Unocal's preliminary adjusted after-tax earnings for the fourth quarter 2004 were $313 million, or $1.17 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published Jan. 31, 2005) of $1.17 per share. Unocal's adjusted after-tax earnings were $167 million, or 63 cents per share (diluted), in the fourth quarter 2003, and $294 million, or $1.09 per share (diluted), in the third quarter 2004. Adjusted after-tax earnings are net earnings excluding special items (discussed below) and the cumulative effect of accounting changes.
CONSOLIDATED RESULTS (UNAUDITED) Millions of dollars except per share 4th Q 3rd Q 4th Q amounts 2004 2004 2003 Earnings from continuing operations $268 $329 $169 Earnings from discontinued operations -- 1 11 Net earnings 268 330 180 Less: Special items in continuing operations (45) 35 5 Less: Special items in discontinued operations -- 1 8 Adjusted after-tax earnings $313 $294 $167 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $1.00 $1.22 $0.64 Discontinued operations -- 0.01 0.04 Total net earnings per share $1.00 $1.23 $0.68 Adjusted after-tax earnings per share $1.17 $1.09 $0.63 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $2,346 $1,993 $1,582
"Our earnings continue to be driven by strong crude oil and natural gas prices," said Charles R. Williamson, Unocal chairman and chief executive officer. "On top of that factor, we also saw an upturn in our international liquids and natural gas production that more than offset our North America declines on an oil-equivalent basis."
Recent operational and financial highlights
Some of Unocal's operational highlights and other developments during the fourth quarter include:
-- Signed a natural gas sales and purchase agreement to develop and produce gas from the Bibiyana field in Bangladesh -- Ramped-up gross production at the deepwater West Seno project in Indonesia to 40,000 barrel-of-oil equivalent (BOE) per day at the end of the quarter; Unocal is operator of the production-sharing contract (PSC) with a 90% working interest -- Progressed with construction on the Phase 1 and 2 developments of the Azerbaijan International Operating Company (AIOC) project in the Caspian Sea (Unocal, 10.28% working interest); first oil at the wellhead expected in early 2005 for Phase 1 -- More than 93 percent of construction completed on the Baku-Tbilisi- Ceyhan export pipeline from the Caspian Sea (Unocal, 8.9% equity interest) -- Geared up for first production from the deepwater Mad Dog project in the Gulf of Mexico; production started Jan. 13, 2005 -- Non-cash dry hole and impairment expenses were significantly higher than in each of the first three quarters of 2004 -- Year-end long-term debt was reduced to $3.06 billion, down from $3.42 billion at the beginning of 2004 (which included $538 million in convertible junior subordinated debentures of Unocal payable to Unocal Capital Trust) -- Announced a $465 million cash expenditure program to redeem the remaining outstanding convertible preferred securities and repurchase Unocal common stock
4Q 2004 financial and operating details
In the fourth quarter 2004, after-tax special items included charges of $43 million in environmental and litigation provisions, a $21 million Oil Insurance Limited retrospective liability increase, and a $14 million charge related to a contract settlement with Agrium Inc. These negative factors were offset partially by a $17 million gain from asset sales and a positive $15 million tax adjustment.
Unocal's fourth quarter 2004 adjusted after-tax earnings (compared with 4Q 2003) reflected higher worldwide crude oil and natural gas prices and higher international production. These positive factors were offset partially by lower North America natural gas and liquids production and higher dry hole costs.
Worldwide hydrocarbon liquids and natural gas production for the fourth quarter 2004 averaged 428,000 BOE per day, up from 420,000 BOE per day in the same period a year ago. The production increase was due primarily to higher liquids and natural gas production in Asia.
Fourth-quarter 2004 worldwide price realizations (including hedging activities) for natural gas averaged $4.15 per thousand cubic feet (mcf), up from $3.65 during the prior year's fourth quarter. The company's fourth quarter 2004 worldwide liquids price realizations (including hedging activities) were $41.27 per barrel, up from $28.33 in the fourth quarter 2003. Hedging activities in the 2004 fourth quarter decreased worldwide liquids realizations by $1.56 per barrel and decreased worldwide natural gas realizations by 20 cents per mcf.
Unocal's preliminary EBITDAX for the fourth quarter 2004 was $1.02 billion, or $3.74 per share (diluted). This compares with $660 million, or $2.41 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.
Full-year 2004 results
Preliminary net earnings for the full-year 2004 were a record $1.21 billion, or $4.48 per share (diluted), compared with $643 million, or $2.46 per share (diluted), reported for the same period a year ago.
CONSOLIDATED RESULTS (UNAUDITED) For the Year Ended December 31, Millions of dollars except per share amounts 2004 2003 Earnings from continuing operations $1,145 $698 Earnings from discontinued operations 63 28 Cumulative effect of accounting changes -- (83) Net earnings 1,208 643 Less: Special items in continuing operations 74 (67) Less: Special items in discontinued operations 57 16 Less: Cumulative effect of accounting changes -- (83) Adjusted after-tax earnings $1,077 $777 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $4.25 $2.66 Discontinued operations 0.23 0.10 Cumulative effect of accounting changes -- (0.30) Total net earnings per share $4.48 $2.46 Adjusted after-tax earnings per share $4.00 $2.95 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $8,204 $6,512
Unocal's preliminary adjusted after-tax earnings for the full-year 2004 were $1.08 billion, or $4.00 per share (diluted). Unocal's adjusted after-tax earnings were $777 million, or $2.95 per share (diluted), for the full-year 2003. The company's full-year 2004 adjusted after-tax earnings (compared with the full-year 2003) benefited from higher worldwide crude oil and natural gas prices, lower exploration expense and lower interest expense. These positive factors were partially offset by lower North America natural gas and liquids production and higher dry hole costs.
Net cash provided from operating activities increased to $2.56 billion in 2004, from $1.95 billion in 2003. Unocal's EBITDAX for the full-year 2004 was $3.42 billion, or $12.42 per share (diluted), compared with $2.92 billion, or $10.70 per share (diluted), for 2003.
Cash and cash equivalents were $1.16 billion at Dec. 31, 2004, up from $404 million at Dec. 31, 2003. The increase was achieved despite paying down debt by $384 million and contributing $100 million to the company's U.S. qualified pension plan during 2004.
1Q 2005 earnings outlook
For the first quarter 2005, Unocal is forecasting adjusted after-tax earnings of $1.20 to $1.35 per share (diluted). This forecast compares with the Thomson/First Call mean of analyst estimates (published Jan. 31, 2005) of $1.09 per share for the first quarter 2005. Unocal's first quarter forecast assumes average NYMEX benchmark prices of $46.70 per barrel of crude oil and $6.25 per million British thermal units (mmBtu) for North America natural gas for the period.
Unocal's first quarter 2005 adjusted after-tax earnings are expected to change $9 million for every $1 change in its average worldwide realized price for crude oil and $2 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 first quarter of $30 to $40 million.
The first-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 first-quarter net earnings.
2005 production outlook
Unocal currently expects worldwide production for the full-year 2005 to exceed 425,000 BOE per day.
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