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.
CONSOLIDATED RESULTS UNOCAL CORPORATION (Unaudited) 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.
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).
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.
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.
ADJUSTED EARNINGS BY BUSINESS SEGMENT UNOCAL CORPORATION (After-tax)(Unaudited) 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 International 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) ADJUSTED DISCRETIONARY CASH FLOW UNOCAL CORPORATION (Unaudited) 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.
OPERATING HIGHLIGHTS UNOCAL CORPORATION (Unaudited) 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