CNOOC Limited Proposes Merger With Unocal Offering US$67 Per Unocal Share In Cash HONG KONG, June 22 /PRNewswire-FirstCall/ -- CNOOC Limited (SEHK:0883)(NYSE:CEO) announces today that it has proposed a merger with Unocal Corporation ("Unocal"; NYSE: UCL) offering US$67 in cash per Unocal share. The offer values Unocal at approximately US$18.5 billion and represents a premium for Unocal's shareholders of approximately US$1.5 billion over the value of Chevron Corporation's ("Chevron") offer based on Chevron's closing price on NYSE on 21 June 2005. In a letter sent to the Chairman of Unocal, CNOOC Limited Chairman and Chief Executive Officer, Mr. Fu Chengyu stressed that the approach is friendly and the company is seeking a consensual transaction with Unocal. This proposal is being submitted in accordance with the sale process initiated by Unocal. CNOOC Limited believes that the combined company would have a leading position in the Asian energy market and an expanded role in the development of China's liquefied natural gas (LNG) market. The combination is expected to more than double CNOOC Limited's oil and gas production and increase its reserves by nearly 80% to approximately four billion barrels of oil equivalent. Approximately 70% of Unocal's current proved oil and gas reserves are in Asia and the Caspian region. It is expected that the merged company would also have an improved oil and gas balance, with total reserves of approximately 53% oil and 47%(1) natural gas. The transaction is expected to be EPS and cash flow per share accretive in the first full year after completion. CNOOC Limited anticipates that it will maintain a strong, investment-grade credit rating. Mr. Fu Chengyu, CNOOC Limited Chairman and Chief Executive Officer, said: "This friendly, all-cash proposal is a superior offer for Unocal shareholders. The deal is fully financed, subject to customary closing conditions, and priced in line with market values for comparable businesses. We hope to be able to enter into a dialogue with Unocal soon and reach agreement on a consensual transaction." "For our shareholders, there is a strong business rationale for the combination, as CNOOC Limited and Unocal would form one of the leading international E&P companies and become one of the premier players in the Asian energy market. It would rebalance our portfolio to include more natural gas reserves and strengthen our regional presence by combining with Unocal's complementary Asian asset base. I am confident that the merger will increase shareholder value." Mr. Fu added, "We also expect this transaction to be accretive and that we will maintain a strong, investment-grade credit rating." Commitments concerning Unocal's U.S. assets CNOOC Limited is committed to fully integrating Unocal's strong management team and workforce into the combined company. The transaction will not adversely affect the U.S. oil and gas market since Unocal's U.S. oil and gas production will continue to be sold in the U.S. Unocal's U.S. oil and gas production accounts for less than 1% of total U.S. oil and gas consumption. In connection with this offer, CNOOC Limited has provided the following assurances: * CNOOC Limited is willing to continue Unocal's practice of selling and marketing all or substantially all of the oil and gas produced from Unocal's U.S. properties in U.S. markets. * CNOOC Limited will seek to retain substantially all Unocal employees, including those in the U.S. This is in contrast to the existing Chevron proposal where Chevron has already announced plans to extract hundreds of millions of dollars of cost savings from the merger annually, including from employee layoffs. * CNOOC Limited hopes and will endeavor to persuade members of Unocal's executive and operational management to join the management team of the combined company. * CNOOC Limited will accept and agree to the terms of Unocal's recent FTC settlement relating to its patent rights in reformulated gasoline. * CNOOC Limited is confident that it will obtain Exon-Florio approval. To this end, CNOOC Limited is willing to divest or take other actions with respect to any of Unocal's non-E&P assets in North America to the extent such divestitures and actions would not give rise to a material adverse effect on Unocal, including considering special management arrangements for Unocal's U.S. non-controlling, minority pipeline interests and its storage assets. Financing structure The financing is structured to ensure that the company will retain a strong balance sheet and maintain future financial flexibility. The transaction will be financed from the following sources: * CNOOC Limited's cash resources of more than US$3 billion; * Bridge loans provided by Goldman Sachs and JPMorgan totaling US$3 billion, which are expected to be replaced by permanent debt financing in the form of bonds at or shortly after completion; * Bridge loans provided by Industrial and Commercial Bank of China (ICBC) in the amount of US$6 billion, which are expected to be replaced by permanent debt financing in the form of term loans at or shortly after completion; * A long-term, subordinated loan provided by CNOOC Limited's majority shareholder, China National Offshore Oil Corporation, of US$4.5 billion, which is expected to receive significant equity credit for credit ratings purposes; and * A subordinated bridge loan provided by CNOOC Limited's majority shareholder of US$2.5 billion, which is expected to be refinanced with equity within two years. CNOOC Limited has received commitment letters from each of Goldman Sachs, JPMorgan, ICBC and CNOOC Limited's majority shareholder for the financing noted above. Strengths and opportunities CNOOC Limited believes that the merged group would benefit greatly from the companies' complementary strengths. * Platform for growth: This combination is expected to more than double CNOOC Limited's production and increase reserves by nearly 80%. CNOOC Limited believes that Unocal has an attractive portfolio of development projects with a substantial growth profile. * An Asia-focused energy company: Both companies are already primarily Asian businesses -- together they will be a leader in one of the fastest growing regions in the world. It is estimated that 85% of the combined reserves of the companies are located in Asia and the Caspian region. * A leading regional gas business: Sixty percent of Unocal's reserves are natural gas (mostly in Asia). CNOOC Limited currently has 35% of its reserves in gas; it is estimated that the combined company will have a more balanced portfolio with reserves of 53% oil and 47%(2) natural gas. CNOOC Limited believes that an improved oil and gas balance will reduce its exposure to commodity price cyclicality. CNOOC Limited believes that China's LNG market potential will allow it to accelerate the exploration and development of gas resources and position it as a long-term supplier to the Bontang LNG plant. This is an important part of the environmental drive to promote cleaner burning fuels. * Optimizing investment programs: CNOOC Limited expects to generate considerable synergies from the optimization of the combined exploration and capital investment programs of the two companies. * Proven management and world-class technical expertise: CNOOC Limited believes that Unocal has an excellent operational management team, and CNOOC Limited can also draw on Unocal's deepwater drilling and production expertise. Advisors CNOOC Limited is advised by Goldman Sachs (Asia) L.L.C. and J.P. Morgan Securities (Asia Pacific) Ltd. N M Rothschild & Sons (Hong Kong) Limited also assisted the board's non-executive directors in their review of the transaction. More information about the transaction can be found through CNOOC's website (http://www.cnoocltd.com/) and through CNOOC's transaction microsite (http://www.transactioninfo.com/cnooc). Conference Call Information: 10 a.m. HKT / 10 p.m. EDT Investor and Analyst Call CNOOC Limited will host a conference call on June 23, 2005 at 10 a.m. HKT/ 10 p.m. EDT to discuss the proposal. The slides will be available on CNOOC Limited's website 10 minutes prior to the start of the event. To access this conference call, please use the following numbers: United States: (800) 475-3716 International: (719) 457-2728 North China: 10-800-712-0336 South China: 10-800-120-0336 Singapore: 800-1203236 Hong Kong: 800-908710 11 a.m. HKT / 11 p.m EDT English Media Call A conference call for English-speaking media will be held today at 11 a.m. HKT / 11 p.m. EDT at the following numbers: United States: (800) 500-0311 International: (719) 457-2698 North China: 10-800-120-0045 South China: 10-800-712-0045 Singapore: 800-1203236 Hong Kong: 800-908707 11:30 a.m. HKT / 11:30 EDT Chinese Media Call A conference call for Chinese-speaking media will be held today at 11:30 a.m. HKT / 11:30 p.m. EDT at the following numbers: United States: (800) 500-0311 International: (719) 457-2698 North China: 10-800-120-0045 South China: 10-800-712-0045 Singapore: 800-1203236 Hong Kong: 800-908707 Contacts: Investor Xiao Zongwei 86 10 8452 1646 CNOOC Limited (Beijing) Media Hong Kong: Tim Payne or Ray Bashford 852 3512 5000 Brunswick Group Beijing: Caroline Jinqing Cai 86 10 8580 5203 Brunswick Group New York: Steve Lipin or Michael Buckley 212 333 3810 Brunswick Group Washington, D.C.: Mark Palmer 202 419 3557 Public Strategies, Inc Notes to Editors: CNOOC LIMITED -- BACKGROUND CNOOC Limited (the "Company", together with its subsidiaries, the "Group"), was listed on the New York Stock Exchange ("NYSE") (code: CEO) and The Stock Exchange of Hong Kong Limited ("HKSE") (code: 0883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent stock of the Hang Seng Index in July 2001. The Group is China's largest producer of offshore crude oil and natural gas and one of the largest independent oil and gas exploration and production companies in the world. The Company mainly engages in offshore oil and natural gas exploration, development, production and sales. The Company has four major oil production areas offshore China which are Bohai Bay, Western South China Sea, Eastern South China Sea and East China Sea. It is the largest offshore crude producer in Indonesia. The Group also has certain upstream assets in regions such as Australia. As at 31 December 2004, the Company owned net proved reserves of approximately 2.2 billion barrels-of-oil equivalent and its annual daily average net production was 382,513 barrels-of-oil equivalent per day. The Group had 2,524 employees and total assets of approximately RMB 94.1 billion. Important Notice: This document contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: whether a transaction with Unocal will occur and the terms and conditions of any such transaction; the extent and timing of our ability to realize synergies from the transaction; the effect of the transaction on employees, customers and other persons that have a material commercial relationship with CNOOC Limited or Unocal and our ability to maximize the value of those relationships; the possibility that the anticipated benefits from the acquisition cannot be fully realized; the possibility that costs or difficulties related to the integration of Unocal operations will be greater than expected; the impact of competition; the parties' ability to obtain required regulatory and other approvals in connection with the transaction; and other risk factors relating to our industry as detailed from time to time in each of CNOOC Limited's and Unocal's reports filed with the SEC. In addition, future results could also differ materially from those expressed in the forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, CNOOC Limited undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 1. All reserves data as at December 31, 2004 and all production data for the year ending December 31, 2004, as published in CNOOC Limited's and Unocal's 2004 financial statements. 2. All reserves data as at December 31, 2004 and all production data for the year ending December 31, 2004, as published in CNOOC Limited's and Unocal's 2004 financial statements. DATASOURCE: CNOOC Limited CONTACT: Investors: Xiao Zongwei of CNOOC Limited (Beijing), +86-10-8452-1646; or Media: Hong Kong: Tim Payne or Ray Bashford of Brunswick Group, +1-852-3512-5000; or Beijing: Caroline Jinqing Cai of Brunswick Group, +86-10-8580-5203; or New York: Steve Lipin or Michael Buckley, both of Brunswick Group, +1-212-333-3810 Washington, D.C.: Mark Palmer of Public Strategies, Inc., +1-202-419-3557, all for CNOOC Limited Web site: http://www.cnoocltd.com/ http://www.transactioninfo.com/cnooc

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