Unocal’s Earnings Nearly Double
Higher oil and gas prices and lower exploration expenses propelled Unocal Corp.’s profit up 93% in the second quarter. But its shares slid 4.4% on Monday after it cut its 2004 production target for the second consecutive quarter.
The El Segundo-based oil and natural gas company said its net income was $341 million, or $1.25 a share, compared with $177 million, or 68 cents, in the year-earlier quarter. Revenue rose 23% to $1.98 billion.
Crude oil sold for an average of $32.61 a barrel, up 29% from a year earlier. Natural gas fetched $3.65 per thousand cubic feet, up 3.4%. Exploration spending slid 45% to $48 million.
Production of oil and natural gas, however, fell 13% to the equivalent of 404,000 barrels a day, in part reflecting the company’s sale of North American fields. For the full year, Unocal cut by 6% to 400,000 barrels its already reduced forecast for average daily production for all of 2004.
Among the reasons cited for the lower forecast was falling output at its deepwater West Seno project in Indonesia.
On that news, Unocal’s stock fell $1.71 to $37.05 on the New York Stock Exchange.
Unocal also said it had adopted, with its latest outlook, a more conservative forecast methodology. “Certainly we recognize our history hasn’t been all that stellar in meeting our production forecast,” Unocal Chairman Charles R. Williamson said in a conference call with analysts.
Second-quarter net income included a $78-million gain from the sale of assets in Texas, Louisiana, Mississippi, Arkansas and Alabama and a stake in a Canadian pipeline. The company gained $46 million from a legal settlement related to a dispute surrounding its geothermal fields in the Philippines.
Excluding one-time items, Unocal earned $231 million, or 86 cents a share. On that basis, analysts had forecast a per-share profit of 83 cents, according to Thomson First Call.
For the third quarter, Unocal projects earnings of 90 cents to $1 per share. Analysts had predicted 75 cents, according to Thomson First Call.
Steve Enger, an analyst with Petrie Parkman & Co., said the company had “as good a quarter as expected,” but he said the underperformance in Indonesia was a disappointment: “People’s expectations for 2004 did come down today.”
On the conference call, Williamson said that “the only real hiccup for us is West Seno,” where output from some deeper wells has been particularly disappointing and some wells have been shut down.
“We’ve had a lot of trouble forecasting it,” Williamson said. “We’re still having trouble forecasting it. We’re getting more conservative about it.”
Bloomberg News was used in compiling this report.
