Unocal mulls cuts in short-term capital projects; no impact on high value exploration, growth programs
El Segundo, Calif., March 19, 1998 - Unocal Corporation today said it is planning to defer about $250 million in capital spending projects in 1998 because of lower crude oil prices.
Earlier, Unocal set its 1998 capital spending plan at $1.5 billion.
"We expect to continue as planned with our high-value growth programs in Indonesia, Bangladesh, Argentina and the Caspian Sea, as well as our exploration programs targeting the Gulf of Mexico shelf and deepwater areas," said Roger C. Beach, Unocal chairman and chief executive officer.
Beach said the capital expenditure reductions will come in three areas: near-term production projects that are most heavily affected by lower current commodity prices, investments in non-oil and gas businesses, and longer term exploration projects that could benefit from more data evaluation.
"Oil prices are at their lowest in almost 10 years, but we have the flexibility and strength to weather this period," Beach said. "We are taking a selective and preemptive approach to cutting our capital spending. We won't compromise the long-term growth of the company by making cuts across-the-board in response to unsustainable low oil prices today."
Beach added that the reduction in capital spending will also impact the company's goal that its 1998 domestic oil and gas production from the Lower 48 would equal the 1997 level. "In the U.S., we will likely see a reduction in workovers and possibly fewer development wells drilled. We are already off to a good start in replacing our Lower 48 production, and we will continue to push forward with our programs to increase Unocal's reserve base," he said. So far in 1998, the company has made seven discoveries on the Gulf of Mexico shelf. In total, nearly 100 exploration wells are planned for the Gulf of Mexico this year.
The company had said it expected to increase Lower 48 U.S. production by 2-1/2 percent per quarter in 1998 from the fourth quarter 1997 level. Because of the lower capital spending, coupled with pipeline curtailments in the Gulf of Mexico, Unocal now estimates that Lower 48 U.S. production for the year will be lower than forecast.
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 about capital expenditures and production forecasts in this news release are based on assumptions concerning market conditions, competition, regulations, operations and other factors. Actual results could differ materially.
Updated: March 1998