Unocal completes sale of California oil and gas assets to Nuevo Energy
El Segundo, Calif., April 9, 1996 -- Unocal Corporation today said it has completed the sale of its California crude oil and natural gas assets for $492 million to Nuevo Energy Company of Houston.
The effective date of the sale is October 1, 1995. After adjustments for revenues, operating expenses, capital expenditures and accrued interest, Unocal realized $481 million in cash from the transaction. In addition, the company could receive contingent payments, which have an estimated present value of $53 million, over a 7-year period beginning in 1998. This estimate is based on company forecasts. Future oil prices and production will determine the actual level of additional payments.
The sale includes Unocal's interests in 68 oil and gas fields, including 11 producing platforms off the California coast in state and federal waters.
Unocal's average net daily production from these properties was 27,000 barrels of oil and 59 million cubic feet of gas during 1995. Estimated net reserves for the properties were 120 million barrels of oil and 162 billion cubic feet of gas. On a barrel of oil equivalent (BOE) basis, the California operations in 1995 accounted for about 7 percent of the company's oil and gas production and 8 percent of its reserves.
"This sale will provide the flexibility for Unocal to move ahead with new growth opportunities we have in Central and Southeast Asia," said Roger C. Beach, Unocal chairman and chief executive officer. "By shifting our investment dollars into these higher return, overseas projects that also offer significant growth potential, we expect to realize important gains in earnings and returns to our stockholders in the next few years."
Beach pointed out that Unocal's upstream California operations earned only about 60 cents per BOE produced in 1995. By comparison, Unocal's operations in the Far East, as well as the U.S. Gulf Coast, earned more than $3 per BOE produced last year.
Unocal is increasing its natural gas production in Thailand and developing new oil and gas fields in Indonesia. In addition, the company is a partner in the development of a new gas field offshore Myanmar and part of an international consortium that is developing oil resources in the Caspian Sea. "Unocal's new business focus follows an arc from the Black Sea to the Pacific Ocean as we pursue opportunities where we can link known energy resources with growing, ready energy markets," Beach said.
"When the company was founded in 1890 in California, the state was an oil frontier," Beach said. "As we exit from California oil and gas production, I want to acknowledge the generations of talented and skilled employees who have worked long and hard in California over the decades to make Unocal successful. With this success as a foundation, our upstream focus has shifted overseas to Unocal's new oil and gas frontiers. We have become a global enterprise."
The sale of the California production is not expected to have a material effect on the company's future operating earnings. Unocal will post a one-time gain from the sale that will be reflected in the company's second quarter results.
California Upstream Assets Sale
|Sales Price||$492 million|
|Interest on sales price (from 10/1/95)||$13 million|
|Net operating adjustments (from 10/1/95)||($24) million|
|Sales price per barrel of oil equivalent
(BOE) of reserves
|Sales price ratios||55 times aftertax earnings
10 times aftertax operating cash flow
|Asset and Operating Information (1995)|
|Properties||68 fields, including 11 offshore platforms in federal and state waters|
|Crude oil||120 mmbbls|
|Natural gas||162 bcf|
|Barrels of oil equivalent (6.0 mcf=1bbl)||147 mmBOE|
|Natural gas||59 mmcf/d|
|Average sales prices|
|Cash production costs||$7.30/BOE|
|Aftertax earnings||$9 million, or $0.63/BOE|
|Aftertax operating cash flow||$49 million|
|Aftertax return on average net properties||2.6%|
|Capital expenditures||$41 million|
Updated: April 1996