press release

Unocal 2Q 2003 net earnings up 55% from year earlier on higher prices

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EL SEGUNDO, Calif., July 29 -- Unocal Corporation (NYSE: UCL) today reported net earnings in the second quarter of $177 million, or 68 cents per share (diluted). This compares with net earnings of $114 million, or 46 cents per share (diluted), in the same period a year ago and $134 million, or 52 cents per share (diluted), in the first quarter 2003.

Unocal's adjusted after-tax earnings for the second quarter 2003 were $191 million, or 73 cents per share (diluted). This compares with the Thomson/First Call consensus (published July 28, 2003) of 69 cents per share. Unocal's adjusted after-tax earnings were $134 million, or 55 cents per share (diluted), in the second quarter 2002 and $229 million, or 87 cents per share, in the first quarter 2003. Adjusted after-tax earnings are net earnings excluding special items, earnings from discontinued operations and cumulative effects of accounting changes. All of the special items are detailed in the Adjusted After-tax Earnings table.

     CONSOLIDATED RESULTS (UNAUDITED)               2Q        1Q        2Q
     Millions of dollars except                    2003      2003      2002
      per share amounts
     Earnings from continuing operations           $169      $217      $113
     Earnings from discontinued operations            8        --         1
     Cumulative effects of accounting changes        --       (83)       --
     Net earnings                                   177       134       114
      Less: Earnings from discontinued operations     8        --         1
      Less: Cumulative effects of
       accounting changes                            --       (83)       --
      Less: Special items                           (22)      (12)      (21)
     Adjusted after-tax earnings                   $191      $229      $134
     DILUTED EARNINGS PER SHARE DATA (UNAUDITED)
     Net earnings per share:
      Continuing operations                       $0.65     $0.82     $0.46
      Discontinued operations                      0.03        --        --
      Cumulative effects of accounting changes       --     (0.30)       --
     Total net earnings per share                 $0.68     $0.52     $0.46
     Adjusted after-tax earnings per share        $0.73     $0.87     $0.55
     REVENUES FROM CONTINUING OPERATIONS
      (UNAUDITED)                                $1,620    $1,789    $1,368

Second quarter earnings factors

Unocal's second quarter 2003 adjusted after-tax earnings (compared with 2Q 2002) reflected higher natural gas prices, increased liquids prices and higher international liquids and natural gas production.

The largest contributor to the higher international production was Thailand, where oil-equivalent production was up 10 percent from last year's second quarter. Crude oil and condensate production increased 29 percent, primarily because of de-bottlenecking production from the Yala-Plamuk oil project and higher condensate production from the Pailin Phase 2 project. Quarterly natural gas production increased 5 percent from last year due to increased demand tied to higher electric power needs and reduced volumes from other suppliers. Unocal functions as the "swing producer" in Thailand, providing above-contract minimum volumes when required to meet Thailand's needs. Unocal has routinely produced more than its contract minimums. In early July, Unocal set a new one-day gross production record of 1.36 billion cubic feet, compared with the contract minimum of 1.07 billion. Higher production from Azerbaijan and Bangladesh also contributed to increased international production.

These positive factors were offset partially by lower North America liquids and natural gas production and higher exploratory land provisions.

The primary reasons for lower North American production in the second quarter were natural declines and decreased drilling activity. The lower North American production also reflected asset dispositions in the first six months of the year, which accounted for decreases of more than 5,000 barrels of oil-equivalent (BOE) per day.

Higher exploratory land provisions of $26 million pretax resulted from Unocal's relinquishment of about 45 deepwater Gulf of Mexico blocks before their expiration dates. This reflected the decision to focus its deepwater Gulf of Mexico land position on those OCS blocks that have the best potential.

Second-quarter total revenues were $1.62 billion, up from $1.37 billion in the second quarter 2002, primarily due to higher commodity prices for natural gas and liquids.

Administrative and general expense in the second quarter included a $27 million pretax charge as a result of the restructuring program announced in June that is aimed at strengthening Unocal's Lower 48 businesses, realigning its corporate staff and shared resource groups, and improving its balance sheet (see special items detailed in the Adjusted After-tax Earnings table). The higher A&aG expense also reflected increased pension-related expenses.

Unocal's EBITDAX for the second quarter 2003 was $720 million, or $2.65 per share (diluted). This compares with $634 million, or $2.58 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 second quarter 2003 averaged 463,000 BOE per day, compared with 486,000 BOE per day a year ago.

Unocal's worldwide average liquids price, including hedging, was $25.36 per barrel, up from $23.25 in the second quarter 2002. The company's average worldwide realized price for natural gas, including hedging, was $3.53 per thousand cubic feet (mcf), compared with $2.87 per mcf a year ago. Hedging activities in the second quarter lowered worldwide liquids realizations by 4 cents per barrel and natural gas realizations by 7 cents per thousand cubic feet.

Six-months results

Net earnings for the first six months of 2003 were $311 million, or $1.20 per share (diluted). This compares with $136 million, or 55 cents per share (diluted) for the same period a year ago.

Unocal's adjusted after-tax earnings for the first six months were $420 million, or $1.60 per share (diluted). This compares with $177 million, or 72 cents per share, for the first six months of 2002. The special items are detailed in the Adjusted After-tax Earnings table included with this news release.

Total revenues for the year-to-date were $3.41 billion, up from $2.42 billion last year.

                                                           For the Six Months
     CONSOLIDATED RESULTS (UNAUDITED)                        Ended June 30,
     Millions of dollars except per share amounts            2003      2002
     Earnings from continuing operations                     $386      $135
     Earnings from discontinued operations                      8         1
     Cumulative effects of accounting changes                 (83)       --
     Net earnings                                             311       136
      Less: Earnings from discontinued operations               8         1
      Less: Cumulative effects of accounting changes          (83)       --
      Less: Special items                                     (34)      (42)
     Adjusted after-tax earnings                             $420      $177
     DILUTED EARNINGS PER SHARE DATA (UNAUDITED)
     Net earnings per share:
      Continuing operations                                 $1.47     $0.55
      Discontinued operations                                0.03        --
      Cumulative effects of accounting changes              (0.30)       --
     Total net earnings per share                           $1.20     $0.55
     Adjusted after-tax earnings per share                  $1.60     $0.72
     REVENUES FROM CONTINUING OPERATIONS (UNAUDITED)       $3,409    $2,417

Unocal's EBITDAX for the six months of 2003 was $1.55 billion, or $5.69 per share (diluted), compared with $1.09 billion, or $4.44 per share (diluted), in 2002.

Financial condition

Cash flow from operating activities for the six months ended June 30, 2003, was $1.09 billion, compared with $626 million for the comparable period of 2002.

Capital spending was $917 million for the six months 2003, versus $830 million in the same period a year ago.

Pretax proceeds from asset sales were $125 million in the second quarter, bringing the total for the year to $191 million. Second quarter dispositions included various oil and gas properties, as well as the sale of Unocal's interest in Matador Petroleum (proceeds $80 million).

The company's total consolidated long-term debt (including current maturities) was $3.0 billion at June 30, 2003, unchanged from year-end 2002. Cash and cash-equivalents were $363 million at June 30, 2003, up from $168 million at December 31, 2002.

Proceeds from the sale of assets in 2003 will be used mainly to reduce debt and other financings. As part of this program, Unocal paid off the $252 million limited partner interest in Spirit Energy 76 Development in July. This financing would have been reclassified from minority interest to debt in the third quarter due to a change in accounting rules.

Third quarter 2003 outlook

For the third quarter 2003, Unocal is forecasting adjusted after-tax earnings of 65 to 75 cents per share (diluted). This forecast compares with the Thomson/First Call consensus (published July 28, 2003) of 64 cents per share for the quarter. The third quarter forecast assumes average NYMEX benchmark prices of $30.00 per barrel of crude oil and $4.95 per million British thermal units (mmBtu) for North America natural gas for the period.

Unocal's third 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 third quarter of $40 to $50 million.

The company's current estimate for third quarter 2003 production is between 460,000 and 470,000 BOE per day.

Full-year 2003 outlook

For the full-year 2003, Unocal is forecasting adjusted after-tax earnings of $2.90 to $3.20 per share (diluted). This forecast compares with the Thomson/First Call consensus (published July 28, 2003) of $2.74 per share for the year. The full-year 2003 forecast assumes average NYMEX benchmark prices of $30.40 per barrel of crude oil and $5.45 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.

Unocal has hedges that result in fixed future prices for natural gas as follows:

  • Third quarter 2003: 109,000 MMBTU per day at $5.87
  • Fourth quarter 2003: 172,000 MMBTU per day at $5.99
  • First quarter 2004: 264,000 MMBTU per day at $6.07

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 $65 to $70 million.

The company's current estimate for full-year 2003 production is between 470,000 and 480,000 BOE per day. This estimate reflects the sale of Unocal's interest in Matador Petroleum and a one-month delay in the start-up of the West Seno field.

In June 2003, Unocal announced plans to sell certain E&P assets in the Gulf of Mexico region that would reduce the size of the company's GOM shelf business to approximately 30 fields. This program is designed to create a more profitable and sustainable North American business that would complement Unocal's high-growth international operations. The company believes that the retained U.S. properties could yield additional production at lower finding and development costs.

The sales could occur later this year and impact Unocal's net production for 2003. The fields currently identified to be sold represent net daily production of about 25,000 to 30,000 BOE.

Unocal's total actual production for the year could also 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.

In addition to the anticipated sale of Gulf of Mexico properties, other investments and non-E&P assets are expected to be sold, including rights to the proposed Sarulla geothermal project in Indonesia, for which Unocal expects to receive $60 million in September.

The third-quarter and full-year adjusted after-tax earnings forecasts exclude special items. Because of the inherent uncertainty related to special items, determining whether or when they will occur and quantifying their dollar impact, Unocal 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 Wednesday, July 30, at 9 a.m. PDT (12 noon. EDT) over the Internet. To listen to the live webcast, go to the Investor Information section of the Unocal web site, www.unocal.com. Replays of the conference call, including questions and answers, will be available.

Complete detailed financial tables for the second 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, www.unocal.com.

    CONSOLIDATED EARNINGS            For the                For the
     (UNAUDITED)                  Three Months             Six Months
                                 Ended June 30,          Ended June 30,
    Millions of dollars except   2003       2002        2003        2002
     per share amounts
    Revenues
    Sales and operating
     revenues                  $1,564      $1,361     $3,339       $2,396
    Interest, dividends and
     miscellaneous income (loss)    9           8         20           20
    Gain (loss) on sales of
     assets                        47          (1)        50            1
      Total revenues            1,620       1,368      3,409        2,417
    Costs and other deductions
    Crude oil, natural gas and
     product purchases            536         428      1,182          723
    Operating expense             325         324        619          623
    Administrative and general
     expense                       87          37        138           80
    Depreciation, depletion and
     amortization                 255         255        515          479
    Asset impairments               3          21          3           21
    Dry hole costs                 10          13         81           41
    Exploration expense            88          61        143          120
    Interest expense               36          43         74           94
    Property and other operating
     taxes                         21          18         43           34
    Distributions on convertible
     preferred securities of
     subsidiary trust               8           8         16           16
      Total costs and other
       deductions               1,369       1,208      2,814        2,231
    Earnings from equity
     investments                   53          51         96           88
    Earnings from continuing
     operations before income
     taxes and minority
     interests                    304         211        691          274
    Income taxes                  133          95        301          135
    Minority interests              2           3          4            4
    Earnings from continuing
     operations                   169         113        386          135
    Earnings from discontinued
     operations                     8           1          8            1
    Cumulative effects of
     accounting changes (a)        --          --        (83)          --
      Net earnings               $177        $114       $311         $136
    Basic earnings per share of
     common stock (b)
      Continuing operations     $0.66       $0.46      $1.50        $0.55
      Net earnings              $0.69       $0.46      $1.21        $0.55
    Diluted earnings per share
     of common stock (c)
      Continuing operations     $0.65       $0.46      $1.47        $0.55
      Net earnings              $0.68       $0.46      $1.20        $0.55
    Cash dividends declared per
     share of common stock      $0.20       $0.20      $0.40        $0.40

     (a) Net of tax (benefit)     $--         $--       $(48)         $--
     (b) Basic weighted average
         shares outstanding
         (in thousands)       258,202     244,639    258,103      244,423
     (c) Diluted weighted
         average shares
         outstanding
         (in thousands)       272,108     245,865    271,907      245,531


    CONDENSED CONSOLIDATED BALANCE SHEET
     (UNAUDITED)                                 At June 30,  At December 31,
    Millions of dollars                              2003           2002
    Assets
    Cash and cash equivalents                        $363            $168
    Other current assets - net                      1,253           1,207
    Investments and long-term receivables - net     1,074           1,044
    Properties - net                                8,327           7,879
    Goodwill                                          129             122
    Other assets                                      390             340
      Total assets                                $11,536         $10,760
    Liabilities and Stockholders' Equity
    Current liabilities (a)                        $1,895          $1,632
    Long-term debt and capital leases               2,744           3,002
    Deferred income taxes                             677             593
    Accrued abandonment, restoration and
     environmental liabilities                        917             622
    Other deferred credits and liabilities            860             816
    Minority interests                                276             275
    Convertible preferred securities of a
     subsidiary trust                                 522             522
    Stockholders' equity                            3,645           3,298
      Total liabilities and stockholders' equity  $11,536         $10,760

     (a) Includes current portion of LTD of:          232               6


    CONSOLIDATED CASH FLOWS (UNAUDITED)               For the Six Months
                                                        Ended June 30,
    Millions of dollars                              2003           2002
    Cash Flows from Operating Activities
    Net earnings                                     $311            $136
    Adjustments to reconcile net earnings to
    net cash provided by operating activities
      Depreciation, depletion and amortization        515             479
      Asset impairments                                 3              21
      Dry hole costs                                   81              41
      Amortization of exploratory leasehold costs      71              45
      Deferred income taxes                            41             (17)
      Gain on sales of assets (pre-tax)               (50)             (1)
      Gain on disposal of discontinued operations
       (pre-tax)                                      (13)             (2)
      Cumulative effects of accounting changes         83              --
      Other                                           110             (40)
      Working capital and other changes related
       to operations                                  (67)            (36)
        Net cash provided by operating activities   1,085             626
    Cash Flows from Investing Activities
     Capital expenditures (includes dry hole costs)  (917)           (830)
     Proceeds from sales of assets                    191              45
     Proceeds from sale of discontinued operations     --               2
     Net cash used in investing activities           (726)           (783)
    Cash Flows from Financing Activities
     Long-term borrowings                              79             440
     Reduction of long-term debt and capital lease
      obligations                                    (143)           (229)
     Minority interests                                (3)             (4)
     Proceeds from issuance of common stock            10              19
     Dividends paid on common stock                  (103)            (98)
     Other                                             (4)             --
        Net cash provided by (used in) financing
         activities                                  (164)            128
    Net increase in cash and cash equivalents         195             (29)
    Cash and cash equivalents at beginning of year    168             190
    Cash and cash equivalents at end of period       $363            $161


    NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS
     BY BUSINESS SEGMENT
    (UNAUDITED)                         2nd Q 2003            1st Q 2003
                                           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)         $89         $70        $111        $111
        Alaska                     14          14          15          15
        Canada                      8           6          24          22
     International
        Far East                  116         116         121         121
        Other                      29          29          21          21
     Trade                          4           4          (9)         (9)
     Midstream                     18          18          18          18
     Geothermal and Power
      Operations                    7           7          12          12
     Corporate and Other
        Administrative and
         General                  (22)        (22)        (23)        (23)
        Interest Expense - Net    (28)        (28)        (31)        (31)
    Environmental and Litigation  (28)         (2)        (17)         (3)
    Other (a)                     (38)        (21)        (25)        (25)
    After-tax earnings (loss)
     from continuing operations   169         191         217         229
    After-tax earnings from
     discontinued operations        8          --          --          --
    Cumulative effects of
     accounting changes            --          --         (83)         --
    After-tax earnings (loss)    $177        $191        $134        $229

     (a) For a reconciliation to net earnings, see the Adjusted After-Tax
         Earnings table.
     (b) Includes earnings (loss) from:
         Onshore / Shelf          118          99         142         142
         Deep water               (29)        (29)        (31)        (31)


    NET EARNINGS AND ADJUSTED AFTER-TAX
     EARNINGS BY BUSINESS SEGMENT
    (UNAUDITED)                      2nd Q 2003             2nd Q 2002
                                           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)         $89         $70         $20         $32
        Alaska                     14          14          (5)         (5)
        Canada                      8           6           6           2
     International
        Far East                  116         116         113         113
        Other                      29          29          12          12
    Trade                           4           4           1           1
    Midstream                      18          18          23          23
    Geothermal and Power
     Operations                     7           7          14          14
    Corporate and Other
        Administrative and
         General                  (22)        (22)        (19)        (19)
        Interest Expense - Net    (28)        (28)        (28)        (28)
        Environmental and
         Litigation               (28)         (2)        (13)         (2)
         Other (a)                (38)        (21)        (11)         (9)
    After-tax earnings (loss)
     from continuing operations   169         191         113         134
    After-tax earnings from
     discontinued operations        8          --           1          --
    After-tax earnings (loss)    $177        $191        $114        $134

     (a) For a reconciliation to net earnings, see the Adjusted After-Tax
         Earnings table.
     (b) Includes earnings (loss) from:
         Onshore / Shelf          118          99          29          41
         Deep water               (29)        (29)         (9)         (9)


    NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS
     BY BUSINESS SEGMENT
    (UNAUDITED)                             For the Six Months
                                              Ended June 30,
                                 2003        2003        2002        2002
                                           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)        $200        $181         $24         $33
        Alaska                     29          29         (11)        (11)
        Canada                     32          28          (3)         (3)
     International
        Far East                  237         237         203         203
        Other                      50          50          24          24
    Trade                          (5)         (5)          2           2
    Midstream                      36          36          42          42
    Geothermal and Power
     Operations                    19          19          20          20
    Corporate and Other
        Administrative and
         General                  (45)        (45)        (43)        (43)
        Interest Expense - Net    (59)        (59)        (65)        (65)
        Environmental and
         Litigation               (45)         (5)        (36)         (3)
        Other (a)                 (63)        (46)        (22)        (22)
    After-tax earnings (loss)
     from continuing operations   386         420         135         177
    After-tax earnings from
     discontinued operations        8          --           1          --
    Cumulative effects of
     accounting changes           (83)         --          --          --
    After-tax earnings (loss)    $311        $420        $136        $177

     (a) For a reconciliation to net earnings, see the Adjusted After-Tax
         Earnings table.
     (b) Includes earnings (loss) from:
         Onshore / Shelf          260         241          42          51
         Deep water               (60)        (60)        (18)        (18)


    OPERATING HIGHLIGHTS
                                             For the            For the
                                          Three Months         Six Months
                                         Ended June 30,      Ended June 30,
                                         2003       2002      2003     2002
    North America Net Daily Production
     Liquids (thousand barrels)
      U.S. Lower 48 (a) (b)                44         54        46       55
      Alaska                               23         25        22       25
      Canada                               17         17        17       18
        Total liquids                      84         96        85       98
     Natural gas - dry basis
      (million cubic feet)
      U.S. Lower 48 (a) (b)               652        766       678      754
      Alaska                               67         77        64       89
      Canada                               86         92        91       91
        Total natural gas                 805        935       833      934
    North America Average Prices
     (excluding hedging activities) (c)
     Liquids (per barrel)
      U. S. Lower 48                   $26.02     $23.49    $28.11   $20.95
      Alaska                           $27.46     $24.74    $31.34   $21.99
      Canada                           $23.52     $21.92    $26.05   $19.15
        Average                        $25.93     $23.56    $28.48   $20.89
     Natural gas (per mcf)
      U. S. Lower 48                    $5.01      $3.12     $5.66    $2.68
      Alaska                            $1.20      $1.57     $1.20    $1.57
      Canada                            $5.13      $3.03     $5.40    $2.54
        Average                         $4.69      $2.98     $5.27    $2.55
    North America Average Prices
     (including hedging activities) (c)
     Liquids (per barrel)
      U. S. Lower 48                   $25.84     $23.48    $27.22   $21.01
      Alaska                           $27.46     $24.74    $31.34   $21.99
      Canada                           $23.52     $21.92    $26.05   $19.15
        Average                        $25.84     $23.56    $27.99   $20.92
     Natural gas (per mcf)
      U. S. Lower 48                    $4.86      $3.12     $5.23    $2.80
      Alaska                            $1.20      $1.57     $1.20    $1.57
      Canada                            $4.79      $2.97     $5.07    $2.62
        Average                         $4.53      $2.97     $4.89    $2.66

     (a) Includes proportional interests in production of equity investees.
     (b) Includes minority interests of :
                          Liquids           1          9         1        9
                      Natural gas          11         98        10       98
           Barrels oil equivalent           3         25         2       25
     (c) Excludes gains/losses on derivative positions not accounted for as
         hedges and ineffective portions of hedges.


    OPERATING HIGHLIGHTS (CONTINUED)
                                             For the            For the
                                          Three Months         Six Months
                                         Ended June 30,      Ended June 30,
                                         2003       2002      2003     2002
    International Net Daily Production (d)
     Liquids (thousand barrels)
      Far East                             59         54        57       53
      Other (a)                            20         20        21       20
        Total liquids                      79         74        78       73
     Natural gas - dry basis
      (million cubic feet)
      Far East                            911        883       890      852
      Other (a)                            89         79       100       78
        Total natural gas               1,000        962       990      930
    International Average Prices (e)
     Liquids (per barrel)
      Far East                         $24.78     $22.50    $27.06   $20.95
      Other                            $25.16     $23.91    $27.11   $23.03
        Average                        $24.90     $22.84    $27.07   $21.43
     Natural gas (per mcf)
      Far East                          $2.74      $2.78     $2.75    $2.70
      Other                             $2.89      $2.79     $2.86    $2.64
        Average                         $2.76      $2.78     $2.76    $2.69

    Worldwide Net Daily
     Production (a) (b) (d)
     Liquids (thousand barrels)           163        170       163      171
     Natural gas - dry basis
      (million cubic feet)              1,805      1,897     1,823    1,864
     Barrels oil equivalent (thousands)   463        486       467      482
    Worldwide Average Prices
     (excluding hedging activities) (c)
     Liquids (per barrel)              $25.40     $23.26    $27.80   $21.11
     Natural gas (per mcf)              $3.60      $2.87     $3.88    $2.62
    Worldwide Average Prices
     (including hedging activities) (c) (e)
     Liquids (per barrel)              $25.36     $23.25    $27.54   $21.13
     Natural gas (per mcf)              $3.53      $2.87     $3.71    $2.68

     (a) Includes proportional interests in production of equity investees.
     (b) Includes minority interests of :
                          Liquids           1          9         1        9
                      Natural gas          11         98        10       98
           Barrels oil equivalent           3         25         2       25
     (c) Excludes gains/losses on derivative positions not accounted for as
         hedges and ineffective portions of hedges.
     (d) International production ispresented utilizing the economic interest
         method.
     (e) International did not have any hedging activities.


    ADJUSTED AFTER-TAX EARNINGS (UNAUDITED)
                                             For the             For the
                                           Three Months        Six Months
    Millions of dollars                   Ended June 30,     Ended June 30,
     except per share amounts            2003       2002      2003     2002
    Net earnings                         $177       $114      $311     $136
    Less:
     Earnings from discontinued
      operations                            8          1         8        1
     Cumulative effects of
      accounting changes                   --         --       (83)      --
     Earnings from continuing
      operations                          169        113       386      135
    Less: Special items
     E&P - North America - U.S. Lower 48
      Asset sales                          20         --        20        2
      Environmental and litigation
       provisions                          (1)        --        (1)       1
      Restructuring                        --        (12)       --      (12)
     E&P - North America - Canada
      Trading derivatives - non-hedging     2          4         4       --
     Corporate & Other
      Environmental and litigation
       provisions                         (26)       (13)      (40)     (35)
      Insurance settlements                --         --        --        2
      Restructuring                       (17)        --       (17)      --
    Total special items                   (22)       (21)      (34)     (42)
     Adjusted after-tax earnings         $191       $134      $420     $177
     Adjusted after-tax diluted
      earnings per share                $0.73      $0.55     $1.60    $0.72


    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)
                                             For the             For the
                                           Three Months        Six Months
                                          Ended June 30,     Ended June 30,
    Millions of dollars                  2003       2002      2003     2002
    Net Earnings                         $177       $114      $311     $136
    Less:
     Earnings from discontinued
      operations                            8          1         8        1
     Cumulative effects of
      accounting changes                   --         --       (83)      --
     Special items                        (22)       (21)      (34)     (42)
    Adjusted after-tax earnings           191        134       420      177
    Add-backs to adjusted after-tax
     earnings:
      Depreciation, depletion and
       amortization                       255        255       515      479
      Asset impairments                     3         21         3       21
      Dry hole costs                       10         13        81       41
      Exploration expenses (including
       amortization of undeveloped
       leasehold costs)                    88         61       143      120
      Current income taxes                100         90       238      152
      Deferred income taxes                37         17        74        7
      Interest expense (a)                 36         43        74       94
        EBITDAX                          $720       $634    $1,548   $1,091
    EBITDAX per share (diluted)         $2.65      $2.58     $5.69    $4.44

     (a) Net of capitalized interest of:   19         10        35       19