UCL Unocal Corp

Unocal Reports Record Quarterly Earnings; Net Up 39% EL SEGUNDO, Calif., July 29 /PRNewswire-FirstCall/ -- Unocal Corporation (NYSE:UCL) today reported preliminary net earnings for the second quarter 2005 of $475 million, or $1.73 per share (diluted), 39 percent above the $341 million, or $1.25 per share (diluted), reported in the same period a year ago. The net earnings, the highest quarterly level in the company's history, included a number of special items discussed below in connection with Unocal's adjusted after-tax earnings. Unocal's preliminary adjusted after-tax earnings for the second quarter 2005 were $488 million, or $1.77 per share (diluted). This compares with the Thomson/First Call mean of analyst estimates (published July 25, 2005) of $1.63 per share. In the second quarter 2004, Unocal's adjusted after-tax earnings were $231 million, or 86 cents per share (diluted). In the first quarter 2005, Unocal's adjusted after-tax earnings were $441 million, or $1.62 per share (diluted). Adjusted after-tax earnings are net earnings excluding special items (discussed below) and the cumulative effect of accounting changes. CONSOLIDATED RESULTS (UNAUDITED) Millions of dollars except 2nd Q 1st Q 2nd Q per share amounts 2005 2005 2004 Earnings from continuing operations $440 $432 $267 Earnings from discontinued operations 35 22 74 Net earnings 475 454 341 Less: Special items in continuing operations (25) 11 54 Less: Special items in discontinued operations 12 2 56 Adjusted after-tax earnings $488 $441 $231 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $1.60 $1.58 $0.98 Discontinued operations 0.13 0.08 0.27 Total net earnings per share $1.73 $1.66 $1.25 Adjusted after-tax earnings per share $1.77 $1.62 $0.86 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $2,213 $2,068 $1,858 "Unocal recorded another quarter of strong earnings as the company increased worldwide crude oil and natural gas production and benefited from continued strong crude oil and natural gas prices and lower interest expense," said Charles R. Williamson, Unocal chairman and chief executive officer. "We initiated production from the final two major projects in our 2005 development pipeline -- K2 in the deepwater Gulf of Mexico and the oil expansion project in Thailand." Recent operational and financial highlights Some of Unocal's recent operational highlights and other developments include: * Amended the merger agreement with Chevron Corporation (NYSE:CVX) to provide for increased merger consideration for the company's stockholders upon the closing of the merger; set a special stockholder meeting date of Aug. 10, 2005 * Entered into a definitive agreement to sell all of the stock of Unocal's Northrock Resources Ltd. subsidiary to Pogo Producing Company (NYSE:PPP) for US$1.8 billion in cash; assets account for less than 7 percent of Unocal's worldwide hydrocarbon reserves; Northrock had reserves of 110 million barrels-of-oil equivalent (BOE) at year-end 2004 and average daily production of 28,100 BOE in 2Q 2005; transaction expected to close in 3Q 2005 * Reduced total debt in the second quarter by $190 million to $2.54 billion * Added $92 million during the second quarter to cash and cash equivalents balance, bringing total cash to $1.78 billion; net debt (debt minus cash and cash equivalents) reduced to $765 million * Increased worldwide production during the second quarter by 14 percent, compared with 2Q 2004 * Began oil production from K2, an oil field located in deepwater Gulf of Mexico in Green Canyon block 562; first well placed on production has an initial flow rate of 8,600 BOE per day gross (Unocal, 12.5% working interest, 1,000 BOE per day net) * Ramped up production from the Mad Dog deepwater Gulf of Mexico field (Unocal 15.6% working interest); 2Q exit rate from two wells of 37,000 BOE per day gross (Unocal, 5,000 BOE per day net) * Encountered more than 300 feet of apparent hydrocarbon pay in a secondary objective at the Knotty Head well, located in Green Canyon block 512 in the Gulf of Mexico (Unocal, 25% working interest) * Ramped up oil production from Phase 1 (Central Azeri) in the Azeri-Chirag-Gunashli development in the Caspian Sea (Unocal, 10.3% working interest), raising gross AIOC production at the end of the second quarter to approximately 275,000 BOE per day (Unocal, 25,400 BOE per day net) * Successfully started up the second oil central processing platform (CPP) at the Pattani oil development in the Gulf of Thailand, putting the company on track to achieve our target of ramping up gross crude oil production to 40,000 barrels per day (b/d) in the third quarter 2005, up from 24,000 b/d at year-end 2004 * Began line fill of the 1,100-mile long Baku-Tbilisi-Ceyhan oil pipeline (Unocal, 8.9% working interest) from Azerbaijan to Turkey; first tanker from Ceyhan is expected to load in 4Q 2005 2Q 2005 financial and operating details Unocal's second quarter 2005 adjusted after-tax earnings (compared with 2Q 2004) reflected higher worldwide crude oil and natural gas prices, higher international production, lower exploration and dry hole costs and lower interest expense. These positive factors were offset partially by lower North America natural gas production. In the second quarter 2005, after-tax special items included a $12 million after-tax gain from the sale of Unocal's 76 Seadrift LLC subsidiary. This gain was offset by $25 million after-tax charges for environmental and litigation provisions. All of the special items are detailed in the Adjusted After-tax Earnings Reconciliation table included at the end of this news release. Worldwide hydrocarbon liquids and natural gas production for the second quarter 2005 averaged 459,000 BOE per day, up nearly 14 percent from 404,000 BOE per day in the same period a year ago. The production increase was due primarily to higher liquids and natural gas production in Asia. Second-quarter 2005 worldwide price realizations (including hedging activities) for natural gas averaged $4.20 per thousand cubic feet (mcf), up from $3.65 during the prior year's second quarter. The company's second quarter 2005 worldwide liquids price realizations (including hedging activities) were $47.94 per barrel, up from $32.61 in the second quarter 2004. Hedging activities in the 2005 second quarter decreased worldwide liquids realizations by 24 cents per barrel and had no impact on worldwide natural gas realizations. Unocal's preliminary EBITDAX for the second quarter 2005 was $1.18 billion, or $4.28 per share (diluted). This compares with $762 million, or $2.74 per share (diluted), for the same period in 2004. EBITDAX is net earnings before interest, taxes, depreciation, depletion and amortization, impairments, exploration expenses, dry hole costs, special items, and the cumulative effect of accounting changes. Six-months 2005 financial and operating details Unocal's preliminary net earnings for the first six months 2005 were $929 million, or $3.39 per share (diluted), 52 percent above the $610 million, or $2.25 per share (diluted), reported in the same period a year ago. Preliminary adjusted after-tax earnings for the first six months of 2005 were also $929 million, or $3.39 per share (diluted). This compares with $470 million, or $1.75 per share (diluted), reported for the first six months of 2004. All of the special items are detailed in the Adjusted After-tax Earnings Reconciliation table included at the end of this news release. CONSOLIDATED RESULTS (UNAUDITED) For the Six Months Millions of dollars except Ended June 30, per share amounts 2005 2004 Earnings from continuing operations $872 $522 Earnings from discontinued operations 57 88 Net earnings 929 610 Less: Special items in continuing operations (14) 84 Less: Special items in discontinued operations 14 56 Adjusted after-tax earnings $929 $470 DILUTED EARNINGS PER SHARE DATA (UNAUDITED) Net earnings per share: Continuing operations $3.18 $1.93 Discontinued operations 0.21 0.32 Total net earnings per share $3.39 $2.25 Adjusted after-tax earnings per share $3.39 $1.75 REVENUES FROM CONTINUING OPERATIONS (UNAUDITED) $4,281 $3,633 Full-year 2005 production outlook Unocal currently expects worldwide average production for the full-year 2005 to exceed 430,000 BOE per day, compared with 440,000 BOE per day that was previously estimated. The change reflects the expected loss of production from the planned sale of Unocal's Northrock subsidiary in the third quarter 2005. The company's updated 2005 net production outlook can be found in the Data Warehouse section of Unocal's Investor Relations web site, http://www.unocal.com/. This document provides additional detailed estimated ranges for the numerous areas of production, which describe the company's lowest and highest production estimates in those areas. In locations where Unocal is limited by market demand or pipeline capacity, the range is between the contract minimum and the highest past production or the estimated capacity limits of the producing assets. A sensitivity factor is provided to adjust future production for the impacts of PSC adjustments due to changes in oil prices. About Unocal Corporation Unocal is one of the world's leading independent natural gas and crude oil exploration and production companies. The company's principal oil and gas activities are in Asia and North America. Financial database Additional financial tables for the second quarter 2005 and the comparable prior periods are available in the company's "Quarterly Fact Book," which is posted in the Data Warehouse in the Investor Relations section of the company's web site. The Quarterly Fact Book is also available upon request from Unocal Investor Relations. Forward-Looking Statements; Preliminary 2005 Second Quarter and Six-Months Results This news release contains forward-looking statements about matters such as Unocal's merger with Chevron, the pending sale of Unocal's western Canada exploration and production business, drilling, development and other plans for future operations, and production rates and timing. Although these statements are based upon Unocal's current expectations and beliefs, they are subject to known and unknown risks and uncertainties that could cause actual results and outcomes to differ materially from those described in, or implied by, the forward-looking statements, including stockholder approval of the Chevron merger and the effects on Unocal in the event that the Chevron merger is not completed; uncertainty as a result of the competing CNOOC Ltd. acquisition proposal; volatility in commodity prices; Unocal's ability to find or acquire commercially productive reservoirs and to develop and produce deepwater and other projects in a timely and cost-effective manner; the accuracy of Unocal's estimates and judgments regarding hydrocarbon resources and formations and reservoir performance; operational risks inherent in the exploration, development and production of oil and gas; the impact of environmental laws, permitting and licensing requirements and other regulations; international and domestic political and economic factors; and other factors discussed in Unocal's 2004 Annual Report on Form 10-K and subsequent reports filed or furnished by Unocal with the U.S. Securities and Exchange Commission (SEC). Copies of Unocal's SEC filings are available from Unocal by calling 800-252-2233 or from the SEC by calling 800-SEC-0330. The reports are also available on the Unocal web site, http://www.unocal.com/. Unocal undertakes no obligation to update the forward-looking statements in this news release to reflect future events or circumstances. All such statements are expressly qualified by this cautionary statement, which is provided pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, disclosures in this news release, including in the attached tables, regarding Unocal's second quarter and first six months of 2005 financial results are preliminary and are subject to change in connection with Unocal's preparation and filing of its Form 10-Q for the three months ended June 30, 2005. Supplemental Non-GAAP Financial Measures The news release includes certain "non-GAAP financial measures" as defined under SEC regulations: (1) adjusted after-tax earnings (net earnings excluding special items and cumulative effects of accounting changes) and (2) EBITDAX (net earnings before interest, taxes, depreciation, depletion and amortization, asset impairments, exploration expenses, dry hole costs, special items and cumulative effects of accounting changes). Special items represent certain significant matters which positively or negatively impact net earnings and that management determines to be not representative of the company's ongoing operations. Examples include: gain/loss from major asset sales; environmental remediation costs related primarily to inactive, closed or previously owned company facilities and third party sites; costs or settlements associated with major restructuring plans; litigation settlement costs primarily associated with former company operations or closed/inactive facilities; significant impairments due to changes in commodity prices; material damage to company facilities or operations due to fire, explosion, earthquakes, storms or other "acts of god" not covered by insurance; certain costs associated with major acquisitions including litigation and significant trading derivatives; and insurance recoveries associated with former company operations or for costs incurred in prior years. Unocal's management believes that adjusted after-tax earnings is a useful supplemental financial measure to investors and analysts because it facilitates a focus on the company's ongoing operations and allows for convenient comparisons to the company's prior reporting periods. Adjusted after-tax earnings is also used as a factor in calculating various performance measures in connection with payments under the company's annual bonus plan, and it is used by management as a factor in reviewing business unit performance. Unocal's management believes that EBITDAX is helpful to investors and analysts because it facilitates a comparison of companies like Unocal that use the "successful efforts" accounting method with other companies in the exploration and production industry that utilize the "full-cost" method of accounting. Adjusted after-tax earnings and EBITDAX are not substitutes for net earnings determined in accordance with GAAP as a measure of profitability or other GAAP financial measures. Special items excluded from these non-GAAP measures do in fact positively or negatively impact net earnings. Other companies may define special items differently, and the Thomson/First Call mean of analyst estimates may not use a similar definition. Hence, these measures may not be comparable with similarly titled amounts reported by other companies or analyst estimates reported by Thomson/First Call. A quantitative historical reconciliation of adjusted after-tax earnings and EBITDAX to GAAP net earnings is found in this news release, including certain of the tables accompanying the text. CONSOLIDATED EARNINGS (UNAUDITED) For the For the Three Months Six Months Millions of dollars except Ended June 30, Ended June 30, per share amounts 2005 2004 2005 2004 Revenues Sales and operating revenues (a) $2,161 $1,799 $4,200 $3,519 Interest, dividends and miscellaneous income 42 19 51 30 Gain on sales of assets 10 40 30 84 Total revenues 2,213 1,858 4,281 3,633 Costs and other deductions Crude oil, natural gas and product purchases (a) 748 729 1,478 1,452 Operating expense 324 350 610 609 Administrative and general expense 66 46 144 109 Depreciation, depletion and amortization 269 213 512 416 Impairments 1 9 1 14 Dry hole costs 12 36 31 59 Exploration expense 36 41 66 85 Interest expense 32 46 65 87 Property and other operating taxes 29 22 50 42 Total costs and other deductions 1,517 1,492 2,957 2,873 Earnings from equity investments 18 38 57 75 Earnings from continuing operations before income taxes and minority interests 714 404 1,381 835 Income taxes 272 138 505 309 Minority interests 2 (1) 4 4 Earnings from continuing operations 440 267 872 522 Earnings from discontinued operations (b) 35 74 57 88 Net earnings $475 $341 $929 $610 Basic earnings per share of common stock (c) Continuing operations $1.62 $1.00 $3.22 $1.98 Discontinued operations 0.13 0.29 0.21 0.34 Net earnings $1.75 $1.29 $3.43 $2.32 Diluted earnings per share of common stock (d) Continuing operations $1.60 $0.98 $3.18 $1.93 Discontinued operations 0.13 0.27 0.21 0.32 Net earnings $1.73 $1.25 $3.39 $2.25 (a) Includes crude oil buy/sell transactions settled in cash of: $197 $210 $360 $462 (b) Net of tax expense (benefit) $30 $36 $48 $46 (c) Basic weighted average shares outstanding (in thousands) 271,993 263,916 271,219 262,945 (d) Diluted weighted average shares outstanding (in thousands) 274,811 277,754 274,057 277,232 CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) At June 30, At December 31, Millions of dollars 2005 2004 Assets Cash and cash equivalents $1,775 $1,160 Assets held for sale 1,372 -- Other current assets - net 1,551 1,770 Investments and long-term receivables - net 720 777 Properties - net 7,806 8,819 Goodwill 81 136 Other assets 464 439 Total assets $13,769 $13,101 Liabilities and Stockholders' Equity Liabilities of assets held for sale $411 $-- Other current liabilities (a) 2,345 2,581 Long-term debt and capital leases 2,076 2,571 Deferred income taxes 591 839 Accrued abandonment, restoration and environmental liabilities 866 897 Other deferred credits and liabilities 1,093 969 Minority interests 29 27 Stockholders' equity 6,358 5,217 Total liabilities and stockholders' equity $13,769 $13,101 (a) Includes current portion of Long-term debt and capital leases of: 464 491 CONSOLIDATED CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, Millions of dollars 2005 2004 Cash Flows from Operating Activities Net earnings $929 $610 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation, depletion and amortization 567 472 Impairments 1 14 Dry hole costs 32 65 Amortization of exploratory leasehold costs 22 32 Deferred income taxes 119 (6) Gain on sales of assets (30) (84) Gain on disposal of discontinued operations (23) (84) Pension expense net of contributions 47 44 Other (10) (51) Working capital and other changes related to operations (22) 114 Net cash provided by operating activities 1,632 1,126 Cash Flows from Investing Activities Capital expenditures (includes dry hole costs) (873) (801) Proceeds from sales of assets 117 158 Proceeds from sales of discontinued operations 47 120 Return of capital from affiliate company -- 48 Net cash used in investing activities (709) (475) Cash Flows from Financing Activities Long-term borrowings 1 135 Reduction of long-term debt and capital lease obligations (291) (241) Minority interests (3) (1) Repurchases of common stock -- (20) Proceeds from issuance of common stock 120 94 Dividends paid on common stock (107) (105) Loans to key employees -- 24 Other -- (2) Net cash used in financing activities (280) (116) Total increase in cash and cash equivalents 643 535 Less: cash and cash equivalents of assets held for sale 28 -- Cash and cash equivalents at beginning of year 1,160 404 Cash and cash equivalents at end of period $1,775 $939 NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS BY BUSINESS SEGMENT (UNAUDITED) 2nd Q 2005 1st Q 2005 Adjusted Adjusted Net After-Tax Net After-Tax Millions of dollars Earnings Earnings (a) Earnings Earnings (a) Exploration and Production North America U.S. $146 $146 $154 $154 Canada -- -- 1 1 Total North America 146 146 155 155 International Asia 294 294 251 229 Other 53 53 48 48 Total International 347 347 299 277 Total Exploration and Production 493 493 454 432 Midstream and Marketing 20 20 35 35 Geothermal 17 17 17 17 Corporate and Other Administrative and General (28) (28) (29) (29) Interest Expense - Net (21) (21) (15) (15) Environmental and Litigation (27) (3) (12) (2) Other (14) (13) (18) (17) After-tax earnings from continuing operations 440 465 432 421 After-tax earnings from discontinued operations 35 23 22 20 After-tax earnings $475 $488 $454 $441 (a) For a reconciliation to net earnings, see the Adjusted After-Tax Earnings Reconciliation table. NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS BY BUSINESS SEGMENT (UNAUDITED) 2nd Q 2005 2nd Q 2004 Adjusted Adjusted Net After-Tax Net After-Tax Millions of dollars Earnings Earnings (a) Earnings Earnings (a) Exploration and Production North America U.S. $146 $146 $108 $86 Canada -- -- -- -- Total North America 146 146 108 86 International Asia 294 294 137 137 Other 53 53 29 29 Total International 347 347 166 166 Total Exploration and Production 493 493 274 252 Midstream and Marketing 20 20 18 18 Geothermal 17 17 57 11 Corporate and Other Administrative and General (28) (28) (21) (21) Interest Expense - Net (21) (21) (33) (33) Environmental and Litigation (27) (3) (11) (3) Other (14) (13) (17) (11) After-tax earnings from continuing operations 440 465 267 213 After-tax earnings from discontinued operations 35 23 74 18 After-tax earnings $475 $488 $341 $231 (a) For a reconciliation to net earnings, see the Adjusted After-Tax Earnings Reconciliation table. NET EARNINGS AND ADJUSTED AFTER-TAX EARNINGS BY BUSINESS SEGMENT (UNAUDITED) For the Six Months Ended June 30, 2005 2005 2004 2004 Adjusted Adjusted Net After-Tax Net After-Tax Millions of dollars Earnings Earnings (a) Earnings Earnings (a) Exploration and Production North America U.S. $300 $300 $221 $178 Canada 1 1 -- -- Total North America 301 301 221 178 International Asia 545 523 295 295 Other 101 101 46 46 Total International 646 624 341 341 Total Exploration and Production 947 925 562 519 Midstream and Marketing 55 55 41 41 Geothermal 34 34 94 27 Corporate and Other Administrative and General (57) (57) (48) (48) Interest Expense - Net (36) (36) (65) (65) Environmental and Litigation (39) (5) (27) (8) Other (32) (30) (35) (28) After-tax earnings from continuing operations 872 886 522 438 After-tax earnings from discontinued operations 57 43 88 32 After-tax earnings $929 $929 $610 $470 (a) For a reconciliation to net earnings, see the Adjusted After-Tax Earnings Reconciliation table. For the For the Operating Highlights Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 North America Net Daily Production Liquids (thousand barrels) U.S. 61 55 59 55 Canada 14 15 15 16 Total liquids 75 70 74 71 Natural gas - dry basis (million cubic feet) U.S. 442 511 448 512 Canada 83 83 83 83 Total natural gas 525 594 531 595 North America Average Prices (excluding hedging activities) (a) Liquids (per barrel) U. S. $48.72 $35.91 $46.60 $33.66 Canada $37.67 $29.89 $38.00 $29.17 Average $46.56 $34.58 $44.85 $32.66 Natural gas (per mcf) U. S. $5.91 $4.80 $5.68 $5.20 Canada $6.35 $5.40 $6.02 $5.37 Average $5.98 $4.88 $5.74 $5.23 North America Average Prices (including hedging activities) (a) Liquids (per barrel) U. S. $48.04 $30.52 $46.39 $29.64 Canada $37.67 $29.89 $38.00 $29.17 Average $46.02 $30.38 $44.68 $29.54 Natural gas (per mcf) U. S. $5.89 $4.53 $6.02 $5.34 Canada $6.35 $5.08 $6.02 $5.06 Average $5.97 $4.61 $6.02 $5.30 (a) Excludes gains/losses on derivative positions not accounted for as hedges and ineffective portions of hedges. Operating Highlights (continued) For the For the Three Months Six Months Ended June 30, Ended June 30, 2005 2004 2005 2004 International Net Daily Production (a) Liquids (thousand barrels) Asia 74 61 75 64 Other (b) 28 20 24 20 Total liquids 102 81 99 84 Natural gas - dry basis (million cubic feet) Asia 1,156 891 1,083 885 Other (b) 10 31 10 28 Total natural gas 1,166 922 1,093 913 International Average Prices (c) Liquids (per barrel) Asia $49.77 $34.02 $47.63 $32.66 Other $48.31 $36.01 $47.74 $34.30 Average $49.43 $34.52 $47.66 $33.02 Natural gas (per mcf) Asia $3.38 $3.02 $3.39 $2.99 Other $5.45 $4.01 $5.35 $4.17 Average $3.40 $3.03 $3.41 $3.01 Worldwide Net Daily Production (b) Liquids (thousand barrels) 177 151 173 155 Natural gas - dry basis (million cubic feet) 1,691 1,516 1,624 1,508 Barrels oil equivalent (thousands) 459 404 444 406 Worldwide Average Prices (excluding hedging activities) (d) Liquids (per barrel) $48.18 $34.55 $46.43 $32.86 Natural gas (per mcf) $4.20 $3.76 $4.17 $3.89 Worldwide Average Prices (including hedging activities) (d) Liquids (per barrel) $47.94 $32.61 $46.35 $31.41 Natural gas (per mcf) $4.20 $3.65 $4.26 $3.92 (a) International production is presented utilizing the economic interest method. (b) Includes proportional interests in production of equity investees of: Liquids -- 1 -- 1 Natural gas -- 20 -- 17 Barrels oil equivalent -- 5 -- 4 (c) International did not have any hedging activities. (d) Excludes gains/losses on derivative positions not accounted for as hedges and ineffective portions of hedges. ADJUSTED AFTER-TAX EARNINGS RECONCILIATION (UNAUDITED) Millions of dollars except 2nd Q 1st Q 2nd Q per share amounts 2005 2005 2004 Net earnings $475 $454 $341 Less: Special items from continuing operations E&P - North America - U.S. Asset sales -- -- 22 E&P - International - Asia Asset sales -- 22 -- Geothermal PGI settlement -- -- 46 Corporate and Other Environmental and litigation provisions (25) (11) (13) Net tax adjustments for settlements / assessments -- -- 27 Restructuring provisions -- -- 1 Provision related to Agrium arbitration settlement -- -- (29) Less: Special items from discontinued operations Gain on asset disposals 12 2 56 Adjusted after-tax earnings $488 $441 $231 Adjusted after-tax earnings per share (diluted) $1.77 $1.62 $0.86 ADJUSTED AFTER-TAX EARNINGS RECONCILIATION (UNAUDITED) For the Six Months Millions of dollars except Ended June 30, per share amounts 2005 2004 Net earnings $929 $610 Less: Special items from continuing operations E&P - North America - U.S. Asset sales -- 28 Litigation provisions / settlements -- 15 E&P - International - Asia Asset sales 22 -- Geothermal Asset sales -- 21 PGI settlement -- 46 Corporate and Other Environmental and litigation provisions (36) (25) Net tax adjustments for settlements / assessments -- 27 Restructuring provisions -- 1 Provision related to Agrium arbitration settlement -- (29) Less: Special items from discontinued operations Gain on asset disposals 14 56 Adjusted after-tax earnings $929 $470 Adjusted after-tax earnings per share (diluted) $3.39 $1.75 EBITDAX RECONCILIATION (UNAUDITED) Millions of dollars except 2Q Six Months per share amounts 2005 2004 2005 2004 Net Earnings $475 $341 $929 $610 Less: Special items from continuing operations (25) 54 (14) 84 Special items from discontinued operations 12 56 14 56 Adjusted after-tax earnings 488 231 929 470 Add-backs to adjusted after-tax earnings: Depreciation, depletion and amortization 291 240 567 472 Impairments 1 9 1 14 Dry hole costs 12 40 32 65 Exploration expenses (including amortization of undeveloped leasehold costs) 41 48 79 98 Current income taxes 220 126 443 267 Deferred income taxes 91 22 139 45 Interest expense (a) 32 46 65 87 EBITDAX $1,176 $762 $2,255 $1,518 EBITDAX per share (diluted) $4.28 $2.74 $8.23 $5.48 (a) Net of capitalized interest of: 14 10 29 26 DATASOURCE: Unocal Corporation CONTACT: Barry Lane (Media), +1-310-726-7731, or Robert Wright (Investors), +1-310-726-7665, both of Unocal Corporation Web site: http://www.unocal.com/

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