Unocal Reports Record Quarterly Earnings; Net Up 69%

Unocal Corporation (NYSE: UCL) reported preliminary net earnings for the first quarter 2005 of $454 million, or $1.66 per share (diluted), 69 percent above the $269 million, or $1.00 per share (diluted), reported in the same period a year ago. The net earnings, the highest quarterly level in the company's history, included a number of special items in connection with Unocal's adjusted after-tax earnings.

Unocal's preliminary adjusted after-tax earnings for the first quarter 2005 were $441 million, or $1.62 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published Apr. 25, 2005) of $1.37 per share. In the first quarter 2004, Unocal's adjusted after-tax earnings were $239 million, or 89 cents per share (diluted). In the fourth quarter 2004, Unocal's adjusted after-tax earnings were $313 million, or $1.17 per share (diluted). Adjusted after-tax earnings are net earnings excluding special items (discussed below) and the cumulative effect of accounting changes.

     CONSOLIDATED RESULTS (UNAUDITED)               1st Q     4th Q     1st Q
     Millions of dollars except per share amounts    2005      2004      2004

     Earnings from continuing operations             $449      $268      $267
     Earnings from discontinued operations              5        --         2
     Net earnings                                     454       268       269
       Less:  Special items in continuing
        operations                                     11       (45)       30
       Less:  Special items in
        discontinued operations                         2        --        --
     Adjusted after-tax earnings                     $441      $313      $239

     Net earnings per share:
       Continuing operations                        $1.64     $1.00     $0.99
       Discontinued operations                       0.02        --      0.01
     Total net earnings per share                   $1.66     $1.00     $1.00
     Adjusted after-tax earnings per share          $1.62     $1.17     $0.89
      (UNAUDITED)                                  $2,186    $2,320    $1,876

"Our earnings in the first quarter were driven primarily by strong crude oil and natural gas prices, a 5 percent increase in our worldwide crude oil and natural gas production over the first quarter a year ago, and lower interest expense," said Charles R. Williamson, Unocal chairman and chief executive officer. "We initiated production from the first three major projects in our 2005 development pipeline -- Mad Dog in the deepwater Gulf of Mexico, Central Azeri in the Caspian Sea, and Moulavi Bazar in Bangladesh. Looking forward, we expect initial oil production from two additional development projects on tap for this year -- K2 in deepwater Gulf of Mexico and the Pattani oil development offshore Thailand."

     Recent operational and financial highlights

     Some of Unocal's recent operational highlights and other developments

     --  Entered into a merger agreement with ChevronTexaco Corporation to
         merge Unocal into a wholly owned subsidiary of ChevronTexaco;
         agreement is subject to Unocal stockholder approval, regulatory
         approvals and clearances and other customary closing conditions

     --  Began production from the Mad Dog deepwater Gulf of Mexico field
         (Unocal working interest, 15.6%); 1Q exit rate from two wells of
         30,000 barrels-of-oil equivalent (BOE) per day gross, 4,100 BOE
         per day net

     --  Began oil production from Phase 1 (Central Azeri) in the
         Azeri-Chirag-Gunashli development in the Caspian Sea (Unocal,
         10.3% interest), raising gross AIOC production at the end of the
         quarter to approximately 200,000 BOE per day (Unocal, 18,300 BOE
         per day net)

     --  Began natural gas production from the Moulavi Bazar field in
         Bangladesh, Unocal is operator and has a 100% working interest in the
         production-sharing contract encompassing two producing fields; 1Q
         exit rate for Bangladesh operations, including the Jalalabad field,
         was 41,000 BOE per day (gross), Unocal, 33,000 BOE per day net

     --  Successful appraisal well on the Mad Dog Southwest Ridge in the Gulf
         of Mexico encountered significant hydrocarbons, extending the limits
         of the field

     --  Completed the redemption of the outstanding 6-1/4% Trust Convertible
         Preferred Securities of Unocal Capital Trust

     --  Reduced total debt by $332 million to $2.73 billion

     --  Added $523 million to cash balance, bringing total cash to
         $1.68 billion; net debt (debt minus cash) reduced to $1.05 billion

     --  Reached final settlement of lawsuits related to Unocal's investment
         in the Yadana gas pipeline project in Myanmar

    1Q 2005 financial and operating details

Unocal's first quarter 2005 adjusted after-tax earnings (compared with 1Q 2004) reflected higher worldwide crude oil and natural gas prices, international production and natural gas storage margins, and lower exploration and dry hole costs and interest expense. These positive factors were offset partially by lower North America natural gas production and higher administrative and general expense.

In the first quarter 2005, after-tax special items included a $22 million gain from the sale of Unocal's interest in Hindustan Oil Exploration Company, which was offset partially by $11 million in provisions for environmental and litigation matters. All of the special items are detailed in the Adjusted After-tax Earnings Reconciliation table included at the end of this news release.

Worldwide hydrocarbon liquids and natural gas production for the first quarter 2005 averaged 429,000 BOE per day, up from 409,000 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.

First-quarter 2005 worldwide price realizations (including hedging activities) for natural gas averaged $4.28 per thousand cubic feet (mcf), up from $4.00 during the prior year's first quarter. The company's first quarter 2005 worldwide liquids price realizations (including hedging activities) were $44.72 per barrel, up from $30.64 in the first quarter 2004. Hedging activities in the 2005 first quarter decreased worldwide liquids realizations by 8 cents per barrel and increased worldwide natural gas realizations by 20 cents per mcf.

Unocal's preliminary EBITDAX for the first quarter 2005 was $1.08 billion, or $3.95 per share (diluted). This compares with $756 million, or $2.73 per share (diluted), for the same period in 2004. 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 2005 production outlook

Unocal currently expects worldwide average production for the full-year 2005 to exceed 430,000 BOE per day, up from 425,000 BOE per day that was previously estimated.

The company's updated 2005 net production outlook can be found in the Data Warehouse section of Unocal's Investor Relations web site, This document provides additional detailed estimated second quarter ranges for the numerous areas of production, which describe the company's lowest and highest production estimates in those areas. In locations where Unocal is limited by market demand or pipeline capacity, the range is between the contract minimum and the highest past production or the estimated capacity limits of the producing assets. A sensitivity factor is provided to adjust future production for the impacts of PSC adjustments due to changes in oil prices.

Discontinued earnings forecasts and conference calls

Pending Unocal's anticipated merger with ChevronTexaco, the company has discontinued providing its forecast of adjusted after-tax earnings per share, including its related assumptions for future commodity prices and future dry hole costs. Unocal has also discontinued holding quarterly earnings conference calls.


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