SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number 1-8483
UNOCAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3825062
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2141 ROSECRANS AVENUE, SUITE 4000, EL SEGUNDO, CALIFORNIA 90245
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 726-7600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of Common Stock, $1 par value, outstanding as of
June 30, 1996: 248,356,915
<PAGE>
Item 1. Financial Statements
<TABLE>
CONSOLIDATED EARNINGS UNOCAL CORPORATION
(Unaudited)
<CAPTION>
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
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C> <C>
Sales and operating revenues (a) ................................... $2,524 $2,238 $4,741 $4,064
Interest, dividends and miscellaneous income ....................... 21 14 37 26
Equity in earnings of affiliated companies ......................... 26 24 47 45
Gain on sales of assets ............................................ 113 14 137 61
------------------------------------------------------
Total revenues ............................................... 2,684 2,290 4,962 4,196
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases .................................... 1,093 982 1,990 1,657
Operating expense .................................................. 446 458 873 886
Selling, administrative and general expense ........................ 112 107 230 209
Depreciation, depletion and amortization ........................... 252 240 496 467
Dry hole costs ..................................................... 5 15 19 19
Exploration expense ................................................ 28 26 50 55
Interest expense ................................................... 69 76 147 146
Excise, property and other operating taxes (a) ..................... 279 261 543 501
-----------------------------------------------------
Total costs and other deductions ............................. 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 STOCK ...................... $ 229 $ 69 $ 344 $ 134
=====================================================
Earnings per share of common stock assuming no dilution............. $ 0.92 $ 0.28 $ 1.39 $ 0.55
=====================================================
Earnings per share of common stock assuming full dilution........... $ 0.89 $ 0.28 $ 1.36 $ 0.55
=====================================================
Cash dividends declared per share of common stock .................. $ 0.20 $ 0.20 $ 0.40 $ 0.40
-----------------------------------------------------
(a) Includes consumer excise taxes of ............................ $ 250 $ 228 $ 486 $ 437
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION
(Unaudited)
<CAPTION>
June 30 December 31
-----------------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents ..................................................................... $ 209 $ 94
Accounts and notes receivable ................................................................. 971 920
Inventories
Crude oil .................................................................................. 46 48
Refined products ........................................................................... 164 161
Agricultural products ...................................................................... 30 40
Minerals ................................................................................... 21 30
Supplies, merchandise and other ............................................................ 82 81
Deferred income taxes ......................................................................... 75 169
Other current assets .......................................................................... 39 33
-----------------------
Total current assets ....................................................................... 1,637 1,576
Investments and long-term receivables ............................................................ 1,057 1,101
Properties (net of accumulated depreciation and other allowances
of $10,768 in 1996 and $11,431 in 1995) ......................................... 6,911 7,109
Deferred income taxes ............................................................................ 27 25
Other assets ..................................................................................... 147 80
-----------------------
Total assets ............................................................................... $ 9,779 $ 9,891
-----------------------
LIABILITIES
Current liabilities
Accounts payable .............................................................................. $ 830 $ 804
Taxes payable ................................................................................. 247 193
Current portion of long-term debt and capital lease obligations ............................... 124 8
Interest payable .............................................................................. 75 92
Other current liabilities ..................................................................... 190 219
-----------------------
Total current liabilities .................................................................. 1,466 1,316
Long-term debt and capital lease obligations ..................................................... 3,117 3,698
Deferred income taxes ............................................................................ 664 722
Accrued abandonment, restoration and environmental liabilities ................................... 664 607
Other deferred credits and liabilities ........................................................... 670 618
-----------------------
Total liabilities .......................................................................... 6,581 6,961
-----------------------
STOCKHOLDERS' EQUITY
Preferred stock ($0.10 par value; stated at liquidation value of $50 per share) .................. 513 513
Common stock ($1 par value) ...................................................................... 248 247
Capital in excess of par value ................................................................... 344 319
Foreign currency translation adjustment .......................................................... (10) (10)
Unearned portion of restricted stock issued ...................................................... (16) (13)
Retained earnings ................................................................................ 2,119 1,874
-----------------------
Total stockholders' equity ................................................................. 3,198 2,930
-----------------------
Total liabilities and stockholders' equity .............................................. $ 9,779 $ 9,891
-----------------------
</TABLE>
See Notes to the Consolidated Financial Statements.
2
<PAGE>
<TABLE>
CONSOLIDATED CASH FLOWS UNOCAL CORPORATION
(Unaudited)
<CAPTION>
For the Six Months
Ended June 30
--------------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings ....................................................................................... $ 362 $ 152
Adjustment to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion and amortization ..................................................... 496 467
Dry hole costs ............................................................................... 19 19
Deferred income taxes ........................................................................ 33 (24)
Gain on sales of assets (before-tax) ......................................................... (137) (61)
Other ........................................................................................ 77 --
Working capital and other changes related to operations
Accounts and notes receivable ............................................................. (73) 21
Inventories ............................................................................... 27 30
Accounts payable .......................................................................... 53 (84)
Taxes payable ............................................................................. 16 (61)
Other ..................................................................................... (180) (101)
---------------------
Net cash provided by operating activities .............................................. 693 358
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (includes dry hole costs) .................................................. (622) (596)
Proceeds from sales of assets ................................................................... 539 128
---------------------
Net cash used in investing activities .................................................. (83) (468)
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings ............................................................................ 110 712
Reduction of long-term debt and capital lease obligations ....................................... (499) (536)
Dividends paid on preferred stock ............................................................... (18) (18)
Dividends paid on common stock .................................................................. (99) (99)
Other ........................................................................................... 11 33
---------------------
Net cash provided by (used in) financing activities ....................................... (495) 92
Increase (decrease) in cash and cash equivalents ................................................... 115 (18)
Cash and cash equivalents at beginning of year ..................................................... 94 148
---------------------
Cash and cash equivalents at end of period ......................................................... $ 209 $ 130
---------------------
Supplemental disclosure of cash flow information: Cash paid during the period
for:
Interest (net of amount capitalized) ......................................................... $ 152 $ 152
Income taxes (net of refunds) ................................................................ $ 166 $ 184
</TABLE>
See Notes to the Consolidated Financial Statements.
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The consolidated financial statements included herein are unaudited and, in
the opinion of management, include all adjustments necessary for a fair
presentation of financial position and results of operations. All
adjustments are of a normal recurring nature. Such financial statements are
presented in accordance with the Securities and Exchange Commission's
(Commission) disclosure requirements for Form 10-Q.
These interim consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and the Notes to
Consolidated Financial Statements filed with the Commission in Unocal
Corporation's 1995 Annual Report on Form 10-K.
Results for the six months ended June 30, 1996, are not necessarily
indicative of future financial results.
Certain items in the prior year financial statements have been reclassified
to conform to the 1996 presentation.
(2) For the purpose of this report, Unocal Corporation and its consolidated
subsidiary, Union Oil Company of California (Union Oil), together with the
consolidated subsidiaries of Union Oil, will be referred to as "Unocal" or
"the company".
(3) Earnings per share of common stock assuming no dilution are based on net
earnings less preferred stock dividend requirements, divided by the
weighted average shares of common stock outstanding during each period. The
computation of fully diluted earnings per share assumes the dilutive effect
of the common stock equivalents and conversion of the company's outstanding
preferred stock. When the computation of fully diluted earnings per share
is antidilutive for any given period presented, the amounts reported for
primary and fully diluted are the same.
(4) As a result of the corporate staff reduction program initiated during the
fourth quarter of 1994, the company recorded in 1994 a pretax charge of $34
million in administrative and general expense for estimated benefits,
primarily termination allowance, to be paid to employees affected by the
program. At June 30, 1996, the amount of unpaid benefits remaining on the
consolidated balance sheet was $12 million. During the first quarter 1996,
approximately 100 employees were inadvertently reported as terminated
instead of 50. Approximately 30 employees were terminated during the second
quarter of 1996, bringing the total number of terminated employees to
approximately 620.
(5) Capitalized interest totaled $3 million and $8 million for the second
quarters of 1996 and 1995, respectively. For the first six months of 1996
and 1995, capitalized interest totaled $6 million and $16 million,
respectively.
(6) Cash Flow Information:
During the first half of 1996 and 1995, shares of Unocal common stock were
purchased by the trustee of the Unocal Savings Plan (the "Plan") either
from Unocal or on the open market as directed by Unocal. The trustee used
Unocal's matching contributions to the Plan to purchase the shares. The
total matching contributions were expensed in Unocal's consolidated
earnings statement. In the consolidated cash flow statements, the portion
of the matching contribution resulting in the issuance of Unocal common
stock, as detailed below, was treated as a noncash transaction since the
resulting effect on cash flow was zero.
For the Six Months
Ended June 30
---------------------------
1996 1995
- --------------------------------------------------------------------------------
Shares of Unocal common stock issued (in thousands) 252 515
Fair value of common stock (in millions of dollars) $8 $14
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(7) Income Taxes:
The components of pre-tax earnings and the provision for income taxes were
as follows:
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
------------------------------------------------------------------
Millions of dollars 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes:
<S> <C> <C> <C> <C>
United States (a) ............................ $ 278 $ (1) $ 351 $ 5
Foreign ...................................... 122 126 263 251
- ------------------------------------------------------------------------------------------------------------------------------------
Total ..................................... $ 400 $ 125 $ 614 $ 256
Income Taxes:
Current
Federal ................................... $ 84 $ 9 $ 104 $ 16
State ..................................... (2) 2 2 5
Foreign ................................... 56 54 112 107
- ------------------------------------------------------------------------------------------------------------------------------------
Total current ........................... $ 138 $ 65 $ 218 $ 128
Deferred
Federal ................................... $ 5 $ (12) $ 5 $ (19)
State ..................................... 14 (11) 14 (17)
Foreign ................................... 5 5 15 12
- ------------------------------------------------------------------------------------------------------------------------------------
Total deferred .......................... $ 24 $ (18) $ 34 $ (24)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income taxes .............................. $ 162 $ 47 $ 252 $ 104
</TABLE>
(a) Includes corporate and unallocated expenses.
Reconciliation of income taxes at the federal statutory rate of 35% to tax
provision:
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended June 30 Ended June 30
--------------------------------------------------------
Millions of dollars 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earnings before income taxes ................................... $ 400 $ 125 $ 614 $ 256
Tax at federal statutory rate .................................. $ 140 $ 44 $ 215 $ 90
Foreign taxes in excess of statutory rate ...................... 23 15 41 34
Dividend exclusion ............................................. (4) (4) (8) (8)
Investment tax credits ......................................... -- (7) -- (11)
Other .......................................................... 3 (1) 4 (1)
- ------------------------------------------------------------------------------------------------------------------------------------
Total provision ........................................... $ 162 $ 47 $ 252 $ 104
</TABLE>
(8) Long Term Debt and Credit Agreements:
During the first quarter of 1996, the company issued $100 million of
medium-term notes with interest rates ranging from 5.94 percent to 6.23
percent and maturity dates ranging from February 2003 to February 2006. The
company also increased its commercial paper borrowings by $44 million.
During the second quarter of 1996, the company reduced long-term debt by
approximately $610 million primarily with the proceeds from the sale of its
California oil and gas producing properties. Financing activities
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
for the second quarter of 1996 primarily consisted of: retirement at
maturity of the $110 million Swiss Franc bond issue and the corresponding
$65 million currency swap agreement; and the early redemption of seven
pollution control bond issues totaling $49 million with interest rates
ranging from 6-1/8 percent to 7-7/8 percent. The company also reduced its
commercial paper balance by $377 million bringing the outstanding balance
to $317 million at June 30, 1996.
In April 1996, the company terminated the $45 million Netherlands revolving
credit facility, and in July 1996, the company terminated its $25 million
revolving credit facility with a Canadian bank.
(9) Financial Instruments
The fair value of the financial instruments described below are based on
the company's outstanding balances at June 30, 1996:
The Deutsche Mark currency swap agreement had a notional value of $110
million and a fair value of approximately $56 million based on dealer
quotes.
There were 16 outstanding currency forward contracts to purchase 28 million
Pounds Sterling for $43 million to hedge a series of known Pounds Sterling
requirements, and the fair market value of the contracts was approximately
$0.9 million in liabilities.
The floating interest rate on the swap agreement to hedge $25 million of
fixed rate medium-term notes was 5.5 percent, and the fair value was
approximately $0.2 million in assets, based on quoted market prices of
comparable instruments.
The company had outstanding commodity futures contracts covering the sale
of 700 thousand barrels of crude oil and 3 billion cubic feet of natural
gas with notional amounts of $13 million and $8 million, respectively. The
fair value of the contracts, based on quoted market prices, was
insignificant.
The estimated fair value of the company's long-term debt was $3,310
million.
(10) Accrued abandonment, restoration and environmental liabilities:
At June 30, 1996, the company had accrued $497 million for the estimated
future costs to abandon and remove wells and production facilities. The
total costs for abandonments are estimated to be $640 million to $780
million, of which the lower end of the range is used to calculate the
amount to be amortized.
At June 30, 1996, the company's reserves for environmental remediation
obligations totaled $244 million, of which $83 million was included in
other current liabilities. The reserve includes estimated probable future
costs of $30 million for federal Superfund and comparable state-managed
multiparty disposal sites; $34 million for formerly-operated sites for
which the company has remediation obligations; $71 million for sites
related to businesses or operations that have been sold with contractual
remediation or indemnification obligations; $76 million for company-owned
or controlled sites where facilities have been closed or operations shut
down; and $33 million for sites owned and/or controlled by the company and
utilized in its ongoing operations.
(11) Contingent Liabilities:
The company has certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings, including
those involving environmental, tax and other matters, certain of which are
discussed more specifically below. The company accrues liabilities when it
is probable that future costs will be incurred and such costs can be
reasonably estimated. Such accruals are based on developments to date, the
company's estimates of the outcomes of these matters and its experience in
contesting, litigating and settling other matters. As the scope of the
liabilities becomes better defined, there will be changes in the estimates
of
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
future costs, which could have a material effect on the company's future
results of operations and financial condition or liquidity.
ENVIRONMENTAL MATTERS
The company is subject to loss contingencies pursuant to federal, state and
local environmental laws and regulations. These include existing and
possible future obligations to investigate the effects of the release or
disposal of certain petroleum, chemical and mineral substances at various
sites; to remediate or restore these sites; to compensate others for damage
to property and natural resources, for remediation and restoration costs
and for personal injuries; and to pay civil penalties and, in some cases,
criminal penalties and punitive damages. These obligations relate to sites
owned by the company or others and are associated with past and present
operations, including sites at which the company has been identified as a
potentially responsible party (PRP) under the federal Superfund laws and
comparable state laws. Liabilities are accrued when it is probable that
future costs will be incurred and such costs can be reasonably estimated.
However, in many cases, investigations are not yet at a stage where the
company is able to determine whether it is liable or, if liability is
probable, to quantify the liability or estimate a range of possible
exposure. In such cases, the amounts of the company's liabilities are
indeterminate due to the potentially large number of claimants for any
given site or exposure, the unknown magnitude of possible contamination,
the imprecise and conflicting engineering evaluations and estimates of
proper cleanup methods and costs, the unknown timing and extent of the
corrective actions that may be required, the uncertainty attendant to the
possible award of punitive damages, the recent judicial recognition of new
causes of action, the present state of the law, which often imposes joint
and several and retroactive liabilities on PRPs, and the fact that the
company is usually just one of a number of companies identified as a PRP.
As disclosed in Note 10, at June 30, 1996, the company had accrued $244
million for estimated future environmental assessment and remediation costs
at various sites where liabilities for such costs are probable. At those
sites where investigations or feasibility studies have advanced to the
stage of analyzing feasible alternative remedies and/or ranges of costs,
the company estimates that it could incur additional remediation costs
aggregating approximately $140 million.
Between August 22 and September 6, 1994, a chemical known as "Catacarb" was
released into the environment at the company's San Francisco Refinery near
Rodeo, California. Persons in the surrounding area have claimed that they
were exposed to the chemical in varying degrees. Since September 22, 1994,
forty-eight lawsuits have been filed by or on behalf of all persons,
alleged to be several thousand, claiming that they or their property were
adversely affected by the releases. Forty-four of the lawsuits have been
consolidated in the Superior Court for Contra Costa County. The First
Amended Model Complaint in this consolidated action, filed February 1,
1995, on behalf of individual plaintiffs and purported classes of
plaintiffs, alleges personal injury, emotional distress and increased risk
of future illness on behalf of the named plaintiffs and all persons present
in and around or downwind from the San Francisco Refinery, and property
damage and loss or diminution of property value on behalf of all owners of
real and personal property in the vicinity of the Refinery, resulting from
the release of Catacarb by the Refinery. Certain individual plaintiffs
allege injury from alleged subsequent releases at the Refinery of hydrogen
sulfide and other chemicals. The Model Complaint seeks compensatory and
punitive damages in unspecified amounts, equitable relief including the
creation of a fund for medical monitoring and treatment of plaintiffs and
members of the purported classes, statutory penalties and other relief. The
company has reached agreement with plaintiffs to certify a mandatory
non-opt out punitive damages class. Plaintiffs have withdrawn their class
claims for personal injury and property damage. Briefing is now in progress
to determine whether or not the Court will certify a medical monitoring
class.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
TAX MATTERS
In December 1994, the company received a Notice of Proposed Deficiency from
the Internal Revenue Service (IRS) related to the years 1985 through 1987.
In February 1995, the company filed a protest of the proposed tax
deficiency with the Appeals section of the IRS. Discussions with the
Appeals Officer are ongoing, but it appears that two substantial issues
will proceed to litigation.
The most significant issue relates to an IRS challenge of a $341 million
deduction taken by the company in its 1985 tax return for amounts paid
under a settlement agreement with Mesa Petroleum, T. Boone Pickens and
Drexel Burnham Lambert, Incorporated and certain others which ended a
hostile takeover attempt by that group. The IRS contends that the deduction
is not allowable because the payment was related solely to the purchase of
the company's common stock. Although the company did purchase shares under
the settlement agreement, it properly reflected the purchase in its records
at the fair market value of the shares purchased. The deduction at issue
relates to that portion of the payment made under the settlement agreement
that exceeded the value of the shares purchased. The company intends to
vigorously dispute the IRS' assertions in court. If the IRS were ultimately
to prevail, the company would owe $157 million of tax for 1985 plus tax
deductible interest estimated at $283 million as of June 30, 1996. As this
matter is not yet before a court, final resolution of this matter is likely
to be several years away.
The second issue relates to an IRS challenge of a continued deferral of
intercompany gains which arose from sales of property between subsidiaries
in 1982 and 1983. The IRS contends that the $201 million balance of
deferred gain must be recognized in the company's taxable income for 1985
when the subsidiaries contributed the property to a wholly owned master
limited partnership. The company intends to vigorously dispute the IRS'
assertions in court. If the IRS were ultimately to prevail, the company
would owe $92 million in tax for 1985, but would receive credits or refunds
for offsetting deductions in later years. For 1986 and 1987 the credits or
refunds would total $35 million. In addition to tax, the company would owe
tax deductible interest estimated at $116 million as of June 30, 1996. As
this matter is not yet before a court, final resolution of this matter is
likely to be several years away.
The total amount of tax and interest that the company would be required to
pay if the IRS were ultimately to prevail on both of the issues described
in the two preceding paragraphs is substantially less than the sum of the
amounts. As a result of the interplay of these issues, application of
foreign tax credits and overpayments related to other issues, the total
amount of tax and interest is estimated at $368 million as of June 30,
1996.
The company believes it has adequately provided in its accounts for items
and issues not yet resolved. In the opinion of management, a successful
outcome of the litigation is reasonably likely. However, substantial
adverse decisions could have a material effect on the company's financial
condition, operating results and liquidity in a given quarter and year when
such matters are resolved.
OTHER MATTERS
The company also has certain other contingent liabilities with respect to
litigation, claims and contractual agreements arising in the ordinary
course of business. Although these contingencies could result in expenses
or judgments that could be material to the company's results of operations
for a given reporting period, on the basis of management's best assessment
of the ultimate amount and timing of these events, such expenses or
judgments are not expected to have a material adverse effect on the
company's consolidated financial condition or liquidity.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
(12) Unocal guarantees certain indebtedness of Union Oil. Summarized below is
financial information for Union Oil and its consolidated subsidiaries:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
---------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total revenues ................................................................. $2,684 $2,290 $4,962 $4,196
Total costs and other deductions, including income taxes ....................... 2,446 2,212 4,599 4,044
---------------------------------------------
Net earnings ................................................................... $ 238 $ 78 $ 363 $ 152
- -------------------------------------------------------------------------------- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At June 30 At December 31
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets ........................................................... $1,629 $1,576
Noncurrent assets ........................................................ $8,158 $8,328
Current liabilities ...................................................... $1,462 $1,309
Noncurrent liabilities ................................................... $5,115 $5,645
Shareholder's equity ..................................................... $3,210 $2,950
-----------------------------------
</TABLE>
9
<PAGE>
<TABLE>
OPERATING HIGHLIGHTS UNOCAL CORPORATION
(Unaudited)
<CAPTION>
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):
<S> <C> <C> <C> <C>
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):
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) (a) .......................... 18.8 21.9 19.6 21.7
GEOTHERMAL (million kilowatt-hours) ................................. 16.8 14.9 15.4 15.2
</TABLE>
<TABLE>
<CAPTION>
AVERAGE SALES PRICES
CRUDE OIL AND CONDENSATE (per barrel):
<S> <C> <C> <C> <C>
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 $ 17.99 $ 16.39
WORLDWIDE ........................................................ $ 18.71 $ 16.30 $ 17.77 $ 15.76
------------------------------------------------------
NATURAL GAS (per thousand cubic feet):
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 ...................................................... -- 63 26 67
Natural gas liquids .............................................. -- 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
</TABLE>
10
<PAGE>
<TABLE>
OPERATING HIGHLIGHTS (continued) UNOCAL CORPORATION
(Unaudited)
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 (primarily sold
through retail channels)
Gasoline ............................................................................. 135 117 131 115
Diesel fuel .......................................................................... 28 31 26 28
Other (includes lube oil, kerosene, and fuel oil) .................................... 8 6 8 6
---------------------------------
Total ........................................................................... 171 154 165 149
Marketing (primarily sold through wholesale or commercial channels)
Gasoline ............................................................................. 24 25 20 21
Jet fuel ............................................................................. 39 27 41 28
Diesel fuel .......................................................................... 25 12 25 12
Other products (includes petroleum products, gas oils , 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
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CONSOLIDATED RESULTS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
------------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings excluding special items: .............................. $ 205 $ 101 $ 325 $ 155
Special items:
Sale of California oil and gas properties * .................... 70 -- 70 --
Other asset sales .............................................. -- 8 14 37
Environmental provision ........................................ (20) (14) (26) (18)
Litigation provision ........................................... (8) (8) (12) (12)
Write-down of assets ........................................... (4) (9) (4) (10)
Other .......................................................... (5) -- (5) --
------------------------------------------------------
Net earnings including special items ........................ $ 238 $ 78 $ 362 $ 152
</TABLE>
* Net of provision for environmental remediation of $10 million
Improved operating earnings for the second quarter and the first six months of
1996 were primarily due to significantly improved refined product margins;
higher worldwide crude oil and natural gas sales prices; higher gasoline sales
volumes; and increased ammonia fertilizer production. Partially offsetting these
positive factors were decreased domestic oil and gas production, principally due
to asset sales.
Consolidated sales and operating revenues for the second quarter of 1996
increased by $286 million, or 13 percent, compared with the second quarter of
1995, and consolidated sales and operating revenues for the first six months of
1996 increased by $677 million, or 17 percent, compared with the first six
months of 1995. The increased sales and operating revenues were the result of
improved refined product margins and higher crude oil and natural gas sales
prices.
OIL AND GAS EXPLORATION AND PRODUCTION
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings excluding special items: ............................ $ 164 $ 112 $ 322 $ 208
Special items:
Sale of California oil and gas properties * .................. 68 -- 68 --
Other asset sales ............................................ -- (2) 6 9
Write-down of assets ......................................... -- (8) -- (8)
-------------------------------------------------------
Net earnings including special items ...................... $ 232 $ 102 $ 396 $ 209
</TABLE>
* Net of provision for environmental remediation of $10 million
Improved earnings for the second quarter and first six months of 1996 were the
result of higher worldwide crude oil and natural gas sales prices and increased
foreign natural gas production.
During the second quarter of 1996, average worldwide crude oil sales prices
increased by $2.41 per barrel, or 15 percent, and worldwide natural gas sales
prices increased by $.45 per thousand cubic feet, or 26 percent, compared with
the second quarter of 1995. During the first six months of 1996, worldwide crude
oil sales prices increased by $2.01 per barrel, or 13 percent, and worldwide
natural gas sales prices increased by $.55 per thousand cubic feet, or 33
percent, compared with the first six months of 1995.
During the second quarter and first six months of 1996, foreign natural gas
production increased by five percent over the corresponding periods in 1995,
primarily in Canada and The Netherlands.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Excluding production from the California properties, domestic crude oil
production decreased, principally due to natural decline and the sale of other
oil and gas properties.
REFINING, MARKETING AND TRANSPORTATION - 76 PRODUCTS COMPANY
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
----------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings (loss) excluding special items: ................................ $ 48 $ 1 $ 41 $(17)
Special items:
Sale of California oil and gas properties (pipelines) ................... 2 -- 2 --
Write-down of assets .................................................... (4) -- (4) --
Other ................................................................... 4 -- 4 --
---- ---- ---- ----
Net earnings (loss) including special items .......................... $ 50 $ 1 $ 43 $(17)
</TABLE>
The 76 Products Company's improved earnings for the second quarter and first six
months of 1996 reflected significantly improved product margins, higher product
sales volumes due to expanded gasoline marketing efforts and increased refinery
production of light oil products. Partially offsetting these positive factors
were costs for repairs and lost production due to a fire in a coker unit at the
San Francisco Refinery in May 1996.
During the second quarter and first six months of 1996, product sales volumes
through retail channels increased by 11 percent compared with the corresponding
periods in 1995. Compared with the second quarter and first six months of 1995,
refinery production increased by 10 percent during the second quarter of 1996
and by 18 percent during the first six months of 1996.
GEOTHERMAL AND POWER OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
----------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings excluding special items: .............................. $ 4 $ 6 $ 9 $10
Special items:
Sale of assets ................................................. -- 5 -- 5
---------------------------------------------------
Net earnings including special items ........................ $ 4 $11 $ 9 $15
</TABLE>
The 1995 gain was from the sale of a small interest in the Indonesian geothermal
operations.
Diversified Businesses
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
----------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
---------------------------------------------------------------- ------------------------------------------------------------------
Net earnings excluding special items:
<S> <C> <C> <C> <C>
Agricultural Products .......................................... $ 37 $ 32 $ 53 $ 48
Carbon and Minerals ............................................ 9 10 27 27
Pipelines ...................................................... 14 17 30 35
Other .......................................................... 3 5 3 6
---- ---- ---- ----
Total ..................................................... $ 63 $ 64 $113 $116
Special items:
Asset sales
Agricultural Products ....................................... -- 4 -- 4
Pipeline .................................................... -- -- 7 --
Miscellaneous (Other) ....................................... -- 1 -- 1
----------------------------------------------------
Net earnings including special items ........................ $ 63 $ 69 $120 $121
</TABLE>
13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
During the second quarter and first six months of 1996, the company reported
increased ammonia fertilizer production due to new production from the Finley,
Washington plant, and continued to experience strong product margins for its
nitrogen fertilizer products.
CORPORATE AND UNALLOCATED
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
------------------------------------------------------
Millions of dollars 1996 1995 * 1996 1995
-----------------------------------------------------------------------------------------------------------------------------------
Net earnings excluding special items:
<S> <C> <C> <C> <C>
Administrative and general expense ................................. $ (16) $ (17) $ (34) $ (35)
Net interest expense ............................................... (48) (47) (98) (90)
Environmental and litigation expense ............................... (5) (8) (9) (17)
Other .............................................................. (5) (10) (19) (20)
------------------------------------------------------
Total ......................................................... (74) (82) (160) (162)
Special items:
Environmental and litigations provisions ........................ (28) (22) (38) (30)
Asset sales (Other) ............................................. -- -- 1 18
Write-down of assets (Other) .................................... -- (1) -- (2)
Other ........................................................... (9) -- (9) --
------------------------------------------------------
Net earnings effect including special items .................. $(111) $(105) $(206) $(176)
</TABLE>
Asset sales for 1995 consisted primarily of the sale of the company's Process,
Technology and Licensing business.
Financial Condition and Capital Expenditures
For the first six months of 1996, cash flow from operating activities, including
working capital changes, was $693 million, compared with $358 million in 1995.
This increase was due to higher earnings from operations.
Proceeds from asset sales were $539 million for the first six months of 1996.
The total included approximately $480 million from the sale of the California
oil and gas producing properties, $20 million from the 1995 sale of geothermal
assets, and $12 million from the sale of the company's interest in the Platte
Pipeline. The company used most of the proceeds from the sale of the California
assets to repay outstanding long-term debt. During 1995, proceeds from asset
sales were $128 million, mainly from the sale of nonstrategic oil and gas
properties and the Process, Technology and Licensing business.
Consolidated working capital at June 30, 1996 was $171 million, a decrease of
$89 million from the year-end 1995 level of $260. The company's total debt was
$3,241 million at June 30, 1996, a decrease of $465 million from the year-end
1995 level. The debt-to-total capitalization ratio dropped to 50.3 percent from
55.8 percent at year-end 1995. See Notes 8 and 9 to the Consolidated Financial
Statements for additional information.
Capital expenditures for the first six months of 1996 totaled $622 million, an
increase of $26 million, or four percent, from the 1995 level of $596 million.
The increase was due to higher spending for domestic and foreign exploration and
production and for geothermal activities. Partially offsetting the increase was
a 43 percent reduction in the 76 Products Company's 1996 spending due to the
completion of modifications made to the Los Angeles and San Francisco refineries
in 1995 to prepare for the manufacture of reformulated gasoline. Estimated
expenditures for the full year 1996 are expected to reach $1.3 billion,
depending upon the progress of various oil and gas projects and product prices.
ENVIRONMENTAL MATTERS
At June 30, 1996, the company's reserves for environmental remediation
obligations totaled $244 million, of which $83 million was included in other
current liabilities. During the first six months of 1996, cash payments of $29
million were applied against reserves and an additional $59 million in
liabilities was recorded to the reserve
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
account, primarily due to changes in estimated future remediation costs for
numerous sites. The company estimates that it could incur additional remediation
costs aggregating approximately $140 million as discussed in Note 11 to the
Consolidated Financial Statements.
The company is subject to federal, state and local environmental laws and
regulations, including the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the Resource Conservation and
Recovery Act (RCRA). Under these laws, the company is subject to possible
obligations to remove or mitigate the environmental effects of the disposal or
release of certain chemical and petroleum substances at various sites.
At year-end 1995, Unocal had received notification from the Federal
Environmental Protection Agency that the company may be a potentially
responsible party (PRP) at 40 sites. In addition, various state agencies and
private parties had identified 30 other similar PRP sites that may require
investigation and remediation. During the first six months of 1996, nine sites
were added and three sites were removed resulting in a total of 76 sites. Of the
total, the company has denied responsibility at 4 sites and at another 14 sites
the company's liability, although unquantified, appears to be de minimis. The
total also includes 34 sites which are under investigation or in litigation, for
which the company's potential liability is not determinable. Of the remaining 24
sites, where probable costs can be reasonably estimated, a reserve of $30
million was included in the total environmental remediation reserve as of June
30, 1996.
Unocal does not consider the number of sites for which it has been named a PRP
as a relevant measure of liability. Although the liability of a PRP is generally
joint and several, the company is usually only one of several companies
designated as a PRP. The company's ultimate share of the remediation costs at
those sites often is not determinable due to many unknown factors as discussed
in Note 11 to the Consolidated Financial Statements. The solvency of other
responsible parties and disputes regarding responsibilities may also impact the
company's ultimate costs.
Corrective investigations and actions pursuant to RCRA are being performed at
the San Francisco and Los Angeles refineries, Beaumont facility and at the
company's closed shale oil project and Molycorp Inc., Washington, Pennsylvania,
facility. The company also must provide financial assurance for future closure
and post-closure costs of its RCRA permitted facilities. Because these costs
will be incurred at different times and over a period of many years, the company
believes that these obligations are not likely to have a material adverse effect
on the company's results of operations or financial condition.
In the second quarter of 1996, the company added $21 million to the reserve for
estimated costs associated with the Guadalupe oil field cleanup of past releases
of a diesel-like additive formerly used to produce the field's heavy crude oil.
The additional reserve includes estimated costs for environmental remediation
and mitigation, an environmental impact report and further studies to conduct a
natural resource damage assessment. The company expects to incur additional, but
presently indeterminable, costs related to these activities. An additional $7
million for the estimated costs to abandon and remove production facilities and
pipelines related to the field's former operations was also accrued.
In the second quarter of 1996, the company added $9 million to the reserve for
the cleanup of petroleum hydrocarbon contamination of the beach area and under
the Front Street section of Avila Beach, California. The reserve increase
includes estimated costs for remediation and mitigation, additional site
assessments and the development of an environmental impact report. The company
expects to incur additional, but presently indeterminable, costs related to this
site.
On April 9, 1996, the company completed the sale of most of its California oil
and gas producing assets. The sales agreement requires the company to retain
environmental liabilities for some of the properties that were sold. Estimated
environmental costs were also identified for properties that were excluded from
the sale. As a result, the company added $17 million to the reserve for
estimated future assessment and remediation costs for the California properties
associated with the sale. Additional related costs may be incurred but cannot be
determined until further assessments and investigations of the properties are
performed.
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
OTHER MATTERS
On August 8, 1996, the company commenced an offer to exchange new 6-1/4 percent
Trust Convertible Preferred Securities of Unocal Capital Trust (which will be a
wholly owned subsidiary of the company) for up to all of the 10.25 million
outstanding shares of the company's $3.50 Convertible Preferred Stock. The
exchange offer will expire on September 5, 1996, unless extended. The purpose of
the exchange offer is to refinance the $3.50 Convertible Preferred Stock with
the Trust Convertible Preferred Securities. The company will announce the
exchange ratio for the new Trust Convertible Preferred Securities and their
conversion ratio into shares of the company's common stock two business days
before the expiration date of the exchange offer. The exchange ratio will be
determined by a formula that gives the exchanging stockholder new Trust
Convertible Preferred Securities with a liquidation value equal to the greater
of the redemption value or the conversion value of the $3.50 Convertible
Preferred Stock. The Trust Convertible Preferred Securities will be convertible
into shares of the company's common stock at a conversion premium of 24 percent
above the average closing price of the common stock for the five trading days
preceding the determination of the exchange ratio. Completion of the exchange
offer will be conditioned on receipt of at least four million validly tendered
shares of the $3.50 Convertible Preferred Stock.
OUTLOOK
Certain of the statements in this discussion, as well as other forward-looking
statements within this document, contain estimates and projections of amounts of
or increases in future revenues, earnings, cash flows, capital expenditures,
assets, liabilities and other financial items and of future levels of or
increases in reserves, production, sales including related costs and prices, and
other statistical items; plans and objectives of management regarding the
company's future operations, products and services; and certain assumptions
underlying such estimates, projection plans and objectives. While these
forward-looking statements are made in good faith, future operating, market,
competitive, legal, economic, political, environmental, and other conditions and
events could cause actual results to differ materially from those in the
forward-looking statements.
While petroleum product margins and natural gas prices have declined from their
peaks earlier this year, the company expects them to remain strong. Crude oil
prices have remained high despite the anticipated effects of Iraq selling $2
billion in oil exports before the end of August 1996. The company will continue
to be affected by the uncertainty and volatility of crude oil prices.
The company started production from the new Seguni oil and gas field in the
Mahakam Delta area offshore East Kalimantan, Indonesia in June 1996. The field
currently produces more than 5,200 barrels of oil per day and 9 million cubic
feet of gas per day from five completions. Unocal holds 100 percent interest in
the Seguni field.
On May 28, 1996, the company signed a production sharing contract with
Petrovietnam for petroleum exploration on Block B, offshore Vietnam. A
three-year work program entails seismic exploration and exploratory drilling.
Seismic exploration is expected to take approximately nine months to complete
and analyze, and the first exploration well should be drilled in 1997. Unocal
has a 45 percent working interest in the project.
The company signed a 30-year gas sales agreement with the Petroleum Authority of
Thailand in August 1996. Under the agreement, production from the Pailin field
is to begin in mid 1999 at 165 million cubic feet (mmcfd) of natural gas per
day, rising to a planned 330 mmcfd in 2001 with the expected delineation of
additional reserves. Unocal is the operator with a 35 percent interest.
On July 26, 1996, the United States Senate approved the Foreign Operations
Appropriations bill which supports investment sanctions against Myanmar. These
investment sanctions would apply only to new, as yet uncommitted investments. As
the Senate bill stands, the company's Yadana Project will not be affected by the
limited investment sanctions. Before the bill passes, Congress must resolve
differences between the Senate and House versions of the bill; the House bill
does not contain language concerning sanctions against Myanmar.
The company received several bids for its oil and gas interests in the
Netherlands sector of the North Sea. After careful consideration, all bids were
rejected, as they were below the net present value of those operations. The
company now plans to hold and operate these assets.
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Underground mine development is continuing at the company's idled molybdenum
mine in Questa, New Mexico. Upon receipt of the necessary permits, the company
will recommence the production of molybdenum. Operations are expected to begin
in the fourth quarter of 1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There is incorporated by reference the information regarding environmental
remediation reserves in Note 10 to the consolidated financial statements in Item
1 of Part I, the discussion thereof in the Environmental Matters section of
Management's' Discussion and Analysis in Item 2 of Part I, and the information
regarding contingent liabilities in Note 11 to the consolidated financial
Statements in Item 1 of Part I.
(1) In Citizens for a Better Environment, et al. v. Union Oil Company of
---------------------------------------------------------------------------
California (No. C94-0712, U.S.D.C., N.D. California) regarding allegations
----------
of NPDES violations from selenium discharges, the Ninth Circuit Court of
Appeals affirmed the trial court's decision denying the company's motion to
dismiss the action. Unocal's request for a rehearing en banc is now
pending.
(2) On August 2, 1996, the office of the Attorney General for the State of
Illinois announced its intention to seek approximately $2.1 million in
civil penalties for Unocal's alleged failure to comply with the State's
environmental statute and Air Pollution regulations since January 1992, at
the company's Carbon Plant in Lemont, Illinois. The company is presently
negotiating with the Attorney General's office.
ITEM 4. SUBMISSION OF A VOTE OF SECURITY HOLDERS
The 1996 Annual Meeting of Stockholders of Unocal Corporation was held on June
3, 1996. The following actions were taken by the stockholders at the Annual
Meeting, for which proxies were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934, as amended.
1. The three nominees proposed by the board of directors were elected as
directors by the following votes for three-year terms expiring at the 1999
Annual Meeting of Stockholders, or until their successors are duly elected and
qualified:
Name Votes For Votes Withheld
---- --------- --------------
Malcolm R. Curie 208,473,246 2,831,252
Neal E. Schmale 208,421,124 2,883,374
Charles E. Weaver 208,493,900 2,810,598
2. A proposal to ratify the selection of Coopers & Lybrand L.L.P. as Unocal's
independent accountants for 1996 was passed by a vote of 209,266,340 for
versus 1,261,663 against. There were 776,495 abstentions and no broker
non-votes.
3. A stockholder proposal regarding a review and report on the company's
international code of conduct failed to pass receiving 9,623,037 votes for
versus 170,181,570 against. There were 13,589,175 abstentions and
17,910,716 broker non-votes.
4. A stockholder proposal regarding a report on a gas plant in Northern
Alberta, Canada, failed to pass receiving 9,669,664 votes for versus
172,192,756 against. There were 11,531,362 abstentions and 17,910,716
broker non-votes.
5. A stockholder proposal regarding a review of and report annually on
pollution prevention options failed to pass, receiving 10,718,278 votes for
versus 171,220,815 against. There were 11,454,689 abstentions and
17,910,716 broker non-votes.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 Bylaws of Unocal, as amended June 3, 1996, and
currently in effect (incorporated by reference to
Exhibit 4.2 to the Registration Statement on Form S-4
of Unocal Corporation and Unocal Capital Trust (File
Nos. 333-09137 and 333-09137-01)).
11 Unocal Corporation statement regarding computation of
earnings per common share for the three months ended
June 30, 1996 and 1995 and for the six-month periods
ended June 30, 1996 and 1995.
12.1 Unocal Corporation statement regarding computation of
ratio of earnings to fixed charges for the six months
ended June 30, 1996 and 1995.
12.2 Unocal Corporation statement regarding computation of
ratio of earnings to combined fixed charges and
preferred stock dividends for the six months ended June
30, 1996 and 1995.
12.3 Union Oil Company of California statement regarding
computation of ratio of earnings to fixed charges for
the six months ended June 30, 1996 and 1995.
27 Financial data schedule for the quarter ended June 30,
1996 (included only in the copy of this report filed
electronically with the Commission).
(b) Reports on Form 8-K
During the second quarter of 1996:
1. Current Report on Form 8-K dated and filed April 9, 1996,
for the purpose of reporting, under Item 5, the sale of the
California oil and gas producing properties.
2. Current Report on Form 8-K dated and filed April 24, 1996,
for the purpose of reporting, under Item 5, Unocal's first
quarter 1996 earnings.
3. Current Report on Form 8-K dated and filed June 3, 1996, for
the purpose of reporting, under Item 5, Unocal's anticipated
strong second quarter 1996 earnings.
During the third quarter of 1996 to the date hereof:
1. Current Report on Form 8-K dated and filed July 25, 1996,
for the purpose of reporting, under Item 5, Unocal's second
quarter and first six months 1996 earnings.
18
<PAGE>
SIGNATURE
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)
Dated: August 14, 1996 By: /s/ CHARLES S. MCDOWELL
-----------------------
Charles S. McDowell
Vice President and Comptroller
(Duly Authorized Officer and
Principal Accounting Officer)
19
<PAGE>
EXHIBIT 11
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------------------------------------------
Dollars and shares in thousands, except per share amounts 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Primary
<S> <C> <C> <C> <C>
Net earnings ............................................... $ 237,881 $ 77,944 $ 362,142 $ 152,081
Preferred stock dividend ................................... (8,969) (8,969) (17,938) (17,938)
---------------------------------------------------------------
Net earnings applicable to common stock ................. 228,912 68,975 344,204 134,143
Weighted average common stock outstanding .................. 248,294 245,804 247,983 245,298
Dilutive common stock equivalents (a)....................... 1,254 1,050 1,121 947
---------------------------------------------------------------
249,548 246,854 249,104 246,245
---------------------------------------------------------------
Net earnings per common share ........................ $ 0.92 $ 0.28 $ 1.38 $ 0.54
---------------------------------------------------------------
Fully Diluted
Net earnings ............................................... $ 237,881 $ 77,944 $ 362,142 $ 152,081
Weighted average common stock outstanding .................. 248,294 245,804 247,983 245,298
Dilutive common stock equivalents .......................... 1,933 1,624 1,794 1,487
Conversion of preferred stock (b)........................... 16,667 16,667 16,667 16,667
---------------------------------------------------------------
266,894 264,095 266,444 263,452
---------------------------------------------------------------
Net earnings per common share ........................ $ 0.89 $ 0.30 $ 1.36 $ 0.58
---------------------------------------------------------------
</TABLE>
(a) The dilutive effect is less than 3 percent.
(b) During 1995, the effect of assumed conversion of preferred stock on earnings
per common stock is antidilutive.
EXHIBIT 12.1
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
----------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings ....................................................................... $362 $152
Provision for income taxes ......................................................... 252 104
---------------------------
Earnings subtotal ............................................................... 614 256
Fixed charges included in earnings:
Interest expense ................................................................ 147 146
Interest portion of rentals ..................................................... 21 25
---------------------------
Subtotal ..................................................................... 168 171
Earnings available before fixed charges ............................................ $782 $427
---------------------------
Fixed charges:
Fixed charges included in earnings .............................................. 168 171
Capitalized interest ............................................................ 6 16
---------------------------
Total fixed charges .......................................................... $174 $187
Ratio of earnings to fixed charges ................................................. 4.5 2.3
</TABLE>
EXHIBIT 12.2
UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
----------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings ....................................................................... $362 $152
Provision for income taxes ......................................................... 252 104
---------------------------
Earnings subtotal ............................................................... 614 256
Fixed charges included in earnings:
Interest expense ................................................................ 147 146
Interest portion of rentals ..................................................... 21 25
---------------------------
Subtotal ..................................................................... 168 171
Earnings available before fixed charges ............................................ $782 $427
---------------------------
Fixed charges:
Fixed charges included in earnings .............................................. 168 171
Capitalized interest ............................................................ 6 16
Preferred stock dividends * ..................................................... 29 29
---------------------------
Total fixed charges .......................................................... $203 216
Ratio of earnings to fixed charges ................................................. 3.9 2.0
</TABLE>
* For purposes of this ratio, preferred stock dividends are adjusted to a
pre-tax basis.
EXHIBIT 12.3
UNION OIL COMPANY OF CALIFORNIA AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
----------------------------
Millions of dollars 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings ....................................................................... $363 $152
Provision for income taxes ......................................................... 252 104
---------------------------
Earnings subtotal ............................................................... 615 256
Fixed charges included in earnings:
Interest expense ................................................................ 147 146
Interest portion of rentals ..................................................... 21 25
---------------------------
Subtotal ..................................................................... 168 171
Earnings available before fixed charges ............................................ $783 $427
---------------------------
Fixed charges:
Fixed charges included in earnings .............................................. 168 171
Capitalized interest ............................................................ 6 16
---------------------------
Total fixed charges .......................................................... $174 $187
---------------------------
Ratio of earnings to fixed charges ................................................. 4.5 2.3
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 209
<SECURITIES> 0
<RECEIVABLES> 971
<ALLOWANCES> 0
<INVENTORY> 343
<CURRENT-ASSETS> 1,637
<PP&E> 17,679
<DEPRECIATION> 10,768
<TOTAL-ASSETS> 9,779
<CURRENT-LIABILITIES> 1,466
<BONDS> 3,117
0
513
<COMMON> 248
<OTHER-SE> 2,463
<TOTAL-LIABILITY-AND-EQUITY> 9,779
<SALES> 4,741
<TOTAL-REVENUES> 4,962
<CGS> 2,863
<TOTAL-COSTS> 4,348
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 614
<INCOME-TAX> 252
<INCOME-CONTINUING> 124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.36
</TABLE>
