SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) October 24, 2001
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UNOCAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-8483 95-3825062
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(Commission File Number) (I.R.S. Employer Identification No.)
2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245
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(Address of Principal Executive Offices) (Zip Code)
(310) 726-7600
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(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events.
Third Quarter and Nine Months 2001 Earnings
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Unocal Corporation's net earnings were $102 million, or 42 cents per share
(diluted), for the third quarter of 2001, with all $102 million coming from
continuing operations. This compared to $190 million, or 77 cents per share
(diluted), for the third quarter of 2000, with $176 million from continuing
operations and $14 million from discontinued operations.
The decrease in quarterly earnings was primarily due to lower worldwide average
crude oil, condensate and natural gas liquids (liquids) and natural gas prices,
which was partially offset by higher worldwide natural gas production. The
Company's worldwide average natural gas price, including realized hedging
activities, was $2.75 per thousand cubic feet (mcf) in the third quarter of
2001, which was a decrease of 36 cents per mcf, or 12 percent, from the same
period a year ago. The Company's worldwide average liquids price, including
realized hedging activities, was $22.87 per barrel in the third quarter of 2001,
which was a decrease of $5.03 per barrel, or 18 percent, from the same period a
year ago. The Company's worldwide natural gas production was 2,013 million cubic
feet per day (mmcf/d) in the third quarter of 2001, which was an increase of 8
percent from the same period a year ago. The increase was primarily due to
higher natural gas production from the U.S. Lower 48 operations. In the third
quarter of 2001, earnings from continuing operations included $25 million in
special item charges, primarily relating to environmental and litigation
provisions, while the third quarter of 2000 included $52 million in special item
charges. The special items recorded in the third quarter of 2000 consisted of
losses of $40 million related to commodity derivative positions not accounted
for as hedges and $38 million in environmental and litigation charges, which
were partially offset by $26 million in net benefits related to foreign and U.S.
deferred tax adjustments.
For the nine months period ending September 30, 2001, the Company's net earnings
were $644 million, or $2.59 per share (diluted), with $629 million from
continuing operations, $16 million from discontinued operations, and a loss of
$1 million from the cumulative effect of an accounting change. This compared to
$587 million, or $2.37 per share (diluted), for the same period a year ago, with
$550 million from continuing operations and $37 million from discontinued
operations.
Earnings from continuing operations for the nine months period of 2001 totaled
$629 million, which was an increase of $79 million from the same period a year
ago. This increase was primarily due to higher worldwide average natural gas
prices and increased natural gas production. The Company's worldwide average
natural gas price, including realized hedging activities, was $3.51 per mcf for
the nine months period of 2001, which was an increase of 83 cents per mcf, or 31
percent, from the same period a year ago. The Company's worldwide natural gas
production increased by 11 percent from the same period a year ago, primarily
due to higher natural gas production from the U.S. Lower 48 and Far East
operations. These positive results were partially offset by higher dry hole
costs and higher depreciation, depletion and amortization expense. In the nine
months period of 2001, earnings from continuing operations included $66 million
in special item charges, primarily relating to environmental and litigation
provisions, while the nine months period of 2000 included $13 million in special
item benefits, detailed in the table below.
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For the Three Months For the Nine Months
Ended September 30, Ended September 30,
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Millions of dollars 2001 2000 2001 2000
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Special items:
Continuing operations
Gain on asset sales - - - 42
Deferred tax adjustment - 46 - 46
Environmental and litigation provisions/settlements (26) (38) (71) (71)
Executive stock purchase program - - - (9)
Insurance benefits related to environmental issues - - - 21
Trading derivatives- non-hedging (Northrock) 1 (40) 5 (40)
Provision for prior years income tax issues (Other) - (20) - (20)
Reformulated gasoline patent case - - - 55
Restructuring costs - - - (11)
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Total special items from continuing operations (25) (52) (66) 13
Discontinued operations
Gain on disposal - Agricultural products - 14 - 37
Gain on disposal - Refining and marketing - - 16 -
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Total special items from discontinued operations - 14 16 37
Earnings from discontinued operations were $16 million in the nine months period
of 2001 compared with $37 million in the same period a year ago. The Company
recorded after-tax gains of $16 million in the nine months period of 2001
related to a participation agreement tied to its former West Coast refining,
marketing and transportation assets, which were sold in 1997. The participation
agreement covers price differences between California Air Resources Board Phase
2 gasoline and conventional gasoline. The maximum potential payments under this
participation agreement are capped at $100 million and extend to 2003. The third
quarter and nine months periods of 2000 results reflected the Company's former
agricultural products business, which was sold later in that year.
In 2001, the Company recorded a one-time non-cash $1 million after-tax charge
consisting of the cumulative effect of change in accounting principle related to
the initial adoption of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities".
Total revenues from continuing operations for the third quarter of 2001 were
$1.58 billion, compared with $2.35 billion for the third quarter of 2000. This
decrease was primarily due to lower marketing and trading activities in crude
oil and condensate by the Company's Trade segment, as well as lower overall
hydrocarbon commodity prices. Total revenues from continuing operations for the
nine months period of 2001 were $5.49 billion, compared with $6.42 billion for
the same period a year ago.
Capital spending in the third quarter of 2001 was $437 million, compared with
$314 million for the third quarter of 2000. Capital spending for the nine months
period of 2001 was $1,261 million, compared with $872 million in the same period
a year ago. The higher capital expenditures in 2001 were primarily due to higher
exploratory expenditures and property acquisitions in the Gulf of Mexico and
Brazil and higher development expenditures in Indonesia. The capital
expenditures amounts for both the third quarter and the nine months periods
excluded major acquisitions.
The Company's total debt, including current maturities, was $2.86 billion at
September 30, 2001, compared with $2.51 billion at December 31, 2000.
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OPERATING HIGHLIGHTS
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
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2001 2000 2001 2000
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North America Net Daily Production
Crude oil, condensate and natural gas liquids (thousand barrels)
Lower 48 (a) 60 53 58 53
Alaska 26 25 25 26
Canada (a) 16 16 15 17
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Total crude oil, condensate and natural gas liquids 102 94 98 96
Natural gas - dry basis (million cubic feet)
Lower 48 (a) 939 777 922 740
Alaska 83 128 104 138
Canada (a) 92 96 105 98
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Total natural gas 1,114 1,001 1,131 976
North America Average Prices (b)
Crude oil, condensate and natural gas liquids (per barrel)
Lower 48 $ 23.11 $ 28.45 $ 24.63 $ 26.27
Alaska $ 21.58 $ 25.70 $ 22.18 $ 24.02
Canada $ 20.89 $ 26.89 $ 20.74 $ 22.43
Average $ 22.37 $ 27.45 $ 23.39 $ 24.97
Natural gas (per mcf)
Lower 48 $ 2.97 $ 4.26 $ 4.76 $ 3.42
Alaska $ 1.57 $ 1.20 $ 1.30 $ 1.20
Canada $ 2.76 $ 2.66 $ 3.40 $ 1.98
Average $ 2.85 $ 3.69 $ 4.29 $ 2.94
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International Net Daily Production
Crude oil, condensate and natural gas liquids (thousand barrels)
Far East 49 47 49 47
Other 19 18 19 18
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Total crude oil, condensate and natural gas liquids 68 65 68 65
Natural gas - dry basis (million cubic feet)
Far East 833 816 845 799
Other 66 52 64 56
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Total natural gas 899 868 909 855
International Average Prices (b)
Crude oil, condensate and natural gas liquids (per barrel)
Far East $ 23.04 $ 28.30 $ 24.02 $ 25.45
Other $ 25.27 $ 29.24 $ 26.04 $ 27.24
Average $ 23.65 $ 28.57 $ 24.60 $ 25.96
Natural gas (per mcf)
Far East $ 2.62 $ 2.44 $ 2.54 $ 2.37
Other $ 2.80 $ 2.86 $ 2.90 $ 2.79
Average $ 2.63 $ 2.47 $ 2.57 $ 2.40
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Worldwide Net Daily Production (a)
Crude oil, condensate and natural gas liquids(thousand barrels) 170 159 166 161
Natural gas - dry basis (million cubic feet) 2,013 1,869 2,040 1,831
Barrels oil equivalent (thousands) 506 470 506 466
Worldwide Average Prices (b)
Crude oil, condensate and natural gas liquids (per barrel) $ 22.87 $ 27.90 $ 23.89 $ 25.37
Natural gas (per mcf) $ 2.75 $ 3.11 $ 3.51 $ 2.68
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(a) Production includes 100 percent of production of consolidated subsidiaries and proportional
shares of production of equity investees.
(b) Average prices include hedging gains and losses but exclude gains or losses on derivative
positions not accounted for as hedges, the ineffective portion of hedges and other Trade margins.
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Outlook
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The Company projects adjusted after-tax earnings to be 25 to 35 cents per share
(diluted) for the fourth quarter of 2001, assuming an average NYMEX benchmark
price of $22.25 per barrel of crude oil and $2.55 per million British thermal
units (MMBtu) for Lower 48 natural gas. The Company's forecasted earnings are
expected to change 3 cents per share for every $1 change increase in the
Company's average worldwide realized price for crude oil and 2 cents per share
for every 10-cent change in its average realized Lower 48 natural gas price.
The Company's net daily worldwide production is projected to average between
500,000 and 510,000 barrels-of-oil equivalent in the fourth quarter. The
Company's forecast also assumes pre-tax dry hole costs of $20 to $25 million in
the fourth quarter.
Forward-looking statements and estimates regarding projected earnings, commodity
prices, dry hole costs and production levels, in this filing 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 2000 Annual Report on Form 10-K and
subsequent reports.
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNOCAL CORPORATION
(Registrant)
Date: October 30, 2001 By: /s/ JOE D. CECIL
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Joe D. Cecil
Vice President and Comptroller
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