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.