Union Pacific Resources Group Inc. said it will take a whopping$760 million after-tax, non-cash charge to fourth quarter earningsfor asset impairment under Financial Accounting Standard 121. UPRalso said its 1999 plans include continuing its cost-reductionprogram and a preliminary capital budget of about $500 million.Excess cash flow of more than $250 million will be used to furthercut debt to keep the company’s $2 billion de-leveraging program ontarget.

“The low price environment in which the oil and gas industryfinds itself is forcing us and many of our competitors, large andsmall, to take asset impairments and actions to reduce costs andconserve cash, said CEO Jack Messman. “Our write-down has beentriggered by low commodity prices and largely relates to NorcenEnergy Resources’ assets acquired just before the collapse inprices in early 1998. While we are required by Financial AccountingStandard 121 to mark these assets to market with a charge to 1998earnings, the write-down will lead to improved earnings goingforward.

“UPR is on target to meet its de-leveraging objectives. Our cashflow remains strong and will allow us to meet our debt covenants,fund our capital program and pay down additional debt. UPR willlive within its means and adjust its capital spending as commodityprices and cash flows change.”

Messman said the actions should put UPR on the road toprofitability in 1999. “After all the changes to our company in1998 caused by the Norcen acquisition and the subsequent assetsales, UPR has about 50% more reserves and about 50% moreproduction today than it did at this time in 1998.”

The company’s assumptions for natural gas prices are $2.05/Mcfin 1999, $2.25 in 2000, and $2.35 beyond 2000.

The company’s preliminary 1999 capital budget of about $500million is down by about two-thirds from 1998’s $1.2 billionexpenditure on exploration and production projects, excluding the$3.5 billion purchase of Norcen in March 1998. UPR said thereduction is a direct consequence of the current price environmentand its commitment to continued de-leveraging.

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