Unocal Profits Drop; Takeover Battle Blamed
Unocal, which recently emerged intact from a takeover battle with Texas oilman T. Boone Pickens Jr., reported second-quarter earnings of $120.4 million, down from $185.7 million in the same quarter of 1984.
The company attributed $60 million of the $65.3-million earnings decline to expenses incurred in fighting the takeover attempt by Pickens’ Mesa Partners investor group and to increased interest costs from Unocal’s higher long-term debt that resulted from the battle. Unocal is the Los Angeles-based parent of Union Oil Co. of California.
Revenue for the quarter was $2.9 billion, down from $3 billion in the second quarter of last year.
For the first six months of 1985, earnings fell to $301.1 million from $365.8 million while revenue remained virtually unchanged at $5.7 billion.
Unocal settled its three-month fight with the Pickens group in late May by agreeing to include Mesa Partners in a lucrative stock buy-back that was originally designed to thwart the takeover bid. Mesa Petroleum, which was the primary member of Mesa Partners, said it will report an $83-million after-tax gain from the takeover battle for the second quarter.
Unocal Chairman Fred L. Hartley said the company will “slow down some investments” because of the new debt, adding that Unocal will “become even sharper in our operations and investment decisions. Our strong cash flow, however, will enable us to maintain an active petroleum exploration and development program.”
Hartley said earnings from operations for the second quarter and six months remained strong because of higher geothermal energy production, increased marketing margins and pipeline equity earnings and improved earnings by Unocal’s specialty metals subsidiary. But those gains were offset by a drop in domestic natural gas sales volume and prices, lower crude oil prices and decreased chemicals sales volumes.
Capital and exploration expenditures were $796 million for the first half of 1985, compared to $800 million for the same period of 1984.
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