Unocal confirms 3Q earnings forecast; updates production outlook
El Segundo, Calif., Oct. 3, 2003 - Unocal Corporation (NYSE: UCL) today said that the company's third quarter 2003 adjusted after-tax earnings are expected to fall within the previously announced range of 65 to 75 cents per share despite lower oil and gas production resulting mainly from startup issues at Unocal's West Seno deepwater development in Indonesia.
For the third quarter, worldwide production is expected to be about 3 to 5 percent below the previously expected range of between 460,000 and 470,000 barrels of oil equivalent (BOE) per day.
Third quarter production volumes were also affected by higher host country production shares in Asia, a return to DCQ (Daily Contract Quantity) level production in Thailand as PTT Public Company Limited reduced nominations, and divestitures and production declines in the U.S. Lower 48.
Worldwide fourth quarter 2003 production is expected to range between 430,000 and 440,000 BOE per day. This forecast reflects the West Seno delays, the sale of nearly 7,000 BOE per day of production from Unocal's equity holdings in Tom Brown, Inc. (NYSE: TBI) and Matador Petroleum, and the expected close of the sale of more than 20,000 BOE per day of production to Forest Oil (NYSE: FST) and others during the fourth quarter.
For the full-year 2003, the company's adjusted after-tax earnings are expected to fall within the previously expected range of $2.90 to $3.20 per share as lower cash expense and dry hole costs have helped offset the effect of the lower production from West Seno and divestitures.
West Seno issues
"The slower than anticipated ramp-up in West Seno production is related mainly to the facilities and start-up operations," said Charles R. Williamson, Unocal chairman and chief executive officer. "The reservoir is performing as we predicted. We are encouraged by what we see in terms of oil pay thickness and initial well performance, which bodes well for the long-term success of the field. We are confident that we can achieve the previously stated peak gross production rates of 35,000 to 45,000 BOE per day from Phase 1, rising to 55,000 to 65,000 BOE per day when Phase 2 is completed."
The company experienced a series of facility-related processing issues that are being corrected. A chemical treatment to minimize oil/water emulsions during surface processing has proven to be effective and is now being utilized, allowing existing wells to come up to full production levels.
Unocal has completed six wells, which are currently producing 17,000 BOE per day, including 15,000 barrels of oil. Estimated actual gross production for the third quarter from West Seno averaged 3,000 BOE per day. Unocal earlier said it expected average production of nearly 20,000 BOE per day from West Seno in the third quarter.
Unocal's share of West Seno production will be approximately 85 percent of gross production during the early cost recovery period. "We will now bring on additional development wells, which will ramp up gross production from the field to 30,000 to 35,000 BOE per day by year-end," Williamson said.
Outlook: 2004 and beyond
Unocal said the delays at West Seno should not affect the expected 2004 worldwide production outlook of 450,000 to 460,000 BOE per day. "Now that we have resolved most of the short-term startup issues, we expect to be back on plan there by year-end 2003," Williamson said.
Williamson went on to say, "Overall, we expect a strong year financially, and we are excited about the company's future as we begin bringing on-line our large inventory of development projects and continue to move forward on existing discoveries," he said. He noted that with the sale of the Gulf of Mexico properties to Forest Oil, Unocal has a stable North America production base to support the growth the company expects from its international and deepwater portfolio over the next 10 years.
"We are already seeing the bottom line impact from our cost reduction and restructuring activities. We have strengthened our balance sheet, which gives us financial flexibility to ensure execution of our major growth initiatives," Williamson said.
This news release contains certain forward-looking statements about future production, earnings, cash expense and dry holes. 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.
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.
Under the terms of the PSCs, Unocal Indonesia Company and its affiliates, including Unocal Makassar, Ltd., as contractors to Pertamina, the Indonesia national oil company, are entitled to varying shares of the oil and gas produced from commercial discoveries.
Updated: October 2003