-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B7Xck+T7W94AhmCKtriM2MmMtFDCb3C/Tmzj8UeUoyCrKiJIXW38Pl+PhT36bFuV 0fgvQG0Ubi0DLOR9NnZ3qA== 0000716039-95-000080.txt : 19951118 0000716039-95-000080.hdr.sgml : 19951118 ACCESSION NUMBER: 0000716039-95-000080 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CORP CENTRAL INDEX KEY: 0000716039 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 953825062 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08483 FILM NUMBER: 95588973 BUSINESS ADDRESS: STREET 1: 1201 W FIFTH ST CITY: LOS ANGELES STATE: CA ZIP: 90017 BUSINESS PHONE: 2139777600 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q/A (Amendment No. 1) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 ------------------- or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------- ------------ Commission file number 1-8483 UNOCAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-3825062 --------- ---------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1201 WEST FIFTH STREET, LOS ANGELES, CALIFORNIA 90017 ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (213) 977-7600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- Number of shares of Common Stock, $1 par value, outstanding as of October 31, 1995: 247,141,638 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Unocal's net earnings for the third quarter of 1995 were $59 million, or 20 cents per common share, compared with $70 million, or 25 cents per common share, in the third quarter of 1994. For the first nine months of 1995, net earnings were $211 million, or 75 cents per common share. This compared with a nine-month net loss of $85 million, or 46 cents per common share, for 1994. The comparability of the company's reported earnings for these periods was affected by the following special items: For the Three Months For the Nine Months Ended September 30 Ended September 30 ---------------------------------------------------- Millions of dollars 1995 1994 1995 1994 ------------------------------------------------------------------------------------------------------------------------------- Special items: Cumulative effect of accounting change ............................. $-- $-- $-- $(277) Write-down of investment and provision for abandonment and remediation of the Guadalupe oil field ...................... -- (4) -- (31) Florida and Alaska OCS settlement .................................. 18 -- 18 -- Environmental provision ............................................ (1) (4) (19) (5) Litigation provision ............................................... (5) -- (17) (17) Mesa settlement .................................................... -- -- -- 24 Asset sales ........................................................ 1 11 38 13 Write-down of assets ............................................... -- (2) (10) (6) Other .............................................................. (4) -- (4) -- ------------------------------------------------------------------------------------------------------------------------------- Total ........................................................... $ 9 $ 1 $ 6 $(299)
Excluding the special items, third quarter 1995 net operating earnings were $50 million, or 17 cents per common share, compared with $69 million, or 25 cents per common share, in the third quarter of 1994. The 1995 year-to-date earnings, excluding special items, were $205 million, or 72 cents per common share, compared with $214 million, or 77 cents per common share, a year ago. Both the quarter and the nine-month 1995 results reflected lower worldwide natural gas prices and crude oil production, as well as depressed refined product margins in the West Coast markets. On the positive side, both periods had the benefits of higher average worldwide crude oil sales prices and increased refined product sales. The year-to-date results also reflected higher agricultural product sales. The nine-month 1995 consolidated revenues were $6.2 billion, up from $5.98 billion for the same period last year. The increased revenues were primarily due to higher sales volumes of certain refined products and significantly improved prices and higher volumes for nitrogen-based fertilizers. These increases were partially offset by lower domestic natural gas prices. Petroleum exploration and production. Third quarter earnings for 1995 totaled $98 million, compared with $122 million in 1994. Earnings for the nine-month period of 1995 were $312 million, compared with $292 million in 1994. The 1995 third-quarter and nine-month earnings included special items consisting of a one-time benefit from a $34 million pretax settlement to recover lease bonus and rentals relating to Outer Continental Shelf leases offshore Florida and Alaska, and the effects of asset sales. In addition, nine-month 1995 earnings included special items consisting of asset write-downs. Third quarter and nine-month 1995 earnings excluding special items were $81 million and $294 million, respectively. Both the third quarter and nine months 1994 periods included special items consisting of asset sales and charges for the Guadalupe oil field. Excluding these special items, third quarter and nine-month 1994 earnings were $116 million and $315 million, respectively. The lower operating earnings for both the quarter and nine months of 1995 reflected lower average worldwide natural gas sales prices and crude oil production. However, both periods benefited from higher average worldwide crude oil sales prices and increased natural gas production from the Gulf of Mexico. The nine-month results also reflected lower domestic operating expense and foreign exploration expense. 1 REFINING AND MARKETING. This segment includes the results of 76 Products Company, Unocal's West Coast refining and marketing unit, and other marketing operations. The 76 Products Company recorded earnings of $6 million in the third quarters of both 1995 and 1994. For the first nine months of 1995, 76 Products Company reported a loss of $17 million, compared with earnings of $27 million in 1994. While there were no special items recorded during 1995, the 1994 results included special items consisting of asset write-downs, an environmental provision, and the effect of asset sales. Excluding the special items, the third quarter and nine-month 1994 earnings were $10 million and $34 million, respectively. The lower 1995 operating earnings, especially for the nine-month period, reflected lower refined product margins in the West Coast markets primarily due to a refinery turnaround in the first quarter. Partially offsetting these decreases were increased refined product sales volumes and lower operating and selling expenses. GEOTHERMAL. Third quarter 1995 earnings were $7 million, compared with $11 million in 1994. Nine-month earnings were $22 million in 1995, compared with $25 million in 1994. Excluding a gain from the sale of a small interest in the Indonesian geothermal operations, this year's third quarter and nine-month earnings were $5 million and $15 million, respectively. The earnings were adversely affected by discretionary electrical generating curtailments by the public utility at The Geysers in Northern California, which ended during the third quarter, and lower generation at MakBan in the Philippines. The segment also benefited from higher Indonesia earnings as the company continues to expand and develop its activities. DIVERSIFIED BUSINESSES. This group consists of the company's agricultural products, carbon and minerals, and real estate operations; and the company's equity interests in various pipelines and The UNO-VEN Company. Third quarter 1995 earnings were $32 million, compared with $31 million in 1994. The nine-month 1995 earnings were $156 million, compared to $104 million last year. The nine-month 1995 results benefited from significant increases in nitrogen fertilizer sales prices and volumes and higher carbon earnings. The third quarter 1995 earnings were impacted by lower lanthanide earnings and costs associated with the start-up of the Kennewick, Washington, fertilizer manufacturing plant and the turnaround at the Kenai, Alaska, plant. Offsetting these negative factors were the continuing strong sales prices in both the domestic and export markets. Earnings for the first two quarters of 1995 were higher than the third quarter due to the seasonality of the agricultural products market. CORPORATE AND OTHER. This category includes administrative and general expense, net interest expense, environmental and litigation expense and other unallocated items. Third quarter and nine-month 1995 expenses were $84 million ($74 million excluding special items) and $263 million ($239 million excluding special items), respectively. For the third quarter and nine-month 1994 periods, expenses were $101 million ($98 million excluding special items) and $265 million ($271 million excluding special items), respectively. Special items for each reporting period included provisions for environmental remediation and litigation. The special items for the nine months of 1995 included a $16 million gain from the sale of the process, technology and licensing (PTL) business and a $4 million charge for a deferred tax adjustment. For the same period of 1994, special items included a $24 million gain from the settlement of the Mesa lawsuit. The reductions principally reflected lower administrative and general expense and benefits from California tax credits earned as a result of the capital investment required to begin manufacturing reformulated gasolines (RFG) to specifications set by the Federal Environmental Protection Agency and the California Air Resources Board (CARB). FINANCIAL CONDITION AND CAPITAL EXPENDITURES For the first nine months of 1995, cash flows from operating activities, including working capital changes, were $676 million, down from $855 million in 1994. The decrease was primarily due to reduced operating earnings. Proceeds from asset sales were $130 million for the first nine months of 1995, compared to $136 million in the same period a year ago. The 1995 proceeds were mainly from the sale of nonstrategic oil and gas properties and the sale of the PTL business. Capital expenditures for the nine months of 1995 totaled $967 million, compared with $839 million a year ago. The increase primarily reflected construction at both the Los Angeles and San Francisco refineries to prepare for manufacturing RFG as well as development in the Gulf of Mexico. 2 Consolidated working capital at September 30, 1995 was $412 million, an increase of $141 million from the 1994 year-end level of $271 million. The company's total debt was $3,902 million, an increase of $436 million from the year-end 1994 level. Of the total increase, $132 million was due to the 1995 classification of debt-related currency swaps as required by new financial accounting standards. See Notes 8 and 9 to the consolidated financial statements for additional information. ENVIRONMENTAL MATTERS At September 30, 1995, the company's reserve for environmental remediation obligations totaled $227 million, of which $97 million was included in other current liabilities. During the first nine months of 1995, cash payments of $69 million were applied against the reserves and an additional $34 million in liabilities was recorded to the reserve account, primarily due to changes in estimated future remediation costs for numerous sites. At year-end 1994, Unocal reported 60 sites where it had received notification from the federal Environmental Protection Agency that the company may be a potentially responsible party (PRP). In addition, various state agencies and private parties had identified 30 other sites that may require investigation and remediation. During the first nine months of 1995, 11 sites were added to the list and 32 sites were removed, resulting in a total of 69 sites. The company removed the 32 sites from its list of PRP sites in the third quarter because there was no evidence of potential liability and there had been no further indication of liability by government agencies or third parties at these sites for at least a 12 month period. Of the total 69 sites, the company has denied responsibility at 2 sites and at another 14 sites the company's liability, although unquantified, appears to be de minimis. The total also includes 24 sites which are under investigation or in litigation, for which the company's potential liability is not presently determinable. Of the remaining 29 sites, where probable costs can be reasonably estimated, a reserve of $32 million was included in the total environmental reserve as of September 30, 1995. FUTURE ACCOUNTING CHANGE In the fourth quarter of 1995, the company will adopt Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long Lived Assets and for Long-Lived Assets to be Disposed Of". The after-tax charge for impairment of oil and gas properties and other operating assets is estimated to be approximately $50 million. OUTLOOK In August, the company and Torch Energy Advisors Incorporated (Torch) reached an agreement in principle on the sale price for the company's crude oil and natural gas holdings in California. The company and Torch are continuing negotiations toward a final agreement. The company expects to receive more than $500 million in cash from the sale of the properties if an agreement is reached. The company could potentially receive additional payments that are contingent upon the price per barrel received by Torch from the properties' future oil production. The sale is not expected to have a material effect on the company's future operating earnings. Hurricane Opal threatened off-shore platforms in the Gulf of Mexico in October, resulting in the shut-in of production. Consequently, the company may report lower natural gas production for the fourth quarter. In October, Unocal entered into agreements with Circle K Corporation, pursuant to which Circle K will sell Unocal 76-branded gasoline at approximately 400 convenience store sites in Arizona. In addition, Unocal will supply its gasoline to approximately twenty Circle K sites in the Las Vegas, Nevada, market and the parties will jointly develop eight new service station/convenience store sites in the Las Vegas area. In November, the company entered into an agreement with Oklahoma City-based Devon Energy Corporation for the sale of the company's 80 percent working interest in the Worland oil and gas field and a natural gas plant in Wyoming for $51 million. Typhoon Angela struck the island of Luzon in the Philippines during the first week in November, damaging the National Power Corporation of the Philippines' (NPC) transmission facilities throughout central and southern Luzon and the power plants near Tiwi. The company and NPC are currently assessing the damages and steps to be taken to bring NPC's power plants back on-line. Consequently, 3 the company anticipates that generation at Tiwi will be curtailed for the remainder of the year. Modifications to the company's refineries to prepare for manufacturing RFG, as required by CARB specifications, are nearly complete, and the actual costs will total less than $400 million, approximately $50 million less than originally estimated. The company will continue to be affected by the uncertainty and volatility of crude oil and natural gas prices. Striving to further reduce operating expenses and corporate administrative and general expense is an ongoing objective for the company. ------------------------------------- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNOCAL CORPORATION (Registrant) Dated: November 9, 1995 By: /s/ CHARLES S. MCDOWELL ----------------------- Charles S. McDowell, Vice President and Comptroller 4 -----END PRIVACY-ENHANCED MESSAGE-----