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Low Prices, Dry Holes, Gulf Storms Dog Unocal
Unocal Corp. said lower oil and gas prices, coupled withincreased exploration costs because of several dry holes, led tolower third quarter earnings of $36 million, or 15 cents per share,compared with $177 million, or 70 cents/share in the third quarterof 1997. Earnings from continuing operations, excluding specialitems, were $4 million, or 2 cents per share, compared with $94million, or 38 cents per share in 3Q97. Total revenues for thethird quarter were $1.4 billion, about the same as a year ago.Capital expenditures were $502 million, up from $308 million in thesame period of 1997.
In late October, three Spirit Energy 76 exploration wells turnedout to be dry holes. They included the Calypso deep-water well. Asa result, the company took an $18 million charge during thequarter, which lowered Unocal earnings by 5 cents per share.Unocal’s total oil and gas exploration expenses in the thirdquarter, including dry hole costs, were $118 million, more thandouble the level for the comparable period in 1997. So far thisyear, 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 sofar this year.
Lower prices for oil and gas reduced after-tax operatingearnings by about $70 million, or nearly 29 cents per share,compared with the same period a year ago. And the companyexperienced Gulf storm-related curtailments which contributed to a5% decline in 3Q oil and gas production. Nevertheless, Unocal saidits exploration program is on track to replace production with newreserves in 1998.
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