Unocal CEO: Company to Boost Production 63% by 2007

Unocal Corp. CEO Charles R. Williamson told analysts last Wednesday at Lehman Brothers' 15th annual CEO Energy Conference in New York City that the company's worldwide net oil and gas production could average nearly 800,000 boe/d in 2007, a 63% boost from the company's average production last year.

"Our legacy assets in North America and Asia continue to perform and grow, while our exploration programs are beginning to deliver new resources for us," said Williamson. "We expect to achieve this production growth through development of frontier discoveries that we have already made and aggressive development of additional oil and gas resources in our established operating areas. Our goal is to maintain a stable capital spending program of $1.8-$2.0 billion per year, with a 45% to 50% debt-to-total-capitalization ratio, while reducing finding and development costs to about $5.50 per boe."

Natural gas accounts for about two-thirds of the international exploration and production company's current production and proved reserves. "We're a major gas producer in North America and we have huge discoveries, but unbooked gas resources in Asia," Williamson said. "By coupling this asset base with our industry-leading drilling capability, we fully expect to meet the production and cost targets that we've outlined."

To achieve this growth, the executive told the analysts that the company is looking at new deep gas production on the Gulf of Mexico (GOM) shelf, GOM deepwater projects and additional oil and gas production in southern Alaska. Internationally, he sees steady growth in oil production in Thailand and Azerbaijan, as well Unocal's deepwater resources in Indonesia.

For 2002 exploration, the CEO outlined Unocal's GOM prospects. "We will continue with the appraisal of our Trident and Mad Dog discoveries, while drilling two or three more wildcats on Unocal prospects," Williamson said. "At the same time, we are taking steps to optimize the use of the Discoverer Spirit drillship by capturing the best opportunities and increasing flexibility so we can reduce our total exploration costs."

Williamson said the company expects adjusted earnings from continuing operations for 2001 of between $3.20 and $3.40 per share, with adjusted discretionary cash flow of $9.10 to $9.25 per share. Unocal's full-year earnings forecast assumes average NYMEX benchmark prices of $27.00/bbl for crude oil and $4.50/MMBtu for Lower 48 natural gas.

Unocal also outlined its worldwide net production. For the year, net production is expected to average between 505,000 to 515,000 boe. In the Lower 48, dry natural gas production is expected to average 920 MMcf/d for the year, up from 764 MMcf/d in 2000.

"We expect to record reserve replacement this year of between 170% and 220% of production at a [finding and development] cost between $7.30/boe and $5.60/boe," Williamson said.

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