press release

Unocal posts 2Q 2002 adjusted operating earnings of 55 cents per share

Download 2Q earnings news release in pdf format

El Segundo, Calif., July 24, 2002 - Unocal Corporation (NYSE: UCL) today reported adjusted aftertax earnings from continuing operations (excluding special items) in the second quarter were $134 million, or 55 cents per share (diluted). This compares with the Thompson/First Call consensus (Published July 22, 2002) of 51 cents per share.

In the second quarter 2001, Unocal had adjusted aftertax earnings from continuing operations of $228 million, or 92 cents per share (diluted).

Unocal recorded second quarter 2002 net earnings of $114 million, or 46 cents per share (diluted). This compares with net earnings in the same period a year ago of $247 million, or 99 cents per share (diluted).

CONSOLIDATED RESULTS (unaudited) 2Q 2002 1Q 2002 2Q 2001
Millions of dollars except per share amounts

Adjusted after-tax earnings from continuing operations $ 134 $ 43 $ 228
Special items (21) (21) 7

Earnings from continuing operations $ 113 $ 22 $ 235
Earnings from discontinued operations 1 - 12
Cumulative effect of accounting change - - -

Net earnings $ 114 $ 22 $ 247

DILUTED EARNINGS PER SHARE DATA (unaudited)
Adjusted after-tax earnings per share from continuing operations $ 0.55 $ 0.17 $ 0.92

Net earnings per share:
Continuing operations $ 0.46 $ 0.09 $ 0.95
Discontinued operations - - 0.04

Total net earnings per share $ 0.46 $ 0.09 $ 0.99

CASH FLOW DATA (unaudited)
Adjusted discretionary cash flow $ 491 $ 335 $ 614
Adjusted discretionary cash flow per share (diluted) $ 2.00 $ 1.37 $ 2.39

REVENUES FROM CONTINUING OPERATIONS (unaudited) $ 1,356 $ 1,038 $ 1,696

2Q 2002 prices and production

Unocal's second quarter 2002 earnings reflected declines in natural gas and liquids prices and lower natural gas production, compared with the same period a year ago.

The company's average worldwide price for natural gas was $2.80 per thousand cubic feet (mcf), compared with $3.41 per mcf a year ago. Unocal's worldwide average liquids price was $22.63 per barrel, down from $24.33 in the second quarter 2001.

Worldwide, Unocal's consolidated net daily production in the second quarter 2002 averaged 486,000 barrels-of-oil equivalent (BOE) per day, compared with 516,000 BOE a year ago. The majority of the decline was in Unocal's North America operations, which reflected lower Gulf of Mexico natural gas production stemming from a significant decline in Muni field production and low second-half 2001 drilling activity in response to lower commodity prices.

Financial measures

Unocal's adjusted discretionary cash flow for the second quarter was $491 million, or $2.00 per share (diluted). This compares with $614 million, or $2.39 per share (diluted), a year ago.

Capital spending in the second quarter was $440 million, down from $464 million, excluding major acquisitions, in the second quarter 2001.

The company's total consolidated long-term debt (including current maturities) was $3.12 billion (46% debt-to-total capitalization ratio) at the end of the second quarter. This compares with $2.91 billion (44% debt-to-total capitalization ratio) at year-end 2001.

Second quarter revenues from continuing operations were $1.36 billion, compared with $1.70 billion in the second quarter 2001. The 2002 revenues primarily reflected lower commodity prices, domestic natural gas production, and crude oil marketing activities by the company's Trade segment.

Special items

Second quarter 2002 special items included $13 million net in aftertax provisions for environmental and litigation matters (primarily related to formerly operated sites, sites previously sold with retained responsibilities, and other inactive sites) and a $12 million aftertax charge for restructuring of the company's Gulf Region USA business unit.

The special items that were included in the company's first quarter 2002 and the comparable periods for 2001 are detailed in the Quarterly Fact Book and prior period earnings news releases that are posted on the Unocal web site.

Six months results

For the first six months of 2002, Unocal's adjusted aftertax earnings from continuing operations were $177 million, or 72 cents per share (diluted). This compares with $568 million, or $2.26 per share, for the same period in 2001. Including special items, discontinued operations and the cumulative effect of an accounting change, Unocal's net earnings for six months 2002 were $136 million, or 55 cents per share (diluted), down from $542 million, or $2.17 per share in 2001.

Total revenues from continuing operations for the six months were $2.39 billion, compared with $3.91 billion in 2001.

CONSOLIDATED RESULTS (unaudited) For the 6 months ended June 30
Millions of dollars except per share amounts 2002 2001
Adjusted after-tax earnings from continuing operations $ 177 $ 568
Special items (42) (41)
Earnings from continuing operations $ 135 $ 527
Earnings from discontinued operations 1 16
Cumulative effect of accounting change - (1)
Net earnings $ 136 $ 542
DILUTED EARNINGS PER SHARE DATA (unaudited)
Adjusted after-tax earnings per share from continuing operations $ 0.72 $ 2.26
Net earnings per share:
Continuing operations $ 0.55 $ 2.11
Discontinued operations - 0.06
Total net earnings per share $ 0.55 $ 2.17
CASH FLOW DATA (unaudited)
Adjusted discretionary cash flow $ 826 $ 1,328
Adjusted discretionary cash flow per share (diluted) $ 3.37 $ 5.17
REVENUES FROM CONTINUING OPERATIONS (unaudited) $ 2,394 $ 3,910

Earnings outlook

Unocal is forecasting adjusted earnings from continuing operations of 45 to 55 cents per share in the third quarter 2002. The third quarter earnings forecast assumes average NYMEX benchmark prices of $26.75 per barrel of crude oil and $3.15 per million British thermal units (mmBtu) for North America natural gas.

Unocal's third-quarter forecasted earnings are expected to change 4 cents per share for every $1 change in its average worldwide realized price for crude oil and 2 cents per share for every 10-cent change in the company's average realized North America natural gas price.

The forecast also assumes pretax dry hole costs in the third quarter of $30 to $40 million.

For the full-year 2002, Unocal is forecasting adjusted earnings from continuing operations of $1.70 to $1.90 per share.

The full-year earnings forecast assumes average NYMEX benchmark prices of $25.10 per barrel of crude oil and $3.05 per mmBtu for North America natural gas.

Unocal's full-year forecasted earnings are expected to change 16 cents per share for every $1 change in its average worldwide realized price for crude oil and 8 cents per share for every 10-cent change in the company's average realized North America natural gas price.

The 2002 forecast also assumes pretax dry hole costs of $110 to $125 million.

Production outlook

Unocal said it expects worldwide net production to increase through the remainder of the 2002, driven mainly by new projects in the Far East and North America. In Thailand, the Pailin II gas project has started production, and the company has ramped-up oil production from the Yala and Plamuk fields.

In the Gulf of Mexico, Unocal expects production gains from several drilling projects on properties jointly held with Forest Oil Corporation (NYSE: FST) and new discoveries made earlier this year. In the second half of 2002, Unocal's drilling capital plan is strongly weighted towards deep-shelf exploration, which could add longer-term reserves, versus development and exploitation to add near-term production.

Offsetting some of the increases, Unocal has curtailed 20 to 30 mmcf per day of Cook Inlet gas deliveries to Agrium's fertilizer plants in Alaska. The curtailment is the result of a legal dispute between Unocal and Agrium. Since the gas is sold to Agrium at a base price of $1.20 per mcf, the curtailment will have little or no impact on Unocal earnings.

The company expects that net daily worldwide production for the third quarter 2002 will average between 480,000 and 490,000 BOE. Net daily worldwide production for the full-year 2002 is expected to be at the lower end of the previously announced estimates that range between 490,000 and 500,000 BOE.

Unocal's currently estimates full-year 2002 capital expenditures at about $1.7 billion.

About Unocal Corporation

Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal oil and gas activities are in North America, Asia, Latin America, and the North Sea. Unocal is one of the world's largest producers of geothermal energy with operations in Indonesia and the Philippines.

Conference call/financial database

Unocal will broadcast its quarterly earnings conference call today at 1 p.m. PDT (4 p.m. EDT) over the Internet. To listen to the live webcast, go to the Investor Information section of the Unocal web site. Replays of the conference call, including questions and answers, will be available through Aug. 30, 2002.

In addition, complete detailed financial tables for the second quarter 2002 and the comparable prior periods are available in the "Quarterly Fact Book," which is posted in the Unocal Investor Data Warehouse on the web site.

This news release contains certain forward-looking statements about expected earnings, production, commodity prices, capital spending, and dry hole costs. 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 from the company by calling 800-252-2233 or from the SEC by calling 800-SEC-0330.

ADJUSTED AFTER-TAX EARNINGS BY BUSINESS SEGMENT (unaudited) 2Q 2002 1Q 2002 2Q 2001
Millions of dollars

Exploration & Production
North America
Lower 48 (a) (b) 32 1 142
Alaska (5) (6) 13
Canada 2 (5) (7)
International
Far East 113 90 113
Other 12 12 5
Trade 1 1 4
Midstream 23 19 18
Geothermal and Power Operations 14 6 2
Corporate and Other
Administrative and General (19) (24) (21)
Interest Expense - Net (a) (28) (37) (32)
Environmental and Litigation (2) (1) (2)
Other (a) (9) (13) (7)

Adjusted after-tax earnings $ 134 43 $ 228

(a) Includes amounts attributable to minority interests of:
Lower 48 (7) (3) (15)
Corporate and Other 4 2 1
(b) Includes earnings (loss) from:
Onshore / Shelf 41 10 150
Deep water (9) (9) (8)

ADJUSTED DISCRETIONARY CASH FLOW (unaudited) 2Q 2002 1Q 2002 2Q 2001
Millions except per share amounts

Adjusted after-tax earnings $ 134 $ 43 $ 228
Adjustments to earnings, excluding special items:
Depreciation, depletion and amortization 276 224 245
Dry hole costs 13 28 47
Amortization of exploratory leasehold costs 23 22 23
Deferred income taxes 17 (10) 45
Exploration expenses 38 37 32
Capitalized interest (10) (9) (6)

Total adjusted discretionary cash flow $ 491 $ 335 $ 614

Diluted weighted average shares 246 245 257
Adjusted discretionary cash flow per share (diluted) 2.00 1.37 2.39

The preceding table of discretionary cash flow, excluding special items and all asset sales, is provided for analysts and others in the investment community as a supplement to conventional financial data prepared in accordance with generally accepted accounting principles. Discretionary cash flow assumes certain income taxes related to special items are deferred and does not give effect to significant uses of cash, including those for capital projects, debt reduction and regular dividends, some of which result from previous commitments, and should only be considered in conjunction with the full presentation of condensed consolidated cash flows in the company's quarterly fact book.

OPERATING HIGHLIGHTS (unaudited) 2Q 2002 1Q 2002 2Q 2001

North America Net Daily Production
Liquids (thousand barrels)
Lower 48 (a) (b) 54 56 59
Alaska 25 25 24
Canada 17 18 15

Total liquids 96 99 98
Natural gas - dry basis (million cubic feet)
Lower 48 (a) (b) 766 746 954
Alaska 77 101 93
Canada 92 90 85

Total natural gas 935 937 1,132
North America Average Prices (c)
Liquids (per barrel)
Lower 48 $ 23.47 $ 18.48 $ 24.57
Alaska $ 20.86 $ 14.54 $ 22.27
Canada $ 21.92 $ 16.52 $ 20.84
Average $ 22.47 $ 17.19 $ 23.45
Natural gas (per mcf)
Lower 48 $ 3.12 $ 2.47 $ 4.62
Alaska $ 1.57 $ 1.57 $ 1.20
Canada $ 2.97 $ 2.25 $ 2.48
Average $ 2.97 $ 2.35 $ 4.16

International Net Daily Production (d)
Liquids (thousand barrels)
Far East 54 53 48
Other (a) 20 20 19

Total liquids 74 73 67
Natural gas - dry basis (million cubic feet)
Far East 883 822 908
Other (a) 79 75 69

Total natural gas 962 897 977
International Average Prices (c)
Liquids (per barrel)
Far East $ 22.50 $ 19.28 $ 24.91
Other $ 23.91 $ 21,96 $ 27.51
Average $ 22.84 $ 19.86 $ 25.61
Natural gas (per mcf)
Far East $ 2.63 $ 2.44 $ 2.54
Other $ 2.79 $ 2.48 $ 2.92
Average $ 2.64 $ 2.44 $ 2.56

Worldwide Net Daily Production (a) (b) (d)
Liquids (thousand barrels) 170 172 165
Natural gas - dry basis (million cubic feet) 1,897 1,834 2,109
Barrels oil equivalent (thousands) 486 477 516
Worldwide Average Prices (c)
Liquids (per barrel) $ 22.63 $ 18.28 $ 24.33
Natural gas (per mcf) $ 2.80 $ 2.39 $ 3.41

(a) Includes proportional shares of production of equity investees.
(b) Includes amounts attributable to minority interests of :
Liquids 9 9 9
Natural gas 98 98 106
Barrels oil equivalent 25 25 26
(c) Average prices include hedging gains and losses but exclude gains or losses on derivative positions not accounted for as hedges, the ineffective portion of hedges and other Trade margins.
(d) International production is presented utilizing the economic interest method.

Updated: July 2002