press release

Unocal's worldwide exploration program drives company growth, analysts told

New York, Nov. 12, 1997 -- Unocal Corporation's aggressive worldwide exploration program will drive the company's long-term growth, Roger C. Beach, Unocal chairman and chief executive officer, told security analysts here today.

"We are taking the proceeds from the sale of our downstream assets and investing them in projects that could offer returns of up to 30 percent," Beach said. "A key part of that investment will be in highly promising oil and gas exploration plays in Asia and the Gulf of Mexico."

Beach told analysts that Unocal's preliminary exploration capital spending program for 1998 is $568 million, up more than 50 percent from the estimated 1997 level. "We expect to drill or participate in 189 exploration wells," he said.

Unocal has identified several deepwater prospects in the Gulf of Mexico and Indonesia. These prospects, when coupled with other exploration plays including those in New Ventures, could have an aggregate unrisked resource potential of 900 million to 1,500 million barrels (Unocal working interest) of oil equivalent (mmboe) if drilling proves successful.

The company's preliminary capital expenditure plan for 1998 could be as much as $1.5 billion, up from an estimated $1.42 billion in 1997.

"The lion's share of our capital spending will go into three engines of growth for Unocal," Beach said. He said that these three areas are Spirit Energy 76 (Unocal's Lower 48 U.S. oil and gas unit), Unocal's International Operations, and the New Ventures group , which is pursuing high-return projects to connect energy resources with growing markets, principally in Asia and Latin America.

Unocal expects the company's net worldwide oil and gas production to average more than 560,000 boe per day in 1998, up 7 percent from an estimated 525,000 boe per day in 1997. The company is targeting growth to more than 700,000 boe per day by 2001.

"This increase will come from new production in Azerbaijan, Yemen, Bangladesh and Myanmar, and expanded production from the United States, Thailand and Indonesia," Beach said.

Spirit Energy 76

In the Gulf of Mexico, Unocal has more than tripled its deepwater portfolio to 123 blocks this year. Six quality prospects, with an unrisked gross resource potential of more than 400 mmboe, are slated for drilling in the next 12 to 14 months. Unocal holds, or expects to acquire, working interests ranging from 15 to 100 percent in these prospects.

"On the Gulf of Mexico shelf and onshore, we have varying interests in an inventory of 130 promising prospects with an unrisked gross resource potential of between 1.1 and 1.65 trillion cubic feet of gas equivalent," Beach said.

He noted that Spirit Energy 76 will be ramping up its exploration program in 1998. Next year, Spirit Energy plans to participate in 91 exploration wells, up from only 35 wells this year.

International Operations

In Indonesia, Unocal plans to expand its deepwater exploration program. The company expects to drill four wells to confirm the discovery it made on the Merah Besar structure in the Makassar contract area earlier this year. In total, Unocal plans to drill 38 deepwater wells in 1998 in Indonesia with only two drilling rigs.

Beach said that Unocal has developed drilling innovations that enable it to drill a deep oil and gas well in one-half the time, compared with the industry average, and at one-third the cost. Unocal drills a deep oil and gas well in an average 15 days at a cost of $2.9 million. This compares with an industry average of 30 days and $10-12 million.

Based on data collected to date, the Merah Besar structure could contain 270 mmbo and 1,400 bcf of gas, and, together with other deepwater prospects, has a gross potential of several trillion cubic feet of gas and several hundred million barrels of oil. Unocal has identified additional structures in the Makassar contract area that will be evaluated during the drilling program.

Beach also noted that Unocal expects to be awarded an additional block east of the northern section of the Makassar contract area. The new contract is awaiting final government approval.

New Ventures

Beach pointed out that the company's current exploration program extends to Azerbaijan, Bangladesh and Argentina.

In Azerbaijan, Unocal is part of a consortium that will spud its first exploration well in the North Absheron area of the Caspian Sea, a high potential venture in a proven oil province.

Unocal has submitted bids on four exploration blocks in Bangladesh, a gas-rich area with an existing pipeline infrastructure and growing power needs.

In Argentina, Unocal formed a joint venture with YPF for the exploration and development of two large offshore permit areas in the prolific San Jorge Basin.

Beach said that the company's New Ventures group has now brought on-line 10 projects with an aggregate market value of more than $700 million.

"We have another 49 projects in the New Ventures pipeline, which could provide significant additional market value to the company," Beach said.

Unocal is a leading global energy resource and project development company, with year-end 1996 petroleum reserves of more than 9.8 trillion cubic feet of natural gas equivalent (1.6 billion barrels of oil equivalent) and major oil and gas production activities in Asia and the U.S. Gulf of Mexico. The company is also active in energy resource development activities in Asia and Latin America and is developing gas-marketing solutions for Turkmenistan. The company maintains twin headquarters in California and Malaysia, with major offices in Singapore, Jakarta, Bangkok and Sugar Land, Texas.

Forward-looking statements and estimates of resources, capital spending, project valuation and production in this news release are based on assumptions concerning geology, drilling success, costs, discount rates, market conditions, competition, and other considerations. Actual results could differ materially.

Updated: November 1997