Unocal Reports Record Quarterly Earnings; Net Up 39%

Unocal Corporation (NYSE: UCL) reported preliminary net earnings for the second quarter 2005 of $475 million, or $1.73 per share (diluted), 39 percent above the $341 million, or $1.25 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 discussed below in connection with Unocal's adjusted after-tax earnings.

Unocal's preliminary adjusted after-tax earnings for the second quarter 2005 were $488 million, or $1.77 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published July 25, 2005) of $1.63 per share. In the second quarter 2004, Unocal's adjusted after-tax earnings were $231 million, or 86 cents per share (diluted). In the first quarter 2005, Unocal's adjusted after-tax earnings were $441 million, or $1.62 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)

     Millions of dollars except                  2nd Q       1st Q       2nd Q
      per share amounts                           2005        2005        2004

     Earnings from continuing operations         $440        $432        $267
     Earnings from discontinued operations         35          22          74
     Net earnings                                 475         454         341
        Less:  Special items in continuing
         operations                               (25)         11          54
        Less:  Special items in
         discontinued operations                   12           2          56
     Adjusted after-tax earnings                 $488        $441        $231
     DILUTED EARNINGS PER SHARE DATA
      (UNAUDITED)
     Net earnings per share:
        Continuing operations                   $1.60       $1.58       $0.98
        Discontinued operations                  0.13        0.08        0.27
     Total net earnings per share               $1.73       $1.66       $1.25
     Adjusted after-tax earnings per share      $1.77       $1.62       $0.86
     REVENUES FROM CONTINUING OPERATIONS
      (UNAUDITED)                              $2,213      $2,068      $1,858

"Unocal recorded another quarter of strong earnings as the company increased worldwide crude oil and natural gas production and benefited from continued strong crude oil and natural gas prices and lower interest expense," said Charles R. Williamson, Unocal chairman and chief executive officer. "We initiated production from the final two major projects in our 2005 development pipeline -- K2 in the deepwater Gulf of Mexico and the oil expansion project in Thailand."

Recent operational and financial highlights

Some of Unocal's recent operational highlights and other developments include:

• Amended the merger agreement with Chevron Corporation to provide for increased merger consideration for the company's stockholders upon the closing of the merger; set a special stockholder meeting date of Aug. 10, 2005
• Entered into a definitive agreement to sell all of the stock of Unocal's Northrock Resources Ltd. subsidiary to Pogo Producing Company for US$1.8 billion in cash; assets account for less than 7 percent of Unocal's worldwide hydrocarbon reserves; Northrock had reserves of 110 million barrels-of-oil equivalent (BOE) at year-end 2004 and average daily production of 28,100 BOE in 2Q 2005; transaction expected to close in 3Q 2005
• Reduced total debt in the second quarter by $190 million to $2.54 billion
• Added $92 million during the second quarter to cash and cash equivalents balance, bringing total cash to $1.78 billion; net debt (debt minus cash and cash equivalents) reduced to $765 million
• Increased worldwide production during the second quarter by 14 percent, compared with 2Q 2004
• Began oil production from K2, an oil field located in deepwater Gulf of Mexico in Green Canyon block 562; first well placed on production has an initial flow rate of 8,600 BOE per day gross (Unocal, 12.5% working interest, 1,000 BOE per day net)
• Ramped up production from the Mad Dog deepwater Gulf of Mexico field (Unocal 15.6% working interest); 2Q exit rate from two wells of 37,000 BOE per day gross (Unocal, 5,000 BOE per day net)
• Encountered more than 300 feet of apparent hydrocarbon pay in a secondary objective at the Knotty Head well, located in Green Canyon block 512 in the Gulf of Mexico (Unocal, 25% working interest)
• Ramped up oil production from Phase 1 (Central Azeri) in the Azeri-Chirag-Gunashli development in the Caspian Sea (Unocal, 10.3% working interest), raising gross AIOC production at the end of the second quarter to approximately 275,000 BOE per day (Unocal, 25,400 BOE per day net)
• Successfully started up the second oil central processing platform (CPP) at the Pattani oil development in the Gulf of Thailand, putting the company on track to achieve our target of ramping up gross crude oil production to 40,000 barrels per day (b/d) in the third quarter 2005, up from 24,000 b/d at year-end 2004
• Began line fill of the 1,100-mile long Baku-Tbilisi-Ceyhan oil pipeline (Unocal, 8.9% working interest) from Azerbaijan to Turkey; first tanker from Ceyhan is expected to load in 4Q 2005

2Q 2005 financial and operating details

Unocal's second quarter 2005 adjusted after-tax earnings (compared with 2Q 2004) reflected higher worldwide crude oil and natural gas prices, higher international production, lower exploration and dry hole costs and lower interest expense. These positive factors were offset partially by lower North America natural gas production.

In the second quarter 2005, after-tax special items included a $12 million after-tax gain from the sale of Unocal's 76 Seadrift LLC subsidiary. This gain was offset by $25 million after-tax charges for 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.

Worldwide hydrocarbon liquids and natural gas production for the second quarter 2005 averaged 459,000 BOE per day, up nearly 14 percent from 404,000 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.

Second-quarter 2005 worldwide price realizations (including hedging activities) for natural gas averaged $4.20 per thousand cubic feet (mcf), up from $3.65 during the prior year's second quarter. The company's second quarter 2005 worldwide liquids price realizations (including hedging activities) were $47.94 per barrel, up from $32.61 in the second quarter 2004. Hedging activities in the 2005 second quarter decreased worldwide liquids realizations by 24 cents per barrel and had no impact on worldwide natural gas realizations.

Unocal's preliminary EBITDAX for the second quarter 2005 was $1.18 billion, or $4.28 per share (diluted). This compares with $762 million, or $2.74 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.

Six-months 2005 financial and operating details

Unocal's preliminary net earnings for the first six months 2005 were $929 million, or $3.39 per share (diluted), 52 percent above the $610 million, or $2.25 per share (diluted), reported in the same period a year ago.

Preliminary adjusted after-tax earnings for the first six months of 2005 were also $929 million, or $3.39 per share (diluted). This compares with $470 million, or $1.75 per share (diluted), reported for the first six months of 2004.

CONSOLIDATED RESULTS (UNAUDITED)
                                                        For the Six Months
     Millions of dollars except                            Ended June 30,
      per share amounts                                2005              2004

     Earnings from continuing operations               $872              $522
     Earnings from discontinued operations               57                88
     Net earnings                                       929               610
        Less:  Special items in continuing
         operations                                     (14)               84
        Less:  Special items in
         discontinued operations                         14                56
     Adjusted after-tax earnings                       $929              $470
     DILUTED EARNINGS PER SHARE DATA
      (UNAUDITED)
     Net earnings per share:
        Continuing operations                         $3.18             $1.93
        Discontinued operations                        0.21              0.32
     Total net earnings per share                     $3.39             $2.25
     Adjusted after-tax earnings per share            $3.39             $1.75
     REVENUES FROM CONTINUING OPERATIONS
      (UNAUDITED)                                    $4,281            $3,633

Full-year 2005 production outlook

Unocal currently expects worldwide average production for the full-year 2005 to exceed 430,000 BOE per day, compared with 440,000 BOE per day that was previously estimated. The change reflects the expected loss of production from the planned sale of Unocal's Northrock subsidiary in the third quarter 2005.