Unocal Acquires Remaining Interest in Spirit Energy 76

Unocal has agreed to acquire the outstanding limited partner interest in Spirit Energy 76 Development, L.P., a consolidated limited partnership that holds interests in certain oil and gas producing properties in the U.S. Gulf of Mexico region.

Unocal will pay the limited partner $252 million in exchange for the partnership interest that has been reflected as minority interest on Unocal's balance sheet. The transaction is expected to be completed in the next 30 days.

The acquisition is part of the recently announced Unocal program to use the company's available cash to prepay debt and other financings. In addition, many of the oil and gas producing properties in which Spirit LP holds interests are part of the asset divestiture program that was also announced recently.

Without the acquisition, a new accounting rule, FASB Interpretation No. 46, would have required Unocal to reclassify essentially all of the limited partner's investment to long-term debt on the company's balance sheet in the third quarter 2003. The minority interest on Unocal's consolidated balance sheet related to Spirit LP was $251 million at March 31, 2003.

Spirit LP was formed in 1999 when the company contributed fixed-price overriding royalty interests from its working interest shares in certain Gulf of Mexico oil and gas producing properties to the limited partnership. In exchange, the company received an initial 55-percent general partnership interest in Spirit LP. The unaffiliated investor contributed $250 million in cash to the partnership in exchange for an initial 45-percent limited partnership interest.