Loans by Unocal Feed Takeover Speculation

Unocal Corp. loaned 10 top executives $32 million to buy 1.15 million of the company’s shares last month, prompting speculation that the oil and natural-gas explorer is a takeover target.

Leading the buying were Chief Executive Roger Beach, Chief Financial Officer Timothy Ling, and Executive Vice President Charles Williamson, who each borrowed $5 million and bought 179,736 shares, El Segundo-based Unocal said in a securities filing.

Analysts question whether Unocal has the resources to keep its independence. Beach said the executives, who paid an average of $27.82 a share, bought because they expect their plans for growth, not a buyout bid, to boost the stock.

“We’re onto a strategy that we believe is going to increase shareholder value,” Beach said, adding that Ling and the others bought stock “to show we truly believe in this strategy and align ourselves more with shareholders.”

The company found substantial oil and gas reserves in Thailand and Indonesia last year, but its cash flow isn’t enough to pay for full development, Moody’s Investors Service said in a report last month. The outlook for Unocal’s debt rating--now at Baa1, an investment grade--is negative, Moody’s said.

Its low share price and the potential of its Asian fields make Unocal tempting to companies looking for oil and gas reserves on the cheap.

On Monday, Unocal shares fell 50 cents to close at $28.13 on the New York Stock Exchange.

Texaco Inc., Chevron Corp. and BP Amoco, which all have production in the Gulf of Mexico that would mesh well with Unocal’s, have shown interest, analysts said. BP and Chevron also have production in the Gulf of Thailand and Indonesia, where Unocal looks for gas and oil too.

Unocal is expected to post earnings of 54 cents a share for the first quarter and $1.89 for the year, the average estimates of analysts polled by First Call/Thomson Financial. Unocal made $113 million from continuing operations last year.