Unocal's profit rises on higher prices

Unocal's profit rises on higher prices

Robin Saponar, Bloomberg, Chicago

Unocal Corp., a U.S. oil company that ChevronTexaco Corp. is buying, said first-quarter profit rose 69 percent on higher gas and oil prices and production.

Net income rose to US$454 million, or $1.66 a share, from $269 million, or $1, a year earlier, the El Segundo, California-based company said in a statement today. Sales rose 17 percent to $2.19 billion from $1.88 billion.

ChevronTexaco is buying Unocal for $14.8 billion for its natural-gas and oil reserves in Asia. Unocal is relying on projects in countries such as Indonesia and Azerbaijan to make up for production declines in North America. Projects in Asia contributed to a 4.9 percent rise in first-quarter production.

"Unocal is just beginning to harvest many of the long-term projects that it has been funding," Phillip Pace and Tracy Todaro, analysts at Credit Suisse First Boston, said in a note to clients today. "The outlook for Asian and Azerbaijan growth remains strong."

Per-share profit excluding a gain of $22 million from the sale of the company's interest in Hindustan Oil Exploration Co. and other one-time items, was $1.62 a share, Unocal said. On that basis, the company was expected to earn $1.37, the average estimate from 21 analysts surveyed by Thomson Financial.

Shares of Unocal fell 59 U.S. cents, or 1.1 percent, to $54 in New York Stock Exchange composite trading. The stock had fallen as much as 1.4 percent as New York crude-oil futures headed for their fourth-straight drop. Oil ended the trading session up 0.3 percent on the New York Mercantile Exchange.

The company's stock, which has risen 43 percent in the past year, has six buy ratings from analysts, 11 holds and one sell.

Unocal said it was paid an average of $4.28 per thousand cubic feet for its gas in the first quarter, including hedging, up 7 percent from a year earlier. Its oil price rose 46 percent to an average of $44.72 a barrel. Gas accounts for about 62 percent of Unocal's output, compared with 28 percent for ChevronTexaco.

The acquisition of Unocal would give ChevronTexaco, the second-biggest U.S. oil company, natural-gas and oil reserves in Thailand, Indonesia, Myanmar and Azerbaijan. Unocal's first- quarter production rose to the equivalent of 429,000 barrels of oil a day from 409,000 a year earlier mostly because of gains in Asia, where half of the company's oil and gas reserves are located.

Unocal said its production this year will exceed the equivalent of 430,000 barrels a day, an increase from an earlier forecast of 425,000 barrels.

Production has started at three "major" projects in which Unocal has a stake, Chief Executive Charles Williamson said in the statement. They are the Mad Dog project in the deep waters of the Gulf of Mexico, Phase 1 of the Azeri-Chirag-Gunashli project in the Caspian Sea and Moulavi Bazar in Bangladesh.

Another deepwater Gulf project, K2, is scheduled to start up later this year, as is the Pattani offshore oil project in Thailand.

The market's "appetite and appreciation for unproven and undeveloped reserves is high" in the Gulf of Mexico, the CSFB analysts said, referring to today's announced purchase by Norway's Statoil ASA of fields in the Gulf from Canada's EnCana Corp. for $2 billion.

After ChevronTexaco completes its acquisition of Unocal, the company plans to sell $2 billion in aging wells with declining production, the company's chief executive, David O'Reilly, 57, has said. Many of the divestitures are expected to be in the Gulf, analysts have said.