Unocal Income Falls 14% but Outlook Is Bright

Unocal profit fell 14% to $60.7 million in the first quarter, the company told shareholders at Monday’s annual meeting. The results were consistent with forecasts by analysts, who generally see the company’s prospects improving sharply as the year unfolds.

Unocal noted that energy prices in the first quarter remained below those of a year earlier, despite the rise of crude oil prices in recent months. The company’s crude oil price averaged $14.50 a barrel in the January-March quarter, compared to $18.50 in early 1986.

The results were further depressed by a net decline in oil production, most of it coming in California, Indonesia and offshore from the Netherlands. Most of the 566 U.S. wells shut down by Unocal during last year’s price collapse were in the San Joaquin Valley.

The latest results were inflated by $14 million from a windfall profit tax settlement and the sale of part of a Norwegian oil field. A year earlier, earnings were boosted $21 million by a regulatory decision on a natural gas price refund.

The first-quarter profit compares to $70 million in the same period last year. Revenue slipped 9% to $2.06 billion from $2.28 billion.

Despite sharply reduced profits in the refining and selling of gasoline and other oil products and a recent drop in prices for geothermal energy, where Unocal is prominent, investment analysts have forecast profit gains of anywhere from 30% to more than 100% for Unocal this year.

The company’s stock is on numerous “buy” lists because oil prices have firmed up, the stock is considered undervalued at recent prices in the high $30 range, and Unocal has made progress in trimming the $4.4-billion debt it assumed in its successful battle to fend off a takeover by Texas oilman T. Boone Pickens Jr.

Chairman and Chief Executive Fred L. Hartley said this was the first time in two years in which prospects were bright instead of bleak. He referred to last year’s oil price collapse and the previous year’s fight with Pickens.

“The outlook is now much better on all fronts,” the 70-year-old Hartley said.

Even analyst and oil company gadfly Kurt L. Wulff, who wants Unocal to quit using so-called standstill agreements and who has said the company should be doing a lot better than it is, conceded that he is recommending that his clients buy Unocal stock.

Wulff captured a respectable 19% of the votes cast Monday for his proposal requiring shareholder approval of any agreement limiting the right of a shareholder to buy Unocal stock.