numerator for diluted earnings   
      per share (a)                       $ --                      $6   
     Basic weighted average shares         241                     251   
     Diluted weighted average shares       243                     265    
    (a)  In 1998, the effect of assumed conversion of preferred securities on
  earnings per share is antidilutive.

Updated: April 1998