Unocal Says Profit May Be 33% Below Forecasts

Citing falling prices for oil and natural gas, Unocal Corp. said Thursday that its fourth-quarter profit could be as much as 33% lower than earlier projections.

The nation’s second-largest independent oil company said it expects adjusted earnings of 40 cents to 45 cents a share for the fourth quarter ending Dec. 30, down from previous company estimates of 50 cents to 60 cents.

A protracted and disruptive strike by oil workers in Venezuela has pushed oil and natural gas prices up in recent weeks, but El Segundo-based Unocal said the average price over the last three months remained below estimates.

Unocal said its average per-barrel price for crude oil during the quarter was $28.10, well below the expected price of $29.75. Natural gas prices also fell below expectations, averaging $3.90 per million British thermal units instead of earlier estimates of $4.10.

The commodity price fluctuations will reduce adjusted earnings for the quarter by 11 cents a share.

Unocal said it shaved another 4 cents off earlier estimates to account for a noncash charge of $11 million after taxes that was related to its purchase of Pure Resources Inc. at the end of October.

As part of the acquisition, options for Pure Resources stock were converted into options for 4.3 million Unocal shares, using Unocal’s stock price at the time of the deal.

The company’s stock price has risen by more than $4 a share since then, triggering the expected compensation expense charge to reflect the increased value of the options, Unocal said.

The company said its fourth-quarter net income will be reduced by the commodity prices and stock-option items, and will further be cut by the cost of additional environmental cleanup at various sites. The new expenses boost Unocal’s earlier cost estimates and will cut an additional 10 cents a share from the company’s fourth-quarter net profit, the company said.

Unocal reported the lowered estimate after the market closed. Its shares Thursday closed at $31.65, down 27 cents in New York Stock Exchange trading.