press release

Unocal second quarter earnings rise on higher crude, natural gas prices and refining/marketing margins

EL SEGUNDO, Calif., July 25, 1996 -- Unocal Corporation today reported second quarter 1996 net earnings of $238 million, or 92 cents per common share, reflecting higher prices for crude oil and natural gas, improved margins for the company's downstream petroleum refining and marketing unit, and a $70 million (aftertax) gain from the sale of essentially all of the company's California oil and gas assets and associated pipelines.

The 1996 results compare with $78 million, or 28 cents per common share, in the second quarter 1995. Unocal's total revenues for the quarter were $2.68 billion, up from $2.29 billion a year ago.

Earnings from operations for the second quarter, excluding special items (detailed in the attached tables), were $205 million, or 79 cents per common share. This compares with adjusted earnings of $101 million, or 37 cents per common share, in the same period a year ago.

"Improved earnings in our oil and gas, refining and marketing, and agricultural products operations gave us the best quarter ever for Unocal," said Roger C. Beach, Unocal chairman and chief executive officer. This spring, we predicted 1996 would be a breakthrough year, and these results are proving our prediction was correct."

Beach noted that along with improved margins, Unocal's 76 Products Company unit posted higher sales volumes due to expanded marketing efforts and increased refinery production of light oil products, which were the result of major process improvements made during 1995. A fire in mid-May in the coker unit at Unocal's San Francisco Refinery cost the company an estimated $21 million (aftertax) for repairs and lost production during the quarter.

Sales prices for crude oil and natural gas continued above year-ago levels. Production was lower, principally because of the sale of Unocal's California upstream assets in early April. In the first quarter 1996, the California properties contributed $1 million (aftertax) to the company's reported earnings from net daily production of 30,200 barrels of oil and 52 million cubic feet of natural gas.

Unocal also posted higher ammonia fertilizer production in the quarter because of new production from its Finley, Wash., plant. Agricultural products earnings were higher in spite of lower ammonia prices.

Our debt-to-total capitalization ratio dropped to 50.3 percent at the end of the second quarter, the lowest level since 1985 and down from 55.8 percent at the end of 1995," Beach said. The company used most of the proceeds from the California properties sale to repay outstanding debt. At June 30, 1996, the company's total debt was about $3.24 billion, down $465 million from year-end 1995. Cash on hand was $209 million, up $115 million from $94 million at December 31, 1995.

Cash flow from operations in the second quarter, before working capital changes, was $464 million, up from $317 million last year, reflecting improved operating earnings.

For the six months, Unocal's net earnings were $362 million, or $1.39 per common share. This compares with $152 million, or 55 cents per common share, for the first six months of 1995.

Adjusted earnings from operations (excluding special items detailed in the attached tables) were $325 million, or $1.24 per common share. This compares with adjusted earnings of $155 million, or 56 cents per common share, for the first half of the 1995.

Beach said that while our petroleum product margins and natural gas prices have declined from their peak earlier this year, they remain strong.

Beach praised the company's employees for the record earnings performance in the quarter. Hard work and dedication by our employee teams have positioned Unocal's operations so we can take maximum advantage of improved market conditions to the benefit of our stockholders," Beach said.

 
               CONDENSED CONSOLIDATED EARNINGS STATEMENT
                              (UNAUDITED)

                          For the Three Months      For the Six Months
                            Ended June 30             Ended June 30
     Dollars in millions 
     except per share amounts  1996       1995         1996       1995
 
     Total revenues (a)        $2,684     $2,290       $4,962     $4,196 
     Costs and other 
      deductions (a)            2,284      2,165        4,348      3,940 
     Earnings before income taxes 400        125          614        256 
     Income taxes                 162         47          252        104 
     Net earnings                $238        $78         $362       $152 
     Dividends on preferred stock   9          9           18         18 
     Net earnings 
      applicable to 
      common shares              $229        $69         $344       $134 
 
     Earnings per 
      common share: (b)         $0.92      $0.28        $1.39      $0.55 
     (a) Includes consumer 
      excise taxes of            $250      $ 228         $486       $437 
     (b) Based on weighted average 
      common shares outstanding 
      (in millions)               248        246          248        245 
 
                  CONDENSED CONSOLIDATED BALANCE SHEET 
                              (UNAUDITED) 
 
                                                   June 30       Dec. 31 
    Millions of dollars                             1996          1995 
     Assets 
     Cash and cash equivalents                      $209        $94 
     Other current assets                          1,428      1,482 
     Investments and long-term receivables         1,057      1,101 
     Properties - net                              6,911      7,109 
     Other assets                                    174        105 
         Total Assets                             $9,779     $9,891 
 
     Liabilities 
     Current portion of long-term debt              $124         $8 
     Other current liabilities                     1,342      1,308 
     Long-term debt and capital lease obligations  3,117      3,698 
     Deferred Income taxes                           664        722 
     Other deferred credits and liabilities        1,334      1,225 
         Total liabilities                         6,581      6,961 
 
     Stockholders' Equity                          3,198      2,930 
         Total liabilities and 
          stockholders' equity                     9,779      9,891 
                   CONDENSED CONSOLIDATED CASH FLOWS 
                              (UNAUDITED) 
 
                              For the Three Months    For the Six Months 
                                  Ended June 30         Ended June 30 
     Millions of dollars          1996     1995       1996      1995 
 
     Cash flows from operating activities 
     Cash flow from operations     $464     $317      $850     $553 
     Working capital and other 
      changes related 
      to operations                 (39)     (73)     (157)    (195) 
     Net cash provided by 
      operating activities          425      244       693      358 
     Cash flows from investing activities 
     Capital expenditures 
      (includes dry hole costs)    (400)    (329)     (622)    (596) 
     Proceeds from asset sales      488       34       539      128 
         Net cash provided/(used) 
         in investing activities     88     (295)      (83)    (468) 
     Cash flows from financing activities 
     Long-term borrowing             --      446       110      712 
     Reduction of long-term debt 
      and capital lease obligations(530)   (336)     (499)    (536) 
     Dividends paid                 (58)    (59)     (117)    (117) 
     Other                           (2)     17        11       33 
         Net cash provided/(used) 
         in financing activities   (590)      68     (495)       92 
     Increase/(decrease) in cash 
     and cash equivalents           (77)      17       115     (18) 
     Cash and cash equivalents 
      at beginning of period        286      113        94      148 
     Cash and cash equivalents 
      at end of period             $209     $130      $209     $130 
 
     SELECTED FINANCIAL DATA 
                               For the Three Months  For the Six Months 
                                   Ended June 30       Ended June 30 
     Millions of dollars         1996        1995     1996     1995 
     Exploration expense 
     Oil & Gas 
     United States                 $7         $10      $11      $20 
     Foreign                       20          15       37       33 
     Geothermal                     1           1        2        2 
     Total                        $28         $26      $50      $55 
     Dry hole costs 
     Oil & Gas 
     United States                 $1          $5      $11       $4 
     Foreign                        3          11        6       13 
     Geothermal                     1         (1)        2        2 
     Total                         $5         $15      $19      $19 
     Depreciation, Depletion 
     & Amortization              $252        $240     $496     $468 
 
                       CONDENSED CAPITAL EXPENDITURES 
                                 (UNAUDITED) 
 
                            For the Three Months     For the Six Months 
                                 Ended June 30         Ended June 30 
     Millions of dollars          1996     1995          1996      1995 
     Domestic Exploration 
     & Production                $156      $102          $235     $206 
     Foreign Exploration 
     & Production                 130        93           216      177 
     76 Products Company           57       101            89      155 
     Geothermal & Power Operations 38        13            52       21 
     Diversified Businesses        11        13            18       22 
     Corporate & Unallocated        8         7            12       15 
         Total                   $400      $329          $622     $596 
 
                            OPERATING HIGHLIGHTS 
                                 (UNAUDITED) 
 
                            For the Three Months     For the Six Months 
                                Ended June 30          Ended June 30 
                                1996     1995          1996      1995 
     Net daily production 
     Crude oil and condensate 
     (thousand barrels daily): 
         United States (a)      88.5     124.3        105.2      128.0 
         Foreign: 
           Far East (b)         84.1      85.1         82.4       86.2 
           Other                27.9      30.1         28.2       30.6 
             Total Foreign     112.0     115.2        110.6      116.8 
     Worldwide                 200.5     239.5        215.8      244.8 
 
     Natural gas (million cubic feet daily): 
         United States (a)     1,053     1,128        1,085      1,126 
         Foreign: 
           Far East (b)          613       602          606        608 
           Other                  63        44           75         41 
             Total Foreign       676       646          681        649 
     Worldwide                 1,729     1,774        1,766      1,775 
 
     Natural gas liquids (thousand 
      barrels daily) (a)        18.8      21.9         19.6       21.7 
     Geothermal (million 
     kilowatt-hours daily)      16.8      14.9         15.4       15.2 
     Average sales prices 
     Crude oil and condensate (per barrel): 
         United States        $19.03    $15.96       $17.60     $15.33 
         Foreign: 
           Far East           $18.17    $16.77       $18.03     $16.49 
           Other              $18.93    $16.77       $17.90     $16.19 
             Total Foreign    $18.40    $16.77       $17.9      $16.39 
     Worldwide                $18.71    $16.30       $17.77     $15.76 
 
     Natural gas (per mcf): 
         United States        $ 2.14    $ 1.57       $ 2.25     $ 1.51 
         Foreign: 
           Far East           $ 2.21    $ 2.00       $ 2.20     $ 1.98 
           Other              $ 1.70    $ 1.00       $ 1.73     $ 1.10 
             Total Foreign    $ 2.16    $ 1.93       $ 2.14     $ 1.92 
     Worldwide                $ 2.15    $ 1.70       $ 2.21     $ 1.66 
 
     (a) Includes production from California upstream properties of: 
         Crude oil and condensate  1.0     28.8         16.0      28.7 
         Natural gas                 0       63           26        67 
         Natural gas liquid        0.0      1.1          0.3       1.2 
     (b) Includes host country share in Indonesia of: 
         Crude oil and condensate 24.0     28.3         26.9      31.0 
         Natural gas                24       25           25        25 
 
                      OPERATING HIGHLIGHTS (continued) 
                                 (UNAUDITED) 
 
                              For the Three Months   For the Six Months 
                                  Ended June 30         Ended June 30 
                                 1996      1995        1996        1995 
     Input to crude oil 
     processing units 
     (thousand barrels daily)      228      212          234        200 
     Refinery production 
      (thousand barrels daily) 
         Gasoline                  113      116          114        100 
         Jet fuel, kerosene 
          and heating oil           30       16           37         18 
         Diesel fuel                47       36           44         33 
         Other products 
         (lubricants, gas oils, etc.) 
                                    65       63           63         67 
           Total                   255      231          258        218 
 
     Petroleum product sales  (thousand barrels daily) 
     Marketing (a) 
         Gasoline                  135      117          131        115 
         Diesel                     28       31           26         28 
         Other (includes lube oil, 
          kerosene, and fuel oil)    8        6            8          6 
           Total                   171      154          165        149 
 
     Product supply and refinery (b) 
         Gasoline                   24       25           20         21 
         Jet fuel                   39       27           41         28 
         Diesel                     25       12           25         12 
         Other products (includes petroleum products, 
         gas oil, etc.)             38       35           36         43 
           Total                   126       99          122        104 
             Total petroleum 
             products sales        297      253          287        253 
 
     Agricultural products production volumes (thousand tons) 
         Ammonia                   378      341          729        692 
         Urea                      277      269          570        564 
         Other products            182      217          345        414 
     Agricultural products sales volumes (thousand tons) 
         Ammonia                   274      266          368        394 
         Urea                      336      298          581        526 
         Other products            438      436          669        708 
     (a)  Primarily sold through retail channels 
     (b)  Primarily sold through wholesale or commercial channels 
 
                        EARNINGS BY BUSINESS SEGMENT 
                                 (Unaudited) 
 
                             2nd Quarter of 1996     2nd Quarter of 1995 
     Millions of dollars    Before-tax  After-tax  Before-tax  After-tax 
 
     Petroleum 
       Exploration and Production 
         United States         $270    $168         $66       $41 
         Foreign                112      64         108        61 
     Refining, Marketing and Transportation 
         76 Products             80      50        (10)         1 
     Geothermal and 
     Power Operations             9       4          17        11 
     Diversified Businesses 
         Agricultural Products   57      37          57        36 
         Carbon and Minerals     11       9          16        10 
         Pipelines               17      14          22        17 
         Other                    6       3           9         6 
     Corporate and Unallocated 
         Administrative and
         general expense        (25)    (16)        (28)      (17) 
         Net interest expense   (63)    (48)        (67)      (47) 
         Environmental and 
         litigation expense     (53)    (33)        (48)      (30) 
         Other                  (21)    (14)        (17)      (11) 
             Total              $400    $238        $125       $78 
 
         Exploration and Production - this segment is engaged in the 
     exploration for, and the production and marketing of, crude oil, 
     condensate, natural gas and natural gas liquids. 
         Refining, Marketing and Transportation 
         76 Products Company - this segment is principally responsible 
     for the company's West Coast petroleum refining operations, 
     marketing and transportation of refined petroleum products and the 
     manufacturing and marketing of petroleum coke. 
         Geothermal and Power - this segment is involved in the 
     exploration for, and the production and sale of geothermal 
     resources for the generation of electricity. 
         Diversified Businesses: 
         Agricultural Products - manufactures and markets nitrogen-based 
     fertilizers for wholesale markets to the western United States and 
     to the Pacific Rim. 
         Carbon and Minerals - produces and markets petroleum coke 
     (other than on the West Coast), graphites, solvents and specialty 
     minerals. 
         Pipelines - principally includes the company's equity interests 
     in affiliated pipeline companies. 
         Other - includes the development and sale of real estate assets 
     and the  company's equity interest in The UNO-VEN Company, a 
     refining and marketing partnership in the midwestern United States. 
 
     SPECIAL ADJUSTMENTS 
     (Unaudited) 
 
                            2nd Quarter of 1996    2nd Quarter of 1995 
     Dollars in millions  Before-tax  After-tax   Before-tax  After-tax 
      except per 
      share amounts 
 
     Reported earnings       $400     $238          $125       $78 
     Less:  Special items 
     Exploration and Production 
      United States 
       Asset Sales              -        -            (4)       (2) 
       Sale of California oil 
        and gas properties*   110       68             -         - 
       Write-down of assets     -        -           (13)       (8) 
      Foreign 
       Asset Sales              -        -             1         - 
     76 Products 
      Sale of California 
       oil and gas  properties  4        2             -         - 
      Litigation provision     (1)       -             -         - 
      Asset write-downs        (6)      (4)            -         - 
      Other                     7        4             -         - 
      Geothermal 
      Asset Sales               -        -             7         5 
      Diversified Businesses 
       Asset Sales 
        Agricultural Products   -        -             6         4 
        Other                   -        -             2         1 
      Corporate and Unallocated 
       Environmental provision (32)    (20)          (22)      (14) 
       Litigation provision    (14)     (8)          (14)       (8) 
       Asset write-downs         -       -            (1)       (1) 
       Other                   (11)     (9)            -         - 
      Total special items       57      33           (38)      (23) 
     Adjusted earnings        $343    $205          $163      $101 
     Less:  Dividends on 
      preferred stock                    9                       9 
     Adjusted net earnings 
     applicable to common shares       196                      92 
     Adjusted net earnings 
     per common share                $0.79                   $0.37 
 
         * Net of provision for environmental remediation of $17 million 
     before-tax and $10 million after-tax. 
 
         EARNINGS BY BUSINESS SEGMENT EXCLUDING SPECIAL ADJUSTMENTS 
                                 (Unaudited) 
 
                            2nd Quarter of 1996     2nd Quarter of 1995 
     Millions of dollars    Before-tax  After-tax  Before-tax  After-tax 
 
     Petroleum 
         Exploration and Production 
         United States          $160      $100        $83         $51 
         Foreign                 112        64        107          61 
         Refining, Marketing 
          and Transportation 
          76 Products             76        48        (10)          1 
     Geothermal and Power 
     Operations                    9         4         10           6 
     Diversified Businesses 
         Agricultural Products    57        37         51          32 
         Carbon and Minerals      11         9         16          10 
         Pipelines                17        14         22          17 
         Other                     6         3          7           5 
     Corporate and Unallocated 
         Administrative and 
         general expense         (25)      (16)       (28)        (17) 
         Net interest expense    (63)      (48)       (67)        (47) 
         Environmental and 
         litigation expense       (7)       (5)       (12)         (8) 
         Other                   (10)       (5)       (16)        (10) 
             Total              $343      $205       $163         $101 
 
                        EARNINGS BY BUSINESS SEGMENT 
                                 (Unaudited) 
 
                       First Six Months of 1996 First Six Months of 1995 
     Millions of          Before-tax  After-tax   Before-tax  After-tax 
      dollars 
     Petroleum 
     Exploration and Production 
         United States          $425      $264        $155         $96 
         Foreign                 235       132         211         113 
     Refining, Marketing and Transportation 
         76 Products              69        43         (45)        (17) 
     Geothermal and 
      Power Operations            18         9          26          15 
     Diversified Businesses 
         Agricultural Products    82        53          83           52 
         Carbon and Minerals      37        27          40           27 
         Pipelines                47        37          44           35 
         Other                     5         3          11            7 
     Corporate and Unallocated 
         Administrative and 
          general expense        (54)      (34)        (57)         (35) 
         Net interest expense   (135)      (98)       (131)         (90) 
         Environmental and 
          litigation expense     (76)      (47)        (76)         (47) 
         Other                   (39)      (27)         (5)          (4) 
             Total              $614      $362        $256         $152 
 
     SPECIAL ADJUSTMENTS (Unaudited) 
     SPECIAL ITEMS 
                    First Six Months of 1996    First Six Months of 1995 
     Dollars in        Before-tax  After-tax     Before-tax   After-tax 
      millions except 
      per share amounts 
     Reported earnings      $614    $362              $256         $152 
     Less:  Special items 
     Exploration and Production 
     United States 
         Asset Sales           4       2                 9            6 
     Sale of California oil 
     and gas properties*     110      68                 -            - 
         Asset write-downs     -       -               (13)          (8) 
     Foreign 
         Asset Sales           6       4                 5            3 
     76 Products 
         Sale of California oil and 
         gas properties        4       2                 -            - 
         Litigation provision (1)      -                 -            - 
         Asset write-downs    (6)     (4)                -            - 
         Other                 7       4                 -            - 
     Geothermal 
         Asset Sales           -       -                 7            5 
     Diversified Businesses 
     Asset Sales 
         Pipeline             12       7                 -            - 
         Agricultural Products -       -                 6            4 
         Other                 -       -                 2            1 
     Corporate and Unallocated 
         Asset Sales           1       1                29           18 
         Environmental 
          provision          (42)    (26)              (29)         (18) 
         Litigation 
          provision          (20)    (12)              (20)         (12) 
         Asset write-downs     -       -                (3)          (2) 
         Other                (11)    (9)                -            - 
     Total special items       64     37                (7)          (3) 
     Adjusted earnings       $550   $325              $263         $155 
     Less: Dividends 
      on preferred stock              18                             18 
     Adjusted net earnings 
     applicable to common shares     307                            137 
     Adjusted net earnings 
     per common share              $1.24                         $0.56 
 
         * Net of provision for environmental remediation of $17 million 
     before-tax and $10 million after-tax. 
 
         EARNINGS BY BUSINESS SEGMENT EXCLUDING SPECIAL ADJUSTMENTS 
                                 (Unaudited) 
 
                       First Six Months of 1996 First Six Months of 1995 
     Millions of          Before-tax  After-tax   Before-tax  After-tax 
      dollars 
     Petroleum 
     Exploration and Production 
         United States         $311     $194           $159         $98 
         Foreign                229      128            206         110 
     Refining, Marketing and Transportation 
         76 Products             65       41            (45)        (17) 
     Geothermal and 
     Power Operations            18        9             19          10 
     Diversified Businesses 
         Agricultural Products   82       53             77           48 
         Carbon and Minerals     37       27             40           27 
         Pipelines               35       30             44           35 
         Other                    5        3              9            6 
     Corporate and Unallocated 
         Administrative 
          and general expense   (54)     (34)           (57)        (35) 
         Net interest expense  (135)     (98)          (131)        (90) 
         Environmental and 
         litigation expense     (14)      (9)           (27)        (17) 
         Other                  (29)     (19)           (31)        (20) 
             Total             $550     $325           $263        $155

Updated: July 1996