Post on 17-Dec-2015
2nd-qtr - 2003, 04/18/23 15:27 Page 1
Fourth Quarter Operating Results Conference Call Slides
Slides contain certain non-GAAP measures.For reconciliation to GAAP measures refer to the Unocal 4Q 2003
Earnings News Release and Quarterly Fact Book
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Clean earnings $ 2.95 per share
ROCE 12.6 %
Operating cash flow $ 2.047 billion
Free cash flow $ 883 million
Reduction in net debt and other financings $ 691 million
Year-end debt / total cap ratio 39%
Reserve replacement * 149%
Worldwide F&D costs $ 6.92 / BOE
2003 Performance Wrap-up
* * Excluding purchases & salesExcluding purchases & sales
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Significant deepwater discoveries: St. Malo, Puma (Gulf of Mexico) and Gehem (Indonesia)
Agreements in Thailand to extend gas sales contracts and increase contract volumes; plans to double oil production
A restructured North American business
East China Sea exploration & production PSCs
Gas sales agreement for new field in Bangladesh
Major Progress on AIOC Phase 1 project & pipeline
Debt reduction for 2003 (39% debt-to-cap)
Unocal 2003 – Operations Highlights
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Unocal What To Watch For In 2004
Major new developments near completion, resulting in 8-10% production growth in 2005
– AIOC, Mad Dog, Bangladesh, Thai oil
Continued deepwater exploration success and appraisal of 2003 deepwater discoveries
– St. Malo, Puma, Gehem
– Commercial progress in Perdido (Trident)
Launching Indonesia deepwater gas developments for Bontang LNG
Meet $8.00 per BOE Finding & Development Cost Target for all of North America, including the reduced Gulf of Mexico shelf program
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Dec. 31, 2002 3,338 ** 168 3,170 47%
Dec. 31, 2003 2,883 404 2,479 39%
Decrease in net debt ($691)
Net Debt Reduced in 2003($MM)
Total Debt /Total Debt / Total Total
TotalTotal NetNet Capitalization CapitalizationDebtDebt CashCash DebtDebt * * Ratio Ratio
* Total debt minus cash** Proforma for FIN 46
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Deepwater GOMDeepwater GOM $85 MM$85 MM
Deep Shelf GOMDeep Shelf GOM $30 MM$30 MM
Deepwater IndonesiaDeepwater Indonesia $60 MM$60 MM
All OtherAll Other $120 $120 MMMM
2004 Estimated Capital Expenditures
Other E&P$600 MM
Major Projects(incl. BTC)$930 MM
Explor. Drilling$295 MM
Note: Excludes Capitalized Interest
Total = $1,926 MM
All OtherAll Other$110 MM$110 MM
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Unocal Reserves & Production
Total: 448,200 barrelsTotal: 448,200 barrelsof oil equivalent per dayof oil equivalent per day
64% gas64% gas 36% oil36% oil
Production (MBOE/D)2003 Average
Far EastFar East46%46%
205
Other Intl.Other Intl.8%8%
35
Lower 48Lower 4832%32%
145
32AlaskaAlaska
7%7%CanadaCanada
7%7%
31
Far EastFar East50%50% Lower 48 Lower 48
21%21%
AlaskaAlaska6%6%
Total: 1,765 million Total: 1,765 million barrels of oil equivalentbarrels of oil equivalent
62% gas62% gas 38% oil38% oil
Reserves (MMBOE)12/31/2003
Other Intl.Other Intl.17%17%
889
293
373
109
CanadaCanada6%6%
101
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2003 Year-End Preliminary Proved Undeveloped Hydrocarbon Reserves
Thailand40 %
MajorDevelopments
40%
P.U.D. = 880 Million BOE
Total = 1,765 Million BOE
All Other20%
West Seno Phase 1 & 2West Seno Phase 1 & 2AIOC AIOC Merah BesarMerah BesarMad DogMad DogK2K2RanggasRanggas
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Thailand Proved Undeveloped Reserves350 Million BOE
• Current Production is Pipeline Limited
• Net Sales Commitments expected to rise from 590 MMCFPD to 920 MMCFPD, contract extension to 2022
• Third Pipeline is under Construction – Est. Completion 2006
• Thailand has a long history of just-in-time Development and routine promotion of PUD units to PDP and Production.
• In order to justify Thailand’s investment in Pipelines and Power Plants the government requires assurance of Proved Reserves for future needs.
• Thai National pipeline company reviews Unocal’s reserve estimates as part of their due diligence
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Quality AssuranceReserve Process
• Reserves are calculated by professionals degreed in engineering and Reserves are calculated by professionals degreed in engineering and geologygeology
• Calculations are reviewed by business unit’s qualified expertsCalculations are reviewed by business unit’s qualified experts
• Business Unit Vice President and experts make representation that Business Unit Vice President and experts make representation that annual reserve estimates are in accordance with SEC standardsannual reserve estimates are in accordance with SEC standards
• In aggregate, a rotating 50% of the asset base and 90% of changes In aggregate, a rotating 50% of the asset base and 90% of changes reviewed by the corporate review team reviewed by the corporate review team
•Leader reports directly to the CFO Leader reports directly to the CFO •No team member has direct or indirect management ties to the No team member has direct or indirect management ties to the `business unit under review `business unit under review•All team members are considered an expert in their disciplineAll team members are considered an expert in their discipline•No team member has a reserve volume goalNo team member has a reserve volume goal•One member from independent 3rd party (Ryder Scott) One member from independent 3rd party (Ryder Scott)
• Material changes reviewed by Management CommitteeMaterial changes reviewed by Management Committee
• Letter of Confidence issued by Outside Audit FirmLetter of Confidence issued by Outside Audit Firm
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2003 Proved Hydrocarbon ReservesAudit Coverage
Audit TeamReview
Audit Team &Partner Review
Not ReviewedIn 2003
Total = 1,765 Million BOE
Third PartyThird PartyReviewReview
11 %11 %
33 %33 %
23 %23 %
33 %33 %100 % of Major100 % of Major
Changes ReviewedChanges Reviewed Every YearEvery Year
95 % of All Changes95 % of All ChangesReviewed in 2003Reviewed in 2003
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Unocal 1Q 2004 Outlook Summary
Worldwide Production: 410,000 – 420,000 boed
EPS
Adjusted after tax (diluted): $0.70 - $0.80
Feb 2nd Analyst Mean Estimate: $0.73
Commodity Price Assumptions
(NYMEX Benchmark at 1-29-2004)
Oil: $ 34.25/bbl (WTI)
Gas: $ 6.00/mmBtu (Henry Hub)
Earnings Sensitivities to Commodity Prices
Oil: $8 MM change for every $1/bbl change
Gas: $3 MM change for every $0.10/mmBtu change in North America realization
Pretax Dry Hole Forecast: $40 - $50 MM
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Unocal 2004Non E&P Earnings Outlook Ranges
Trade 0 - 1 0 - 4
Midstream 20–25 65–75
Geothermal 12–18 50–65
Corporate & Other
Admin & General (20)–(24) (90)-(95)
Net Interest (23)–(28) (80)-(90)
Environ. & Litigation (3)-(6) (18)-(24)
Other (30)-(35) (100-110)
Million $ 1Q Full Year
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Unocal 1Q 2004 Material Hedge Positions*
* NYMEX trading closed for January & February
Fixed Price
Gas, MMMBTU 448 $6.25
Oil, MBO 30 $30.14
Collars Ceiling Floor
Oil, MBO 2 $28.40 $24.00
DailyVolume Fixed Price
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Unocal 2Q 2004 Material Hedge Positions
Fixed Price Gas, MMMBTU 102 $5.31
Oil, MBO 26 $30.67
Collars Ceiling FloorGas, MMMBTU 13 $5.76 $4.65Oil, MBO 2 $28.40 $24.00
DailyVolume Fixed Price
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Unocal 3Q 2004 Material Hedge Positions
Fixed Price
Gas, MMMBTU 140 $5.29
Collars Ceiling Floor
Oil, MBO 2 $28.40 $24.00
DailyVolume Fixed Price
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Unocal 4Q 2004 Material Hedge Positions
Fixed Price
Gas, MMMBTU 140 $5.29
Collars Ceiling Floor
Oil, MBO 2 $28.40 $24.00
DailyVolume Fixed Price
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Unocal Full Year 2004 Material Hedge Positions*
* NYMEX trading closed for January & February
Fixed Price Gas, MMMBTU 211 $5.80
Oil, MBO 14 $30.39Collars Ceiling Floor
Gas, MMMBTU 3 $5.76 $4.65Oil, MBO 2 $28.40 $27.41
DailyVolume Fixed Price
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Reported Fourth Quarter 2003 180 .68
Special Items
Gain on Sale of L 48 Assets (3) (.01)
Canadian Statutory Tax Rate (29) (.11)
Insurance Recoveries (17) (.06)
Premium on Debt Buy Back 28 .11
Environmental & Litigation 15 .05Restructuring Charge 1 -
Discontinued Ops (R&M) (8) (.03)
Unocal 4Q Reported and Adjusted Earnings
$ Million $ Per Share
Adjusted Fourth Quarter 2003 167 .63
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Fourth Quarter 2003 167 .63
Third Quarter 2003 190 .72
Decrease (23) (.09)
Factors:Higher worldwide oil/liquids prices 8 .03 ($28.33 vs. $27.28)
Higher worldwide gas prices 9 .03 ($3.65 vs. $3.60)
Higher E&P expenses (Timing) (37) (.13)
Lower Earnings from non E&P oper. (10) (.04)
Lower production volumes (19) (.07) (420 MBOE/D vs. 441 MBOE/D)
Timing of Crude Oil Liftings 10 .03
Lower Corporate & Other Expense 16 .06
Unocal Adjusted Earnings
$ Million $ Per Share
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Unocal E&PLower 48 Results
4Q 2003 vs. 3Q 2003
Lower 48 - lower earnings (27)
Higher oil and liquids prices 3($28.50 vs. $27.71)
Higher Natural Gas Prices 4( $4.91 vs, $ 4.82)
Higher cash expenses (10)
Lower Dry Holes (9)
Lower production volumes (15)
$ Million
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Unocal E&PAlaska Results
4Q 2003 vs. 3Q 2003
$ Million
Alaska – higher results 4
Higher liquids price 1($30.73 vs. $29.39)
Timing of crude oil liftings 3
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Unocal E&PCanada Results
4Q 2003 vs. 3Q 2003
$ Million
Canada - Lower results (8)
Timing of 3Q Gain on sale of Tar Sands (7)
Lower Prices (3)Liq. ($ 22.94 vs. 24.02)Gas ($ 4.34 vs, $4.64)
Income Tax & Other 2
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Unocal E&PInternational Results4Q 2003 vs. 3Q 2003
International - Higher earnings 2
Lower production (3)( 236 MBOEPD vs. 238 MBOEPD)
Timing of crude oil liftings 7
Tax rate & Other 3
Higher liquids prices 5($28.73 vs. $27.20)
Higher natural gas prices 7($2.96 vs. $2.87)
Timing of Cash Expenses (17)
$ Million
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$ Million
Unocal Non E&P Operating Segment Results
4Q 2003 vs. 3Q 2003
Non E&P - Lower earnings (10)
Geothermal Timing of Power Results (6) All Other (1)
Oil and gas marketing - (Trade) (3)
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Unocal Corporate & Other Results
4Q 2003 vs. 3Q 2003
$ Million
Corp. & Other - Lower expenses 16
Lower net interest expense 6
Higher Minerals results 2
Timing of litigation expense 7
All Other 1