Unocal Trims Payout, Warns Profit Will Fall

Unocal cut its dividend by 5 cents to 25 cents a share Monday and said the collapse of oil prices will have a worse effect on second-quarter earnings than it did on first-quarter results, when profits plunged 61%.

Unocal’s dividend had been the subject of speculation by analysts all year because of the plunging prices and the heavy debt load that the Los Angeles-based oil company took on last year in fighting off a takeover attempt by investors led by Texas oilman T. Boone Pickens Jr.

Fred L. Hartley, chairman of Unocal, said the action “reflects the adverse impact on earnings and cash flow caused by the recent sharp drop in world crude oil prices.”

Spending Reductions Made

“Although the company has made significant cost and capital spending reductions in the past six months, continued low crude oil prices will impact second-quarter earnings to a greater extent than in the first quarter.”

The company has cut capital spending by nearly 40% from last year’s total to $1.1 billion. A hiring freeze and early retirement offer have been implemented, and the company says it has saved about $100 million annually by refinancing debt at lower interest rates. Unocal has also paid down about $540 million of its $6-billion debt.

The 5 cents-a-share quarterly dividend reduction would save Unocal about $23 million in payouts over a year’s time.

Unocal said its board also deferred the distribution to Unocal shareholders of units in its Union Exploration Partners, a master limited partnership created last August.