Higher Oil Prices Lift Unocal Profit
Higher oil and natural gas prices lifted Unocal Corp.’s fourth-quarter profit 49% and will help generate first-quarter earnings well above analysts’ forecasts, the company said Tuesday.
Unocal, which has been reported to be a potential takeover target, said its oil and gas production climbed to the equivalent of 428,000 barrels of oil a day, up 5% from 407,000 in the third quarter.
Net income rose to $268 million, or $1 a share, from $180 million, or 68 cents, in the fourth quarter of 2003. Revenue also was up 49%, to $2.35 billion from $1.58 billion.
Excluding some one-time gains and charges, Unocal’s fourth-quarter earnings were $313 million, or $1.17, which matched Wall Street estimates, according to a survey of analysts by Thomson First Call.
The El Segundo-based company said that in the current quarter, it would earn $1.20 to $1.35 a share, excluding one-time items. The consensus analysts’ forecast is for $1.09, according to Thomson First Call.
Unocal’s prediction assumes an average price for light crude oil of $46.70 a barrel in the quarter. On Tuesday, oil for March delivery closed at $47.12 a barrel, down $1.08, on the New York Mercantile Exchange.
Fadel Gheit, an analyst at Oppenheimer & Co., said that Unocal’s outlook was “significantly higher” than the analysts’ largely because of a recent rebound in oil prices.
In the fourth quarter, charges included $43 million for unspecified legal and environmental matters.
Unocal said in December that it would settle landmark human rights lawsuits brought by 15 villagers from Myanmar who claimed the company was responsible for forced labor, rapes and a murder allegedly committed by Myanmar soldiers along the route of a natural gas pipeline that is partly owned by Unocal.
“We’re not going to comment on the details” of this case and other litigation covered by the charges, Unocal Chief Executive Charles Williamson told analysts on a conference call. “We’re pleased to have these behind us.”
Earlier this month, some published reports speculated that China National Offshore Oil Corp. and giant oil company Royal Dutch/Shell Group both were considering bids to acquire Unocal.
Neither Unocal nor the two possible suitors have confirmed that any negotiations are underway. Unocal’s stock has jumped 16% since the Chinese company’s interest was first reported Jan. 6.
One of Unocal’s challenges this year will be maintaining its recent production levels. The company is hoping that output from new projects overseas will more than offset declining production at some of its mature North American fields.
Unocal said it expected 2005 oil and gas production to exceed the equivalent of 425,000 barrels a day, helped by increased operations in Bangladesh, Thailand and the Caspian Sea.
“We’re going to get renewed production growth in 2005,” Williamson said. “We simply have to deliver that and we’ll have a pretty good-looking year.”
For all of 2004, Unocal earned a company record $1.21 billion, or $4.48 a share, up 88% from $643 million, or $2.46, in 2003. Revenue climbed 26% to $8.2 billion.
Unocal stock edged up 19 cents to $47.76 on the New York Stock Exchange.
