Unocal Reports Record Quarterly Earnings; Net Up 69% EL SEGUNDO,
Calif., April 28 /PRNewswire-FirstCall/ -- Unocal Corporation
(NYSE:UCL) today reported preliminary net earnings for the first
quarter 2005 of $454 million, or $1.66 per share (diluted), 69
percent above the $269 million, or $1.00 per share (diluted),
reported in the same period a year ago. The net earnings, the
highest quarterly level in the company's history, included a number
of special items discussed below in connection with Unocal's
adjusted after-tax earnings. Unocal's preliminary adjusted
after-tax earnings for the first quarter 2005 were $441 million, or
$1.62 per share (diluted). This compares with the Thomson/First
Call mean of analyst estimates (published Apr. 25, 2005) of $1.37
per share. In the first quarter 2004, Unocal's adjusted after-tax
earnings were $239 million, or 89 cents per share (diluted). In the
fourth quarter 2004, Unocal's adjusted after-tax earnings were $313
million, or $1.17 per share (diluted). Adjusted after-tax earnings
are net earnings excluding special items (discussed below) and the
cumulative effect of accounting changes. CONSOLIDATED RESULTS
(UNAUDITED) 1st Q 4th Q 1st Q Millions of dollars except per share
amounts 2005 2004 2004 Earnings from continuing operations $449
$268 $267 Earnings from discontinued operations 5 -- 2 Net earnings
454 268 269 Less: Special items in continuing operations 11 (45) 30
Less: Special items in discontinued operations 2 -- -- Adjusted
after-tax earnings $441 $313 $239 DILUTED EARNINGS PER SHARE DATA
(UNAUDITED) Net earnings per share: Continuing operations $1.64
$1.00 $0.99 Discontinued operations 0.02 -- 0.01 Total net earnings
per share $1.66 $1.00 $1.00 Adjusted after-tax earnings per share
$1.62 $1.17 $0.89 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED)
$2,186 $2,320 $1,876 "Our earnings in the first quarter were driven
primarily by strong crude oil and natural gas prices, a 5 percent
increase in our worldwide crude oil and natural gas production over
the first quarter a year ago, and lower interest expense," said
Charles R. Williamson, Unocal chairman and chief executive officer.
"We initiated production from the first three major projects in our
2005 development pipeline -- Mad Dog in the deepwater Gulf of
Mexico, Central Azeri in the Caspian Sea, and Moulavi Bazar in
Bangladesh. Looking forward, we expect initial oil production from
two additional development projects on tap for this year -- K2 in
deepwater Gulf of Mexico and the Pattani oil development offshore
Thailand." Recent operational and financial highlights Some of
Unocal's recent operational highlights and other developments
include: -- Entered into a merger agreement with ChevronTexaco
Corporation to merge Unocal into a wholly owned subsidiary of
ChevronTexaco; agreement is subject to Unocal stockholder approval,
regulatory approvals and clearances and other customary closing
conditions -- Began production from the Mad Dog deepwater Gulf of
Mexico field (Unocal working interest, 15.6%); 1Q exit rate from
two wells of 30,000 barrels-of-oil equivalent (BOE) per day gross,
4,100 BOE per day net -- Began oil production from Phase 1 (Central
Azeri) in the Azeri-Chirag-Gunashli development in the Caspian Sea
(Unocal, 10.3% interest), raising gross AIOC production at the end
of the quarter to approximately 200,000 BOE per day (Unocal, 18,300
BOE per day net) -- Began natural gas production from the Moulavi
Bazar field in Bangladesh, Unocal is operator and has a 100%
working interest in the production-sharing contract encompassing
two producing fields; 1Q exit rate for Bangladesh operations,
including the Jalalabad field, was 41,000 BOE per day (gross),
Unocal, 33,000 BOE per day net -- Successful appraisal well on the
Mad Dog Southwest Ridge in the Gulf of Mexico encountered
significant hydrocarbons, extending the limits of the field --
Completed the redemption of the outstanding 6-1/4% Trust
Convertible Preferred Securities of Unocal Capital Trust -- Reduced
total debt by $332 million to $2.73 billion -- Added $523 million
to cash balance, bringing total cash to $1.68 billion; net debt
(debt minus cash) reduced to $1.05 billion -- Reached final
settlement of lawsuits related to Unocal's investment in the Yadana
gas pipeline project in Myanmar 1Q 2005 financial and operating
details Unocal's first quarter 2005 adjusted after-tax earnings
(compared with 1Q 2004) reflected higher worldwide crude oil and
natural gas prices, international production and natural gas
storage margins, and lower exploration and dry hole costs and
interest expense. These positive factors were offset partially by
lower North America natural gas production and higher
administrative and general expense. In the first quarter 2005,
after-tax special items included a $22 million gain from the sale
of Unocal's interest in Hindustan Oil Exploration Company, which
was offset partially by $11 million in provisions for environmental
and litigation matters. All of the special items are detailed in
the Adjusted After-tax Earnings Reconciliation table included at
the end of this news release. Worldwide hydrocarbon liquids and
natural gas production for the first quarter 2005 averaged 429,000
BOE per day, up from 409,000 BOE per day in the same period a year
ago. The production increase was due primarily to higher liquids
and natural gas production in Asia. First-quarter 2005 worldwide
price realizations (including hedging activities) for natural gas
averaged $4.28 per thousand cubic feet (mcf), up from $4.00 during
the prior year's first quarter. The company's first quarter 2005
worldwide liquids price realizations (including hedging activities)
were $44.72 per barrel, up from $30.64 in the first quarter 2004.
Hedging activities in the 2005 first quarter decreased worldwide
liquids realizations by 8 cents per barrel and increased worldwide
natural gas realizations by 20 cents per mcf. Unocal's preliminary
EBITDAX for the first quarter 2005 was $1.08 billion, or $3.95 per
share (diluted). This compares with $756 million, or $2.73 per
share (diluted), for the same period in 2004. EBITDAX is net
earnings before interest, taxes, depreciation, depletion and
amortization, impairments, exploration expenses, dry hole costs,
special items, and the cumulative effect of accounting changes.
Full-year 2005 production outlook Unocal currently expects
worldwide average production for the full-year 2005 to exceed
430,000 BOE per day, up from 425,000 BOE per day that was
previously estimated. The company's updated 2005 net production
outlook can be found in the Data Warehouse section of Unocal's
Investor Relations web site, http://www.unocal.com/. This document
provides additional detailed estimated second quarter ranges for
the numerous areas of production, which describe the company's
lowest and highest production estimates in those areas. In
locations where Unocal is limited by market demand or pipeline
capacity, the range is between the contract minimum and the highest
past production or the estimated capacity limits of the producing
assets. A sensitivity factor is provided to adjust future
production for the impacts of PSC adjustments due to changes in oil
prices. Discontinued earnings forecasts and conference calls
Pending Unocal's anticipated merger with ChevronTexaco, the company
has discontinued providing its forecast of adjusted after-tax
earnings per share, including its related assumptions for future
commodity prices and future dry hole costs. Unocal has also
discontinued holding quarterly earnings conference calls. About
Unocal Corporation Unocal is one of the world's leading independent
natural gas and crude oil exploration and production companies. The
company's principal oil and gas activities are in Asia and North
America. Financial database Additional financial tables for the
first quarter 2005 and the comparable prior periods are available
in the company's "Quarterly Fact Book," which is posted in the Data
Warehouse in the Investor Relations section of the company's web
site. The Quarterly Fact Book is also available upon request from
Unocal Investor Relations. Forward-Looking Statements; Preliminary
2005 First Quarter Results This news release contains
forward-looking statements about matters such as Unocal's merger
with ChevronTexaco and production rates and timing. Although these
statements are based upon Unocal's current expectations and
beliefs, they are subject to known and unknown risks and
uncertainties that could cause actual results and outcomes to
differ materially from those described in, or implied by, the
forward-looking statements, including whether the pending merger
with ChevronTexaco is completed and the effects on Unocal in the
event that it is not completed; volatility in commodity prices;
Unocal's ability to find or acquire commercially productive
reservoirs and to develop and produce deepwater and other projects
in a timely and cost- effective manner; the accuracy of Unocal's
estimates and judgments regarding hydrocarbon resources and
formations and reservoir performance; operational risks inherent in
the exploration, development and production of oil and gas; the
impact of environmental laws, permitting and licensing requirements
and other regulations; international and domestic political and
economic factors; and other factors discussed in Unocal's 2004
Annual Report on Form 10-K and subsequent reports filed by Unocal
with the U.S. Securities and Exchange Commission (SEC). Copies of
Unocal's SEC filings are available from Unocal by calling
800-252-2233 or from the SEC by calling 800-SEC-0330. The reports
are also available on the Unocal web site, http://www.unocal.com/.
Unocal undertakes no obligation to update the forward-looking
statements in this news release to reflect future events or
circumstances. All such statements are expressly qualified by this
cautionary statement, which is provided pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. In addition,
disclosures in this news release, including in the attached tables,
regarding Unocal's first quarter 2005 financial results are
preliminary and are subject to change in connection with Unocal's
preparation and filing of its Form 10-Q for the three months ended
March 31, 2005. Supplemental Non-GAAP Financial Measures The news
release includes certain "non-GAAP financial measures" as defined
under SEC regulations: (1) adjusted after-tax earnings (net
earnings excluding special items and cumulative effects of
accounting changes) and (2) EBITDAX (net earnings before interest,
taxes, depreciation, depletion and amortization, asset impairments,
exploration expenses, dry hole costs, special items and cumulative
effects of accounting changes). Special items represent certain
significant matters which positively or negatively impact net
earnings and that management determines to be not representative of
the company's ongoing operations. Examples include: gain/loss from
major asset sales; environmental remediation costs related
primarily to inactive, closed or previously owned company
facilities and third party sites; costs or settlements associated
with major restructuring plans; litigation settlement costs
primarily associated with former company operations or
closed/inactive facilities; significant impairments due to changes
in commodity prices; material damage to company facilities or
operations due to fire, explosion, earthquakes, storms or other
"acts of god" not covered by insurance; certain costs associated
with major acquisitions including litigation and significant
trading derivatives; and insurance recoveries associated with
former company operations or for costs incurred in prior years.
Unocal's management believes that adjusted after-tax earnings is a
useful supplemental financial measure to investors and analysts
because it facilitates a focus on the company's ongoing operations
and allows for convenient comparisons to the company's prior
reporting periods. Adjusted after-tax earnings is also used as a
factor in calculating various performance measures in connection
with payments under the company's annual bonus plan, and it is used
by management as a factor in reviewing business unit performance.
Unocal's management believes that EBITDAX is helpful to investors
and analysts because it facilitates a comparison of companies like
Unocal that use the "successful efforts" accounting method with
other companies in the exploration and production industry that
utilize the "full-cost" method of accounting. Adjusted after-tax
earnings and EBITDAX are not substitutes for net earnings
determined in accordance with GAAP as a measure of profitability or
other GAAP financial measures. Special items excluded from these
non-GAAP measures do in fact positively or negatively impact net
earnings. Other companies may define special items differently, and
the Thomson/First Call mean of analyst estimates may not use a
similar definition. Hence, these measures may not be comparable
with similarly titled amounts reported by other companies or
analyst estimates reported by Thomson/First Call. A quantitative
historical reconciliation of adjusted after-tax earnings and
EBITDAX to GAAP net earnings is found in this news release,
including certain of the tables accompanying the text. CONSOLIDATED
EARNINGS (UNAUDITED) For the Three Months Ended March 31, Millions
of dollars except per share amounts 2005 2004 Revenues Sales and
operating revenues (a) $2,157 $1,821 Interest, dividends and
miscellaneous income 9 11 Gain on sales of assets 20 44 Total
revenues 2,186 1,876 Costs and other deductions Crude oil, natural
gas and product purchases (a) 754 744 Operating expense 307 281
Administrative and general expense 78 63 Depreciation, depletion
and amortization 276 232 Impairments -- 5 Dry hole costs 20 25
Exploration expense 38 50 Interest expense 33 41 Property and other
operating taxes 21 20 Total costs and other deductions 1,527 1,461
Earnings from equity investments 39 37 Earnings from continuing
operations before income taxes and minority interests 698 452
Income taxes 247 180 Minority interests 2 5 Earnings from
continuing operations 449 267 Earnings from discontinued operations
(b) 5 2 Net earnings $454 $269 Basic earnings per share of common
stock (c) Continuing operations $1.66 $1.02 Discontinued operations
0.02 0.01 Net earnings $1.68 $1.03 Diluted earnings per share of
common stock (d) Continuing operations $1.64 $0.99 Discontinued
operations 0.02 0.01 Net earnings $1.66 $1.00 Cash dividends
declared per share of common stock $0.20 $0.20 (a) Includes crude
oil buy/sell transactions settled in cash of: $163 $252 (b) Net of
tax (benefit) $4 $1 (c) Basic weighted average shares outstanding
(in thousands) 270,445 261,974 (d) Diluted weighted average shares
outstanding (in thousands) 273,270 276,889 CONDENSED CONSOLIDATED
BALANCE SHEET (UNAUDITED) At March 31, At December 31, Millions of
dollars 2005 2004 Assets Cash and cash equivalents $1,683 $1,160
Other current assets - net 1,714 1,770 Investments and long-term
receivables - net 717 777 Properties - net 8,916 8,819 Goodwill 135
136 Other assets 525 439 Total assets $13,690 $13,101 Liabilities
and Stockholders' Equity Current liabilities (a) $2,655 $2,581
Long-term debt and capital leases 2,302 2,571 Deferred income taxes
849 839 Accrued abandonment, restoration and environmental
liabilities 900 897 Other deferred credits and liabilities 1,078
969 Minority interests 28 27 Stockholders' equity 5,878 5,217 Total
liabilities and stockholders' equity $13,690 $13,101 (a) Includes
current portion of Long-term debt and capital leases of: 428 491
CONSOLIDATED CASH FLOWS (UNAUDITED) For the Three Months Ended
March 31, Millions of dollars 2005 2004 Cash Flows from Operating
Activities Net earnings $454 $269 Adjustments to reconcile net
earnings to net cash provided by operating activities Depreciation,
depletion and amortization 276 232 Impairments -- 5 Dry hole costs
20 25 Amortization of exploratory leasehold costs 14 16 Deferred
income taxes 43 28 Gain on sales of assets (20) (44) Gain on
disposal of discontinued operations (4) -- Pension expense net of
contributions 24 23 Other (4) (13) Working capital and other
changes related to operations 105 209 Net cash provided by
operating activities 908 750 Cash Flows from Investing Activities
Capital expenditures (includes dry hole costs) (419) (360) Proceeds
from sales of assets 96 72 Return of capital from affiliate company
-- 52 Net cash used in investing activities (323) (236) Cash Flows
from Financing Activities Long-term borrowings -- 40 Reduction of
long-term debt and capital lease obligations (102) (197) Minority
interests (2) -- Repurchases of common stock -- (20) Proceeds from
issuance of common stock 95 51 Dividends paid on common stock (53)
(52) Loans to key employees -- 20 Net cash used in financing
activities (62) (158) Net increase in cash and cash equivalents 523
356 Cash and cash equivalents at beginning of year 1,160 404 Cash
and cash equivalents at end of period $1,683 $760 NET EARNINGS AND
ADJUSTED AFTER-TAX EARNINGS BY BUSINESS SEGMENT 1st Q 2005 4th Q
2004 (UNAUDITED) Adjusted Adjusted Net After-Tax Net After-Tax
Millions of dollars Earnings Earnings (a) Earnings Earnings (a)
Exploration and Production North America U.S. $154 $154 $77 $77
Canada 18 18 14 14 Total North America 172 172 91 91 International
Asia 251 229 187 187 Other 48 48 31 31 Total International 299 277
218 218 Total Exploration and Production 471 449 309 309 Midstream
and Marketing 35 35 26 26 Geothermal 17 17 22 22 Corporate and
Other Administrative and General (29) (29) (28) (28) Interest
Expense - Net (15) (15) (20) (20) Environmental and Litigation (12)
(2) (47) (5) Other (18) (17) 6 9 After-tax earnings from continuing
operations 449 438 268 313 After-tax earnings from discontinued
operations 5 3 -- -- After-tax earnings $454 $441 $268 $313 (a) For
a reconciliation to net earnings, see the Adjusted After-Tax
Earnings Reconciliation table. NET EARNINGS AND ADJUSTED AFTER-TAX
BY BUSINESS SEGMENT 1st Q 2005 1st Q 2004 (UNAUDITED) Adjusted
Adjusted Net After-Tax Net After-Tax Millions of dollars Earnings
Earnings (a) Earnings Earnings (a) Exploration and Production North
America U.S. $154 $154 $113 $92 Canada 18 18 12 12 Total North
America 172 172 125 104 International Asia 251 229 158 158 Other 48
48 17 17 Total International 299 277 175 175 Total Exploration and
Production 471 449 300 279 Midstream and Marketing 35 35 23 23
Geothermal 17 17 37 16 Corporate and Other Administrative and
General (29) (29) (27) (27) Interest Expense - Net (15) (15) (32)
(32) Environmental and Litigation (12) (2) (16) (5) Other (18) (17)
(18) (17) After-tax earnings from continuing operations 449 438 267
237 After-tax earnings from discontinued operations 5 3 2 2
After-tax earnings $454 $441 $269 $239 (a) For a reconciliation to
net earnings, see the Adjusted After-Tax Earnings Reconciliation
table. OPERATING HIGHLIGHTS For the Three Months Ended March 31,
2005 2004 North America Net Daily Production Liquids (thousand
barrels) U.S. 57 55 Canada 16 17 Total liquids 73 72 Natural gas -
dry basis (million cubic feet) U.S. 456 515 Canada 83 84 Total
natural gas 539 599 North America Average Prices (excluding hedging
activities) (a) Liquids (per barrel) U.S. $44.72 $32.66 Canada
$38.31 $28.51 Average $43.35 $31.71 Natural gas (per mcf) U.S.
$5.26 $5.04 Canada $5.69 $5.38 Average $5.32 $5.09 North America
Average Prices (including hedging activities) (a) Liquids (per
barrel) U.S. $44.46 $29.87 Canada $38.31 $28.51 Average $43.15
$29.56 Natural gas (per mcf) U.S. $5.93 $5.57 Canada $5.69 $5.08
Average $5.90 $5.50 (a) Excludes gains/losses on derivative
positions not accounted for as hedges and ineffective portions of
hedges. OPERATING HIGHLIGHTS (Continued) For the Three Months Ended
March 31, 2005 2004 International Net Daily Production (a) Liquids
(thousand barrels) Asia 76 66 Other (b) 20 20 Total liquids 96 86
Natural gas - dry basis (million cubic feet) Asia 1,011 884 Other
(b) 10 25 Total natural gas 1,021 909 International Average Prices
(c) Liquids (per barrel) Asia $45.50 $31.44 Other $47.57 $32.12
Average $45.93 $31.57 Natural gas (per mcf) Asia $3.40 $2.97 Other
$5.26 $4.29 Average $3.41 $2.98 Worldwide Net Daily Production (b)
Liquids (thousand barrels) 169 158 Natural gas - dry basis (million
cubic feet) 1,560 1,508 Barrels oil equivalent (thousands) 429 409
Worldwide Average Prices (excluding hedging activities) (d) Liquids
(per barrel) $44.80 $31.64 Natural gas (per mcf) $4.08 $3.83
Worldwide Average Prices (including hedging activities) (d) Liquids
(per barrel) $44.72 $30.64 Natural gas (per mcf) $4.28 $4.00 (a)
International production is presented utilizing the economic
interest method. (b) Includes proportional interests in production
of equity investees of: Liquids -- 1 Natural gas -- 15 Barrels oil
equivalent -- 4 (c) International did not have any hedging
activities. (d) Excludes gains/losses on derivative positions not
accounted for as hedges and ineffective portions of hedges.
ADJUSTED AFTER-TAX EARNINGS RECONCILIATION (UNAUDITED) 1st Q 4th Q
1st Q Millions of dollars except per share amounts 2005 2004 2004
Net earnings $454 $268 $269 Less: Special items from continuing
operations E&P - North America - U.S. Asset sales -- -- 6
Litigation settlement -- -- 15 E&P - International - Asia Asset
sales 22 -- -- Geothermal Asset sales -- -- 21 Corporate and Other
Asset sales -- 17 -- Environmental and litigation provisions (11)
(43) (12) Net tax adjustments for settlements / assessments -- 15
-- Restructuring provisions -- 1 -- Oil Insurance Limited
retrospective liability increase -- (21) -- Agrium settlement --
(14) -- Less: Special items from discontinued operations Gain on
asset disposals 2 -- -- Adjusted after-tax earnings $441 $313 $239
Adjusted after-tax earnings per share (diluted) $1.62 $1.17 $0.89
EBITDAX RECONCILIATION (UNAUDITED) For the Three Months Ended March
31, Millions of dollars except per share amounts 2005 2004 Net
Earnings $454 $269 Less: Special items from continuing operations
11 30 Special items from discontinued operations 2 -- Adjusted
after-tax earnings 441 239 Add-backs to adjusted after-tax
earnings: Depreciation, depletion and amortization 276 232
Impairments -- 5 Dry hole costs 20 25 Exploration expenses
(including amortization of undeveloped leasehold costs) 38 50
Current income taxes 223 141 Deferred income taxes 48 23 Interest
expense (a) 33 41 EBITDAX $1,079 $756 EBITDAX per share (diluted)
$3.95 $2.73 (a) Net of capitalized interest of: 15 16 DATASOURCE:
Unocal Corporation CONTACT: Barry Lane (Media), +1-310-726-7731, or
Robert Wright (Investors), +1-310-726-7665, both of Unocal
Corporation Web site: http://www.unocal.com/
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