Low Prices, Dry Holes, Gulf Storms Dog Unocal
Unocal Corp. said lower oil and gas prices, coupled with
increased exploration costs because of several dry holes, led to
lower third quarter earnings of $36 million, or 15 cents per share,
compared with $177 million, or 70 cents/share in the third quarter
of 1997. Earnings from continuing operations, excluding special
items, were $4 million, or 2 cents per share, compared with $94
million, or 38 cents per share in 3Q97. Total revenues for the
third quarter were $1.4 billion, about the same as a year ago.
Capital expenditures were $502 million, up from $308 million in the
same period of 1997.
In late October, three Spirit Energy 76 exploration wells turned
out to be dry holes. They included the Calypso deep-water well. As
a result, the company took an $18 million charge during the
quarter, which lowered Unocal earnings by 5 cents per share.
Unocal's total oil and gas exploration expenses in the third
quarter, including dry hole costs, were $118 million, more than
double the level for the comparable period in 1997. So far this
year, Unocal's oil and gas exploration success rate has been 52%
with 49 commercial successes. Dry hole costs were $156 million,
which is 42% of the $375 million spent on exploration drilling so
far this year.
Lower prices for oil and gas reduced after-tax operating
earnings by about $70 million, or nearly 29 cents per share,
compared with the same period a year ago. And the company
experienced Gulf storm-related curtailments which contributed to a
5% decline in 3Q oil and gas production. Nevertheless, Unocal said
its exploration program is on track to replace production with new
reserves in 1998.
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