press release

Unocal Canada completes exchange of assets for Tarragon common stock and debenture

El Segundo, Calif., April 15, 1998 - Unocal Corporation said today that its Unocal Canada Limited subsidiary has completed the exchange of certain of its Canadian oil and gas assets for approximately $208 million (C$297 million) in common stock and a debenture of Tarragon Oil and Gas Limited.

Under the transaction, Unocal Canada received 21 million shares of Tarragon common stock and a $70 million (C$100 million) Tarragon subordinated debenture with a floating coupon rate of 150 basis points over the three-year Government of Canada Treasury bond rate (fixed quarterly). The common share position gives Unocal Canada a 28.7-percent ownership in Tarragon.

The transaction also gives Unocal representation on Tarragon's board of directors. Unocal has the option to participate on a limited basis in any future equity offerings by Tarragon to permit Unocal to maintain its interest. Unocal is not generally permitted to increase its interest in Tarragon.

"This exchange enables us to realize full value for these Canadian assets and participate in the growth potential of Tarragon's other operations," said Charles R. Williamson, Unocal group vice president.

Williamson added that the exchange is accretive to Unocal's reserves and production. "We also expect to see Tarragon's aggressive approach increase reserves and production in the future."

Unocal Canada transferred all of its producing oil and gas assets in Alberta, essentially all of its producing assets in British Columbia, substantially all of its undeveloped lands in Alberta and certain of its undeveloped lands in British Columbia to Tarragon.

These assets include proved reserves of approximately 31 million barrels of oil equivalent (boe), 348,000 net acres of undeveloped land, up to 24,700 miles (39,500 kilometers) of 2-D seismic data, and 1,400 linear miles (2,200 linear kilometers) of proprietary 3-D seismic data. The undeveloped land being transferred to Tarragon is comprised of 330,000 net acres in Alberta (78% average working interest) and 18,000 net acres in British Columbia (74% average working interest).

Net production from the Unocal Canada properties currently averages about 12,700 boe per day. The Unocal Canada reserves and production data are reported on a U.S. basis after royalties, with natural gas converted at a 6:1 ratio.

Unocal Canada will retain its interests in the Alliance Pipeline project, the Aitken Creek Gas Storage Project in British Columbia, the Cal Ven Pipeline, interests in the Northwest Territories and oil and gas producing properties located in Southwest Saskatchewan. Net production from Southwest Saskatchewan is about 6,200 boe per day. Unocal Canada is currently in discussions with certain parties regarding the non-operated Southwest Saskatchewan assets.

Unocal Canada has approximately 100 employees. Under the terms of the agreement, Tarragon has offered employment opportunities to the Unocal Canada employees who are necessary to operate the assets, as well as those employees that have the skills and necessary experience to benefit the expanded Tarragon organization.

The transaction has been approved by Tarragon's stockholders and necessary government agencies. Tarragon stock closed at $6.56 (C$9.40) on the Toronto exchange yesterday (April 14).

CIBC Wood Gundy Securities Inc. advised Unocal in respect to this transaction.

Unocal is one of the world's largest independent oil and gas exploration and production companies, with major resource development, power plant and pipeline projects in Central and Southeast Asia, Latin America and the U.S. Gulf of Mexico region.

Forward-looking statements, including estimates of future business arrangements and operating forecasts in this news release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.

Unocal Canada Limited/Tarragon Oil and Gas Limited Asset Exchange Fact Sheet

  • U.S. dollar amounts are converted at the 4/14/98 foreign currency exchange rate; market prices quoted at close of trading on Toronto Stock Exchange on 4/14/98
  • Production and reserve data are stated in accordance with accepted U.S. reporting practices

Value of transaction

  • Approximately $208 million (C$297 million):
    • 21 million shares of Tarragon Oil & Gas Limited - market value ~$6.56 (C$9.40)/share
    • $70 million (C$100 million) in senior subordinated debentures with a floating coupon rate (current rate: 7.04%)

Unocal Canada assets contributed

  • Producing properties: Slave, Red Earth and Sturgeon fields in northern Alberta; Kakwa, Kaybob and Virginia Hills in west-central Alberta; and Fireweed in northeast British Columbia
  • 348,000 net acres undeveloped land
  • Up to 24,700 miles of 2-D seismic data
  • 1,400 linear miles of proprietary 3-D seismic

Unocal Canada Asset Operating Data (1997)

  • Proved reserves (12/31/97)
    • 31 million boe: 15.9 mmbbl oil & NGL, 91.4 bcf gas
  • Net production
    • 12,700 boe/d: 7,900 bbl oil & NGL/d, 29 mmcf gas/d

Unocal's pro forma 28.7% interest in Tarragon

  • Proved reserves (12/31/97)
    • 57.9 million boe: 28 million bbl oil & NGL, 182 bcf gas
  • Production
    • 17,100 boe/d: 8,300 bbl oil & NGL/d, 53 mmcf gas/d

Updated: April 1998