SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) November 11, 1998
------------------------
UNOCAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-8483 95-3825062
- --------------------------------------------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(310) 726-7600
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Item 5. Other Events.
Unocal Corporation announced that it expects to reduce capital expenditures by
30 to 40 percent in 1999 from the expected 1998 level. In addition, the company
is targeting cash expense reductions of $150 million, of which about $100
million has already been identified. Unocal's challenge in the near-term is to
deliver earnings, maintain production and keep a manageable level of debt while
funding key growth projects in a world of depressed commodity prices.
The company expects its 1999 capital expenditures to approximate $1 billion to
$1.2 billion, which is in line with anticipated cash flow based on continued low
commodity prices. The capital spending reduction will come from deferring
company-wide expenditures on lower-return projects and suspending activities in
non-core areas. The level of spending in 1998 for some projects, such as the
Gulf of Mexico OCS lease sales that established Spirit Energy 76's major
deepwater land position, will not be matched in 1999.
Targeted cash expense reductions for next year will be through elimination of
certain project development costs, substantial savings on production and
operating expenses, lower exploration expense and reduced administrative and
general expense.
The company will continue to focus on the key high-value growth areas of
Indonesia, Thailand, the Gulf of Mexico, South and Southeast Asia, and the
Southern Cone of Latin America. In addition, the company is looking to acquire
low-priced assets, but only if they enhance Unocal's existing portfolio and add
value immediately. Unocal plans to withdraw from or suspend various projects in
areas with either lower returns, heightened political risk or unacceptable
payout timelines.
The company is targeting 1999 net worldwide oil and gas production to exceed
1998's estimated production of 485,000 barrels of oil equivalent per day. The
1999 production target has been lowered from previous estimates because of the
company's plan to tie capital spending to anticipated cash flow as a guard
against increasing debt. Achieving the 1999 production target will be dependent
on market conditions in Asia, particularly Thailand.
Forward-looking statements and estimates regarding capital expenditures,
business expenses, and production and operating results set forth above are
based on assumptions concerning market, competitive, regulatory, environmental,
operational and other considerations. Actual results could differ materially.
2
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)
Date: November 16, 1998 By: /s/ JOE D. CECIL
- ------------------------ -----------------------------------
Joe D. Cecil
Vice President and Comptroller
3