press release

Unocal reports higher 3Q operating earnings on improved oil and natgas prices, lower costs

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El Segundo, Calif., Oct. 26, 1999 -- Unocal Corporation today reported third quarter 1999 preliminary net earnings of $24 million, or 10 cents per share (diluted). Adjusted operating earnings (excluding special items) were $42 million, or 18 cents per share (diluted).

The third quarter results compare with reported earnings of $36 million, or 15 cents per share (diluted), for the same period a year ago when the company had a $49 million gain from the sale of assets in Canada. Adjusted operating earnings for the third quarter 1998 were $4 million, or 2 cents per share (diluted).

Adjusted discretionary cash flow for the quarter was $285 million, or $1.17 per share, compared with $228 million, or 94 cents per share, in the same period a year ago. Third quarter 1999 revenues were $1.59 billion, up from $1.39 billion in the third quarter 1998.

                                       3rd            2nd          3rd 
  Millions of dollars except         Quarter        Quarter      Quarter 
   per share amounts                  1999            1999         1998   
  Reported after-tax earnings         $24              $9          $36 
  Special items                       (18)            (10)          32 
  Adjusted after-tax earnings         $42             $19           $4  
  Diluted reported earnings 
   per share                        $0.10           $0.04        $0.15 
  Diluted adjusted earnings 
   per share                        $0.18           $0.08        $0.02 
  Adjusted discretionary 
   cash flow                         $285            $308         $228 
  Adjusted discretionary 
   cash flow per share              $1.17           $1.26        $0.94 
  Total revenues                  $ 1,588          $1,555       $1,394    

"We are pleased with the significant improvement in our operating results, which reflect not only improved prices, but also our continued focus on cash costs," said Roger C. Beach, Unocal chairman and chief executive officer. "The improved results from our mature businesses provide the cash flow to move forward with exploring and developing our exciting growth portfolio."

The third quarter earnings reflect higher oil and gas prices, lower dry hole costs and a lower effective tax rate. These positive factors were offset partially by lower net oil and gas sales volumes and reduced earnings from non-E&P businesses.

"In recent months, we had a number of exploration successes, with discoveries in the deepwater Kutei Basin offshore Indonesia, the deepwater Gulf of Mexico, and in the Gulf of Thailand," Beach said. "On the development side, gross production from the Pailin field in the Gulf of Thailand has ramped up quickly to average nearly 160 million cubic feet of gas per day this month. Our gross gas production under our four sales contracts in Thailand so far in October is averaging 1.05 billion cubic feet per day."

Beach added that Unocal is well positioned to participate as the economies of Asia recover in the coming years. "Thailand expects increased gas demand. Vietnam is progressing quickly toward developing a gas market. India and Bangladesh have the potential for cross-border sales of gas from Bangladesh. And Unocal is developing the natural gas that will help meet the demands of these markets," he said.

Commodity prices and hedging impact

Unocal's third quarter 1999 worldwide average crude oil price rose $5.11 per barrel, while the average price for natural gas by Unocal's Spirit Energy 76 unit was up 29 cents per thousand cubic feet (mcf).

Late in 1998, Unocal employed a "collar" hedging program to protect against depressed worldwide oil and domestic gas prices. Because of this hedging position, the company has not been able to realize fully the benefits of the strong increases in commodity prices that occurred this year. Even so, Unocal has been able to participate in about 80 percent of the benefits from higher prices in 1999.

Costs of Unocal's corporate hedging program reduced the company's realized average worldwide crude oil price by $1.38 per barrel in the third quarter. For natural gas produced by Spirit Energy, the hedging program reduced the average realized price by about 29 cents per mcf in the quarter. For the fourth quarter 1999, the lower realizations are expected to equate to about 90 cents per barrel of oil (worldwide) and 12 cents per mcf of gas sold by Spirit Energy, based on recent NYMEX futures prices.

"While we will continue to use hedging as a strategic tool to ensure adequate funding for our growth portfolio, we do not intend to deploy derivative instruments in the future that would prevent us from participating fully in significant commodity price increases," Beach said.

Worldwide production

For the third quarter 1999, Unocal's net worldwide production was 491,300 barrels-of-oil-equivalent (BOE), compared with 481,500 BOE the year before (see attached table).

Capital expenditures

In the third quarter 1999, capital expenditures totaled $293 million, compared with $482 million a year ago. The company expects that capital expenditures for the full-year will total about $1.17 billion (excluding the Northrock acquisition), compared with $1.7 billion in 1998.

Nine-month results

For the first nine months of 1999, Unocal reported net earnings of $40 million, or 17 cents per share (diluted). Adjusted operating earnings (excluding special items) for the year-to-date were $81 million, or 34 cents per share (diluted).

This compares with reported earnings of $159 million, or 66 cents per share, and adjusted operating earnings (excluding special items) of $138 million, or 57 cents per share (diluted), for the first nine months of 1998.

Nine-month revenues were $4.37 billion, compared with $4.0 billion last year.

Forward looking statements and estimates regarding exploration and production activities and costs, capital expenditures, and oil and gas prices and their related earnings effects in this news release are based on assumptions about operational, market, competitive, regulatory, environmental, political and other considerations. Actual results could differ materially as a result of factors discussed in Unocal's 1998 Form 10-K report filed with the U.S. Securities and Exchange Commission.

                                         3rd          2nd          3rd 
                                       Quarter      Quarter      Quarter 
  Millions of dollars                    1999        1999         1998  
  Exploration & Production 
    United States 
      Spirit Energy 76 (a)(b)            $17          $6          $(9) 
      Alaska                               8           6            2 
      Far East                            78          39           47 
      Other                               (7)          1          (22) 
  Global Trade 
      Global Trade                        (5)         --            3 
      Pipelines                           13          16           14 
  Geothermal and Power Operations          6          14           16 
  Diversified Business Group 
    Agricultural Products                 (2)          3           12 
    Carbon & Minerals (a)                  6           7            1 
  Corporate and Unallocated 
    New Ventures                          (4)         (4)          (4) 
    Administrative & General             (23)        (21)         (24) 
    Interest Expense - Net (a)           (36)        (34)         (33) 
    Environmental & Litigation            (2)         (4)          (4) 
    Other                                 (7)        (10)           5 
  Total adjusted after-tax earnings      $42         $19           $4  
  (a) includes minority interest 
   income/ (expense) of: 
    Spirit Energy 76                      (2)         (2)          -- 
    Carbon & Minerals                     (1)         --           (1) 
    Corporate and Unallocated              2          --           --  
  (b) includes earnings/(loss) from: 
    Mature Areas                          35          41 
    Deepwater                            (18)        (35)

                                           3rd         2nd           3rd
                                         Quarter     Quarter       Quarter
    Millions except per share amounts      1999       1999           1998

    Earnings excluding special items       $42         $19            $4

    Adjustment to earnings
     excluding special items:
      Depreciation, depletion and
       amortization                        205         183           186
      Dry hole costs                        33          47            58
      Deferred income taxes                (34)         28           (67)
      Exploration expenses                  44          35            53
      Capitalized interest                  (5)         (4)           (6)
        Total adjusted discretionary
         cash flow                        $285        $308          $228

    Diluted weighted average shares        244         244           243
    Adjusted discretionary cash
     flow per share                       1.17        1.26          0.94

The preceding table of discretionary cash flow excluding special items 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 all 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.

                                          3rd         2nd          3rd 
                                        Quarter     Quarter      Quarter 
                                         1999        1999         1998  
  United States Net Daily Production 
  Crude oil (thousand barrels daily) 
    Spirit Energy 76                      40          40            44 
    Alaska                                27          28            27 
  Natural gas - wet basis 
   (million cubic feet daily) 
    Spirit Energy 76                     729         764           808 
    Alaska                               106         131           118 
  United States Average Prices (a) 
  Crude oil (per barrel) 
    Spirit Energy 76                  $18.32      $14.98        $12.20 
    Alaska                            $14.50      $12.02         $9.35 
  Natural gas (per mcf) 
    Spirit Energy 76                   $2.26       $2.05         $1.97 
    Alaska                             $1.20       $1.20         $1.20  
  International Net Daily 
   Production (b) 
  Crude oil (thousand barrels daily) 
    Far East                              73          72            81 
    Other (c)                             40          35            31 
  Natural gas (million cubic 
   feet daily) 
    Far East                             884         851           828 
    Other (c)                            149          88            37 
  International Average Prices (a) 
  Crude oil (per barrel) 
    Far East                          $16.43      $14.76        $12.28 
    Other                             $16.69      $13.41        $10.58 
  Natural gas (per mcf) 
    Far East                           $2.02       $2.03         $2.23 
    Other                              $2.09       $1.90         $2.38  
  Worldwide Net Daily 
   Production (b)(c) 
  Crude oil (thousand barrels 
   daily)                                180         175           183 
  Natural gas (per mcf)                1,868       1,834         1,791 
  Worldwide Average Prices (a)  
  Crude oil (per barrel)              $16.65      $13.99        $11.54 
  Natural gas (per mcf)                $2.07       $1.97         $2.04  
  (a)average prices include hedging gains and losses, but exclude other 
      Global Trade margins.  
  (b) production includes certain 
      host countries' shares of: 
        Crude oil                         30          26             6 
        Natural gas                       95          77            44  
  (c) production includes 100% of 
      Northrock Resources Ltd. in 
      Canada of: 
        Crude oil                          8           5            -- 
        Natural gas                      110          59            --

Updated: October 1999