press release

Unocal reports higher 4Q earnings on improved oil and natural gas prices

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El Segundo, Calif., Jan. 26, 2000 -- Unocal Corporation today reported fourth quarter 1999 preliminary unaudited net earnings of $97 million, or 40 cents per share (diluted). Adjusted net earnings (excluding special items) were $77 million, or 32 cents per share (diluted).

The fourth quarter results compare with a reported loss of $29 million, or 12 cents per share (diluted), for the same period a year ago. Adjusted net earnings for the fourth quarter 1998 were $28 million, or 11 cents per share (diluted).

CONSOLIDATED RESULTS (unaudited) Unocal Corporation
Millions of dollars except per share amounts 4Q 1999 3Q 1999 4Q 1998

Earnings (loss) from continuing operations $ 75 $ 28 $ (33)
Earnings (loss) from discontinued operations 22 (4) 4

Net earnings (loss) $ 97 $ 24 $ (29)
Special items $ 20 $ (18) $ (57)

Adjusted net earnings $ 77 $ 42 $ 28
Diluted net earnings (loss) per share:
Continuing operations $ 0.31 $ 0.12 $ (0.14)
Discontinued operations $ 0.09 $ (0.02) $ 0.02

Diluted net earnings (loss) per share $ 0.40 $ 0.10 $ (0.12)
Diluted adjusted net earnings per share $ 0.32 $ 0.18 $ 0.11

Adjusted discretionary cash flow per share $ 384 $ 285 $ 347
Adjusted discretionary cash flow $ 1.58 $ 1.17 $ 1.43

Total revenues from continuing operations $ 1,934 $ 1,514 $ 1,404

The fourth quarter earnings reflect higher oil and gas prices, offset partially by lower net oil and gas sales volumes and a higher international tax rate. Unocal's fourth quarter 1999 worldwide average crude oil price rose $9.97 per barrel over the same period in 1998, while the average price for natural gas from Unocal's Spirit Energy 76 unit was up 36 cents per thousand cubic feet.

"Commodity prices are strong and holding firm," said Roger C. Beach, Unocal chairman and chief executive officer. "The Thailand economy has rebounded strongly, with gas demand growing. And we closed out last year with a string of exploration successes in our core mature asset areas - the Gulf of Mexico shelf and the Gulf of Thailand."

Beach added that Unocal is reversing its production declines in the Gulf of Mexico and Indonesia, strengthening the company's ability to benefit from the rise in commodity prices.

"Spirit Energy's net production ramped up at the end of 1999, and we expect first quarter 2000 average daily production to be 4 to 6 percent above the average production for the fourth quarter," he said. "It's that kind of performance in our mature assets that will allow us to execute our strategy of generating near-term earnings while pursuing long-term growth from our excellent exploration portfolio."

For the fourth quarter 1999, Unocal's consolidated net worldwide average daily production was 490,000 barrels-of-oil-equivalent (BOE) (see attached table).

The company's reported earnings from continuing operations were $75 million, while discontinued operations contributed $22 million. Reported earnings from discontinued operations included $21 million from refining and marketing and $1 million from the company's agricultural products segment. Unocal announced last week that it is selling the agricultural products business to Agrium Inc. for $325 million and possible future consideration.

The earnings from refining and marketing were primarily due to a settlement with Tosco Corporation to resolve certain contingent payment issues related to gasoline margins in Unocal's former West Coast refining and marketing system, which Tosco purchased in 1997.

Adjusted discretionary cash flow for the quarter was $384 million, or $1.58 per share, compared with $347 million, or $1.43 per share, in the same period a year ago. Fourth quarter 1999 revenues from continuing operations were $1.9 billion, up from $1.4 billion in the fourth quarter 1998.

Full-Year Results

The following table shows full-year results for 1999 and 1998:

CONSOLIDATED RESULTS (unaudited) Unocal Corporation
Millions of dollars except per share amounts Full Year 1999 Full Year 1998

Earnings from continuing operations $ 113 $ 93
Earnings from discontinued operations 24 37

Net earnings $ 137 $ 130
Special items $ (21) $ (36)

Adjusted net earnings $ 158 $ 166
Diluted net earnings per share:
Continuing operations $ 0.46 $ 0.39
Discontinued operations $ 0.10 $ 0.15

Diluted net earnings per share $ 0.56 $ 0.54
Diluted adjusted net earnings per share $ 0.65 $ 0.68

Adjusted discretionary cash flow $ 1,233 $ 1,304
Adjusted discretionary cash flow per share $ 5.07 $ 5.39

Total revenues from continuing operations $ 6,057 $ 5,103

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

Detailed financial tables for the fourth quarter and full-year 1999 are available for download in the Investor Data Warehouse. They can be found in the "Quarterly Fact Book."

Forward looking statements and estimates regarding exploration and production activities 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)

                                                    4th       3rd       4th
                                                Quarter   Quarter   Quarter
    Millions of dollars                            1999      1999      1998

    Exploration & Production
      United States
        Spirit Energy 76 (a) (b)                   $ 26      $ 17      $(11)
        Alaska                                       20         8         3
      International
        Far East                                     57        78        68
        Other (a)                                     9        (7)       (2)
    Global Trade
      Global Trade                                    1        (5)        8
      Pipelines                                      16        13        18
    Geothermal and Power Operations                   7         6         8
    Carbon & Minerals (a)                             1         6         2
    Corporate and Unallocated
      New Ventures                                   (5)       (4)       (6)
      Administrative & General                      (16)      (23)      (21)
      Interest Expense - Net (a)                    (37)      (36)      (30)
      Environmental & Litigation                     (2)       (2)       (3)
      Other                                          (1)      (11)      (10)
    Adjusted earnings from continuing operations     76        40        24

    Adjusted earnings from discontinued operations    1         2         4
    Adjusted net earnings                          $ 77      $ 42      $ 28
    (a) Includes minority interest of:
        Spirit Energy 76                             (4)       (4)       -
        International - Other                        (3)       (1)       -
        Carbon & Minerals                             -        (1)       -
        Corporate and Unallocated                    (1)        2        -

    (b) Includes earnings/(loss) from:
        Mature Areas                                 54        35       N/A
        Deepwater                                   (28)      (18)      N/A


    ADJUSTED DISCRETIONARY CASH FLOW                  UNOCAL CORPORATION
    (Unaudited)

                                                    4th       3rd       4th
                                                Quarter   Quarter   Quarter
    Millions except per share amounts              1999      1999      1998

    Adjusted net earnings                         $  77     $  42     $  28

    Adjustments to earnings, excluding
     special items:
      Depreciation, depletion and amortization      225       205       206
      Dry hole costs                                 41        33        34
      Deferred income taxes                         (16)      (34)       19
      Exploration expenses                           59        44        64
      Capitalized interest                           (2)       (5)       (4)
        Total adjusted discretionary cash flow    $ 384     $ 285     $ 347

    Diluted weighted average shares                 243       244       242
    Adjusted discretionary cash flow per share     1.58      1.17      1.43

The preceding table of discretionary cash flow, excluding special items and all asset sales, is provided for analysts and others in the investment community as a supplement to conventional financial data prepared in accordance with generally accepted accounting principles. Discretionary cash flow assumes 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)
                                                    4th       3rd       4th
                                                Quarter   Quarter   Quarter
                                                   1999      1999      1998
    United States Net Daily Production
    Crude oil (thousand barrels daily)
      Spirit Energy 76                               41        40        42
      Alaska                                         28        27        29
    Natural gas - wet basis
     (million cubic feet daily)
      Spirit Energy 76                              722       729       798
      Alaska                                        154       106       147
    United States Average Prices (a)
    Crude oil (per barrel)
      Spirit Energy 76                           $21.90    $18.32    $11.00
      Alaska                                     $18.35    $14.50     $8.78
    Natural gas (per mcf)
      Spirit Energy 76                            $2.41     $2.26     $2.05
      Alaska                                      $1.20     $1.20     $1.20

    International Net Daily Production (b)
    Crude oil (thousand barrels daily)
      Far East                                       76        73        72
      Other (c)                                      35        40        27
    Natural gas (million cubic feet daily)
      Far East                                      825       884       857
      Other (c)                                     158       149        26
    International Average Prices (a)
      Far East                                   $20.08    $16.43    $11.00
      Other                                      $20.33    $16.69     $9.66
    Natural gas (per mcf)
      Far East                                    $2.22     $2.02     $1.95
      Other                                       $2.44     $2.09     $2.40

    Worldwide Net Daily Production (b)(c)
    Crude oil (thousand barrels daily)              180       180       170
    Natural gas (per mcf)                         1,859     1,868     1,828
    Worldwide Average Prices (a)
    Crude oil (per barrel)                       $20.34    $16.65    $10.37
    Natural gas (per mcf)                         $2.22     $2.07     $1.96

    (a) average prices include hedging gains and losses, but exclude other
        Global Trade margins.

    (b) production includes certain host
        countries' shares of:       Crude oil        27        30         9
                                  Natural gas        75        95        67

    (c) production includes 100% of
        Northrock Resources Ltd:    Crude oil         6         8         -
                                  Natural gas       104       110         -


Updated: January 2000