press release

Unocal posts higher 3Q earnings; sees improved domestic natural gas prices

EL SEGUNDO, Calif., Oct. 27, 1997 -- Unocal Corporation today reported third quarter 1997 earnings from continuing operations of $177 million, or 71 cents per share, compared with earnings from continuing operations of $134 million, or 32 cents per share, for the same period a year ago.

Earnings from continuing operations, excluding special items (detailed in attached tables) were $94 million, or 38 cents per share, compared with $118 million, or 25 cents per share, in the third quarter 1996.

The 1997 third quarter operating earnings reflect improved foreign natural gas and crude oil production and higher worldwide natural gas prices. These were more than offset by lower domestic crude oil and natural gas production and lower worldwide crude oil prices.

For the quarter, net natural gas production in Thailand was up 24 percent to 634 million cubic feet per day, compared with the third quarter 1996. In Indonesia, Unocal's net crude oil production (including host country share) averaged 73,033 barrels per day, up 14 percent from a year ago.

The third quarter special items included $182 million in deferred income tax benefits -- $114 million related to a reassessment of Unocal's exposure for pending federal income tax appeals and $68 million related to the recent currency devaluation in Thailand. The 1996 earnings per share amounts reflect a one-time $54 million non-cash reduction resulting from the exchange of preferred stock.

"We continued to post higher crude oil and natural gas production in our foreign operations," said Roger C. Beach, Unocal chairman and chief executive officer. "In addition, net interest expense declined $18 million due to debt reduction."

Beach noted that the company's total debt was $2.08 billion, down $980 million from year-end 1996. Cash flow from operations in the third quarter, before working capital changes, was $307 million, compared with $450 million last year.

To date, the company has purchased approximately 4.5 million common shares for $172 million under the company's $400 million stock repurchase program. Reported earnings for the third quarter, including discontinued operations and special items, were $177 million, or 71 cents per common share. This compares with $171 million, or 47 cents per common share, reported in the third quarter a year ago.

Forecast for 1997 earnings, gas prices

"Based on our internal forecasts, we expect our fourth quarter adjusted earnings to be 57 to 63 cents per share," Beach said. The company's earnings forecast assumes that Unocal realizes domestic commodity prices based on the present NYMEX futures prices and improvements in operating results.

The company estimates that Unocal's Lower 48 U.S. natural gas prices could average more than $3 per thousand cubic feet in the fourth quarter 1997, up 75 cents from the third quarter. This increase alone would boost Unocal's aftertax earnings by about 15 cents per share. Each 10-cent change in realized Lower 48 U.S. gas prices results in a quarterly earnings impact of $5 million, or about 2 cents per share.

"We are also looking at stronger sales and improved earnings from nitrogen fertilizer products in the last three months of the year, compared with the third quarter, and higher geothermal earnings, reflecting additional revenues from new power plants in Indonesia," Beach said.

Beach also noted that the company's deepwater exploration program in Indonesia continues to yield successes. Unocal recently completed a 3-D seismic survey in the Makassar contract area, and an additional confirmation well, Merah Besar #4, tested 21.7 million cubic feet of gas per day. This was a horizontal well in the Pliocene gas sands and provided important new data critical to development of the area. Four additional confirmation wells are planned in the area to test the Miocene oil-bearing sands.

Nine-month 1997 results

For the nine months, earnings from continuing operations were $521 million or $2.09 per share, compared with $453 million, or $1.54 per share in 1996.

Excluding special items, earnings from continuing operations for the nine months were $381 million, or $1.53 per share, compared with $402 million, or $1.32 per share.

The reported net earnings for the first nine months of 1997, including discontinued operations and special items, were $439 million, or $1.76 per share. This compares with $533 million or $1.86 per share, recorded for the first nine months 1996.

Unocal is a leading global energy resource and project development company, with reserves of more than 9.8 trillion cubic feet of natural gas equivalent (1.6 billion barrels of oil equivalent) and major oil and gas production activities in Asia and the U.S. Gulf of Mexico.

Forward-looking statements in this news release, including estimates of profitability and cash flows, are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially.

 CONDENSED CONSOLIDATED EARNINGS STATEMENT
    (UNAUDITED)
                                  For the Three Months  For the Nine Months
                                    Ended September 30   Ended September 30
                                         1997     1996         1997    1996
    Dollars in millions except per share amounts

    Total revenues                  $ 1,397   $ 1,337     $ 4,507   $ 3,943
    Costs and other deductions        1,394     1,145       3,918     3,206
    Earnings from continuing operations
      before income taxes                 3       192         589       737
    Income taxes                       (174)       58          68       284
    Earnings from continuing operations 177       134         521       453
    Earnings from discontinued
      operations (net of tax)            --        37          --        80
    Loss on disposal (net of tax)        --        --         (44)       --
    Extraordinary charge - extinguishment
      of debt (net of tax)               --        --         (38)       --
    Net earnings                      $ 177     $ 171       $ 439     $ 533
    Dividends on preferred stock         --        --          --        18
    Non-cash charge related to exchange
      of preferred stock                 --        54          --        54
    Net earnings applicable
      to common stock                 $ 177     $ 117       $ 439     $ 461
    Earnings/(loss) per common share
        assuming no dilution (a)
      Continuing operations             $ 0.71    $ 0.32      $ 2.09    $ 1.54
      Discontinued operations            --         0.15       (0.18)     0.32
      Extraordinary item - extinguishment of
        debt (net of tax)                --        --          (0.15)    --
    Net earnings per share              $ 0.71    $ 0.47      $ 1.76    $ 1.86

    (a) Based on weighted average common
    shares outstanding (in millions)    247       249         249       248

    CONDENSED CONSOLIDATED BALANCE SHEET
    (UNAUDITED)
    Millions of dollars
                                                 Sept. 30         Dec. 31
                                                    1997            1996
    Assets
    Cash and cash equivalents                      $ 516           $ 217
    Net assets of discontinued operations (b)         --           1,774
    Other current assets                           1,045           1,237
    Investments and long-term receivables          1,081           1,206
    Properties -- net                              4,688           4,590
    Other assets                                     127              99
      Total assets                                $7,457          $9,123
    Liabilities and Equity
    Current portion of long-term debt
      and capital lease obligations                 $ --           $ 118
    Other current liabilities                        975           1,504
    Long-term debt and capital
      lease obligations                            2,078           2,940
    Deferred income taxes                            166             348
    Other deferred credits and liabilities         1,311           1,416
    Convertible preferred securities                 522             522
    Stockholders' equity                           2,405           2,275
    Total liabilities and equity                  $7,457          $9,123

    (b) Excludes retained working capital


    CONDENSED CONSOLIDATED CASH FLOWS
    (INCLUDES DISCONTINUED OPERATIONS)
    (UNAUDITED)
                                    For the Three MonthsFor the Nine Months
                                      Ended September 30 Ended September 30
    Millions of dollars
                                         1997       1996     1997      1996
    Cash flows from operating activities
      Net earnings                       $ 177      $ 171    $ 439     $ 533
      Adjustments to reconcile net earnings to
       net cash provided by operating activities
         Loss on disposal of discontinued
          operations (before-tax)           --         --       71        --
         Depreciation, depletion and
          amortization                     300        228      755       724
         Dry hole costs                      8         53       51        72
         Deferred income taxes            (255)        15     (226)       48
         Gain on sales of assets (before-tax)2        (36)     (59)     (173)
         Other                              75         19      (83)       96
    Working capital and other changes
      related to operations                 (8)        56     (212)     (101)
         Net cash provided by operating
          activities                       299        506      736     1,199
    Cash flows from investing activities
      Capital expenditures (includes dry
       hole costs)                        (308)      (318)    (953)     (940)
      Proceeds from sale of discontinued
       operations                            3         --    1,789        --
      Proceeds from asset sales              7         46       55       585
      Net cash provided by/(used in)
       investing activities               (298)      (272)     891      (355)

    Cash flows from financing activities
      Net decrease in long-term debt and
       capital lease obligations          (241)      (171)    (959)     (560)
      Dividends paid                       (50)       (59)    (150)     (176)
      Repurchase of common stock           (81)        --     (173)       --
      Other                                  3         12      (46)       23
         Net cash used in financing
          activities                      (369)      (218)  (1,328)     (713)
    Increase/(decrease) in cash and
      cash equivalents                    (368)        16      299       131
    Cash and cash equivalents at
      beginning of period                  884        209      217        94
    Cash and cash equivalents at end
     of period                           $ 516      $ 225    $ 516     $ 225

    CONDENSED CAPITAL EXPENDITURES
    (UNAUDITED)
    Millions of dollars

    United States Exploration & Production$ 88      $ 92    $ 200     $ 327
    International Exploration & Production171         96      574       312
    Geothermal Operations                  29         39       76        91
    Diversified Business Group             18          8       40        26
    New Ventures (Non E & P)                2          5        5         5
    Corporate & Unallocated                --         10        9        22
    Discontinued Operations                --         68       49       157
    Total (a)                            $308       $318     $953      $940
    (a) Includes capitalized interest of:$ 10        $ 3     $ 26       $ 9

    DEPRECIATION, DEPLETION & AMORTIZATION
    (UNAUDITED)
    Millions of dollars
    Depreciation, depletion & amortization
    from continuing operations            $300       $192     $755      $617

    DISCRETIONARY CASH FLOW
    (INCLUDES DISCONTINUED OPERATIONS)
    (UNAUDITED)
                                      For the Three MonthsFor the Nine Months
                                        Ended September 30 Ended September 30
    Millions of dollars                   1997       1996     1997      1996

    Net earnings                         $ 177      $ 171    $ 439     $ 533
    Adjustments to net earnings
      Depletion, depreciation &
        amortization                       238        228      693       724
      SFAS no. 121 impairment               62         --       62        --
      Dry hole costs                         8         53       51        72
      Deferred income taxes               (255)        15     (226)       48
      (Gain) Loss on sales of assets         2        (36)     (59)     (173)
      Exploration expenses                  50         33      114        83
      Proceeds from asset sales             10         46    1,844       585
      Environmental and litigation provision97         51      120       113
      Environmental and litigation payments(21)       (23)    (133)      (53)
      Other, net                            (1)        (9)       1        36
        Total discretionary cash flow    $ 367      $ 529  $ 2,906   $ 1,968

The preceding table of discretionary cash flow 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 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 on the preceding page.

    RESULTS OF OPERATIONS FOR
    EXPLORATION AND PRODUCTION ACTIVITIES
    (UNAUDITED)
                                               For the Nine Months
                                            Ended September 30, 1997
                                    Spirit   Other             Other
                                  Energy 76   U.S. Far EastInternational Total
    Millions of dollars
    Sales (includes intercompany sales) (a)
      Crude oil and condensate      $ 245   $ 136   $ 342     $ 119    $ 842
      Natural gas                     546      47     485        35    1,113
      Natural gas liquids              41       3      18         3       65
      Other                             2      --      --        --        2
        Total                         834     186     845       157    2,022
    Other revenue                      10       4       2        16       32
    Gain/(loss) on asset sales          2      --      --       (16)     (14)
    Total revenues                    846     190     847       157    2,040
    Production costs                  139      73      93        53      358
    Exploration expenses               37      --      43        28      108
    Dry hole costs                     10      --      39         1       50
    Depreciation, depletion &
      amortization                    374      42     235        53      704
    Other operating expenses           56       8      48        31      143
      Results of operations before
        income tax                  $ 230    $ 67   $ 389      $ (9)   $ 677

                                               For the Nine Months
                                            Ended September 30, 1996
                                    Spirit   Other             Other
                                  Energy 76   U.S.Far EastInternational Total
    Sales (includes intercompany sales) (a)
      Crude oil and condensate      $ 287   $ 209   $ 278     $ 137    $ 911
      Natural gas                     562      61     362        35    1,020
      Natural gas liquids              47       4      12         3       66
      Other                             3      --      --        --        3
        Total                         899     274     652       175    2,000
    Other revenue                       8       2      --        17       27
    Gain on asset sales                 8     110       1        23      142
        Total revenues                915     386     653       215    2,169
    Production costs                  134      96      94        57      381
    Exploration expenses               19      --      31        28       78
    Dry hole costs                     49      --      13         5       67
    Depreciation, depletion &
      amortization                    268      74     163        44      549
    Other operating expenses          100      13      30         4      147
      Results of operations before
        income tax                  $ 345   $ 203   $ 322      $ 77    $ 947
    (a) Sales revenues are net of royalty payments, net profits interests and
    marketing related purchases


    RESULTS OF OPERATIONS FOR
    EXPLORATION AND PRODUCTION ACTIVITIES
    (UNAUDITED)                            For the Three Months Ended
                                            Ended September 30, 1997
                                    Spirit   Other             Other
                                  Energy 76   U.S. Far EastInternationalTotal
    Millions of dollars
    Sales (includes intercompany sales) (a)
      Crude oil and condensate       $ 67   $ 40    $ 112      $ 34    $ 253
      Natural gas                     171     15      168        11      365
      Natural gas liquids              12     --        4         1       17
      Other                             1     --       --        --        1
                                      251
    Loss on asset sales                (2)    --       --        --       (2)
        Total revenues                253     58      280        49      640
    Production costs                   41     27       30        17      115
    Exploration expenses               13     --       25        10       48
    Dry hole costs                      3     --        4        --        7
    Depreciation, depletion &
      amortization                    169     13       81        17      280
    Other operating expenses           18      2       26         7       53
      Results of operations before
        income tax                    $ 9   $ 16    $ 114      $ (2)   $ 137

                                          For the Three Months Ended
                                            Ended September 30, 1996
                                    Spirit   Other             Other
                                  Energy 76   U.S.Far EastInternational Total
    Sales (includes intercompany sales) (a)
      Crude oil and condensate      $ 104   $ 57     $ 95      $ 47    $ 303
      Natural gas                     178     18      132        10      338
      Natural gas liquids              17      1        3         1       22
      Other                             1     --       --        --        1
        Total                         300     76      230        58      664
    Other revenue                       5     --        1         6       12
    Gain on asset sales                 3     --        1        17       21
        Total revenues                308     76      232        81      697
    Production costs                   46     19       31        20      116
    Exploration expenses                8     --       14         8       30
    Dry hole costs                     38     --       11         1       50
    Depreciation, depletion &
      amortization                     94     18       47        14      173
    Other operating expenses           34      4       13        --       51
      Results of operations before
        income tax                   $ 88   $ 35    $ 116      $ 38    $ 277
    (a) Sales revenues are net of royalty payments, net profits interests and
    marketing related purchases.


    OPERATING HIGHLIGHTS
    (UNAUDITED)                     For the Three Months  For the Nine Months
                                     Ended September 30   Ended September 30
                                      1997         1996       1997      1996
    Net daily production
      Crude oil and condensate (thousand barrels daily):
        United States
          Spirit Energy 76            40.8         51.4       45.0      51.7
          Other (a)                   29.8         34.7       31.5      47.2
            Total United States       70.6         86.1       76.5      98.9
        International
          Far East (b)                96.2         82.2       94.9      82.4
          Other                       24.9         27.2       25.9      27.6
            Total International      121.1        109.4      120.8     110.0
            Total Worldwide          191.7        195.5      197.3     208.9
    Natural gas (million cubic feet daily):
        United States
          Spirit Energy 76           844.5        928.4      875.7     917.0
          Other (a)                  109.6        146.8      130.8     164.5
            Total United States      954.1      1,075.2    1,006.5   1,081.5
        International
          Far East (b)               790.0        666.5      789.5     625.7
          Other                       54.8         63.0       61.7      71.1
            Total International      844.8        729.5      851.2     696.8
            Total Worldwide        1,798.9      1,804.7    1,857.7   1,778.3
    Natural gas liquids (thousand
                                      17.8
    Average sales prices
      Crude oil and condensate (per barrel):
        United States
          Spirit Energy 76         $ 17.27      $ 21.80    $ 19.69   $ 20.33
          Other                      13.36        17.37      15.39     16.52
            Total United States      15.57        20.01      17.90     18.31
        International
          Far East                 $ 17.45      $ 18.89    $ 18.72   $ 18.32
          Other                      16.58        19.89      17.58     18.53
            Total International      17.23        19.21      18.41     18.39
            Total Worldwide        $ 16.48      $ 19.62    $ 18.18   $ 18.34
      Natural gas (per mcf):
        United States
          Spirit Energy 76          $ 2.28       $ 2.23     $ 2.41    $ 2.34
          Other                       1.47         1.36       1.39      1.42
            Total United States       2.19         2.09       2.28      2.20
        International
          Far East                  $ 2.39       $ 2.27     $ 2.35    $ 2.23
          Other                       2.40         2.05       2.23      1.82
            Total International       2.39         2.25       2.34      2.18
            Total Worldwide         $ 2.28       $ 2.15     $ 2.30    $ 2.20

    (a) Includes production from California upstream properties of:
        Crude oil and condensate        --          1.0         --      10.9
        Natural gas                     --           --         --      17.2
        Natural gas liquids             --           --         --       0.2
    (b) Includes host country share in Indonesia of:
        Crude oil and condensate      27.9         26.4       29.2      26.8
        Natural gas                   21.9         29.1       26.6      26.2


    OPERATING HIGHLIGHTS (continued)
    (UNAUDITED)
                                For the Three Months EndedFor the Nine Months
                                      Ended September 30  Ended September 30
                                       1997        1996       1997      1996
    Agricultural products production volumes (thousand tons)
      Ammonia                          314          360      1,072     1,089
      Urea                             188          275        696       845
      Other products                   146          149        494       494
    Agricultural products sales volumes (thousand tons)
      Ammonia                          187          206        590       574
      Urea                             191          198        690       779
      Other products                   200          302        907       971


    EARNINGS BY BUSINESS SEGMENT
    (Unaudited)
                                       3rd Quarter of 1997 3rd Quarter of 1996
                                    Before-tax  After-tax Before-taxAfter-tax
    Millions of dollars
    Exploration and Production
      United States
        Spirit Energy 76                $ 9         $ 6       $ 88      $ 55
        Other                            16          10         35        22
      International                     112         128        154       107
    Geothermal Operations                 7           6         15         6
    Diversified Business Group
      Agricultural Products               5           4         31        20
      Carbon and Minerals                13          10         15        13
      Pipelines                          19          16         17        14
      Other                              (1)         --          5         3
    Corporate and Unallocated
      Administrative and general expense(20)        (13)       (33)      (21)
      Net interest expense              (26)        (19)       (62)      (37)
      Environmental and litigation expense(104)     (65)       (60)      (37)
      New Ventures                       (3)         (1)       (10)       (7)
    Other                               (24)         95         (3)       (4)
    Earnings from continuing operations
     before discontinued operations
     and extraordinary item               3         177        192       134
    Earnings from discontinued operations--          --         59        37
    Extraordinary item                   --          --         --        --
        Total                           $ 3       $ 177      $ 251     $ 171

    EXPLORATION AND PRODUCTION -- this segment explores for, produces and
        markets crude oil, condensate, natural gas and natural gas liquids.
    GEOTHERMAL OPERATIONS -- this segment explores for, produces and sells
        geothermal resources used to generate electricity.
    DIVERSIFIED BUSINESS GROUP:
      AGRICULTURAL PRODUCTS -- this business unit manufactures and markets
        nitrogen-based products for wholesale agricultural and industrial
        markets supplying the western United States and the Pacific Rim.
      CARBON AND MINERALS -- this business unit produces and markets petroleum
        coke, graphites, solvents and specialty minerals.
      PIPELINES -- this business unit principally includes the company's
        equity interests in affiliated pipeline companies.
      OTHER -- principally includes the company's equity interest in The UNO-
        VEN Company.


    SPECIAL ITEMS
    (Unaudited)                      3rd Quarter of 1997 3rd Quarter of 1996
                                    Before-tax After-tax  Before-taxAfter-tax
    Dollars in millions except per share amounts
    Reported earnings                   $ 3       $ 177      $ 251     $ 171
    Less: Special items
      Exploration and Production
        United States
          Spirit Energy
            Asset Sales                  (1)         --          4         3
            SFAS no.121 impairment      (62)        (39)        --        --
        International
          Asset Sales                    (1)         (1)        18        37
          Uninsured loss -- Bangladesh   --          --         --        --
          Deferred tax adjustment        --          68         --        --
      Geothermal Operations
          Deferred tax adjustment        --           3         --        --
      Corporate and Unallocated
          Asset Sales                    --          (1)        14         8
          Environmental provision       (65)        (41)       (20)      (12)
          Litigation provision          (32)        (20)       (31)      (20)
          Deferred tax adjustment        --         114         --        --
      Discontinued Operations
          Asset Sales                    --          --          1         1
          Other                          --          --          2         1
      Total special items              (161)         83        (12)       18
    Adjusted earnings                 $ 164        $ 94      $ 263     $ 153


    EARNINGS BY BUSINESS SEGMENT
    EXCLUDING SPECIAL ITEMS
    (Unaudited)
                                     3rd Quarter of 1997 3rd Quarter of 1996
                                   Before-tax  After-tax  Before-taxAfter-tax
    Millions of dollars
    Exploration and Production
      United States
        Spirit Energy 76               $ 72        $ 45       $ 84      $ 52
        Other                            16          10         35        22
      International                     113          61        136        70
    Geothermal Operations                 7           3         15         6
    Diversified Business Group
        Agricultural Products             5           4         31        20
        Carbon and Minerals              13          10         15        13
        Pipelines                        19          16         17        14
        Other                            (1)         --          5         3
    Corporate and Unallocated
        Administrative and general expense(20)      (13)       (33)      (21)
        Net interest expense            (26)        (19)       (62)      (37)
        Environmental and
          litigation expense             (7)         (4)        (9)       (5)
        New Ventures                     (3)         (1)       (10)       (7)
        Other                           (24)        (18)       (17)      (12)
    Earnings from continuing operations 164          94        207       118
    Earnings from discontinued operations--          --         56        35
        Total                         $ 164        $ 94      $ 263     $ 153
    Non-cash charge related to
      exchange of preferred stock                    --                  54
    Adjusted net earnings applicable
      to common stock                              $ 94                $ 99
    Adjusted net earnings
      per common share                            $0.38               $0.39
    Adjusted net earnings from continuing
      operations per common share                 $0.38               $0.25


    EARNINGS BY BUSINESS SEGMENT
    (Unaudited)
                                      First Nine Months    First Nine Months
                                            of 1997             of 1996
    Millions of dollars             Before-tax  After-tax Before-taxAfter-tax

    Exploration and Production
      United States
        Spirit Energy 76              $ 230       $ 144      $ 345     $ 215
        Other                            67          42        203       126
      International                     380         259        399       245
    Geothermal Operations                28          25         33        15
    Diversified Business Group
        Agricultural Products            75          50        113        73
        Carbon and Minerals             110          76         52        40
        Pipelines                        54          46         64        51
        Other                            43          37         15         9
    Corporate and Unallocated
        Administrative and
          general expense               (62)        (40)       (87)      (55)
        Net interest expense           (109)        (84)      (197)     (135)
        Environmental and
          litigation expense           (138)        (86)      (136)      (84)
        New Ventures                    (34)        (23)       (20)      (13)
        Other                           (55)         75        (47)      (34)
    Earnings from continuing operations
      before discontinued operations
      and extraordinary item            589         521        737       453
    Earnings (loss) from discontinued
      operations                        (71)        (44)       128        80
    Extraordinary item                  (52)        (38)        --        --
          Total                       $ 466       $ 439      $ 865     $ 533


    SPECIAL ITEMS
    (Unaudited)
                                      First Nine Months    First Nine Months
                                           of 1997              of 1996
                                    Before-tax After-tax  Before-taxAfter-tax
    Dollars in millions except per share amounts

    Reported earnings                 $ 466       $ 439      $ 865     $ 533
    Less: Special items
      Exploration and Production
        United States
          Spirit Energy
            Asset Sales                   2           2          8         5
            SFAS no.121 impairment      (62)        (39)        --        --
          Other
            Asset Sales                  --          --        110        68
        International
            Asset Sales                 (17)        (17)        24        41
            Uninsured loss -- Bangladesh(10)         (7)        --        --
            Deferred tax adjustment      --          68         --        --
      Geothermal Operations
            Deferred tax adjustment      --          10         --        --
      Diversified Business Group
        Carbon and Minerals
            Asset Sales                  67          41         --        --
        Pipeline
            Asset Sales                  --          --         12         7
        Other
            UNO-VEN restructuring        46          39         --        --
      Corporate and Unallocated
            Asset Sales                   7           4         15         9
            Environmental provision     (80)        (50)       (62)      (38)
            Litigation provision        (40)        (25)       (51)      (32)
            Deferred tax adjustment      --         114         --        --
            Other                        --          --        (11)       (9)
      Discontinued Operations
            Asset Sales                  --          --          5         3
            Other                        --          --          2         1
            Net loss on disposal        (71)        (44)        --        --
      Extraordinary item                (52)        (38)        --        --
      Total special items              (210)         58         52        55
    Adjusted earnings                 $ 676       $ 381      $ 813     $ 478


    EARNINGS BY BUSINESS SEGMENT
    EXCLUDING SPECIAL ITEMS
    (Unaudited)
                                      First Nine Months    First Nine Months
                                            of 1997             of 1996
    Millions of dollars             Before-tax After-tax  Before-taxAfter-tax

    Exploration and Production
      United States
        Spirit Energy 76              $ 290       $ 181      $ 337     $ 210
        Other                            67          42         93        58
      International                     407         215        375       204
    Geothermal Operations                28          15         33        15
    Diversified Business Group
        Agricultural Products            75          50        113        73
        Carbon and Minerals              43          35         52        40
        Pipelines                        54          46         52        44
        Other                            (3)         (2)        15         9
    Corporate and Unallocated
        Administrative and
          general expense               (62)        (40)       (87)      (55)
        Net interest expense           (109)        (84)      (197)     (135)
        Environmental and litigation
          expense                       (18)        (11)       (23)      (14)
        New Ventures                    (34)        (23)       (20)      (13)
        Other                           (62)        (43)       (51)      (34)
    Earnings from continuing operations 676         381        692       402
    Earnings from discontinued operations--          --        121        76
      Total                           $ 676       $ 381      $ 813     $ 478
    Dividends on preferred stock                     --                   18
    Non-cash charge related to exchange
      of preferred stock                             --                   54
    Adjusted net earnings applicable
      to common stock                             $ 381                $ 406
    Adjusted net earnings per common share        $1.53                $1.63
    Adjusted net earnings from continuing
      operations per common share                 $1.53                $1.32

Updated: October 1997