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Unocal's Third-Quarter Profit Rises 54% on Higher Oil and Gas Prices

Revenue increases 19% despite a 5.4% drop in production. The El Segundo-based firm's stock price dips.

October 31, 2003|Elizabeth Douglass | Times Staff Writer

Profit soared 54% at oil and natural gas producer Unocal Corp. in the third quarter, as lower production was easily offset by higher commodity prices.

The El Segundo-based firm, which has no refineries or retail operations, reported net income of $152 million, or 58 cents a share, compared with $99 million, or 41 cents, in the same period last year. Revenue jumped 19% to $1.5 billion.

Not counting one-time gains and charges, Unocal's third-quarter earnings totaled $190 million, or 72 cents a share. That compared with 68 cents expected by Wall Street analysts, according to a survey by Thomson First Call.

"They've certainly capitalized again on the strong commodity prices," said Bryan Caviness, who follows Unocal for Fitch Ratings. "These guys are still doing very, very well."

For the three months ended Sept. 30, Unocal sold its crude oil and related byproducts for a worldwide average price of $27.28 a barrel, up 10% from the year-earlier average. The company's average price for natural gas jumped 29% to $3.60 per thousand cubic feet.

Still, traders didn't seem impressed by the financial report card, which was issued Thursday before U.S. stock markets opened. Unocal shares fell 30 cents, or 1%, to $31.50 on the New York Stock Exchange.

Caviness said the market probably was eyeing Unocal's oil and natural gas production, which fell 5.4% in the third quarter to the equivalent of 441,000 barrels of oil a day.

The dip was partly a reflection of Unocal's recent sale of production fields in the Gulf of Mexico, Caviness said, adding, "they still have a lot of opportunity for growth."

The point was underscored Wednesday by Unocal's announcement that it had made a major oil discovery in the deep waters of the Gulf of Mexico. The company labeled the dis- covery "a significant milestone" in the so-called St. Malo project, in which it owns a nearly 28% stake alongside other players such as ChevronTexaco Corp.

During the quarter, Unocal took several previously announced steps to sell assets and reduce its debt, including the sale of stock it held in Tom Brown Inc., a Denver-based natural gas producer; and the repurchase of about $300 million in debt.

As a result, Unocal's third quarter included a special gain of $23 million from the stock sale, as well as $61 million in charges for the write-down of assets sold or for sale, restructuring costs and additional environmental and litigation costs.

The Federal Trade Commission has sued the company, alleging that its behavior in securing a patent on a key gasoline formula violated laws against unfair competition.

The company also faces a lawsuit that accuses it of complicity in violent crimes committed by the junta in Myanmar, where Unocal has partial ownership of a pipeline. The company has denied the charges in both cases.

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