By OGJ editors
HOUSTON, June 5 -- Unocal Corp. Thursday announced plans to sell its interest in 75 Gulf of Mexico field as its strives to improve the profitability of its Lower 48 US exploration and production businesses and to strengthen the company's balance sheet.
The pending asset sales of oil and natural gas fields are intended to Unocal's operating expenses and depreciation, depletion and amortization unit costs. The company also plans to lower its corporate and business unit administrative and general costs.
In addition, Unocal anticipates using cash flow and proceeds from these and other asset sales to reduce its debt.
"Our focus on growth from large development projects is beginning to pay off," said Unocal Chairman and CEO Charles R. Williamson. "The West Seno deepwater project in Indonesia is expected to begin production within the next 30 days (OGJ, Feb. 1, 1999, p. 31)."
Major development initiatives also are under way in Azerbaijan, Thailand, Indonesia, Bangladesh, and the deepwater Gulf of Mexico. Williamson expects Unocal plans to sanction additional developments in each of these areas during the next 12-18 months.
Gulf of Mexico asset sales
In the Gulf of Mexico, Unocal's goal is to create a more profitable business by selling its smaller fields. Some 65-70% of Unocal's shelf production comes from 25 properties, which the company still values for future opportunities.
The 75 fields targeted for sale represent a net average production of from 25,000 boe/d to 30,000 boe/d and proved reserves of 40-50 million boe.
As the smaller fields are divested, Unocal will reduce associated direct and indirect costs. With the asset sales and cost reductions in the Gulf of Mexico, Unocal expects to reduce its Lower 48 finding and development costs to below $8/boe.
Gulf of Mexico deepwater
Unocal will continue exploration and development activities in the deepwater Gulf of Mexico.
Williamson said the company has identified opportunities for improved efficiency across its exploration groups, which will result in a 20% overall reduction in deepwater Gulf of Mexico cash expenses.
In addition, Unocal plans to relinquish some primary-term Outer Continental Shelf blocks. The company will record a pre-tax $25 million charge associated with the early relinquishment in its second quarter results.
Unocal plans to drill 3-5 wildcat wells/year in the deepwater gulf during the next few years.
Debt reduction
Unocal said it is committed to reducing debt and strengthening its balance sheet, regardless of commodity price fluctuations.
Accordingly, Unocal also has implemented hedging programs to lock in natural gas prices. In 2003 if New York Mercantile Exchange futures prices hold at $29.40/bbl for oil and $6/Mcf for gas, the company expects $450 million in cash available to prepay debt and other financings in 2003.
The level of debt reduction could be substantially higher depending on the amount and timing of the proceeds from the sale of the Gulf of Mexico assets, along with other asset sales including real estate holdings and certain business interests outside the exploration and production sector.
