Although it is widely believed the collapse of crude oil pricescould force many producers to cut back drilling plans this year,Unocal Corp. was the first company to formally confirm ityesterday. Unocal said it will prune its capital spending by about$250 million to $1.3 billion. According to CEO Roger C. Beach thecapital expenditure reductions will come in three areas: near-termproduction projects that are most heavily affected by lower currentcommodity prices, investments in non-oil and gas businesses, andlonger term exploration projects that could benefit from more dataevaluation. The move probably will not have a significant impact onUnocal’s natural gas production, a spokesman said, adding however,some associated gas production could become a casualty in thecutbacks. No specifics were available.

“We expect to continue as planned with our high-value growthprograms in Indonesia, Bangladesh, Argentina and the Caspian Sea,as well as our exploration programs targeting the Gulf of Mexicoshelf and deep-water areas,” said Beach. “Oil prices are at theirlowest in almost 10 years, but we have the flexibility and strengthto weather this period. We are taking a selective and preemptiveapproach to cutting our capital spending. We won’t compromise thelong-term growth of the company by making cuts across-the-board inresponse to unsustainable low oil prices today.”

Beach added that the reduction in capital spending will alsoimpact the company’s goal that its 1998 domestic oil and gasproduction from the Lower 48 would equal the 1997 level. “In theU.S., we will likely see a reduction in workovers and possiblyfewer development wells drilled. We are already off to a good startin replacing our Lower 48 production, and we will continue to pushforward with our programs to increase Unocal’s reserve base,” hesaid. So far in 1998, the company has made seven discoveries on theGulf of Mexico shelf. In total, nearly 100 exploration wells areplanned for the Gulf of Mexico this year. The company, however, nowestimates that Lower 48 U.S. production for the year will be lowerthan forecast.

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