press release

Unocal expects 3Q earnings at upper end of forecasted range; Williamson updates analysts on exploration, development programs

New York City, Sept. 4, 2002 - Unocal Corporation (NYSE: UCL) today told analysts that the company expects third quarter 2002 adjusted aftertax earnings will be in the upper end of the previously announced range of 45 to 55 cents per share (diluted).

"In the third quarter, we expect that the effect of higher prices and lower dry hole costs will more than offset the effect of slightly lower production," said Charles R. Williamson, Unocal chairman and chief executive officer.

Williamson's comments came at the Lehman Brothers CEO Energy/Power Conference today in New York City.

The earnings guidance assumes an average NYMEX benchmark prices of $28.25 per barrel of crude oil and $3.10 per million British thermal units (mmBtu) for North America natural gas. Dry hole costs are expected to be at the lower end of the previously forecast $30 to $40 million range.

Williamson said that Unocal's worldwide net production is expected to average 470,000 to 480,000 barrels-of-oil-equivalent (BOE) per day in the third quarter 2002. This compares with earlier guidance of 480,000 to 490,000 BOE per day.

For the full-year 2002, Unocal still expects adjusted aftertax earnings of between $1.70 and $1.90 per share, using commodity prices of $26.00 for oil and $3.00 for natural gas. Net production for the year is expected to average between 480,000 and 490,000 BOE per day, compared with the earlier guidance of 490,000 to 500,000 BOE per day.

Pure Resources exchange offer

Williamson noted that the prospectus for the tender offer to Pure Resources, Inc., stockholders to exchange Pure shares for Unocal shares will be mailed Thursday, Sept. 5. Pure's stockholders will have 20 business days to tender their shares to Unocal, which currently owns 65 percent of the outstanding Pure shares.

Growth objectives

Williamson stressed that one of the company's key objectives is to deliver growth in production and earnings margin per BOE.

"We simply cannot allow our production growth to come at the expense of our margins," he said. "We expect to realize margin and production growth goals through aggressive cost management and restructuring in the mature business units." Williamson said the company is focusing on achieving production growth with major developments such as West Seno, Azerbaijan International Operating Company (AIOC) and Ranggas, and by shifting its focus on the Gulf of Mexico shelf to higher scope, deeper exploration and reducing capital spending on small scope, lower return production-adding activities.

AIOC development

The AIOC full-field development is now moving forward on the first two phases. Construction of the Baku-Tbilisi-Ceyhan pipeline is slated to commence early in 2003. Williamson stressed the magnitude and impact of the development of this 5-billion-plus barrel oil field to Unocal. "Our net production is expected to increase from around 12,000 barrels a day today to 21,000 by 2005 and ultimately to more than 80,000 barrels per day in 2008," he said.

Deepwater Indonesia

In the deepwater Indonesia, Williamson noted that the program continues at a high level of activity, focusing on the continued appraisal of the Ranggas oil and gas discovery and the Gendalo gas and condensate discovery, and continuing exploration for oil targets in deeper intervals and newly acquired outboard acreage.

"We just drilled another successful Ranggas appraisal well and believe we can have a commercial development there. The key is to determine how much additional appraisal is needed to optimize our development plan," he said.

Deepwater GOM

In the deepwater Gulf of Mexico, the company plans to drill a second appraisal well on the Trident discovery in Alaminos Canyon this fall. The Mad Dog development, operated by BP, is on schedule.

Williamson said that an appraisal well on the deepwater K2 discovery encountered more than 300 feet of net oil pay in three sands. K2 is located in Green Canyon block 562, about 180 miles south of New Orleans at a water depth of almost 4,000 feet. Drilled to a total depth of 25,700 feet, the appraisal well confirmed the findings of discovery well and detected a thickening of the pay zones. The well encountered pay in additional intervals where no pay was found in the discovery well.

"We are evaluating the well data to determine the size of the reservoir and estimate the resource potential," Williamson said. "The success of this well solidifies our confidence that the project will proceed toward sanction and development with first production as early as 2004."

Unocal holds a 12.5 percent working interest in K2. Its co-venturers are Agip, the operator (18.2 percent), Anadarko (52.5 percent) and Conoco (16.8 percent).

Williamson added that the company is anxious to move Trident forward to this same stage and would like to pursue development options at the BP-operated Mirage discovery as well.

"We are planning to return to exploration drilling in the deepwater Gulf after about a year's drilling hiatus," Williamson said. "We wanted to digest the significant information we acquired in our 2001 program and also see what success the industry had. We now feel we have an excellent inventory of prospects as we resume our exploration drilling, focusing completely in areas which have seen recent industry success, namely Green Canyon and Mississippi Canyon."

GOM shelf

In the Gulf of Mexico shelf, Williamson told analysts that the shift towards deeper, higher risk and scope exploration was in full swing.

"In the coming months, we should have multiple 'deep shelf' wildcats drilling concurrently," Williamson said. "Our portfolio of leads and prospects continues to grow along with our regional G&G understanding of the play. We are confident that this program will be successful for the company, and an important part of ensuring a sustainable shelf business."

About Unocal Corporation

Unocal is one of the world's largest independent natural gas and crude oil exploration and production companies. Based in El Segundo, Calif., Unocal's principal production operations are in North America, Asia, and the North Sea. Unocal is also one of the world's largest producers of geothermal energy with operations in Indonesia and the Philippines.

This news release contains certain forward-looking statements about expected earnings, commodity prices, dry hole costs, production, and future drilling plans. These statements are not guarantees of future performance. 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 2001 Annual Report on Form 10-K and subsequent reports filed with the U.S. Securities and Exchange Commission. Unocal undertakes no obligation to update the information in this news release.

Investors are urged to consider closely the disclosure in Unocal's 2001 Annual Report on Form 10-K and other reports filed with the SEC (SEC File No. 1-8483). Copies of the company's SEC filings are available on the Unocal web site,, or by calling the company at 800-252-2233. Unocal's filings are also available from the SEC by calling 800-SEC-0330.

Updated: September 2002