Unocal Shares Drop on Forecast

Shares of Unocal Corp. fell nearly 5% on Friday, a day after the second-largest independent oil company in the U.S. lowered its fourth-quarter profit forecast because oil and natural gas prices fell short of projections.

Unocal shares slid $1.53 to $30.12 in New York Stock Exchange trading, the biggest decline since Oct. 29. Unocal shares had risen 14% since Nov. 1 as U.S. crude oil and natural gas futures prices soared to their highest levels in more than a year.

The El Segundo-based company said Thursday after the markets closed that adjusted earnings would be 40 to 45 cents a share in the quarter, less than an earlier forecast of 50 to 60 cents.

Analysts were expecting a profit of 52 cents a share, according to the average estimate in a Thomson First Call poll.

Lower-than-expected oil and gas prices account for about 11 cents of the revision, the company said. Unocal expects $28.10 a barrel for crude oil in the fourth quarter, 5.5% less than an earlier estimate, and $3.90 per million British thermal units of gas, 4.9% lower than expected.

Unocal said fourth-quarter profit also would be crimped by environmental cleanup costs and higher-than-expected acquisition expenses. After-tax environmental cleanup costs of $22 million to $25 million will lower fourth-quarter net income by 9 to 10 cents a share, to 30 to 35 cents, it said.

Nearly all of the costs are for cleanup responsibilities at service stations, refineries and other sites that Unocal has closed or no longer owns, the company said in a filing with the Securities and Exchange Commission.

The costs also involve oil and gas fields in California and Michigan that Unocal previously operated.

The conversion of Pure Resources Inc. stock options to Unocal options will reduce fourth-quarter earnings by 4 cents a share, the company said.

Unocal shares have risen since it bought the 35% of Pure it didn’t own; it will have to record $11 million in additional costs to account for the higher value.