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 26, 1999
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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)
<PAGE>
Item 5. Other Events.
Third Quarter Earnings
Unocal Corporation reported preliminary net earnings of $24 million, or
10 cents per share diluted, for the third quarter of 1999. This compared to $36
million, or 15 cents per share diluted, for the third quarter of 1998. The third
quarter 1999 results benefited from higher oil prices, lower dry hole costs and
a lower effective tax rate primarily due to a change in the Thailand foreign
exchange rate. These factors in the third quarter of 1999 were offset by lower
oil and gas sales volumes and reduced earnings from non-exploration and
production businesses. In addition, the third quarter of 1999 included after-tax
special item charges of $12 million relating to environmental and litigation
provisions and $6 million in charges relating to a Kenai Plant accident in the
Agricultural Products business unit. The third quarter of 1998 special items
were a positive $32 million, which included $49 million relating to the gain
from the sale of assets in Canada partially offset by $10 million of
environmental and litigation provisions.
The adjusted after-tax earnings for the third quarter of 1999,
excluding $18 million in special item charges, were $42 million, or 18 cents per
share diluted. The adjusted after-tax earnings for the third quarter of 1998,
excluding a positive $32 million in special items, were $4 million, or 2 cents
per share diluted.
For the first nine months of 1999, the company reported preliminary net
earnings of $40 million, or 17 cents per share diluted. This compared with net
earnings of $159 million, or 66 cents per share diluted, for the first nine
months of 1998. The first nine months of 1999 results were lower due to lower
worldwide crude oil and natural gas sales volumes, lower natural gas prices,
lower agricultural products prices, reduced earnings from other non-exploration
and production businesses and higher corporate net interest expense. In
addition, the first nine months of 1999 included after-tax special item charges
of $14 million for environmental and litigation provisions, an $11 million
restructuring charge, a $10 million loss related to the sale of The Geysers
geothermal assets, and the $6 million charge relating to the Kenai Plant
accident. These factors were partially offset by higher worldwide oil prices, a
lower effective tax rate primarily due to a change in the Thailand foreign
exchange rate and lower dry hole costs. The first nine months of 1998 special
items were a positive $21 million after-tax, which included $102 million
relating to the gain from the sale of assets in Canada partially offset by $71
million of environmental and litigation provisions.
The adjusted after-tax earnings for the first nine months of 1999,
excluding $41 million in special item charges, were $81 million, or 34 cents per
share diluted. The adjusted after-tax earnings for the first nine months of
1998, excluding a positive $21 million in special items, were $138 million, or
57 cents per share diluted.
Total revenues for the third quarter of 1999 were $1.6 billion,
compared with $1.4 billion for the third quarter of 1998. Total revenues for the
first nine months of 1999 were $4.4 billion, compared with $4.0 billion for the
first nine months of 1998.
Capital expenditures for the third quarter of 1999 were $293 million,
compared with $482 million for the third quarter of 1998. Capital expenditures
for the first nine months of 1999 were $761 million, compared with $1,248
million for the first nine months of 1998. The first nine months of 1999 capital
expenditures excluded $184 million for the acquisition of Northrock Resources
Ltd. (Northrock). The company expects that capital expenditures for the 1999
full-year will total $1.17 billion (excluding the Northrock acquisition),
compared with $1.7 billion for the full-year 1998.
Total debt at the end of the third quarter of 1999 was $2.83 billion,
compared with $2.56 billion at the end of 1998. Most of this increase reflected
the consolidation of the company's investment in Northrock.
The company, at times, employs a commodity price option program that
establishes a price floor, while retaining most of the benefits of higher price
movements. This program is designed to protect cash flow and the capital
spending program against the effects of severe commodity price deterioration. In
the third quarter of 1999, the program resulted in lower realizations for crude
oil and natural gas totaling about $23 million after-tax, or 9 cents per share.
For the full-year 1999, based on recent NYMEX oil and gas futures prices, the
company anticipates this program will lower earnings by approximately $29
million after-tax. This program's results exclude hedging activities by
Northrock.
1
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Outlook
The company's Spirit Energy 76 (Spirit) business unit averaged 729 MMCF
per day of natural gas production in the third quarter of 1999. The company
estimates that, because of the current drilling activity and the return to
production of key wells after repairs, Spirit's natural gas production will
average approximately 750 MMCF per day in the fourth quarter of 1999.
In Thailand, net natural gas sales are expected to average
approximately 600 MMCF per day in the fourth quarter of 1999, as compared with
an average of 643 MMCF per day for the third quarter of 1999. In Mynamar,
commercial production from the Yadana field is now not expected to begin until
very late in 1999 or early 2000.
Indonesia Deepwater Development
The company received approvals from Indonesia's national oil company to
begin initial development activities on the West Seno and Merah Besar oil and
gas fields in the deepwater Kutei Basin, offshore East Kalimantan. Unocal
Makassar, Ltd, a wholly owned subsidiary, is operator of the West Seno discovery
in the Makassar Strait production-sharing contract (PSC) area and has a
50-percent working interest. The Merah Besar field is located on the Makassar
Strait PSC and the East Kalimantan PSC areas. Unocal Indonesia Company, also a
wholly owned subsidiary, holds a 100-percent working interest in the East
Kalimantan PSC. Development activity is planned in two phases with phase one
production expected in 2002. With this approval, the two fields now qualify to
supply gas for the latest package of LNG sales and natural gas is also available
for LPG extraction.
Forward-looking statements and estimates regarding exploration and production
activities, production levels, oil and gas prices and their related earnings
effects, and capital expenditures 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 1998 Annual Report on Form 10-K.
2
<PAGE>
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 28, 1999 By: /s/ JOE D. CECIL
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Joe D. Cecil
Vice President and Comptroller
3
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<TABLE>
<CAPTION>
CONSOLIDATED EARNINGS UNOCAL CORPORATION
(Unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
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Millions of dollars except per share amounts 1999 1998 1999 1998
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Revenues
<S> .................................................................... <C> <C> <C> <C>
Sales and operating revenues ........................................... $ 1,546 $ 1,286 $ 4,230 $ 3,683
Interest, dividends and miscellaneous income ........................... 16 12 72 74
Equity in earnings of affiliated companies ............................. 24 23 72 75
Gain/(loss) on sales of assets ......................................... 2 73 -- 166
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Total revenues ................................................... 1,588 1,394 4,374 3,998
Costs and other deductions
Crude oil, natural gas and product purchases ........................... 891 604 2,329 1,535
Operating expense ...................................................... 270 313 807 993
Selling, administrative and general expense ............................ 34 34 118 73
Depreciation, depletion and amortization ............................... 205 186 588 566
Dry hole costs ......................................................... 33 58 107 150
Exploration expense .................................................... 44 53 117 139
Interest expense ....................................................... 52 48 145 131
Property and other operating taxes ..................................... 13 13 40 44
Distributions on convertible preferred
securities of subsidiary trust ...................................... 8 8 24 24
Minority interests ..................................................... 4 2 8 7
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Total costs and other deductions ................................. 1,554 1,319 4,283 3,662
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Earnings (loss) from operations before income taxes .................... 34 75 91 336
Income taxes ........................................................... 10 39 51 177
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Net earnings (loss) .............................................. $ 24 $ 36 $ 40 $ 159
======================= =======================
Basic earnings (loss) per share of common stock (a) .................... $ 0.10 $ 0.15 $ 0.17 $ 0.66
Diluted earnings (loss) per share of common stock (b) .................. $ 0.10 $ 0.15 $ 0.17 $ 0.66
Cash dividends declared per share of common stock ...................... $ 0.20 $ 0.20 $ 0.60 $ 0.60
<FN>
(a) Basic weighted average shares outstanding (in thousands) ......... 242,404 241,362 241,905 241,621
(b) Diluted weighted average shares outstanding (in thousands) ........ 244,022 242,535 243,050 242,916
</FN>
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET UNOCAL CORPORATION
September 30 December 31
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Millions of dollars 1999(a) 1998
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Assets
Current assets
<S> .................................................................... <C> <C>
Cash and cash equivalents ........................................... $ 209 $ 238
Accounts and notes receivable ....................................... 798 807
Inventories ......................................................... 197 179
Deferred income taxes ............................................... 130 142
Other current assets ................................................ 26 22
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Total current assets ............................................. 1,360 1,388
Investments and long-term receivables .................................. 1,269 1,143
Properties (b) ......................................................... 5,868 5,276
Deferred income taxes .................................................. 71 23
Other assets ........................................................... 120 122
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Total assets ..................................................... $ 8,688 $ 7,952
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Liabilities and Stockholders' Equity
Current liabilities
Accounts payable .................................................... $ 899 $ 709
Taxes payable ....................................................... 128 260
Interest payable .................................................... 46 52
Current portion of environmental liabilities ........................ 145 142
Other current liabilities ........................................... 128 213
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Total current liabilities ........................................ 1,346 1,376
Long-term debt ......................................................... 2,834 2,558
Deferred income taxes .................................................. 268 132
Accrued abandonment, restoration and environmental liabilities ......... 566 622
Other deferred credits and liabilities ................................. 599 514
Minority interests ..................................................... 421 26
Company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust holding solely parent debentures ... 522 522
Common stock ($1 par value) ............................................ 253 252
Shares authorized: 750,000,000 (c)
Capital in excess of par value ......................................... 492 460
Unearned portion of restricted stock issued ............................ (22) (24)
Retained earnings ...................................................... 1,854 1,959
Accumulated other comprehensive income (loss) .......................... (34) (34)
Treasury stock - at cost (d) .......................................... (411) (411)
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Total stockholders' equity ....................................... 2,132 2,202
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Total liabilities and stockholders' equity .................... $ 8,688 $ 7,952
=============== ===============
<FN>
(a) Unaudited
(b) Net of accumulated depreciation ................................... $ 10,395 $ 10,193
(c) Number of shares outstanding (in thousands) ....................... 242,419 241,378
(d) Number of shares (in thousands) ................................... 10,623 10,623
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOWS UNOCAL CORPORATION
(Unaudited)
For the Nine Months
Ended September 30
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Millions of dollars 1999 1998
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Cash Flows from Operating Activities
<S> .................................................................... <C> <C>
Net earnings (loss) .................................................... $ 40 $ 159
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation, depletion and amortization ......................... 588 566
Dry hole costs ................................................... 107 150
Deferred income taxes ............................................ (54) (34)
(Gain) loss on sales of assets (before-tax) ...................... -- (166)
Other ............................................................ (54) 18
Working capital and other changes related to operations
Accounts and notes receivable ................................. 12 96
Inventories ................................................... (18) 18
Accounts payable .............................................. 92 (10)
Taxes payable ................................................. (132) 50
Other ......................................................... (64) (136)
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Net cash provided by (used in) operating activities ........ 517 711
Cash Flows from Investing Activities
Capital expenditures (includes dry hole costs) ...................... (761) (1,248)
Acquisition of Northrock Resources Ltd. ............................. (184) --
Proceeds from sales of assets ....................................... 163 299
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Net cash provided by (used in) investing activities ........ (782) (949)
Cash Flows from Financing Activities
Long-term borrowings ................................................ 833 666
Reduction of long-term debt ......................................... (708) (381)
Dividends paid on common stock ...................................... (145) (145)
Repurchases of common stock ......................................... -- (48)
Minority interests .................................................. 234 (9)
Other ............................................................... 22 --
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Net cash provided by (used in) financing activities ........... 236 83
Increase (decrease) in cash and cash equivalents ....................... (29) (155)
Cash and cash equivalents at beginning of year ......................... 238 338
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Cash and cash equivalents at end of period ............................. $ 209 $ 183
=====================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS UNOCAL CORPORATION
(Unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
----------------------- -----------------------
Millions of dollars except per share amounts 1999 1998 1999 1998
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<S> .................................................................... <C> <C> <C> <C>
Reported after-tax earnings ............................................ $ 24 $ 36 $ 40 $ 159
Special items .......................................................... (18) 32 (41) 21
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Adjusted after-tax earnings ............................................ $ 42 $ 4 $ 81 $ 138
Diluted reported earnings per share .................................... $ 0.10 $ 0.15 $ 0.17 $ 0.66
Diluted adjusted earnings per share .................................... $ 0.18 $ 0.02 $ 0.34 $ 0.57
ADJUSTED EARNINGS BY BUSINESS SEGMENT
(After-tax)(Unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
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Millions of dollars except per share amounts 1999 1998 1999 1998
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Exploration & Production
United States
<S> .................................................................... <C> <C> <C> <C>
Spirit Energy 76 (a) ............................................. $ 17 $ (9) $ 24 $ 15
Alaska ........................................................... 8 2 16 15
International
Far East ......................................................... 78 47 165 147
Other ............................................................ (7) (22) (21) (45)
Global Trade
Global Trade ..................................................... (5) 3 (3) 13
Pipelines ........................................................ 13 14 46 44
Geothermal and Power Operations ........................................ 6 16 31 44
Diversified Business Group
Agricultural Products .............................................. (2) 12 4 33
Carbon & Minerals (a) ............................................... 6 1 22 23
Corporate and Unallocated
New Ventures ........................................................ (4) (4) (9) (16)
Administrative & General ............................................ (23) (24) (65) (58)
Interest Expense - Net (a) .......................................... (36) (33) (101) (83)
Environmental & Litigation .......................................... (2) (4) (8) (8)
Other ............................................................... (7) 5 (20) 14
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Total adjusted after-tax earnings ...................................... $ 42 $ 4 $ 81 $ 138
======================= =======================
(a) Includes minority interests income/ (expense) of:
Spirit Energy 76 ............................................. $ (2) $ -- $ (4) $ (1)
Carbon & Minerals ............................................ (1) (1) (1) (3)
Corporate and Unallocated .................................... 2 -- 2 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPERATING HIGHLIGHTS UNOCAL CORPORATION
(Unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
----------------------- -----------------------
Millions of dollars except per share amounts 1999 1998 1999 1998
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United States Net Daily Production
Crude oil (thousand barrels daily)
<S> .................................................................... <C> <C> <C> <C>
Spirit Energy 76 .................................................... 40 44 40 44
Alaska .............................................................. 27 27 27 29
Natural gas - wet basis (million cubic feet daily)
Spirit Energy 76 .................................................... 729 808 756 795
Alaska .............................................................. 106 118 124 126
United States Average Prices (a)
Crude oil (per barrel)
Spirit Energy 76 .................................................... $ 18.32 $ 12.20 $ 14.87 $ 12.80
Alaska .............................................................. $ 14.50 $ 9.35 $ 11.43 $ 9.69
Natural gas (per mcf)
Spirit Energy 76 .................................................... $ 2.26 $ 1.97 $ 2.09 $ 2.08
Alaska .............................................................. $ 1.20 $ 1.20 $ 1.20 $ 1.38
International Net Daily Production (b)
Crude oil (thousand barrels daily)
Far East ............................................................ 73 81 72 83
Other (c) ........................................................... 40 31 35 31
Natural gas (million cubic feet daily)
Far East ............................................................ 884 828 859 851
Other (c) ........................................................... 149 37 93 53
International Average Prices (a)
Crude oil (per barrel)
Far East ............................................................ $ 16.43 $ 12.28 $ 13.75 $ 13.02
Other ............................................................... $ 16.69 $ 10.58 $ 13.96 $ 11.07
Natural gas (per mcf)
Far East ............................................................ $ 2.02 $ 2.23 $ 1.97 $ 2.10
Other ............................................................... $ 2.09 $ 2.38 $ 1.99 $ 2.26
Worldwide Net Daily Production (b)(c)
Crude oil (thousand barrels daily) ..................................... 180 183 174 187
Natural gas (per mcf) .................................................. 1,868 1,791 1,832 1,825
Worldwide Average Prices (a)
Crude oil (per barrel) ................................................. $ 16.65 $ 11.54 $ 13.65 $ 12.09
Natural gas (per mcf) .................................................. $ 2.07 $ 2.04 $ 1.97 $ 2.04
<FN>
(a) average prices include hedging gains and losses, but exclude other Global
Trade margins
(b) production includes certain host countries' shares of: Crude oil 30 6 23 11
Natural gas 95 44 86 44
(c) production includes 100% of Northrock Resources Ltd. in Canada of:Crude oil 8 - 4 -
Natural gas 110 - 56 -
</FN>
</TABLE>
