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Fourth Quarter Operating Results Conference Call Slides

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. 2003 Performance Wrap-up. Clean earnings $ 2.95 per share ROCE 12.6 %

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Fourth Quarter Operating Results Conference Call Slides

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  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

  2. 2003 Performance Wrap-up 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 * Excluding purchases & sales

  3. Unocal 2003 – Operations Highlights • 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)

  4. 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

  5. Net Debt Reduced in 2003($MM) Total Debt / Total Total Net Capitalization DebtCashDebt * Ratio Dec. 31, 2002 3,338 ** 168 3,170 47% Dec. 31, 2003 2,883 404 2,479 39% Decrease in net debt ($691) * Total debt minus cash ** Proforma for FIN 46

  6. 2004 Estimated Capital Expenditures Total = $1,926 MM Other E&P $600 MM Deepwater GOM $85 MM Deep Shelf GOM $30 MM Deepwater Indonesia $60 MM All Other $120 MM Explor. Drilling $295 MM Major Projects (incl. BTC) $930 MM All Other $110 MM Note: Excludes Capitalized Interest

  7. Unocal Reserves & Production Reserves(MMBOE) 12/31/2003 Production(MBOE/D) 2003 Average Other Intl. 17% Other Intl. 8% Far East 50% Lower 48 32% Far East 46% Lower 48 21% 35 293 145 373 889 205 31 101 109 32 Alaska 7% Alaska 6% Canada 6% Canada 7% Total: 1,765 million barrels of oil equivalent 62% gas 38% oil Total: 448,200 barrels of oil equivalent per day 64% gas 36% oil

  8. 2003 Year-End Preliminary Proved Undeveloped Hydrocarbon Reserves West Seno Phase 1 & 2 AIOC Merah Besar Mad Dog K2 Ranggas Major Developments 40% All Other 20% Thailand 40 % P.U.D. = 880 Million BOE Total = 1,765 Million BOE

  9. 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

  10. Quality AssuranceReserve Process • Reserves are calculated by professionals degreed in engineering and geology • Calculations are reviewed by business unit’s qualified experts • Business Unit Vice President and experts make representation that annual reserve estimates are in accordance with SEC standards • In aggregate, a rotating 50% of the asset base and 90% of changes reviewed by the corporate review team • Leader reports directly to the CFO • No team member has direct or indirect management ties to the `business unit under review • All team members are considered an expert in their discipline • No team member has a reserve volume goal • One member from independent 3rd party (Ryder Scott) • Material changes reviewed by Management Committee • Letter of Confidence issued by Outside Audit Firm

  11. 2003 Proved Hydrocarbon ReservesAudit Coverage Total = 1,765 Million BOE Audit Team Review 33 % Not Reviewed In 2003 Audit Team & Partner Review 11 % 23 % 33 % 100 % of Major Changes Reviewed Every Year 95 % of All Changes Reviewed in 2003 Third Party Review

  12. 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

  13. Unocal 2004Non E&P Earnings Outlook Ranges Million $ 1Q Full Year 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)

  14. Unocal 1Q 2004 Material Hedge Positions* Daily VolumeFixed Price Fixed Price Gas, MMMBTU 448 $6.25 Oil, MBO 30 $30.14 Collars CeilingFloor Oil, MBO 2 $28.40 $24.00 * NYMEX trading closed for January & February

  15. Unocal 2Q 2004 Material Hedge Positions Daily VolumeFixed Price Fixed Price Gas, MMMBTU 102 $5.31 Oil, MBO 26 $30.67 CollarsCeilingFloor Gas, MMMBTU 13 $5.76 $4.65 Oil, MBO 2 $28.40 $24.00

  16. Unocal 3Q 2004 Material Hedge Positions Daily VolumeFixed Price Fixed Price Gas, MMMBTU 140 $5.29 Collars CeilingFloor Oil, MBO 2 $28.40 $24.00

  17. Unocal 4Q 2004 Material Hedge Positions Daily VolumeFixed Price Fixed Price Gas, MMMBTU 140 $5.29 Collars CeilingFloor Oil, MBO 2 $28.40 $24.00

  18. Unocal Full Year 2004 Material Hedge Positions* Daily Volume Fixed Price Fixed Price Gas, MMMBTU 211 $5.80 Oil, MBO 14 $30.39 Collars CeilingFloor Gas, MMMBTU 3 $5.76 $4.65 Oil, MBO 2 $28.40 $27.41 * NYMEX trading closed for January & February

  19. Unocal 4Q Reported and Adjusted Earnings $ Million$ Per Share 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 .05 Restructuring Charge 1 - Discontinued Ops (R&M) (8) (.03) Adjusted Fourth Quarter 2003 167 .63

  20. Unocal Adjusted Earnings $ Million$ Per Share 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

  21. Unocal E&PLower 48 Results4Q 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

  22. Unocal E&PAlaska Results4Q 2003 vs. 3Q 2003 Alaska – higher results 4 Higher liquids price 1 ($30.73 vs. $29.39) Timing of crude oil liftings 3 $ Million

  23. Unocal E&PCanada Results4Q 2003 vs. 3Q 2003 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 $ Million

  24. 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

  25. Unocal Non E&P Operating Segment Results4Q 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) $ Million

  26. Unocal Corporate & Other Results4Q 2003 vs. 3Q 2003 Corp. & Other - Lower expenses 16 Lower net interest expense 6 Higher Minerals results 2 Timing of litigation expense 7 All Other 1 $ Million

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