press release

Unocal announces program for common and preferred repurchases, pension contribution

El Segundo, Calif., July 28, 2004 - Unocal Corporation (NYSE: UCL) today announced a three-part, cash expenditure program of up to $511 million that includes repurchases of Unocal securities and a contribution to the company's U.S. pension plan.

The program consists of repurchasing up to $150 million of Unocal common stock from its previously announced $200 million repurchase program (which has a $189 million balance), the redemption or other repurchase of up to one-half of the aggregate liquidation value of Unocal's outstanding trust convertible preferred securities (approximately $261 million) and a contribution of $100 million to the company's U.S. pension plan.

"With our strong operations, recent asset sales, and high commodity prices, we have built up significant cash balances," said Charles R. Williamson, Unocal chairman, chief executive officer, and president. "This program is designed to increase stockholder value and reduce the diluted shares overhang. At the same time, the remaining cash on hand, together with cash flow from operating activities, will be sufficient to fund our planned capital programs."

If completed in full, the total cash outlay would represent approximately one-half of the cash balance that the company expects to report at the end of the second quarter 2004.

"If commodity prices remain high, and we have additional excess cash on hand at year-end, Unocal may consider expanding one or more of these programs," Williamson said.

In total, the common stock and preferred repurchase programs are expected to reduce Unocal's diluted share count by about 10 million shares, or nearly 4 percent of the diluted share balance as of July 27, 2004.

The common stock repurchase program could total approximately 4 million shares (based on the July 27, 2004, closing price of $37.28/share). The convertible preferred securities repurchase would eliminate the potential dilution of up to 6.1 million shares (based on the conversion rate to common stock for the securities).

Common stock repurchase

In June 1998, Unocal's board of directors authorized company management to repurchase up to $200 million of Unocal's common stock. Only $11 million has been expended to date on that program. The $150 million program presented today to Unocal's board of directors falls under the remaining 1998 authorization of $189 million.

The common shares will be repurchased through open market or privately negotiated transactions at the discretion of company management, depending upon financial and market conditions and as otherwise permitted under applicable laws. There is no set time limit on the repurchases, but the company expects to begin the repurchase program by the end of 2004.

Redemption of trust convertible preferred securities

Unocal's board authorized company management to redeem or otherwise repurchase up to one-half of the aggregate liquidation value of the outstanding 6-1/4% Trust Convertible Preferred Securities of Unocal Capital Trust (approximately $261 million). The company expects to redeem the preferred securities, but the actual timing and method for the repurchase will be at the discretion of company management. The company expects to begin this program by the end of the third quarter 2004.

The repurchase of the securities is expected to reduce Unocal's annual interest expense by more than $16 million. Because of recent accounting changes, the debentures underlying the preferred securities have been classified as long-term debt on Unocal's balance sheet beginning in the first quarter 2004.

Pension plan contribution

Unocal's board authorized management to make a $100 million voluntary contribution to its U.S. pension plan. The payment, while not required this year, represents all of the unfunded portion of the year-end 2003 accumulated benefit obligation for Unocal's U.S. qualified pension plan. The payment is expected to be made in the third quarter 2004.

The voluntary payment is expected to postpone any required contribution payments until 2007 or later.

About Unocal Corporation

Unocal is one of the world's leading independent natural gas and crude oil exploration companies. The company's principal oil and gas activities are in North America and Asia.

This news release contains forward-looking statements about matters such as the consummation, amounts, timing, structure and effect on Unocal's diluted share balance of common and preferred stock repurchase programs; contributions to Unocal's pension plan and other potential uses of available cash; the sufficiency of remaining cash to partially fund capital expenditures; increases in stockholder value; anticipated cash balances; reductions in future interest expense; and future required contributions to Unocal's pension plan. Although these statements are based upon Unocal's current expectations and beliefs, they are subject to known and unknown risks and uncertainties that could cause actual results and outcomes to differ materially from those described in, or implied by, the forward-looking statements, including market conditions for the company's common and preferred stock; any future issuances of common or preferred stock; changes in commodity prices and the effectiveness of the company's hedging activities to manage that volatility; the company's ability to find or acquire additional oil and gas reserves and to develop deepwater fields and other large projects in a timely and cost-effective manner; the accuracy of the company's estimates and judgments regarding hydrocarbon resources and formations; decline rates of producing properties in which the company has an interest; adverse geological and other operational factors; the extent of the company's operating cash flow and other capital resources available to fund its capital expenditures; international and domestic regulatory, political, and economic considerations, including regulations that may affect the repurchases of the company's securities; performance by third parties, including foreign government entities, joint venture partners, independent contractors and operators of properties in which the company has an interest; and other factors discussed in Unocal's 2003 Annual Report on Form 10-K, as amended, and subsequent reports filed by Unocal with the Securities and Exchange Commission (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. Unocal undertakes no obligation to update the forward-looking statements in this news release to reflect future events or circumstances. All such statements are expressly qualified in their entirety by this cautionary statement.

Updated: July 2004