press release

Unocal reports 4Q 1998 results

Download quarterly financial tables (MS Excel 5.0 Workbook - 134K)

El Segundo, Calif., Jan. 27, 1999 - Unocal Corporation today said that continued depressed crude oil and natural gas prices, coupled with asset writedowns and restructuring costs, were major factors in the company's reporting a preliminary loss of $29 million, or 12 cents per share (basic and diluted) in the fourth quarter. This compares with earnings of $142 million, or 57 cents per share (diluted), in the fourth quarter a year ago.

Earnings from continuing operations, excluding special items (detailed in the attached tables), were $28 million, or 11 cents per share (diluted), compared with $134 million, or 54 cents per share (diluted), a year ago.

"We recorded higher natural gas production in the Far East during the quarter as gross production in Thailand continued at about 1 billion cubic feet per day," said Roger C. Beach, Unocal chairman and chief executive officer. Unocal has an average 64-percent net interest in its Thailand operations.

For the fourth quarter, discretionary cash flow (see attached table) was $436 million, or $1.81 per basic share. This included $136 million in proceeds from the sale of Unocal's interest in the Alliance Pipeline Project and various oil and gas properties, including the company's Oklahoma operations.

Because of continued low commodity prices, the company has projected capital expenditures of about $1.0 billion for 1999, compared with $1.7 billion in 1998. Unocal has also laid out a goal of reducing annualized cash expenses by $150 million to $200 million from the 1998 level to bolster cash flow.

"Our capital plan focuses on preserving our high-potential deepwater exploration and development program in the Gulf of Mexico and Indonesia, while ensuring that our debt ratio remains below 50 percent," Beach said. The company expects to drill four new deepwater exploration wells in the Gulf of Mexico this year, and continue its exploration and delineation program in the Kutei Basin offshore Indonesia.

Beach added that Unocal had decided to retain its pipeline assets as part of the company's strategic portfolio because of the dependable earnings and cash flow they generate. Earlier, Unocal had indicated it was considering restructuring options for its pipeline assets.

"We have consolidated responsibility for pipelines and related midstream operations into our Unocal Global Trade unit," Beach said. "A vigorous, market-based commercial approach to commodity trading has made Unocal Global Trade a fast-growing, profitable part of Unocal. Now we plan to extend that philosophy by integrating commercial, strategic and marketing responsibility for the pipeline assets and operations into Global Trade."

Unocal Global Trade recorded earnings of $8 million in the fourth quarter, up from $3 million in the same period a year ago. For the full-year 1998, the unit earned $21 million, up 31 percent from $16 million in 1997. Average gross margins on total natural gas volumes increased 10 percent in 1998 over 1997 to 4.2 cents per million Btu above IFERC indices. Average crude oil gross margins increased about 3 percent over the year before.

Special items

In the fourth quarter, Unocal realized $45 million from an insurance settlement of various environmental matters and $18 million in gains from asset sales.

Offsetting these positive special items were $65 million in asset writedowns, $30 million in environmental and litigation provisions and a $17 million restructuring charge arising from workforce reductions. The asset writedowns reflect the impairment of certain oil and gas and mineral properties, primarily due to low commodity prices. The restructuring charge includes the cost of terminating about 475 employees. These include 240 employees in Unocal's mining operations, 95 from various exploration and production business units and departments, and 140 support personnel.

Total revenues for the fourth quarter were $1.48 billion, off from $1.56 billion in the same period a year ago.

Full-year 1998 results

Unocal reported preliminary net earnings for 1998 of $130 million, or 54 cents per share (basic and diluted). Full-year 1998 earnings from continuing operations, excluding special items (detailed in the attached tables), were $166 million, or 68 cents per share (diluted).

Discretionary cash flow (see attached table) for 1998 was $1.5 billion, or $6.41 per basic share.

Total revenues for 1998 were $5.48 billion.

Unocal is a leading global oil and gas exploration and production company with significant pipeline and power plant development projects worldwide

Forward-looking statements and estimates regarding exploration and production activity and business results in this news release 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 Twelve Months
                                   Ended December 31      Ended December 31
                                    1998        1997       1998       1997
    Millions of dollars except
     per share amounts
    Total revenues                 $1,481     $1,557     $5,479      $6,064
    Costs and other deductions      1,512      1,375      5,174       5,293
    Earnings/(loss) from
     continuing operations
      before income taxes             (31)       182        305         771
    Income taxes/(benefit)             (2)        34        175         102
    Earnings/(loss) from
     continuing operations            (29)       148        130         669
    Loss from discontinued
     operations (net of tax)           --         (6)        --         (50)
    Extraordinary charge -
     extinguishment of debt
     (net of tax)                      --         --         --         (38)
    Net earnings/(loss)              $(29)      $142       $130        $581

    Basic earnings/(loss) per
     share of common stock (a)
      Continuing operations        $(0.12)     $0.60      $0.54       $2.69
      Discontinued operations
       (net of tax)                    --      (0.02)        --      (0.20)
      Extraordinary item -
       extinguishment of debt
       (net of tax)                    --         --         --      (0.15)
    Basic net earnings/(loss)
     per share                     $(0.12)     $0.58      $0.54       $2.34

    Diluted earnings/(loss) per
     share of common stock (b)(c)
      Continuing operations        $(0.12)     $0.59      $0.54       $2.65
      Discontinued operations
       (net of tax)                    --      (0.02)        --       (0.19)
      Extraordinary item -
       extinguishment of debt
       (net of tax)                    --         --         --       (0.15)
    Diluted net earnings/(loss)
     per share                     $(0.12)     $0.57      $0.54       $2.31

    (a) Weighted average shares -
        basic (millions).             241        245        241         248
    (b) Weighted average shares -
        diluted (millions).           242        259        242         262
    (c) Distributions on preferred
        securities (net of taxes)
        excluded in numerator.        $--         $6        $--         $24

    In 1998, the effect of assumed conversion of preferred securities on
    earnings per share is antidilutive.


    CONDENSED CONSOLIDATED BALANCE SHEET
    (UNAUDITED)

                                              Dec. 31        Dec. 31
    Millions of dollars                         1998           1997
    Assets
    Cash and cash equivalents                   $238           $338
    Other current assets                       1,140          1,163
    Investments and long-term receivables      1,153          1,113
    Properties - net                           5,276          4,816
    Other assets                                 145            100
        Total assets                          $7,952         $7,530

    Liabilities and Equity
    Current liabilities                       $1,376         $1,160
    Long-term debt                             2,558          2,169
    Deferred income taxes                        132            137
    Other deferred credits and liabilities     1,162          1,228

    Convertible preferred securities of a
     subsidiary trust                            522            522

    Stockholders' equity
     Common stock                                712            704
     Retained earnings                         1,935          1,990
     Accumulated other comprehensive loss        (34)           (18)
     Less treasury stock at cost
      (10,623 thousand shares)                  (411)          (362)
        Total liabilities and equity          $7,952         $7,530


    CONDENSED CONSOLIDATED CASH FLOWS
    (UNAUDITED)

                                   For the Three Months  For the Twelve Months
                                    Ended December 31      Ended December 31
    Millions of dollars             1998       1997(a)     1998       1997(a)
    Cash flows from operating
     activities
      Net earnings (loss)            $(29)      $142       $130        $581
      Adjustments to reconcile net
       earnings to net cash provided
       by operating activities
        Loss on disposal of
         discontinued
         operations (before-tax)       --         10         --          81
        Depreciation, depletion
         and amortization             301        207        867         962
        Dry hole costs                 34         59        184         110
        Deferred income taxes         (38)       (23)       (72)       (249)
        Gain on sales of assets
         (before-tax)                 (45)       (21)      (211)        (80)
        Other                          17        (27)        35        (110)
      Working capital and other
       changes related to operations   52         50         70        (162)
        Net cash provided by
         operating activities         292        397      1,003       1,133

    Cash flows from investing
     activities
      Capital expenditures
       (includes dry hole costs)     (456)      (474)    (1,704)     (1,427)
      Proceeds from sale of
       discontinued operations         --         --         --       1,789
      Proceeds from asset sales       136         45        435         100
        Net cash (used in) provided
         by investing activities     (320)      (429)    (1,269)        462

    Cash flows from financing
     activities
      Net increase (decrease) in
       long-term debt                 134         93        419        (866)
      Dividends paid                  (48)       (49)      (193)       (199)
      Repurchase of common stock       --       (189)       (48)       (362)
      Other                            (3)        (1)       (12)        (47)
        Net cash provided
         by (used in)
          financing activities         83       (146)       166      (1,474)

    Increase (decrease) in cash and
     cash equivalents                  55       (178)      (100)        121
    Cash and cash equivalents at
     beginning of period              183        516        338         217
    Cash and cash equivalents at
     end of period                   $238       $338       $238        $338

    (a)  Cash flows related to discontinued operations have not been
    segregated.


    CONDENSED CAPITAL EXPENDITURES
    (UNAUDITED)

    Millions of dollars
    United States Exploration &
     Production                      $221       $167       $810        $367
    International Exploration &
     Production                       186        227        762         801
    Geothermal and Power Operations     4         26         26         102
    Diversified Business Group         32         19         78          59
    New Ventures (Non-E & P)           --         --          1           5
    Corporate & Unallocated            13         35         27          44
    Discontinued Operations            --         --         --          49
        Total (b)                    $456       $474     $1,704      $1,427

    (b) Includes capitalized
         interest of:                  $4         $9        $26         $35


    DISCRETIONARY CASH FLOW
    (UNAUDITED)

                                   For the Three Months  For the Twelve Months
                                     Ended December 31     Ended December 31
                                    1998       1997(a)     1998       1997(a)
    Millions of dollars
    Net earnings (loss)              $(29)      $142       $130        $581

    Adjustments to net earnings
      Depletion, depreciation &
       amortization                   301        207        867         962
      Dry hole costs                   34         59        184         110
      Deferred income taxes           (38)       (23)       (72)       (249)
      Gain on sales of assets         (45)       (21)      (211)        (80)
      Exploration expenses             64         79        203         193
      Proceeds from asset sales       136         45        435       1,889
      Capitalized interest             (4)        (9)       (26)        (35)
      Environmental and litigation
       provisions                      49         14        162         139
      Environmental and litigation
       payments                       (61)       (29)      (189)       (162)
      Loss on disposal of
       discontinued operations         --         10         --          81
      Other                            29        (12)        62         (87)
        Total discretionary
         cash flow                   $436       $462     $1,545      $3,342

    (a)  Cash flows related to discontinued operations have not been
    segregated.

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 Three Months
                                       Ended December 31, 1998
                            Spirit                          Other
    Millions of dollars    Energy 76  Alaska   Far East International   Total
    Sales (includes
     intercompany sales)
      Crude oil and
       condensate            $43       $25       $67        $22         $157
      Natural gas            135        15       164          6          320
      Natural gas liquids      8        --         7         --           15
      Other                   --        --        --         --           --
        Total                186        40       238         28          492
    Other revenue             14         4        11          5           34
    Gain/(loss) on asset
     sales (a)                31         1        (3)        (2)          27
        Total revenues       231        45       246         31          553

    Production costs          56        22        35         11          124
    Exploration expenses      28        --         9         23           60
    Dry hole costs            21        --         7          -           28
    Depreciation, depletion
     & amortization (b)      143        35        45         25          248
    Other operating expenses   9         3        27          3           42
      Results of operations
       before income tax    $(26)     $(15)     $123       $(31)         $51

                                         For the Three Months
                                       Ended December 31, 1997
                            Spirit                          Other
                           Energy 76  Alaska  Far East  International  Total
    Sales (includes
     intercompany sales)
      Crude oil and
       condensate            $75       $44      $111        $42         $272
      Natural gas            202        18       157         11          388
      Natural gas liquids     15         1         7          1           24
      Other                    1        --        --         --            1
        Total                293        63       275         54          685
    Other revenue              3         2         5          7           17
    Gain on asset sales        9        --        --          1           10
        Total revenues       305        65       280         62          712

    Production costs          54        20        37         21          132
    Exploration expenses      22         1        33         20           76
    Dry hole costs            19        --        30         --           49
    Depreciation, depletion
     & amortization (b)       94        11        68         16          189
    Other operating expenses  21         4        13         12           50
    Results of operations
     before income tax       $95       $29       $99        $(7)        $216

    (a)  Includes the gain on the sale of the company's Oklahoma properties.
    (b)  Includes asset write-downs.


    RESULTS OF OPERATIONS FOR
    EXPLORATION AND PRODUCTION ACTIVITIES
    (UNAUDITED)
                                        For the Twelve Months
                                       Ended December 31, 1998
                            Spirit                        Other
    Millions of dollars   Energy 76  Alaska   Far East International Total
    Sales (includes
     intercompany sales)
      Crude oil and
       condensate            $194    $102      $329        $101      $726
      Natural gas             566      62       610          25     1,263
      Natural gas liquids      41       2        16           1        60
      Other                     3      --        --          --         3
        Total                 804     166       955         127     2,052
    Other revenue/(loss)       20      10        (6)         19        43
    Gain on asset sales (a)    32       1        --         158       191
        Total revenues        856     177       949         304     2,286

    Production costs          187      82       123          66       458
    Exploration expenses       75       2        59          56       192
    Dry hole costs            121      --        42          21       184
    Depreciation, depletion
     & amortization (b)       410      71       212          68       761
    Other operating expenses   63      13        70          40       186
      Results of operations
       before income tax       --      $9      $443         $53      $505

                                        For the Twelve Months
                                       Ended December 31, 1997
                            Spirit                        Other
                          Energy 76  Alaska   Far East International Total
    Sales (includes
     intercompany sales)
      Crude oil and
       condensate            $308    $180      $453        $161    $1,102
      Natural gas             743      65       642          46     1,496
      Natural gas liquids      56       4        25           4        89
      Other                     3      --        --          --         3
        Total               1,110     249     1,120         211     2,690
    Other revenue              10       6         5          23        44
    Gain/(loss) on asset
     sales                     11      --        --         (15)       (4)
        Total revenues      1,131     255     1,125         219     2,730

    Production costs          193      93       130          74       490
    Exploration expenses       59       1        73          51       184
    Dry hole costs             29      --        69           1        99
    Depreciation, depletion
     & amortization (b)       468      53       303          69       893
    Other operating expenses   77      12        47          57       193
      Results of operations
       before income tax     $305     $96      $503        $(33)     $871

    (a)  Includes the gain on the sale of the company's Oklahoma and Canadian
         properties.
    (b)  Includes asset write-downs.


    OPERATING HIGHLIGHTS
    (UNAUDITED)
                              For the Three Months       For the Twelve Months
                               Ended December 31           Ended December 31
                               1998         1997          1998          1997
    Net daily production
     Crude oil and condensate
      (thousand barrels daily):
       United States
        Spirit Energy 76        42            43           44            45
        Alaska                  29            34           29            31
        Total United States     71            77           73            76
       International
        Far East(a)             72            96           80            95
        Other                   27            25           30            26
        Total International     99           121          110           121

         Total Worldwide       170           198          183           197

     Natural gas (million
      cubic feet daily):
       United States
        Spirit Energy 76       798           813          795           860
        Alaska                 147           138          132           133
        Total United States    945           951          927           993
       International
        Far East(a)            857           809          853           795
        Other                   26            57           45            60
        Total International    883           866          898           855

         Total Worldwide     1,828         1,817        1,825         1,848

     Natural gas liquids
      (thousand barrels daily)  19            17           19            18

     Geothermal (million
      kilowatt-hours daily)     23            20           21            18

    Average sales prices (b)
     Crude oil and condensate
      (per barrel):
       United States
        Spirit Energy 76    $11.00        $18.08       $12.41        $18.47
        Alaska                8.78         14.83         9.35         15.25
        Total United States $10.07        $16.70       $11.17        $17.13
       International
        Far East            $11.00        $17.95       $12.55        $18.52
        Other                 9.66         16.90        10.73         17.39
        Total International $10.61        $17.65       $12.04        $18.21

         Total Worldwide    $10.37        $17.23       $11.67        $17.71

     Natural gas (per mcf):
       United States
        Spirit Energy 76     $2.05         $2.92        $2.07         $2.51
        Alaska                1.20          1.47         1.33          1.41
        Total United States  $1.91         $2.70        $1.97         $2.36
       International
        Far East             $1.95         $2.16        $2.06         $2.30
        Other                 2.40          2.34         2.36          2.25
        Total International  $1.98         $2.17        $2.07         $2.30

        Total Worldwide      $1.96         $2.44        $2.02         $2.33

    Agricultural products
     production volumes
      (thousand tons)
       Ammonia                 395           383        1,524         1,455
       Urea                    235           223          974           919

    Agricultural products
     sales volumes
      (thousand tons)
       Ammonia                 240           179          889           769
       Urea                    242           285        1,096           975

    (a) Includes host country
        share of:
         Crude oil
          and condensate         9            26           10            28
         Natural gas            67            34           49            28

    (b) Excludes Global Trade
        margins and Canada equity
        affiliate sales


    EARNINGS BY BUSINESS SEGMENT
    (UNAUDITED)
                                    4th Quarter of 1998   4th Quarter of 1997
    Millions of dollars          Before-tax   After-tax  Before-tax After-tax

    Exploration and Production
     United States
      Spirit Energy 76                $(26)        $(17)       $95       $59
      Alaska                           (15)          (9)        29        18
     International
      Far East                         123           69         99       102
      Other                            (31)         (16)        (7)      (13)

    Global Trade                        12            8          5         3

    Geothermal and Power Operations     11            8          3         1

    Diversified Business Group
     Agricultural Products               4            4          8         4
     Carbon and Minerals               (54)         (33)        (1)       --
     Pipelines                          28           23         16        13
     Other                              --           --          2         1

    Corporate and Unallocated
     Administrative and
      general expense                  (22)         (17)       (20)      (16)
     Net interest expense              (38)         (30)       (24)      (22)
     Environmental and
      litigation expense               (42)         (27)        (8)       (5)
     New Ventures (non E&P)             (7)          (6)       (15)      (10)
     Other                              26           14         --        13

    Earnings / (Loss) from continuing
     operations before
      discontinued operations          (31)         (29)       182       148
    Loss from discontinued operations   --           --        (10)       (6)
        Total                         $(31)        $(29)      $172      $142

    Exploration and Production - involves the exploration for, and the
     production of crude oil and natural gas.

    Global Trade - handles the company's worldwide crude oil, condensate and
     natural gas trading and marketing activities.
     Global Trade also purchases crude oil, condensate and natural gas from
     the company's joint venture partners, royalty owners and other
     unaffiliated oil and gas producers for resale.

    Geothermal and Power Operations - involves the exploration for, and the
     production and sale of geothermal resources, and the construction and
     operation of electrical power plants.

    Diversified Business Group:
     Agricultural Products - involves the manufacture, transportation and
      marketing of nitrogen-based products for agricultural and industrial
      use.
     Carbon and Minerals - involves the production and marketing of petroleum
      coke, graphites and specialty minerals.
     Pipelines -principally includes the company's equity interests in
      affiliated pipeline companies.
     Other - principally included the company's equity interest in The UNO-VEN
      Company, prior to its restructuring in May 1997.


    SPECIAL ADJUSTMENTS
    (UNAUDITED)
                                    4th Quarter of 1998   4th Quarter of 1997
    Millions of dollars           Before-tax  After-tax   Before-tax After-tax

    Reported earnings / (loss)        $(31)        $(29)      $172      $142
    Less: Special items
     Exploration and Production
      United States
       Spirit Energy
        Asset sales                     22           14          9         5
        Asset write-downs              (43)         (27)        (4)       (2)
        Litigation                      11            7         --        --
       Alaska
        Asset write-downs              (19)         (12)        --        --
       International
        Asset sales - Other             (3)          (1)         2         1
        Asset write-downs - Other       (6)          (4)        (3)       (2)
        Bangladesh well
         blowout - Other                --           --         (2)       (1)
        Deferred tax adjustments        --           (8)        --        26
     Diversified Business Group
       Carbon and Minerals
        Asset write-downs              (34)         (22)        --        --
        Environmental and litigation   (21)         (13)       (10)       (6)
        Restructuring costs             --           --         (2)       (1)
       Pipelines
        Asset sales                      8            5         --        --
       Other
        UNO-VEN restructuring           --           --          2         1
     Corporate and Unallocated
        Asset sales - Other             --           --         11         7
        Environmental and litigation   (37)         (24)        (5)       (3)
        Deferred tax
         adjustment - Other             --           --         --       (11)
        Insurance benefit - Other       70           45         --        --
        Restructuring costs - Other    (27)         (17)        --        --
     Discontinued Operations
        Net loss on disposal            --           --        (10)       (6)
     Total special items               (79)         (57)       (12)        8
      Adjusted earnings                $48          $28       $184      $134


    EARNINGS BY BUSINESS SEGMENT
    EXCLUDING SPECIAL ADJUSTMENTS
    (UNAUDITED)
                                    4th Quarter of 1998  4th Quarter of 1997
    Millions of dollars except     Before-tax  After-tax  Before-tax After-tax
     share amounts
    Exploration and Production
     United States
      Spirit Energy 76                $(16)        $(11)       $90       $56
      Alaska                             4            3         29        18
     International
      Far East                         123           68         99        76
      Other                            (22)          (2)        (4)      (11)

    Global Trade                        12            8          5         3

    Geothermal and Power Operations     11            8          3         1

    Diversified Business Group
      Agricultural Products              4            4          8         4
      Carbon and Minerals                1            2         11         7
      Pipelines                         20           18         16        13

    Corporate and Unallocated
      Administrative and
       general expense                 (22)         (17)       (20)      (16)
      Net interest expense             (38)         (30)       (24)      (22)
      Environmental and litigation
     expense                            (5)          (3)        (3)       (2)
      New Ventures (non E&P)            (7)          (6)       (15)      (10)
      Other                            (17)         (14)       (11)       17
    Earnings from
     continuing operations             $48          $28       $184      $134

    Basic earnings from continuing
     operations per share
     of common stock                              $0.11                $0.55
    Diluted earnings from continuing
     operations per share of
     common stock (a)                             $0.11                $0.54

    Distributions on preferred securities
     (net of tax) excluded in numerator
     for diluted earnings per share (a)             $--                   $6
    Basic weighted average shares                   241                  245
    Diluted weighted average shares                 242                  259

    (a)  In 1998, the effect of assumed conversion of preferred securities on
    earnings per share is antidilutive.


    EARNINGS BY BUSINESS SEGMENT
    (UNAUDITED)
                                    Twelve Months Ended   Twelve Months Ended
                                      December 31, 1998    December 31, 1997
    Millions of dollars            Before-tax  After-tax  Before-tax After-tax

    Exploration and Production
     United States
      Spirit Energy 76                 $--          $--       $305      $191
      Alaska                             9            6         96        60
     International
      Far East                         443          195        503       392
      Other                             53           41        (33)      (45)

    Global Trade                        33           21         27        16

    Geothermal and Power Operations     77           52         31        26

    Diversified Business Group
      Agricultural Products             44           37         83        54
      Carbon and Minerals              (28)          (9)       109        76
      Pipelines                         81           67         70        59
      Other                             --           --         45        38

    Corporate and Unallocated
      Administrative and
       general expense                 (84)         (60)       (82)      (56)
      Net interest expense            (144)        (113)      (133)     (106)
      Environmental and
       litigation expense             (161)        (102)      (146)      (91)
      New Ventures (non E&P)           (33)         (22)       (49)      (33)
      Other                             15           17        (55)       88

    Earnings from continuing operations
     before discontinued operations
     and extraordinary item            305          130        771       669
    Loss from discontinued operations   --           --        (81)      (50)
    Extraordinary item                  --           --        (52)      (38)
        Total                         $305         $130       $638      $581


    SPECIAL ADJUSTMENTS
    (UNAUDITED)
                                    Twelve Months Ended  Twelve Months Ended
                                     December 31, 1998     December 31, 1997
    Millions of dollars            Before-tax  After-tax  Before-tax After-tax

    Reported earnings                 $305         $130       $638      $581
    Less: Special items
     Exploration and Production
      United States
       Spirit Energy
        Asset sales                     22           14         11         7
        Asset write-downs              (43)         (27)       (66)      (41)
        Litigation                      11            7         --        --
       Alaska
        Asset write-downs              (19)         (12)        --        --
      International
        Asset sales - Other            155          101        (15)      (16)
        Asset write-downs - Other       (6)          (4)        (3)       (2)
        Bangladesh well
         blowout - Other                --           --        (12)       (8)
        Deferred tax adjustments        --          (29)        --        94
     Geothermal and Power Operations
        Deferred tax adjustment         --           --         --        10
     Diversified Business Group
      Carbon and Minerals
        Asset sales                     --           --         67        41
        Asset write-downs              (34)         (22)        --        --
        Environmental and litigation   (27)         (17)       (10)       (6)
        Restructuring costs             --           --         (2)       (1)
      Pipelines
        Asset sales                      8            5         --        --
      Other
        UNO-VEN restructuring           --           --         48        40
     Corporate and Unallocated
        Asset sales - Other             --           --         18        11
        Deferred tax
         adjustment - Other             --           --         --       103
        Environmental and litigation  (143)         (91)      (125)      (78)
        Insurance benefit - Other       70           45         --        --
        Insurance settlement - Other    17           11         --        --
        Restructuring costs - Other    (27)         (17)        --        --
     Discontinued Operations
        Net loss on disposal            --           --        (81)      (50)
     Extraordinary Item
        Extinguishment of debt          --           --        (52)      (38)
     Total special items               (16)         (36)      (222)       66
       Adjusted earnings              $321         $166       $860      $515


    EARNINGS BY BUSINESS SEGMENT
    EXCLUDING  SPECIAL ADJUSTMENTS
    (UNAUDITED)
                                    Twelve Months Ended  Twelve Months Ended
                                      December 31, 1998    December 31, 1997
    Millions of dollars            Before-tax  After-tax  Before-tax After-tax
     except share amounts
    Exploration and Production
     United States
      Spirit Energy 76                 $10           $6       $360      $225
      Alaska                            28           18         96        60
     International
      Far East                         443          215        503       298
      Other                            (96)         (47)        (3)      (19)

    Global Trade                        33           21         27        16

    Geothermal and Power Operations     77           52         31        16

    Diversified Business Group
      Agricultural Products             44           37         83        54
      Carbon and Minerals               33           30         54        42
      Pipelines                         73           62         70        59
      Other                             --           --         (3)       (2)
    Corporate and Unallocated
      Administrative and
       general expense                 (84)         (60)       (82)      (56)
      Net interest expense            (144)        (113)      (133)     (106)
      Environmental and
       litigation expense              (18)         (11)       (21)      (13)
      New Ventures (non E&P)           (33)         (22)       (49)      (33)
      Other                            (45)         (22)       (73)      (26)
    Earnings from
     continuing operations            $321         $166       $860      $515

    Basic earnings from continuing
     operations per share of
      common stock                                $0.69                $2.08
    Diluted earnings from continuing
     operations per share of
      common stock (a)                            $0.68                $2.06

    Distributions on preferred
     securities (net of tax) excluded
      in numerator for diluted
       earnings per share (a)                       $--                  $24
    Basic weighted average shares                   241                  248
    Diluted weighted average shares                 242                  262

    (a)  In 1998, the effect of assumed conversion of preferred securities on
    earnings per share is antidilutive.

Updated: January 1999