Unocal Corp. said last week it expects 1999 capital spending tototal between $1 billion and $1.1 billion, down from the estimated$1.7 billion in capital expenditures this year. The lower spendingreflects Unocal’s narrowed focus on core oil and gas explorationand production in response to lower commodity prices.

The 1998 capital expenditures included significant outlays, suchas Gulf of Mexico Outer Continental Shelf leases, to build thecompany’s deep-water exploration and growth portfolio. That levelof spending for leases is not expected to be repeated in 1999,accounting for about one-fourth of the reduction in the overallcapital spending plan.

“This capital spending plan is designed to preserve ourhigh-potential, deep-water exploration and development program inthe Gulf of Mexico and Indonesia,” said Roger C. Beach, Unocal CEO.”We are prioritizing our capital spending in other areas based onour net present value and return on investment analysis, and somegood projects on the list will have to be deferred.”

Unocal’s actual capital spending in 1999 depends on commodityprices during the year. “If oil and gas prices remain at currentlevels, our capital spending for the year could be even lower. Wewant to ensure that our debt ratio remains below 50%, and we willreview the investment plan on a month-to-month basis.” More than90% of the planned capital spending will be for oil and gasexploration and production, with more than half of that going toprojects outside the U.S.

Last Friday ARCO said it expects 1999 capital spending will be$2.7 billion, down 25% from 1998. The 1999 program reflects thecompany’s previously announced intention to focus operations in keygeographic areas of the world. “In light of current oil prices, wehave taken a hard look at all of our projects,” said Mike R.Bowlin, ARCO CEO. “We intend to pursue those that are key to ourfocus areas, and even in those areas, defer some projects thatrequire a more positive market outlook.”

Also last week, Chevron Corp. announced a $5.1 billion capitaland exploratory spending program for 1999 and a plan to reduceexpenses in 1999 by $500 million. The 1999 capital budget is about8% less than projected spending for 1998, but significant spendingwill continue for promising long-term growth projects inKazakhstan, West Africa and the Gulf of Mexico. “As I’ve saidbefore, we will consider mergers or acquisitions as one possibleway to improve business results. But it is not necessary forChevron to merge with a competitor to continue to provide topreturns to our shareholders. We need to execute our business plan,”said Chairman Ken Derr. “We have the financial strength to dealwith low oil prices, poor economic conditions in Asia and otherfinancial challenges over the next few years. Our business is oneof cycles.”

Joe Fisher, Houston

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