Unocal agrees to sell 70 Gulf of Mexico region fields to Forest Oil
El Segundo, Calif., Sept. 21, 2003 - Unocal Corporation (NYSE: UCL) today said its Gulf Region business unit has agreed to sell 70 properties in the Gulf of Mexico and onshore Louisiana to Forest Oil Corporation (NYSE: FST) for $295 million (subject to certain purchase price adjustments) as part of an initiative announced earlier in the year to improve the profitability and sustainability of its Lower-48 exploration and production businesses.
The company expects to close the transaction by the end of October. The effective date of the sale will be July 1, 2003. Net proceeds from the sale will be used to reduce debt and increase the company's capacity to fund its sizable inventory of development projects and discoveries.
Estimated July 1, 2003, reserves of the fields included in the purchase and sale agreement are approximately 34 million barrels of oil equivalent (BOE). The net production associated with the properties to be sold was about 18,000 BOE per day on the effective date.
The properties included in the sale represent the majority of the Gulf of Mexico properties that were earmarked for divestment. The company expects to divest the remaining properties before year-end 2003.
The company expects that the anticipated sale of these assets will result in an estimated $45 million (pretax) third quarter 2003 impairment charge. Of this, an estimated $30 million that is in excess of normal depreciation and depletion will be classified as a special item.
After the divestments are complete, the Gulf Region business unit portfolio will include roughly 25 fields with production of approximately 67,000 BOE per day, along with an option to initiate deep exploration on many of the fields being sold to Forest. Unocal is continuing its active deep shelf exploration program and currently is drilling five deep shelf tests.
Additional asset sales
About 20 properties remain in the asset packages being offered for sale, and the company expects to sell those properties in the fourth quarter 2003. Some of those properties have book value in excess of the anticipated fair market value. The company expects to record an estimated $20 million pretax impairment charge in the third quarter to reduce the book value of those properties to the anticipated fair market value. Of this, an estimated $18 million that is in excess of normal depreciation and depletion will be classified as a special item.
Other properties in the asset packages are also expected to sell in the fourth quarter to different buyers and are expected to yield a pretax gain of around $25 million, which will be classified as a special item.
Earlier this month Unocal announced the sale of 4.925 million shares of Tom Brown, Inc. (NYSE: TBI), which will result in a pretax gain of $45 million.
Third quarter special items summary
Third quarter 2003 special items related to the Lower 48 asset sales include a $30 million pretax charge related to the sale to Forest, a $18 million pretax charge related to the expected fourth quarter asset sales, and a $45 million pretax gain from the sale of Tom Brown shares. The company will also record a special item charge for employee reductions related to the asset sales. The amount will depend on the number of employees that are hired by Forest Oil.
About Unocal Corporation
Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's oil and gas activities are in North America and Asia.
This news release contains certain forward-looking statements about future business transactions, production, accounting charges and earnings. 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 factors discussed in Unocal's 2002 Form 10-K and other reports filed with the U.S. Securities and Exchange Commission. Unocal undertakes no obligation to update the information in this news release.
U.S. investors are urged to consider closely the disclosure in Unocal's 2002 Form 10-K (SEC File No. 1-8483). Copies of the Unocal's SEC filings are available from the company by calling 800-252-2233. The reports are also available on the Unocal web site, www.unocal.com. You can also obtain this form from the SEC by calling 800-SEC-0330.
Updated: September 2003