Unocal's preliminary adjusted after-tax earnings for the third quarter 2004 were $294 million, or $1.09 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published Oct. 25, 2004) of 96 cents per share. Unocal's adjusted after-tax earnings were $190 million, or 72 cents per share (diluted), in the third quarter 2003, and $231 million, or 86 cents per share (diluted), in the second quarter 2004. Adjusted after-tax earnings are net earnings excluding special items (discussed below) and the cumulative effect of accounting changes.
CONSOLIDATED RESULTS (UNAUDITED) 3rd Q 2nd Q 3rd Q Millions of dollars except per share amounts 2004 2004 2003 Earnings from continuing operations $329 $282 $150 Earnings from discontinued operations 1 59 2 Net earnings 330 341 152 Less: Special items in continuing operations 35 54 (38) Less: Special items in discontinued operations 1 56 -- Adjusted after-tax earnings $294 $231 $190 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $1.22 $1.04 $0.57 Discontinued operations 0.01 0.21 0.01 Total net earnings per share $1.23 $1.25 $0.58 Adjusted after-tax earnings per share $1.09 $0.86 $0.72 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $1,993 $1,980 $1,535
"We recorded another outstanding quarter, with the results driven by continued high commodity prices," said Charles R. Williamson, Unocal chairman and chief executive officer. "We continued to execute on our major development programs in the Caspian Sea, Thailand, Bangladesh and deepwater Gulf of Mexico -- programs that we believe will contribute to production growth in 2005 and 2006."
Recent operational and financial highlights
Some of Unocal's operational highlights and other developments during the third quarter include:
3Q 2004 financial and operating details
In the third quarter 2004, after-tax special items included $38 million in tax benefits from prior-year audit settlements with federal and state tax authorities and a $16 million gain from the sale of some non-oil and gas properties. These were offset partially by $17 million in environmental and litigation provisions. All of the special items are detailed in the Adjusted After-tax Earnings Reconciliation table included at the end of this news release.
Unocal's third quarter 2004 adjusted after-tax earnings (compared with 3Q 2003) reflected higher worldwide crude oil and natural gas prices and lower net interest expense and litigation costs. These positive factors were partially offset by lower North America natural gas and liquids production, Xihu Trough (China) exit costs and power generation impairments.
Worldwide hydrocarbon liquids and natural gas production for the third quarter 2004 averaged 407,000 BOE per day, compared with 441,000 BOE per day in the same period a year ago. The production decline was due primarily to the sale of oil and gas producing assets in North America, which accounted for nearly 27,000 BOE per day during 2003, Gulf of Mexico storms that reduced production by 2,400 BOE per day, natural production declines in North America, and lower contractor's cost recovery barrels from certain PSCs in Asia, as a result of higher commodity prices and recovery of sunk costs, which reduced production by about 10,000 BOE per day. Higher liquids production in Thailand and from the West Seno field in Indonesia partially offset these negative factors.
Third-quarter 2004 worldwide price realizations (including hedging activities) for natural gas averaged $3.90 per thousand cubic feet (mcf), up from $3.60 during the prior year's third quarter. The company's third quarter 2004 worldwide liquids price realizations (including hedging activities) were $38.85 per barrel, up from $27.28 in the third quarter 2003. Hedging activities in the 2004 third quarter decreased worldwide liquids realizations by $1.51 per barrel and decreased worldwide natural gas realizations by 3 cents per mcf.
Unocal's preliminary EBITDAX for the third quarter 2004 was $884 million, or $3.22 per share (diluted). This compares with $709 million, or $2.60 per share (diluted), for the same period in 2003. EBITDAX is net earnings before interest, taxes, depreciation, depletion and amortization, impairments, exploration expenses, dry hole costs, special items, and the cumulative effect of accounting changes.
The company's total consolidated long-term debt (including current maturities) was $3.1 billion at Sept. 30, 2004. Because of an accounting rule change, in the first quarter 2004 the $522 million obligation for the Unocal Capital Trust convertible preferred securities was removed from the balance sheet and replaced by a debt liability of $538 million in 6-1/4-percent junior subordinated debentures of Unocal payable to Unocal Capital Trust. Approximately $269 million of this debt liability was repaid or converted to common stock in the third quarter 2004 in connection with Unocal's partial redemption of the trust's convertible preferred securities.
Unocal's cash and cash-equivalents were $780 million at Sept. 30, 2004.
Preliminary net earnings for the first nine months of 2004 were $940 million, or $3.48 per share (diluted), compared with $463 million, or $1.78 per share (diluted), reported for the same period a year ago.
Unocal's preliminary adjusted after-tax earnings for the nine months 2004 were $764 million, or $2.84 per share (diluted). Unocal's adjusted after-tax earnings were $610 million, or $2.32 per share (diluted), for the nine months 2003.
CONSOLIDATED RESULTS (UNAUDITED) For the Nine Months Ended September 30, Millions of dollars except per share amounts 2004 2003 Earnings from continuing operations $877 $529 Earnings from discontinued operations 63 17 Cumulative effect of accounting changes -- (83) Net earnings 940 463 Less: Special items in continuing operations 119 (72) Less: Special items in discontinued operations 57 8 Less: Cumulative effect of accounting changes -- (83) Adjusted after-tax earnings $764 $610 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $3.25 $2.02 Discontinued operations 0.23 0.06 Cumulative effect of accounting changes -- (0.30) Total net earnings per share $3.48 $1.78 Adjusted after-tax earnings per share $2.84 $2.32 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $5,858 $4,930
4Q 2004 earnings outlook
For the fourth quarter 2004, Unocal is forecasting adjusted after-tax earnings of $1.15 to $1.30 per share (diluted). This forecast compares with the Thomson/First Call mean of analyst estimates (published Oct. 25, 2004) of 99 cents per share for the fourth quarter 2004. Unocal's fourth quarter forecast assumes average NYMEX benchmark prices of $53.00 per barrel of crude oil and $7.30 per million British thermal units (mmBtu) for North America natural gas for the period.
Unocal's fourth quarter 2004 adjusted after-tax earnings are expected to change $8 million for every $1 change in its average worldwide realized price for crude oil and $3 million for every 10-cent change in its average realized North America natural gas price, excluding the effect of hedging activities. The forecast also assumes pretax dry hole costs in the fourth quarter of $50 to $75 million.
The fourth-quarter adjusted after-tax earnings forecast excludes special items and accounting changes. Because of the inherent uncertainty related to determining whether or when these items will occur and quantifying their dollar impact, Unocal does not believe it is able to provide a meaningful forecast of fourth-quarter net earnings.
2004 production outlook
Unocal currently expects worldwide production for the full-year 2004 to exceed 405,000 BOE per day.
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