Unocal 1Q 2003 net earnings up 500% from 1Q 2002 on higher prices; production up 4.4% vs. 4Q 2002
Download 1Q earnings news release (pdf format)
El Segundo, Calif., April 24, 2003 - Unocal Corporation (NYSE: UCL) today reported net earnings in the first quarter of $134 million, or 52 cents per share (diluted). This compares with net earnings of $22 million, or 9 cents per share (diluted), in the same period a year ago and $96 million, or 38 cents per share (diluted), in the fourth quarter 2002.
Unocal's adjusted after-tax earnings were $229 million, or 87 cents per share (diluted). This compares with the Thompson/First Call consensus (published April 22, 2003) of 79 cents per share. In the first quarter 2002, Unocal's adjusted after-tax earnings were $43 million, or 17 cents per share (diluted). Adjusted after-tax earnings are net earnings excluding special items, earnings from discontinued operations and cumulative effects of accounting changes. The accounting changes reflect adoption of SFAS No. 143, Accounting for Asset Retirement Obligations. All of the special items are detailed in the Adjusted After-tax Earnings table.
|CONSOLIDATED RESULTS (UNAUDITED)||1Q 2003||4Q 2002||1Q 2002|
|Millions of dollars except per share amounts|
|Earnings from continuing operations||$ 217||$ 96||$ 22|
|Earnings from discontinued operations||-||-||-|
|Cumulative effects of accounting changes||(83)||-||-|
|Net earnings||$ 134||$ 96||$ 22|
|Less: Earnings from discontinued operations||-||-||-|
|Less: Cumulative effects of accounting changes||(83)||-||-|
|Less: Special items||(12)||(27)||(21)|
|Adjusted after-tax earnings||$ 229||$ 123||$ 43|
|DILUTED EARNINGS PER SHARE DATA (UNAUDITED)|
|Net earnings per share:|
|Continuing operations||$ 0.82||$ 0.38||$ 0.09|
|Cumulative effects of accounting changes||(0.30)||-||-|
|Total net earnings per share||$ 0.52||$ 0.38||$ 0.09|
|Adjusted after-tax earnings per share||$ 0.87||$ 0.48||$ 0.17|
|REVENUES FROM CONTINUING OPERATIONS (UNAUDITED)||$ 1,827||$ 1,583||$ 1,049|
First quarter earnings factors
Unocal's first quarter 2003 adjusted after-tax earnings (compared with 1Q 2002) reflected higher natural gas and liquids prices. These positive factors were offset partially by higher dry hole costs, depreciation and depletion rates, and lower liquids production. First-quarter revenues from continuing operations were $1.83 billion, up from $1.05 billion in the first quarter 2002, primarily due to higher commodity prices for natural gas and liquids.
Unocal's EBITDAX for the first quarter 2003 was $828 million, or $3.05 per share (diluted). This compares with $457 million, or $1.87 per share (diluted), for the same period in 2002. EBITDAX is net earnings before interest, taxes, depreciation, depletion and amortization, asset impairments, exploration expenses, dry hole costs, special items, earnings from discontinued operations and cumulative effects of accounting changes. EBITDAX is commonly used by investors and analysts to facilitate comparison of companies like Unocal that use the "successful efforts" accounting method with other exploration and production companies that use the "full-cost" method.
Worldwide, Unocal's consolidated net daily production in the first quarter 2003 averaged 471,000 barrels-of-oil equivalent (BOE) per day, compared with 477,000 BOE per day a year ago. When compared with the fourth quarter 2002, production was up 4.4 percent from 451,000 BOE per day. This reflected increased production in Thailand and a 14-percent increase in the Gulf Region, as production ramped back up from hurricane related shut-ins in the fourth quarter 2002 and new deep shelf discoveries on the Jalapeo and Rio Grande projects came on production.
Unocal's worldwide average liquids price, including hedging, was $29.99 per barrel, up from $18.86 in the first quarter 2002. The company's average worldwide realized price for natural gas, including hedging, was $3.90 per thousand cubic feet (mcf), compared with $2.46 per mcf a year ago.
Cash flow from operating activities for the first quarter 2003 was $685 million, compared with $271 million for 2002.
Capital spending was $429 million for the first quarter 2003, compared with $390 million in the same period a year ago.
The company's total consolidated long-term debt (including current maturities) was $2.92 billion at March 31, 2003. This compares with $3.0 billion at year-end 2002. Cash and cash equivalents were $356 million at the end of the first quarter, up from $168 million at the end of 2002.
Earnings and production outlook
For the second quarter 2003, Unocal is forecasting adjusted after-tax earnings of 65 to 75 cents per share (diluted). This forecast compares with the Thompson/First Call consensus (published April 22, 2003) of 56 cents per share for the quarter. The second quarter forecast assumes average NYMEX benchmark prices of $29.75 per barrel of crude oil and $5.50 per million British thermal units (mmBtu) for North America natural gas for the period.
Unocal's second quarter adjusted after-tax earnings are expected to change 4 cents per share for every $1 change in its average worldwide realized price for crude oil and 2 cents per share for every 10-cent change in its average realized North America natural gas price, excluding the effect of hedging activities. The forecast also assumes pretax dry hole costs in the second quarter of $40 to $50 million.
The company's current estimate for second quarter 2003 production is between 460,000 and 470,000 BOE per day. For the full-year 2003, Unocal is forecasting adjusted after-tax earnings of $3.00 to $3.40 per share (diluted). This forecast compares with the Thompson/First Call consensus (published April 22, 2003) of $2.26 per share for the year. The full-year 2003 forecast assumes average NYMEX benchmark prices of $29.50 per barrel of crude oil and $5.90 per mmBtu for North America natural gas. Unocal's full-year adjusted after-tax earnings are expected to change 14 cents per share for every $1 change in its average worldwide realized price for crude oil and 7 cents per share for every 10-cent change in its average realized North America natural gas price, excluding the effect of hedging activities. The forecast also assumes pretax dry hole costs of $155 to $185 million and that pretax pension-related expenses will increase over 2002 by approximately $55 million to $60 million.
Unocal has completed the divestiture of various properties in Canada, onshore U.S. and the Gulf of Mexico and has additional property divestitures pending or planned. So far this year, net proceeds from the completed divestitures are $64 million, with an associated production loss of approximately 5,000 BOE per day.
Adjusted for the divestitures, full-year 2003 production is expected to average 475,000 to 490,000 BOE per day. Unocal continues to expect production will be at the lower end of the forecasted range. The company will make additional adjustments in this range as further divestitures are completed. The expected increase over the 2002 level reflects the start of new oil production from the West Seno field in Indonesia late in the second quarter.
Unocal's total actual production for the year could be impacted by cost recovery volume fluctuations under its various foreign production-sharing contracts due to changes in commodity prices, changes in demand for gas in Thailand and production and exploration performance in the Gulf of Mexico.
The second quarter and full-year adjusted after-tax earnings forecasts exclude special items. The first quarter special items are detailed in the Adjusted After-tax Earnings table. Because of the inherent uncertainty related to special items, determining whether or when they will occur and quantifying their dollar impact, Unocal is unable to predict them and therefore does not forecast net earnings.
About Unocal Corporation
Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal oil and gas activities are in North America and Asia.
Conference call/financial database
Unocal will webcast its quarterly earnings conference call today at 1 p.m. PDT (4 p.m. EDT) over the Internet. To listen to the live webcast, go to the Investor Information section of the Unocal web site. Replays of the conference call, including questions and answers, will be available.
Complete detailed financial tables for the first quarter 2003 and the comparable prior periods are available in the "Quarterly Fact Book," which is posted in the Data Warehouse in the Investor Information section of the company's web site. The Quarterly Fact Book is also available upon request from Unocal Investor Relations.
This news release contains certain forward-looking statements about expected adjusted after-tax earnings, production rates, commodity prices, dry hole costs, divestitures and pension costs. These statements are not guarantees of future performance. The statements are based upon Unocal's current expectations and beliefs and are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results could differ materially as a result of changes in commodity prices; the levels of the company's oil and gas production; the extent of the company's operating cash flow and other capital resources available to fund its capital expenditures; regulatory, geological, operating and economic considerations; and other factors discussed in Unocal's 2002 Annual Report on Form 10-K and subsequent reports filed with the U.S. Securities and Exchange Commission. Unocal undertakes no obligation to update the information in this news release.
Investors are urged to consider closely the disclosure in Unocal's 2002 Annual Report on Form 10-K and other reports filed with the SEC (SEC File No. 1-8483). Copies of the company's SEC filings are available from the company by calling 800-252-2233 or from the SEC by calling 800-SEC-0330. The reports are also available on the Unocal web site.
CONSOLIDATED EARNINGS (UNAUDITED) For the Three Months Ended March 31, Millions of dollars except per share amounts 2003 2002 Revenues Sales and operating revenues $1,813 $1,035 Interest, dividends and miscellaneous income 11 12 Gain on sales of assets 3 2 Total revenues 1,827 1,049 Costs and other deductions Crude oil, natural gas and product purchases 684 295 Operating expense 294 299 Administrative and general expense 51 43 Depreciation, depletion and amortization 260 224 Asset impairments -- -- Dry hole costs 71 28 Exploration expense 55 59 Interest expense 38 51 Property and other operating taxes 22 16 Distributions on convertible preferred securities of subsidiary trust 8 8 Total costs and other deductions 1,483 1,023 Earnings from equity investments 43 37 Earnings from continuing operations before income taxes and minority interests 387 63 Income taxes 168 40 Minority interests 2 1 Earnings from continuing operations 217 22 Earnings from discontinued operations -- -- Cumulative effects of accounting changes (a) (83) -- Net earnings $134 $22 Basic earnings per share of common stock (b) Continuing operations $0.84 $0.09 Net earnings $0.52 $0.09 Diluted earnings per share of common stock (c) Continuing operations $0.82 $0.09 Net earnings $0.52 $0.09 Cash dividends declared per share of common stock $0.20 $0.20 (a) Net of tax (benefit) (48) -- (b) Basic weighted average shares outstanding (in thousands) 258,005 244,207 (c) Diluted weighted average shares outstanding (in thousands) 271,729 245,247 CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) At March 31, At December 31, Millions of dollars 2003 2002 Assets Cash and cash equivalents $356 $168 Other current assets - net 1,354 1,207 Investments and long-term receivables - net 1,038 1,044 Properties - net 8,114 7,879 Goodwill 125 122 Other assets 396 340 Total assets $11,383 $10,760 Liabilities and Stockholders' Equity Current liabilities (a) $1,869 $1,632 Long-term debt and capital leases 2,918 3,002 Deferred income taxes 631 593 Accrued abandonment, restoration and environmental liabilities 880 622 Other deferred credits and liabilities 844 816 Minority interests 275 275 Convertible preferred securities of a subsidiary trust 522 522 Stockholders' equity 3,444 3,298 Total liabilities and stockholders' equity $11,383 $10,760 (a) Includes current portion of LTD: 6 6 CONDENSED CONSOLIDATED CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, Millions of dollars 2003 2002 Cash Flows from Operating Activities Net earnings $134 $22 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion and amortization 260 224 Asset impairments -- -- Dry hole costs 71 28 Amortization of exploratory leasehold costs 24 22 Deferred income taxes 30 (23) Gain on sales of assets (pre-tax) (3) (2) Earnings applicable to minority interests 2 1 Cumulative effects of accounting changes 83 -- Other 30 (12) Working capital and other changes related to operations 54 11 Net cash provided by operating activities 685 271 Cash Flows from Investing Activities Capital expenditures (includes dry hole costs) (429) (390) Proceeds from sales of assets 66 28 Proceeds from sale of discontinued operations -- 2 Net cash used in investing activities (363) (360) Cash Flows from Financing Activities Long-term borrowings 16 399 Reduction of long-term debt and capital lease obligations (100) (123) Minority interests (2) (2) Proceeds from issuance of common stock 1 14 Dividends paid on common stock (52) (49) Other 3 (2) Net cash provided (used) by financing activities (134) 237 Net increase in cash and cash equivalents 188 148 Cash and cash equivalents at beginning of year 168 190 Cash and cash equivalents at end of period $356 $338 NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS 1st Q 2003 4th Q 2002 BY BUSINESS SEGMENT (UNAUDITED) Adjusted Adjusted Net After-Tax Net After-Tax Millions of dollars Earnings Earnings(a) Earnings Earnings(a) Exploration & Production North America U.S. Lower 48 (b) $111 $111 $(4) $41 Alaska 15 15 1 1 Canada 24 22 5 6 International Far East 121 121 111 111 Other 21 21 29 29 Trade (9) (9) 3 3 Midstream 18 18 45 15 Geothermal and Power Operations 12 12 5 5 Corporate and Other Administrative and General (23) (23) (18) (18) Interest Expense - Net (31) (31) (35) (35) Environmental and Litigation (17) (3) (26) (5) Other (25) (25) (20) (30) After-tax earnings (loss) from continuing operations 217 229 96 123 After-tax earnings from discontinued operations -- -- -- -- Cumulative effects of accounting changes (83) -- -- -- After-tax earnings (loss) $134 $229 $96 $123 (a) For a reconciliation to net earnings, see the Adjusted After-Tax Earnings table. (b) Includes earnings (loss) from: Onshore / Shelf 142 142 12 57 Deepwater (31) (31) (16) (16) OPERATING HIGHLIGHTS 1Q 4Q 1Q 2003 2002 2002 North America Net Daily Production Liquids (thousand barrels) U.S. Lower 48 (a) (b) 48 46 56 Alaska 22 23 25 Canada 18 18 18 Total liquids 88 87 99 Natural gas - dry basis (million cubic feet) U.S. Lower 48 (a) (b) 700 659 746 Alaska 61 68 101 Canada 97 91 90 Total natural gas 858 818 937 North America Average Prices (excluding hedging activities) (c) (d) Liquids (per barrel) U.S. Lower 48 $30.53 $25.20 $18.36 Alaska $33.48 $26.96 $18.61 Canada $28.44 $21.84 $16.52 Average $30.77 $24.94 $18.06 Natural gas (per mcf) U.S. Lower 48 $6.29 $3.77 $2.23 Alaska $1.20 $1.20 $1.57 Canada $5.64 $3.50 $2.34 Average $5.83 $3.51 $2.16 North America Average Prices (including hedging activities) (c) (d) Liquids (per barrel) U.S. Lower 48 $28.97 $25.19 $18.54 Alaska $33.48 $26.96 $18.61 Canada $28.44 $21.84 $16.52 Average $29.90 $24.94 $18.17 Natural gas (per mcf) U.S. Lower 48 $5.61 $3.75 $2.47 Alaska $1.20 $1.20 $1.57 Canada $5.33 $3.31 $2.25 Average $5.25 $3.47 $2.35 (a) Includes proportional interests in production of equity investees. (b) Includes minority interests of : Liquids 1 3 9 Natural gas 10 41 98 Barrels oil equivalent 2 10 25 (c) Excludes Trade segment margins. (d) Excludes gains/losses on derivative positions not accounted for as hedges and ineffective portions of hedges. OPERATING HIGHLIGHTS (CONTINUED) 1Q 4Q 1Q 2003 2002 2002 International Net Daily Production (e) Liquids (thousand barrels) Far East 55 53 53 Other (a) 21 21 20 Total liquids 76 74 73 Natural gas - dry basis (million cubic feet) Far East 875 823 822 Other (a) 107 96 75 Total natural gas 982 919 897 International Average Prices (f) Liquids (per barrel) Far East $29.69 $25.36 $19.28 Other $32.21 $27.55 $21.96 Average $30.11 $26.01 $19.86 Natural gas (per mcf) Far East $2.76 $2.77 $2.59 Other $2.83 $2.83 $2.48 Average $2.77 $2.78 $2.58 Worldwide Net Daily Production (a) (b) (e) Liquids (thousand barrels) 164 161 172 Natural gas - dry basis (million cubic feet) 1,840 1,737 1,834 Barrels oil equivalent (thousands) 471 451 477 Worldwide Average Prices (excluding hedging activities) (c) (d) Liquids (per barrel) $30.49 $25.44 $18.80 Natural gas (per mcf) $4.17 $3.12 $2.37 Worldwide Average Prices (including hedging activities) (c) (d) Liquids (per barrel) $29.99 $25.44 $18.86 Natural gas (per mcf) $3.90 $3.10 $2.46 (a) Includes proportional interests in production of equity investees. (b) Includes minority interests of : Liquids 1 3 9 Natural gas 10 41 98 Barrels oil equivalent 2 10 25 (c) Excludes Trade segment margins. (d) Excludes gains/losses on derivative positions not accounted for as hedges and ineffective portions of hedges. (e) International production is presented utilizing the economic interest method. (f) International did not have any hedging activities. ADJUSTED AFTER-TAX EARNINGS (UNAUDITED) 1Q 4Q 1Q Millions of dollars except per share amounts 2003 2002 2002 Net earnings $134 $96 $22 Less: Earnings from discontinued operations -- -- -- Cumulative effects of accounting changes (83) -- -- Earnings from continuing operations 217 96 22 Less: Special items Asset sales (E&P - North America - U.S. Lower 48) -- (28) 2 Asset sales (Midstream) -- 30 -- Asset sales (Corporate & Other) -- 14 -- Environmental and litigation provisions (Corporate & Other) (14) (25) (21) Insurance settlements (Corporate & Other) -- -- 2 Minority interests acquisition (E&P - North America - U.S. Lower 48) -- (8) -- Trading derivatives -- non-hedging (E&P - North America - Canada) 2 (1) (4) Uninsured losses (E&P - North America - U.S. Lower 48) -- (9) -- Total special items (12) (27) (21) Adjusted after-tax earnings $229 $123 $43 Adjusted after-tax earnings per share $0.87 $0.48 $0.17 The preceding table reconciles adjusted after-tax earnings to net earnings. Special items represent certain significant matters which positively or negatively impact net earnings that management determines to be not representative of the company's ongoing operations. Examples of such items which have generally been excluded in determining adjusted after-tax earnings include: gain/loss from major asset sales; environmental remediation costs primarily related to inactive, closed or previously owned company facilities and third party sites; costs or settlements associated with major restructuring plans; litigation settlement costs primarily associated with former company operations or closed/inactive facilities; significant asset impairments due to changes in commodity prices; material damage to company facilities or operations due to fire, explosion, earthquakes, storms or other 'acts of god' not covered by insurance; certain costs associated with major acquisitions including litigation and significant trading derivatives; insurance recoveries associated with former company operations or for costs incurred in prior years. Other companies may define special items differently; hence, we cannot assure that adjusted after-tax earnings are comparable with similarly titled amounts reported by other companies. EBITDAX (UNAUDITED) 1Q 4Q 1Q Millions of dollars except per share amounts 2003 2002 2002 Net Earnings $134 $96 $22 Less: Earnings from discontinued operations -- -- -- Cumulative effects of accounting changes (83) - -- Special items (12) (27) (21) Adjusted after-tax earnings 229 123 43 Add-backs to adjusted after-tax earnings: Depreciation, depletion and amortization 260 249 224 Asset impairments -- 20 -- Dry hole costs 71 26 28 Exploration expenses (including amortization of undeveloped leasehold costs) 55 66 59 Current income taxes 138 81 62 Deferred income taxes 37 10 (10) Interest expense (a) 38 45 51 EBITDAX $828 $620 $457 EBITDAX per share (diluted) $3.05 $2.43 $1.87 (a) Net of capitalized interest of: 16 13 9
Updated: April 2003