<PAGE>
 

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549

                                   FORM 10-K

         X    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       -----  
          SECURITIES EXCHANGE ACT OF 1934
          For the fiscal year ended December 31, 1995
                                    -----------------

                         Commission file number 1-8483
                               UNOCAL CORPORATION
             (Exact name of registrant as specified in its charter)
          DELAWARE                                    95-3825062
      (State or other jurisdiction of              (I.R.S. Employer
      incorporation or organization)                Identification No.)

 2141 ROSECRANS AVENUE, SUITE 4000, EL SEGUNDO, CALIFORNIA  90245
          (Address of principal executive offices)    (Zip Code)

      Registrant's telephone number, including area code:  (310) 726-7600

          Securities registered pursuant to Section 12(b) of the Act:

      Title of each class            Name of each exchange on which registered
      -------------------            -----------------------------------------
Common Stock, par value $1.00 per share    New York Stock Exchange
                                           Chicago Stock Exchange
                                           Pacific Stock Exchange
Preferred Stock Purchase Rights            New York Stock Exchange
                                           Chicago Stock Exchange
                                           Pacific Stock Exchange

       Securities registered pursuant to Section 12(g) of the Act:  None

   Indicate by check mark whether the registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes  X      No
                                                ----      ----

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [   ]

   The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1996 (based upon the average of the high and low
prices of these shares reported in the New York Stock Exchange Composite
Transactions listing for that date) was $7,869 million.

   Shares of Common Stock outstanding as of March 15, 1996:  247,860,562

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the registrant's definitive Proxy Statement for its 1996 Annual
Meeting of Stockholders (to be filed with the Securities and Exchange Commission
on or about April 22, 1996) are incorporated by reference into Part III.
<PAGE>
 
                                     PART I

ITEMS 1 AND 2 - BUSINESS AND PROPERTIES

HISTORY AND ORGANIZATION

   Unocal Corporation was incorporated in Delaware on March 18, 1983, to operate
as the parent of Union Oil Company of California (Union Oil), which was
incorporated in California on October 17, 1890.  Virtually all operations are
conducted by Union Oil and its subsidiaries.  The terms "Unocal" and "the
company" as used in this report mean Unocal Corporation and its subsidiaries,
except where the context indicates otherwise.

   Unocal is a fully integrated energy resources company whose worldwide
operations comprise many aspects of energy production.  During 1995, the company
reorganized its business into the following segments in order to remain focused
on its most critical business activities:

 .    EXPLORATION AND PRODUCTION - this segment is engaged in the exploration 
     for, and the production and marketing of, crude oil, condensate, natural
     gas and natural gas liquids.

 .    REFINING, MARKETING AND TRANSPORTATION

     76 PRODUCTS COMPANY - this segment is principally responsible for the
     company's West Coast petroleum refining operations, marketing and
     transportation of refined petroleum products and the manufacturing and
     marketing of petroleum coke.

 .    GEOTHERMAL AND POWER OPERATIONS - this segment is involved in the
     exploration for, and the production and sale of, geothermal resources for
     the generation of electricity.

 .    DIVERSIFIED BUSINESSES:
     AGRICULTURAL PRODUCTS - manufactures and markets nitrogen-based fertilizers
     for wholesale markets to the western United States and to the Pacific Rim.
     CARBON AND MINERALS - produces and markets petroleum coke (other than on
     the West Coast), graphites, solvents and specialty minerals.
     PIPELINES - principally includes the company's equity interests in
     affiliated pipeline companies.
     OTHER - includes the development and sale of real estate assets and the
     company's equity interest in The UNO-VEN Company, a refining and marketing
     partnership in the midwestern United States.

   Unocal competes in a challenging business environment of global competition,
political instability, rapid technological developments, volatile oil and gas
prices, and rising costs of complying with environmental regulations. In order
to meet these challenges, the company's focus remains on its basic businesses
and core competitive strengths. In keeping with this emphasis, the company
continues to sell assets that were marginally related to its core activities or
that were not a good strategic fit for Unocal. In February 1996, Unocal and
Nuevo Energy Company signed an asset purchase agreement for the sale of nearly
all of Unocal's crude oil and natural gas producing properties in California.
Torch Energy Advisors, Inc. negotiated the sale and will operate the properties
on behalf of Nuevo. Proceeds from the sale will allow Unocal to reduce debt and
help fund core activities in Central and Southeast Asia. The company is in the
process of retaining an advisor to assist in the disposal of its oil and gas
interests in the Netherlands sector of the North Sea as the company continues to
shift its focus to Southeast Asia and other areas that offer greater growth
opportunities.

   In February 1994, the company was granted a United States patent for
reformulated gasolines that meet the 1996 California state standards for
reduced emissions. Six refining companies filed suit against Unocal in April
1995 to invalidate the patent or declare it unenforceable. See Item 3-Legal
Proceedings. The company intends to aggressively defend its rights under this
patent.

   The company's research activities were phased out at its Brea, California
facility during 1995, and routine laboratory operations and seismic data
processing were outsourced.  The decision to outsource was based on projected
cost savings.  Selected research activities are now handled by the operating
segments.

   For a detailed analysis of the company's financial results and information on
capital expenditures, see Management's Discussion and Analysis under Item 7
beginning on page 19 of this report.

                                       1
<PAGE>
 
SEGMENT AND GEOGRAPHIC INFORMATION


   Financial information relating to the company's business segments, geographic
areas of operations, and sales revenues by classes of products is presented
under Note 24 to the consolidated financial statements, on page 55 of this
report.

PETROLEUM OPERATIONS

   Information regarding oil and gas financial data and oil and gas reserve data
and its related present value of future net cash flow is presented on pages 60
through 65 of this report. During 1995, certain estimates of underground oil and
gas reserves were filed with the Department of Energy under the name of Union
Oil. Such estimates were consistent with reserve data filed with the
Securities and Exchange Commission.

WORLDWIDE OIL AND GAS ACTIVITIES

   Unocal conducts exploration, production and development activities, including
low-risk exploration within producing areas with major operations in the United
States, Thailand, Indonesia and Canada.  Exploration and production
operations make up approximately 48 percent of Unocal's assets, and of this,
operations in the United States make up 65 percent of the current asset base.
Unocal's future growth will focus principally in the foreign sector, with a
concentration in the Far East. In addition, growth opportunities in the United
States will focus in the Gulf of Mexico.
<TABLE>
<CAPTION>
 
WORLDWIDE                                  1995    1994    1993
----------------------------------------------------------------
<S>                                        <C>     <C>     <C>
NET PROVED RESERVES AT YEAR END: (a)
 Crude oil and condensate - million          667     697     764
  barrels
 Natural gas - billion cubic feet          6,765   6,911   6,632
NET DAILY PRODUCTION: (a)
 Crude oil and condensate - thousand             
  barrels                                    240     260     246
 Natural gas - million cubic feet          1,765   1,766   1,599
 Natural gas liquids - thousand barrels       21      22      20
NATURAL GAS SALES TO PUBLIC - MILLION      1,513   1,529   1,422
 CUBIC FEET DAILY
----------------------------------------------------------------
</TABLE>

     (a)  Includes foreign production sharing agreements on a gross basis.
          Natural gas is reported on a wet-gas basis; production excludes gas
          consumed on lease.

   The decrease in worldwide crude oil production was mainly due to natural
production declines and the sale of nonstrategic domestic properties.  Due to
the accelerated development program initiated in 1993, worldwide natural gas
production remains stable, despite the sales of domestic oil and gas producing
properties.

   Operating expense decreased in 1995 due primarily to the sale of nonstrategic
domestic properties and cost reductions. In 1995, average production costs per
barrel of oil equivalent were $2.94, down from $3.00 and $3.40 for 1994 and
1993, respectively.

   Unocal pursues exploration opportunities and business development projects to
sustain the long-term growth of the company. The company's exploration activity
in high-risk, high-potential wildcat areas is limited to projects that pass
rigorous geotechnical and economic review. This assures concentration of
technical talent and resources on the most promising areas which have the
highest potential value to the company.

                                       2
<PAGE>
 
UNITED STATES

EXPLORATION

   In an effort to reduce exploration risk, Unocal has formed drilling venture
teams to actively solicit opportunities to farm into ready-to-drill projects in
parts of Texas, Oklahoma, Louisiana and the Gulf of Mexico.  The company
anticipates this approach will not only reduce risk, but will also put cash to
work more efficiently, offer cash flow recovery and provide upside potential if
energy prices rise.

   The company holds approximately 1.2 million net acres of unproved lands in
the United States.  Most of these lands are located in Alaska, Louisiana, Texas,
California and New Mexico.  Unproved acreage in federal offshore exploration and
production areas is included in the contiguous states.

   Unocal concentrates its domestic exploration activities in the Gulf of
Mexico.  The company foresees exploration potential along the entire Louisiana
Coast.  In 1996, Unocal has plans to drill 16 offshore exploration wells and
4 onshore Texas/Louisiana coast wells.  The company is also planning 24
development wells and 141 recompletions.  Unocal has recently leased eight deep-
water blocks in a lease sale. The company has acquired 3-D surveys for use in
evaluating exploration potential near existing fields. In the past, these types
of surveys have identified opportunities which resulted in increased production.

PRODUCTION

   The company holds approximately 815,000 net acres of proved lands in 19
states.  Most of these lands are located in Texas, Louisiana, California,
Alaska, Oklahoma, and New Mexico.  Proved acreage in federal offshore
exploration and production areas is included in the contiguous states.

   Unocal's domestic crude oil production comes principally from fields in
Alaska (32%), California (23%), Texas (19%) and Louisiana (21%).  Approximately
43% of domestic natural gas production is from offshore and onshore fields in
Louisiana, with most of the balance coming from Texas (26%), Alaska (13%), New
Mexico (4%), Oklahoma (3%) and California (2%).

   Unocal has varying ownership interests in 21 natural gas processing plants
located near major gas fields in the United States.  Of the 21 natural gas
processing plants, interests in 3 are included in the expected sale of the
California oil and gas producing properties.  The company operates 11 of these
plants and has full ownership in four.  Nineteen of the  21 processing plants
were active in 1995.
<TABLE>
<CAPTION>
 
UNITED STATES                              1995    1994    1993
----------------------------------------------------------------
<S>                                        <C>     <C>     <C>
NET PROVED RESERVES AT YEAR END:(a)
 Crude oil and condensate - million          387     419     483
  barrels
 Natural gas - billion cubic feet          3,261   3,580   3,727
NET DAILY PRODUCTION:(a)
 Crude oil and condensate - thousand         125     137     148
    barrels
 Natural gas - million cubic feet          1,103   1,095     952
 Natural gas liquids - thousand               16      16      15
    barrels 
NATURAL GAS SALES TO PUBLIC - MILLION        882     873     752
 CUBIC FEET DAILY
----------------------------------------------------------------
</TABLE>

     (a)  Natural gas is reported on a wet-gas basis; production excludes gas 
consumed on lease.

   The decline in crude oil and condensate production reflects the sale of
nonstrategic oil and gas producing properties and natural production decline.
The company expects oil and gas production to further decline in 1996 due to the
sale of its California oil and gas producing properties anticipated to be
completed in April 1996.  Domestic natural gas production in 1996 is expected to
be 58% of the company's total production with most coming from the
Louisiana/Gulf Coast area. Even though Unocal's 1995 domestic natural gas
production remained at about the same level as 1994, production in the Gulf of
Mexico has increased over 30 percent since 1993.

                                       3
<PAGE>
 
   Most of the company's crude oil produced in the United States is sold to
third parties.  A substantial portion of the natural gas produced domestically
is sold to third parties under contracts having terms of less than two years.
The company believes that it has sufficient production capacity in the U.S. to
meet the contracted deliveries.  Another significant portion of the domestic gas
production is sold to third parties in the spot market.  The remainder is
primarily used in the company's agricultural products manufacturing operations
or as fuel in its refineries.

FOREIGN

EXPLORATION

   Unocal pursues oil and gas exploration and development opportunities
overseas, primarily in Thailand, Azerbaijan, Myanmar and Indonesia. Unocal is
also pursuing oil and gas exploration and development opportunities in
Turkmenistan, Pakistan, China and Vietnam.

   THAILAND.  Considerable exploration potential still exists in the Gulf of
Thailand.  Natural gas markets for electricity generation are projected to grow
by 50 percent by the year 2000 and double by 2010.

   During 1995 and early 1996, Unocal drilled 29 exploration, appraisal and 
delineation wells, of which 22 were successful. This program has extended the 
limits of currently producing fields, proved commerciality of the Pladang and 
Trat fields and delineated the Pailin field. Further drilling is expected to 
take place in Pailin in 1996, subject to the signing of the Pailin gas sales 
agreement, to extend the field to the north and potentially increase the 
ultimate daily contract quantity.

   AZERBAIJAN.  Unocal is part of an international consortium participating in
the development of three oil fields in the Caspian Sea offshore Azerbaijan.  In
October 1995, the consortium announced two pipeline routes for the export of
initial oil production from Azerbaijan to the Black Sea.  The success of the
initial oil program will help determine the feasibility of full field
development.  A delineation drilling program, scheduled for completion in 1997,
will help determine proved reserves in the three fields.  Unocal holds a 9.5
percent interest.  Significant issues remain to be resolved, including
contractual agreements and the routing and construction of a new export
pipeline, before full field development can begin.

   MYANMAR. During 1996, a major focus of capital spending will be the Yadana
project offshore Myanmar of which Unocal holds a 28.26 percent interest. This
natural gas project, which is expected to include four offshore platforms,
should begin operations by mid-1998. When fully developed, estimated gross
production is expected to reach 650 million cubic feet of natural gas per day in
1999. Most of the Yadana natural gas production will be shipped by pipeline to
an electric power plant southwest of Bangkok, Thailand.

   In March 1996, a potentially significant new gas field was discovered about
six miles south of the Yadana field.  Further studies are under way to prove the
commerciality of the new discovery.  The discovery could be produced through the
Yadana platform complex currently under construction.

   INDONESIA.  Oil and gas production has been revitalized in Indonesia as a 
result of a successful exploration and development program. Since December 1993,
when the current exploration phase started, Unocal drilled 25 exploration, 
delineation and appraisal wells, of which 15 were successful. Fifteen of these 
wells were drilled in 1995, with nine successes.

   The Company conducted an extensive exploration 3-D seismic program in 1995 
and another program is planned for early 1996. An aggressive exploration and 
delineation drilling program is also planned for 1996, which will use drilling 
technology developed by the company to drill as many as 30 wells in one year. 
The company will continue to seek new production sharing agreements in 
Indonesia.

                                       4
<PAGE>
 
PRODUCTION

   Unocal has oil and gas production in six foreign countries:  Thailand,
Indonesia, Canada, the Netherlands, United Kingdom and Zaire.  Overseas, Unocal
is the operator in each of these countries except Zaire.  The company sells most
of its foreign natural gas production to third parties under long-term
contracts.  The crude oil and condensate produced overseas are primarily sold at
spot market prices to third parties.
<TABLE>
<CAPTION>
 
 
FOREIGN                                    1995    1994    1993
----------------------------------------------------------------
<S>                                        <C>     <C>     <C>
NET PROVED RESERVES AT YEAR END: (a)
 Crude oil and condensate - million          280     278     281
  barrels
  Natural gas - billion cubic feet         3,504   3,331   2,905
 NET DAILY PRODUCTION: (a)
   Crude oil and condensate - thousand       115     123      98
    barrels
   Natural gas - million cubic feet          662     671     647
   Natural gas liquids - thousand barrels      5       6      5     
 NATURAL GAS SALES TO PUBLIC - MILLION       
 CUBIC FEET DAILY                            631     656     670
----------------------------------------------------------------
</TABLE>

     (a)  Includes production sharing agreements on a gross basis.  Natural gas
          is reported on a wet-gas basis; production excludes gas consumed on
          lease.

   THAILAND.  Natural gas and condensate production began in Thailand in 1981
and is Unocal's primary gas producing area outside the United States.  Unocal
and its partners have spent more than $3.9 billion developing the offshore gas
fields.  In 1996, the Company expects to spend approximately $160 million on 
projects that will allow gross production to remain at 950 million cubic feet 
of gas per day, once a second pipeline becomes operational.

   Gross natural gas production averaged about 720 million cubic feet (mmcf) per
day (466 mmcf net to Unocal) in 1995.  Construction of the Petroleum Authority
of Thailand's (PTT) second pipeline is expected to be completed by mid-1996.
This second pipeline should allow Unocal to increase its net gas production from
466 mmcf per day in 1995 to 550 in 1996 and to 655 in 1998, mainly attributable
to the Jakrawan, Funan and Gomin fields. Unocal's net working interests in all
eight producing fields average 65 percent.

   The company is negotiating a separate gas sales agreement related to the
development of the Pailin field where gross reserves may exceed one trillion
cubic feet.  Production from Pailin should start in 1998 at a gross rate of 150
million cubic feet per day and may peak at a rate of 250 million cubic feet per
day by 1999.  Unocal's  share in this field is 35 percent.

   Unocal's future development plan in the Gulf of Thailand calls for
delineation and additional development of the eight fields operated by Unocal
under the existing gas sales contracts and the new Pailin field.  For the next
four years, the company plans to drill nearly 380 wells and install 32
additional production platforms.  Estimated gross capital expenditures over the
four year period are $1.0 billion ($632 million net for Unocal).

   Natural gas demand in Thailand is expected to continue its active growth over
the next 10 to 15 years, providing a market for increased production from the
Gulf of Thailand.

   Unocal's natural gas production in Thailand is sold under long-term
contracts.  The contract prices are based on formulas that allow prices to
fluctuate with market prices.  The company has typically supplied more natural
gas to PTT than is called for in the daily contract quantity provisions of its
sales contracts.  In any event, the company's obligation to deliver gas to PTT
is limited to the available economic production from its properties in Thailand.

   INDONESIA.  Unocal operates seven producing oil and gas fields.  Discoveries
and extensions have increased production to the highest levels in more than a
decade.  Net production in 1995 averaged about 68,000 barrels of oil and 179
mmcf of natural gas per day.

   During 1995, the Seguni field was discovered and is
expected to begin production early in 1996 from four wells at about 10,000 
barrels of oil per day. The time from discovery to production is expected to be 
significantly reduced at this field, due to an innovative early production 
system. Further delination of this field is planned for 1996. In 1997, the 
Santan field is expected to start production, and the company is also planning a
waterflood project in the Attaka field, which has already produced over 500 
million barrels of crude oil.

                                       5
<PAGE>
 
   CANADA.  Net crude oil production averaged 13,900 barrels per day in 1995,
down from 14,600 barrels per day in 1994.  The decrease was due to natural
production declines in mature fields and the sale of the Kidney field.
Partially offsetting the decrease was the purchase of an additional working
interest in the Virginia Hills unit.

   Unocal Canada operates the Aitken Creek natural gas storage facility in
Northern British Columbia and has a working interest of approximately 94
percent.  During 1995, fixed-price seasonal contracts were negotiated and
resulted in the company receiving prices for winter sales which are currently
averaging 30 to 35 percent more than the spot market.  The contracts 
provide take-or-pay protection for the company.

   NETHERLANDS.  Daily gross oil production from Unocal's five offshore fields
averaged 14,000 barrels in 1995, up 6,100 barrels from 1994.  Unocal holds an 80
percent working interest in all five fields.  Gross natural gas production was
19 mmcf per day from two offshore gas fields.  Unocal holds a 46 percent working
interest in both fields.  The company is currently pursuing advice to assist in
the disposal of oil and gas interests in the Netherlands sector of the North
Sea.

   UNITED KINGDOM.  Gross production from the Heather field averaged 6,400
barrels of oil per day in 1995, down 15 percent from a year ago.  The field is
approaching the end of its production life and the company expects to abandon
the field within the next few years.  Unocal holds a 31.25 percent interest in
this field.

   ZAIRE.  Gross production from five fields averaged 19,600 barrels of oil per
day in 1995, compared with 18,100 barrels per day in 1994.  Production from new
fault blocks accounted for the increase in production.  Unocal holds a 17.7
percent interest in these fields.

   In light of the changing political climates and relationships between
international oil companies and host governments in the foregoing countries and
other parts of the world, including changes in posted or tax-reference prices
for crude oil, increases in tax rates (sometimes retroactive) and demands for
increased participation in the ownership of operations, there could be changes
in the status of Unocal's exploration and production activities in these and
other foreign countries during the coming years.

                                       6
<PAGE>
 
<TABLE>
<CAPTION>
OIL AND GAS ACREAGE
                                 As of December 31, 1995
                                  (thousands of acres)
                         ------------------------------------------
                           Proved Acreage      Prospective Acreage
                         -----------------   ----------------------
                         Gross      Net         Gross         Net
                         ------   --------   ------------   -------
<S>                      <C>      <C>        <C>            <C>
         United States    1,197        815          1,562     1,218
         Far East           417        257         11,754     6,930
         Other Foreign      262        141          4,978     1,834
                          -----      -----         ------     -----
           Total          1,876      1,213         18,294     9,982
                          =====      =====         ======     =====
 
</TABLE> 

 PRODUCIBLE OIL AND GAS WELLS
<TABLE> 
<CAPTION> 

                                  As of December 31, 1995
                          -----------------------------------------
                                 Oil                   Gas
                          -----------------   ----------------------
                          Gross      Net         Gross         Net
                          ------   --------   ------------   -------
<S>                       <C>      <C>        <C>            <C>          
         United States    5,514      3,740          1,827       881
         Far East           221        155            398       295
         Other Foreign    1,253        502            106        66
                          -----      -----         ------     -----
           Total          6,988      4,397          2,331     1,242
                          =====      =====         ======     =====
 </TABLE> 
 
   The company had 143 gross and 91 net producible wells with multiple
completions.
 
 
DRILLING IN PROGRESS

<TABLE> 
<CAPTION> 
                                   As of December 31, 1995
                                   -----------------------
                                     Oil and Gas Wells
                                   -----------------------
                                    Gross          Net
                                   -------        --------
<S>                                <C>            <C>       
        United States                   34              18
         Far East                       85              56
         Other Foreign                   5               2
                                     -----          ------
           Total                       124              76
                                     =====          ======
 
</TABLE>

   The company had one waterflood project in process of installation at December
31, 1995.



NET OIL AND GAS WELLS COMPLETED AND DRY HOLES
<TABLE>
<CAPTION>
 
                          Productive              Dry
                      ------------------   ------------------
                      1995   1994   1993   1995   1994   1993
                      ----   ----   ----   ----   ----   ----
<S>                   <C>    <C>    <C>    <C>    <C>    <C>
     Exploratory
      United States     15      7      9     11     10     11
      Far East           7      9      4      7      3      3
      Other Foreign      3      4      1      5      6      4
                      ----   ----   ----   ----   ----   ----
       Total            25     20     14     23     19     18
                      ====   ====   ====   ====   ====   ====
 
     Development
      United States    113    137    164      5      2      7
      Far East          38     50     60      -      4      4
      Other Foreign     32     19     17      1      4      2
                      ----   ----   ----   ----   ----   ----
       Total           183    206    241      6     10     13
                      ====   ====   ====   ====   ====   ====
</TABLE>

                                       7
<PAGE>
 
REFINING, MARKETING AND TRANSPORTATION -- 76 PRODUCTS COMPANY

   This business segment is principally responsible for the company's West Coast
petroleum refining operations, marketing and transportation of refined petroleum
products and the manufacturing and marketing of petroleum coke.

REFINING

   The company owns three refineries in California that are operated by 76
Products Company, which carries out the company's refining and marketing
activities.  The refineries manufacture a complete line of high-quality
petroleum products, including automotive gasoline, jet and turbine fuels,
kerosene, diesel oils, automotive and industrial lubricating oils and petroleum
coke. Green petroleum coke, a by-product of refining operations, is calcined for
use in aluminum production and other industrial applications. Green coke is also
used as a fuel. Calcining plants are located adjacent to the Santa Maria and San
Francisco refineries.

   Rated capacities of crude oil processing units for the refineries are
summarized below:
<TABLE>
<CAPTION>
 
Refinery                                               Barrels Per Day
----------------------------------------------------   ---------------
<S>                                                    <C>
 
         Los Angeles-Wilmington and Carson plants              130,000
         San Francisco                                          77,000
         Santa Maria                                            44,000
</TABLE>
   The Santa Maria refinery produces unfinished products for further processing
at the company's Los Angeles and San Francisco refineries.

   Upgrades to the Los Angeles and San Francisco refineries are now complete
and higher valued products are being produced along with the new reformulated
gasolines (RFG) required by the California Air Resources Board. RFG must be sold
at the retail level by June 1, 1996. The major construction at the refineries
required to manufacture RFG was completed over a three-year period at a cost of
approximately $400 million, $50 million under budget.

   The company's input to crude oil processing units and refinery production
data are shown below:
<TABLE>
<CAPTION>
 
Thousand barrels per day                   1995   1994   1993
-------------------------------------------------------------
<S>                                        <C>    <C>    <C>
Input to crude oil processing units:
   Crude oil                                203    218    205
   Other materials                           10     13     12
                                           ----   ----   ----
     Total                                  213    231    217
                                           ====   ====   ====
 
Refinery production:
   Gasoline                                 110    115    113
   Jet fuel, kerosene and heating oil        24     21     22
   Diesel fuel                               38     35     28
   Other products (lubricants, gas           62     78     71
    oils, etc.)                            ----   ----   ----
     Total                                  234    249    234
                                           ====   ====   ====
</TABLE>

   The decrease in refinery production in 1995 was primarily due to extended
scheduled maintenance at the refineries early in the year.

                                       8
<PAGE>
 
MARKETING

   The company markets gasoline and other refined petroleum products in the
western United States under the "Unocal 76" trade name.  Gasoline is marketed,
directly or through marketers, to consumers at retail service stations, while
jet fuels, diesel fuel, lube oil and heavy fuel oil are marketed to commercial
users.  A significant majority of retail outlets, including locations owned and
leased by the company, are operated by independent dealers.  The retail outlets
also sell branded tires, batteries and other automobile accessories.  Unocal
currently operates about five percent of the retail outlets and is working
toward operating between 20 to 25 percent.

   Unocal's retail marketing covers six western states: California, Arizona,
Nevada, Hawaii, Washington and Oregon.  The company has an approximate 13.6
percent market share in the greater Los Angeles metropolitan area, which is one
of the world's largest and most competitive regional gasoline markets.  The West
Coast marketing network includes about 1,300 branded retail outlets (1,100 of
which are in California) and  13 proprietary terminals.

   The company will continue to expand its marketing operations at retail
outlets with the addition of new businesses to certain existing locations, such
as FastBreak convenience stores, ProWash car washes, AutoPulse car maintenance
services and quick-service restaurants.  The company is also working to increase
gasoline retail sales volumes by installing credit card readers at the
dispensers and reconfiguring the service islands. In February 1996, Unocal
entered into a strategic alliance with Fleetman, Inc. to market Fuelman Fleet
Cards and also signed a Memorandum of Understanding with Southern Counties Oil
Company/Cardlock Fuels System which could lead to joint construction,
development and operation of unattended commercial fueling facilities throughout
California. These agreements position the company as a leader in the West Coast
commercial fleet fuel business.

   The company is actively pursuing joint ventures and alliances in order to
improve its standing in markets outside California and Hawaii.  In October 1995,
Unocal and Circle K Corporation (Circle K), one of the nation's leading
convenience store operators, signed a branding/licensing agreement for more than
400 Circle K sites in the Phoenix and Tucson, Arizona markets. In addition,
Unocal expects to brand and supply 20 existing Circle K sites in Las Vegas,
Nevada and the two companies plan to co-develop new service stations/convenience
store sites in the Las Vegas area.  In February 1996, Tosco Corporation, a
petroleum refiner and marketer, announced that it had entered into a merger
agreement with Circle K.

   The company's sales volumes of refined products are as follows:
<TABLE>
<CAPTION>
 
Thousand barrels per day                   1995   1994   1993
-------------------------------------------------------------
 
<S>                                        <C>    <C>    <C>
Gasoline                                    145    133    129
Jet fuel, kerosene and heating oil           35     30     27
Diesel fuel                                  45     37     32
Other products (lubricants, gas oils,        44     52     46
 etc.)                                     ----   ----   ----
   Total                                    269    252    234
                                           ====   ====   ====
 
</TABLE>
   The increase in 1995 refined product sales volumes compared with 1994 is
primarily related to the outside purchase and resale of refined products to
other than retail customers.


TRANSPORTATION

   The 76 Products Company has various interests in West Coast pipelines, 
through which crude oil production and purchases are transported to the
company's refineries or to selling locations.

   At year-end 1995, the company's marine fleet consisted of one crude oil
tanker and two refined product tankers.  The company also has an extensive fleet
of product tank trucks.

                                       9
<PAGE>
 
GEOTHERMAL AND POWER OPERATIONS

   This segment is involved in the exploration for and the production and sale
of geothermal resources for the generation of electricity.  Unocal is the
world's largest supplier of geothermal energy for power generation, with major
operations in California, the Philippines and Indonesia.  The production of
geothermal resources for power generation has been a core business for Unocal
for a quarter of a century. Unocal holds over 100 geothermal patents in five
countries. The company currently supplies geothermal energy for about 1,850
megawatts of installed generating capacity worldwide. Capital expenditures  are
expected to more than double to $110 million in 1996, focusing on projects in
Indonesia.

   In November 1994, Unocal signed amended agreements with PERTAMINA, the 
Indonesian state energy company, and PLN, Indonesia's state utility, to develop 
and produce the Gunung Salak geothermal resource and to build and operate three
new 55-megawatt electrical generating plants at the field on Java. These plants
in addition to a third new 55-megawatt plant being built by PLN are expected to
begin operation mid-1997. PLN operates two 55-megawatt electrical generating
power plants that began operation during late 1994. When fully operational, the
six electrical generating power plants will have a combined capacity of 330
megawatts (100 million barrels of oil equivalent over a project life of 30
years). The company will provide steam to all six of the Salak power plants and
sell the electricity generated by the three plants to PLN.

   During 1995, in the Sarulla contract area on the island of Sumatra in
Indonesia, a discovery well was drilled that indicated a highly productive
geothermal resource.  The slimhole well tested sufficient steam to fuel 23
megawatts of generating capacity. The company, which holds a 90 percent interest
in the contract area, is continuing additional resource delineation to confirm
commerciality of the field. Exploration of the 240,000-acre tract is being
conducted under a 1993 contract signed with PERTAMINA, Indonesia's state oil and
gas company. The contract calls for Unocal to explore for, appraise and develop
geothermal resources of up to 1,000 megawatts (315 million barrels of oil
equivalent over a project life of 30 years). If further drilling confirms the
existence of commercially exploitable resources, Unocal will also build and
operate power plants with the first of these scheduled to begin power
generation in 1999 under an energy sales contract with PLN. The company expects
to conduct additional exploration work at Sarulla.

   Unocal has been involved in the exploration and development of geothermal
resources in the Philippines since 1971.  The company operates the Tiwi and Mak-
Ban geothermal fields which commenced production in 1979.  In 1995, the
Philippine National Power Corporation (NPC) selected Unocal as a strategic
partner in NPC's privatization efforts.  The company will participate in the
rehabilitation of the 330-megawatt Tiwi and 330-megawatt Mak-Ban power plants.
Unocal expects to participate in the ownership and operation of both the
geothermal resource and power plants.

   Unocal has operated The Geysers, a dry-steam reservoir in Northern
California, since 1967.  The geothermal steam produced is purchased by a public
utility for power generation.  In 1996, the company is scheduled to begin a
project to inject waste water from municipal treatment plants to recharge the
reservoir. This injection project should increase the productivity and extend
the life of this mature steam field.

   Below are geothermal reserves and operating data:
<TABLE>
<CAPTION>
                                                            1995      1994      1993
                                                        ------------------------------
<S>                                                           <C>       <C>       <C>
Net proved geothermal reserves at year end:
 - billion kilowatt-hours                                      144       143       125
 - million equivalent oil barrels                              216       215       188
Net daily production 
  - million kilowatt-hours                                      16        21        20
  - thousand equivalent oil barrels                             24        31        30
Net geothermal lands in acres    
  - proved                                                  20,240    20,240    20,249
  - prospective                                            457,380   457,380   457,943
Net producible geothermal wells                                260       261       266
</TABLE>

   The lower net daily production in 1995 was due to seven months of
discretionary curtailments at The Geysers by the public utility due to an
abundant supply of low cost hydro-power available from record rainfalls and
depressed natural gas prices.  Steam production was lower in the Philippines due
primarily to damage to the Tiwi facilities caused by a November typhoon.
Increased production from Indonesian operations partially offset these
decreases.

                                       10
<PAGE>
 
   The present value of future net cash flows from proven geothermal reserves at
year-end 1995 was $555 million.  The net future cash flows are based on
estimated future revenues less future development and production costs and
income taxes.  A 10 percent discount factor was used in calculating the present
value.  Estimated future revenues are based on estimated generation of
electricity from proved reserves from existing and new facilities under
development and on actual prices for geothermal steam pursuant to long-term
service and energy sales contracts at year-end.  Development and production
costs related to future production are based on year-end cost levels and assume
continuation of existing economic conditions.  Income tax is computed by
applying the appropriate year-end statutory tax rates to pretax future cash
flows less recovery of the tax basis of proved properties, and reduced by
applicable tax credits.

   The company cautions readers that the data on the present value of future net
cash flows of geothermal reserves are based on many subjective judgments and
assumptions.  Different, but equally valid, assumptions and judgments could lead
to significantly different results.  Additionally, estimates of physical
quantities of geothermal reserves, power plant efficiency factors, minimum
contract purchase quantities, future rates of production and related prices and
costs for such production are subject to extensive revisions and a high degree
of variability as a result of economic and political changes. Any subsequent
price changes will alter the results and the indicated present value of
geothermal reserves.


DIVERSIFIED BUSINESSES

AGRICULTURAL PRODUCTS

   The Agricultural Products business unit manufactures and markets nitrogen-
based fertilizers for wholesale markets to the western United States and to the
Pacific Rim.

   Unocal's largest fertilizer manufacturing facility, located in Kenai, Alaska,
produces ammonia and urea for agricultural applications using natural gas as
feedstock.  The natural gas comes primarily from nearby Unocal-operated fields.
This manufacturing operation is supported by a system of West Coast terminals
and product upgrading plants in Kennewick, Washington and West Sacramento,
California.

   In 1995, Agricultural Products benefited from significant increases in
ammonia and urea products sales prices primarily due to high demand in
international markets.  This was partially offset by higher manufacturing costs
due to start-up expenses associated with an ammonia plant located in Finley,
Washington. Plant improvements were completed and production began in 
December 1995. Production from the Finley plant is targeted for domestic 
markets which will allow more of the Kenai, Alaska facility's marketable
production of ammonia and urea to target international markets.


CARBON AND MINERALS

   The Carbon and Minerals business unit produces and markets petroleum coke
(outside the West Coast), graphites, solvents, and specialty minerals.

   Green petroleum coke, a by-product of refining operations, is calcined for
use in aluminum production and other industrial applications.  Green coke is 
also sold in the United States and overseas as fuel.  A calcining plant is
located adjacent to The UNO-VEN Company's (UNO-VEN) Chicago Refinery.

   The Needle Coker Company, a joint venture equally owned by Unocal and UNO-
VEN, produces calcined needle coke at facilities also adjacent to UNO-VEN's
Chicago Refinery.  Needle coke is a high quality petroleum coke used to make
graphite electrodes for the production of steel in electric arc furnaces.

   Through its wholly owned subsidiary, Poco Graphite, Inc., the company
manufactures premium graphite materials for use in electrodes, semiconductors,
biomedical products and other advanced technologies.  The subsidiary experienced
its ninth consecutive year of sales growth.

   Unocal's mineral operations are carried out by Molycorp, Inc., a wholly owned
subsidiary, which mines, processes and markets lanthanides.  It operates a
lanthanide mine and mill and a chemical plant at Mountain 

                                       11
<PAGE>
 
Pass, California. Lanthanides have a variety of applications in industrial and
electronic products, including high-strength magnets, television phosphors, and
automobile and refining catalysts. Lanthanide markets have become highly
competitive over the past 10 years with the entry of suppliers from China, Japan
and Eastern Europe. Molycorp continued to focus its production on cerium, the
demand for which is growing for use in automobile catalytic converters,
polishing powders and glass to help filter ultraviolet radiation.

   Molycorp also owns an approximate 45 percent interest in Companhia Brasileira
de Metalurgia e Mineracao, a Brazilian company which is the world's largest
niobium producer.  Niobium is used as a hardening agent in steel.

   Molycorp, in response to increased molybdenum demand and prices, is expected
to resume operations in late 1996 at its molybdenum mine and mill in Questa, New
Mexico.  After being idle for approximately ten years, this mine is expected to
produce about 14 million pounds per year of molybdenum when it reaches full
production.  Molybdenum is used in the production of stainless and alloy steels,
nonferrous alloys, pigments, lubricants and catalysts.


PIPELINES

   Pipelines principally includes the company's equity interests in petroleum
pipeline companies in undivided interest systems and wholly owned pipeline
systems throughout the United States, other than California. As of December 31,
1995, Unocal had interests in more than 7,200 miles of refined product pipelines
and 6,500 miles of crude oil pipelines through these investments.

   Included in Unocal's pipeline investments are: 1) the Colonial Pipeline
Company in which the company holds a 20.75 percent equity interest.  The
Colonial Pipeline system runs from Texas to New Jersey and transports a
significant portion of all petroleum products consumed in its 13-state market
area; and 2) the Unocal Pipeline Company, a wholly owned subsidiary of Unocal,
holds a 1.36 percent participation interest in the TransAlaska Pipeline System
(TAPS) which transports crude oil from the North Slope of Alaska to the port of
Valdez in Alaska. In 1995, TAPS oil throughput averaged 1.6 million barrels per
day, of which Unocal's share was approximately 22,000 barrels per day.


   In February 1996, Unocal sold its 15 percent interest in the Platte Pipeline
Company, which owns 1,282 miles of crude oil pipeline.

OTHER OPERATIONS

   Unocal's real estate activities include the development and sale of certain
real estate assets for industrial, commercial and residential purposes.

   Unocal, through a subsidiary, owns a 50 percent interest in UNO-VEN, which
owns and operates a refinery near Chicago, Illinois, 11 product terminals, two
lubricant terminals and a lube oil blending and packaging plant. UNO-VEN has a
long-term crude oil supply agreement with a subsidiary of Petroleos de
Venezuela, S.A. (PDVSA), which provides 135,000 barrels per day of crude oil as
feedstock for the refinery through the year 2009. The purchase prices of the
crude oil are tied to refined product prices at the time of delivery. While this
arrangement limits UNO-VEN's refining margins, it has provided UNO-VEN with
earnings stability. All products produced from its refinery operations are
marketed under the "76" trade name. UNO-VEN supplies, directly or through
jobbers and marketers, approximately 2,500 service stations. UNO-VEN's wholesale
marketing and bulk distribution network consists of 250 terminals.

   UNO-VEN is an Illinois general partnership.  The managing general partners,
each with a 50 percent interest, are Midwest 76, Inc., a subsidiary of Union
Oil, and a subsidiary of PDV America Corp., (Petroleos de Venezuela America
Corp.).  PDV America Corp. is a wholly owned indirect subsidiary of PDVSA.

                                       12
<PAGE>
 
COMPETITION

   The energy industry is highly competitive. Unocal competes with numerous
companies in all phases of its petroleum operations. The company competes with
other producers and marketers of non-petroleum energy.

   Competition for finding, developing and producing oil and gas resources
occurs in bidding for domestic prospective leases or foreign exploration rights,
acquisition of geological, geophysical and engineering knowledge, and the cost-
efficient development and production of proved oil and gas reserves.  The future
availability of prospective domestic leases is subject to competing land uses
and federal, state and local statutes and policies.  The company's geothermal
and power operations are in competition with producers of other energy
resources.

   Competition also exists in the manufacture, distribution and marketing of
petroleum products.  In the refining segment, the ability to produce high-value
products at a competitive cost, while meeting regulatory standards, is of
primary importance.  On the marketing side, price, customer service, advertising
and new product development are the major factors affecting competition.  In the
Agricultural Products business, the key competitive factors for the company's
fertilizer products are prices, cost and availability of natural gas and other
raw materials.

EMPLOYEES

   As of December 31, 1995, Unocal had 12,509 employees compared to 13,127 a
year ago.  The decrease principally reflects the impact of business divestments
and a two-year restructuring program.  Of the total employees, 2,176 were
represented by various labor unions.

   Collective bargaining agreements covering represented employees at Unocal's
refineries and various other facilities were entered into during 1996.  Most of
these new labor agreements are for three-year terms.  See page 67 of this report
for information on total payroll and employee benefits costs.

GOVERNMENT REGULATION

   Certain interstate crude oil pipeline subsidiaries of Unocal are regulated
(as common carriers) by the Federal Energy Regulatory Commission (FERC).  As a
lessee from the United States government, Unocal is subject to Department of the
Interior regulations covering activities onshore and on the Outer Continental
Shelf (OCS).  In addition, state regulations impose strict controls on both
state-owned and privately-owned lands.

   Some federal and state bills would, if enacted, significantly and adversely
affect Unocal and the petroleum industry.  These include the imposition of
additional taxes, land use controls, prohibitions against operating in certain
foreign countries and restrictions on development.

   Regulations promulgated by the Environmental Protection Agency (EPA), the
Department of the Interior, the Department of Energy, the State Department, the
Department of Commerce and other government agencies are complex and subject to
change.  New regulations may be adopted.  The company cannot predict how
existing regulations may be interpreted by enforcement agencies or court
rulings, whether amendments or additional regulations will be adopted, or what
effect such changes may have on its business or financial condition.

ENVIRONMENTAL REGULATION

   Federal, state and local laws and provisions regulating the discharge of
materials into the environment or otherwise relating to environmental protection
have a continuing impact on the company's operations.  Significant federal
legislation applicable to the company's operations includes the following:  the
Clean Water Act, as amended in 1977; the Clean Air Act, as amended in 1977 and
1990; the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976, as amended in 1984; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended in 1986; the Toxic
Substances Control Act of 1976, as amended in 1986; and the Oil Pollution Act of
1990.  Various state and local governments have adopted or are considering the
adoption of similar laws and regulations.

                                       13
<PAGE>
 
   The California Air Resources Board and the federal government have both
adopted new standards for gasoline.  The Federal Clean Air Act Amendments of
1990 required the manufacture and sale of reformulated gasolines in areas not
meeting specified air quality standards commencing January 1, 1995.  These
requirements apply to the nine areas which have the worst ozone pollution,
including Los Angeles and San Diego.  The California Air Resources Board has
established stricter standards than those imposed by the federal rules.  These
standards for reformulated gasolines are to become effective for fuel production
at refineries commencing March 1, 1996 and for retail sales commencing on June
1, 1996.  Modifications to the company's refineries to meet these regulatory
standards were performed between 1993 and 1995 at a cost of approximately $400
million.

   The Air Quality Management Plan for the Los Angeles Basin, as adopted, and
the Clean Air Act Amendments could, by the year 2000, significantly and
adversely affect all of the company's petroleum operations in the Los Angeles
area, including its refining operations located near the Los Angeles harbor and
in Carson.  The company believes it can continue to meet the requirements of
existing laws and regulations, although changes in operating procedures and the
acquisition of additional pollution control facilities may be necessary to meet
future regulatory standards.

   The company has been a party to a number of administrative and judicial
proceedings under federal, state and local provisions relating to environmental
protection.  These proceedings include actions for civil penalties or fines for
alleged environmental violations, permit proceedings including hearing requests
into the issuance or modification of National Pollution Discharge Elimination
System (NPDES) permits, requests for temporary variances from air pollution
regulations for refinery operations, and similar matters.  The company has also
joined or intervened with the American Petroleum Institute, the Western States
Petroleum Association and with other oil companies in actions relating to
guidelines and proposed and final regulations of the EPA, the Department of the
Interior and other agencies.

     For information regarding the company's environmental-related capital
expenditures and charges to earnings and possibe future environmental exposure,
see Legal Proceedings below and the Environmental Matters section of
Management's Discussion and Analysis on pages 25 through 27 of this report.


ITEM 3 - LEGAL PROCEEDINGS

   There is incorporated by reference the information regarding environmental
remediation reserves in Note 17 to the consolidated financial statements on page
50, the discussion thereof in the Environmental Matters section of Management's
Discussion and Analysis, on pages 25 through 27 and the information regarding
contingent liabilities in Note 18 to the consolidated financial statements on
pages 50 and 51 of this report.

(1)  The matter previously reported regarding claimed violations concerning
     hazardous waste management at the company's Parachute Creek Oil Shale
     facility in Colorado has been settled.

(2)  The matters previously reported regarding claimed NPDES permit violations
     in Cook Inlet have been settled.  The company paid $140,000 to EPA;
     $499,000 to Greenpeace; and $36,524 to the Trustees for the State of
     Alaska.

                                       14
<PAGE>
 
(3)  The matter previously reported regarding the complaint filed by the Ventura
     County District Attorney for several alleged violations related to
     discharges of crude oil into state waters has been settled for a total
     payment of $27,000.

(4)  In December 1994, the company received notice of alleged violations from
     the EPA, Region IX, relating to New Source Performance Standards at its Los
     Angeles Refinery - Carson Plant. Civil penalties in excess of $100,000
     could be imposed.  Proceedings and negotiations are continuing.

(5)  In the litigation previously reported as Forty-Niner Truck Plaza Inc., et
                                              --------------------------------
     al. v. Unocal Corporation, et al. in Superior Court for Sacramento County,
     ------------------------------- 
     the trial court granted the company's motion for a new trial. That order is
     now on appeal. This matter does not appear to have a potentially material
     effect on the company's financial condition or results of operations, and
     no further reports will be made.

(6)  On April 13, 1995, Atlantic Richfield Company, Chevron U.S.A., Inc., Exxon
     Corporation, Mobil Oil Corporation, Shell Oil Products Company and Texaco
     Refining and Marketing, Inc. filed a lawsuit against the company regarding
     U.S. Letters Patent No. 5,288,393 issued to the company in 1994 and
     covering several patent claims for the composition of reformulated
     gasoline. (Atlantic Richfield Company, et al. v. Unocal Corporation, et
                ------------------------------------------------------------
     al., U.S.D.C., C.D. California, No. CV-95-2379-RG). The plaintiffs allege
     ----
     that the company's patent is invalid and unenforceable, and they seek
     declaratory relief for equitable estoppel and an injunction against
     enforcement.  The company has filed its answer as well as a counterclaim
     for patent infringement, lost royalties and further injunctive relief.
     Discovery and pretrial proceedings are continuing.

(7)  Between August 22 and September 6, 1994, a chemical known as "Catacarb" was
     released into the environment at the company's San Francisco Refinery near
     Rodeo, California.  Persons in the surrounding area have claimed that they
     were exposed to the chemical in varying degrees.  Since September 22, 1994,
     42 lawsuits have been filed by or on behalf of all persons, alleged
     to be several thousand, claiming that they or their property were adversely
     affected by the releases.  Thirty-nine of the lawsuits have been
     consolidated in the Superior Court for Contra Costa County under the
     caption In Re Unocal Refinery Litigation (Santos, et al. v. Unocal
             ----------------------------------------------------------
     Corporation), Case No. 94-04141.  The First Amended Model Complaint in this
     ------------
    consolidated action, filed on February 1, 1996, on behalf of individual
     plaintiffs and purported classes of plaintiffs, alleges personal injury,
     emotional distress, and increased risk of future illness on behalf of the
     named plaintiffs and all persons present in and around or downwind from the
     San Francisco Refinery, and property damage and loss or diminution of
     property value on behalf of all owners of real and personal property in the
     vicinity of the Refinery, resulting from the release of Catacarb by the
     Refinery.  Certain individual plaintiffs allege injury from alleged
     subsequent releases at the Refinery of hydrogen sulfide and other 
     chemicals. The Model Complaint seeks compensatory and punitive damages in
     unspecified amounts, equitable relief including the creation of a fund for
     medical monitoring and treatment of plaintiffs and members of the purported
     classes, statutory penalties and other relief. 

     The company is also presently in discussions with the EPA to settle an
     administrative Complaint issued on November 28, 1995, seeking approximately
     $490,000 in civil penalties for failure to report timely the Catacarb
     release and a subsequent release of hydrogen sulfide.  All state civil and
     criminal governmental investigations, claims and charges have been settled.

(8) Citizens for a Better Environment, et al. v. Union Oil Company of
    -----------------------------------------------------------------
     California, No. C94-0712, U.S. D.C., N.D. California, filed on March 2,
     ----------
     1994, alleges that as of February 28, 1994, the company's San Francisco
     Refinery was in violation of the selenium limit in its NPDES permit. The
     company denies that any violations have occurred. By a prior Cease and
     Desist Order issued after notice and hearing, the permitting agency, the
     California Regional Water Quality Control Board, deferred to July 1998, the
     effective date of the selenium limitation in question. The company's motion
     to dismiss the Citizens action was denied by the trial court. The
                           --------
     company believes that the court's ruling is in error and that it conflicts

                                       15
<PAGE>

     with precedent from two different federal circuits.  The Ninth Circuit
     Court of Appeals has accepted the appeal of the trial court decision.  That
     appeal is now pending and oral arguments are scheduled for April 8, 1996.

(9)  In September 1994, the California Regional Water Quality Control Board
     issued a Cleanup or Abatement Order relating to prior underground petroleum
     leaks along Front Street and vicinity in the town of Avila Beach,
     California.  In October 1994, the company initiated an administrative
     appeal proceeding and a related civil suit in the Superior Court for San
     Luis Obispo County for declaratory and injunctive relief and writ of
     mandate with respect to the soil and shallow ground water standard to be
     applied to the remediation.  The company has been working with local
     agencies and property owners for several years regarding the hydrocarbon
     presence in this location.  Various related civil suits have been filed or
     threatened.

(10) On March 23, 1994, a civil suit seeking various forms of penalties,
     restitution and remediation regarding contamination at the Guadalupe oil
     field was filed against the company by the California Attorney General on
     behalf of the Department of Fish and Game, the Regional Water Quality
     Control Board and the Department of Toxic Substances Control (People v.
                                                                   ---------
     Union Oil Company of California, Superior Court for San Luis Obispo County,
     --------------------------------
     Civil No. 75194).  The complaint alleges several categories of violations,
     namely, discharge into marine and state waters, failure to report
     discharge, destruction of natural resources, failure to warn, exposure
     to known carcinogens, public nuisance, unauthorized disposal of hazardous
     waste, and labeling violations for "recycled" diluent material.  Injunctive
     relief and civil penalties are demanded for the various claimed violations,
     as well as prejudgment and postjudgment interest, costs and reasonable
     attorney fees. Several related follow-on private civil actions have been
     filed, including a purported class action, or threatened, each seeking
     damages and various other forms of relief similar to those sought by the
     Attorney General.

     Trial settings have been vacated on motion of the California Attorney
     General. The next status conference is scheduled for July 19, 1996.

(11) In September 1994, the U.S. Minerals Management Service (MMS) issued an
     administrative compliance order assessing the company approximately $21
     million in royalty fees and interest associated with FERC Order No. 94.
     The company is presently negotiating with the MMS for a settlement of
     outstanding issues which could include this MMS assessment.

(12) In June 1994, the EPA filed an administrative complaint against the company
     seeking $252,000 in civil penalties for alleged late filing of certain
     reports regarding gas processing plant inventories under the Toxic
     Substances Control Act (TSCA) Inventory Update Rule.  The company notified
     the EPA that no reports for the gas processing facilities had been filed in
     1991.  Reports, due every four years, were filed in March 1994.  No public
     safety or environmental harm could be associated with these delayed reports
     or any alleged technical violation of the reporting rules, even if the
     rules are applicable.  The Gas Processors Association has urged an amnesty
     for past alleged violations and is seeking EPA clarification of application
     of these rules to natural gas streams for the next TSCA Inventory Update
     due later this year.  The company has appealed this complaint.

(13) On February 9, 1996, Bridas Corporation filed a petition in the District 
     Court of Fort Bend County, Texas alleging that the company and other
     defendants conspired to and did tortiously interfere with certain
     agreements and prospective business relations between Bridas and the
     government of Turkmenistan (Bridas Corporation v. Unocal Corporation,
                                 -----------------------------------------
     et al., Case No. 94144, 268th Judicial District). The Plaintiff alleges
     ------
     that as a result of the defendants' conduct, it has lost the ability to
     timely and reasonably develop, produce, transport, export and sell its
     interest in the Yashlar area of Turkmenistan, an area that includes the
     Yashlar field. The plaintiff also claims it has lost the opportunity to
     participate in a Turkmenistan-Pakistan pipeline project. The plaintiff
     seeks unspecified actual damages as well as punitive damages, plus interest
     at the highest lawful rate. On March 11, 1996, the defendants filed a
     notice of removal of the case to U.S. District Court, Southern District of
     Texas, Houston Division (Civ. No. H-906-0824).


                                       16
<PAGE>

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE.

EXECUTIVE OFFICERS OF THE REGISTRANT
 
Set forth below are the executive officers of Unocal Corporation as of March 1,
1996.
<TABLE> 
<CAPTION> 
 
NAME, AGE AND PRESENT
POSITION WITH UNOCAL               BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---------------------------------------------------------------------------------
<S>                             <C>
ROGER C. BEACH, 59              Mr. Beach has been Chairman of the Board
Chairman and Chief Executive    of Directors since April 1995 and Chief
 Officer                        Executive Officer since 1994.  He heads the
Director since 1988             Office of the Chief Executive Officer, formed in
Chairman of Management and      1994.  He served as President and Chief
 Executive Committees           Operating Officer from 1992 to 1994. Mr. Beach 
                                was President of the Unocal Refining &
                                Marketing Division from 1986 to 1992 and from 
                                1987 to 1992 also served as Senior Vice 
                                President.
---------------------------------------------------------------------------------
JOHN F. IMLE, JR., 55           Mr. Imle has been President since 1994.
President                       He directs the company's growth activities and
Director since 1988             Planning Department from the Office of the
Member of Management            Chief Executive Officer.  From 1992 to 1994 he 
 Committee                      served as Executive Vice President and 
                                President of the Energy Resources Division, 
                                which encompassed the company's worldwide oil,
                                gas and geothermal businesses. Mr. Imle was
                                Senior Vice President from 1988 until his
                                appointment as Executive Vice President.
---------------------------------------------------------------------------------
NEAL E. SCHMALE, 49             Mr. Schmale has been Chief Financial Officer
Chief Financial Officer         since 1994, when he joined the Office of the
Director since 1991             Chief Executive Officer. He served as Senior
Member of Management            Vice President of the company from 1988 to
 Committee                      1994.  Mr. Schmale was President of the
                                Petroleum Products & Chemicals Division (which
                                encompassed refining, marketing, chemicals and
                                minerals operations) from 1992 to 1994.  He was
                                President of the Unocal Chemicals & Minerals 
                                Division from 1991 to 1992.
---------------------------------------------------------------------------------
LAWRENCE M. HIGBY, 50           Mr. Higby has been a Group Vice President and
Group Vice President and        President of the company's 76 Products Company
 President, 76 Products         business segment since 1994.  From 1992 to 1994,
 Company                        he was Executive Vice President, Marketing for
                                the Los Angeles Times and Chairman for the
                                Orange County Edition. In 1991, he was Senior
                                Vice President, Consumer Marketing for the Los
                                Angeles Times and President of the Orange County
                                Edition. Prior to 1991, he was Senior Vice
                                President for Marketing, Programming and Sales
                                for Times Mirror Cable Television.
---------------------------------------------------------------------------------
JOHN W. SCHANCK, 44             Mr. Schanck has been Group Vice President, Oil
Group Vice President, Oil       and Gas Operations, since 1994.  From 1992 to
 and Gas Operations             1994, he was Vice President, Worldwide
                                Exploration, of the Energy Resources Division.
                                From 1989 through 1991, he was President of
                                Unocal Canada Limited.
---------------------------------------------------------------------------------
DENNIS P.R. CODON, 47           Mr. Codon has been Vice President, General
Vice President, General         Counsel and Chief Legal Officer since 1992.
 Counsel,                       He has been Corporate Secretary since 1990.
Chief Legal Officer, and        He served as Deputy General Counsel in 1990 
 Corporate                      and various other positions in the Law
Secretary                       Department prior thereto.
---------------------------------------------------------------------------------
CHARLES S. McDOWELL, 54         Mr. McDowell has been a Vice President since
Vice President and              1991 and Comptroller since 1986.
 Comptroller
</TABLE>

  The bylaws of the company provide that each executive officer shall hold
office until the annual organizational meeting of the Board of Directors held
June 3, 1996 and until his successor shall be elected and qualified, unless he
shall resign or shall be removed or otherwise disqualified to serve.

                                       17
<PAGE>

                                    PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
<TABLE>
<CAPTION>
 
 
                                                            1995 Quarters                        1994 Quarters
                                                -----------------------------------     -----------------------------------
                                                1st       2nd       3rd       4th       1st       2nd       3rd       4th
   ------------------------------------------------------------------------------------------------------------------------
 
<S>                                           <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
      Market price per common share -  high   $29-1/8   $30-1/8   $30-1/2   $29-7/8   $    30   $29-5/8   $30-3/4   $29-7/8
                                     -  low    25-1/4    27-5/8    26-7/8    24-3/4    24-7/8    24-3/8    26-5/8    25-5/8
      Cash dividends paid per common share        .20       .20       .20       .20       .20       .20       .20       .20
   ------------------------------------------------------------------------------------------------------------------------
 
</TABLE>

   Prices in the foregoing table are from the New York Stock Exchange Composite
Transactions listing.  On March 15, 1996, the high price per share was $32 and
the low price per share was $31-5/8.

   Unocal common stock is listed for trading on the New York, Pacific and
Chicago Stock Exchanges in the United States, on the Stock Exchange of Singapore
and on the Basel, Geneva and Zurich Stock Exchanges in Switzerland.

   As of March 15, 1996, the approximate number of holders of record of Unocal
common stock was 35,051 and the number of shares outstanding was 247,860,562.

   Unocal's quarterly dividend declared has been $.20 per common share since the
third quarter of 1993.  The previous quarterly dividend rate was $.175 per share
since the third quarter of 1989.  The company has paid a quarterly dividend for
80 consecutive years.

   ITEM 6 - SELECTED FINANCIAL DATA - SEE PAGE 67

                                       18
<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

<TABLE>
<CAPTION>
 
 
CONSOLIDATED RESULTS
<S>                                        <C>      <C>      <C>
 
Millions of Dollars                         1995     1994     1993
------------------------------------------------------------------
Net earnings excluding special items:      $ 297    $ 300    $ 347
 
Special items:
 Cumulative effect of accounting changes       -     (277)    (130)
 Impairment of long-lived assets (SFAS       (53)       -        -
  No. 121)
 Litigation                                  (37)     (43)     (30)
 Environmental remediation provisions        (26)     (99)     (10)
 Write-downs of assets                       (12)     (44)     (12)
 Asset sales                                  71        8       66
 Provision for abandonment and
  remediation of the Guadalupe oil field       -      (16)       -
 Restructuring costs                           -      (15)       -
 Other                                        20       33      (18)
 -----------------------------------------------------------------
   Net earnings (loss) including           
    special items                          $ 260    $(153)   $ 213
                                        --------------------------
</TABLE>
   The 1995 earnings excluding special items reflected lower margins for refined
petroleum products due primarily to lower refinery production, lower worldwide
crude oil production, lower average sales prices for natural gas and lower
geothermal steam production.  Partially offsetting these negative factors were
higher worldwide average crude oil sales prices and higher average sales prices
for agricultural products.

   Comparing the 1994 operating results with 1993, the reduction in earnings
reflected the adverse effects of lower average crude oil and natural gas prices
and lower margins in West Coast refining and marketing operations.  These
negative factors were partially offset by higher natural gas production, higher
foreign crude oil production, stronger agricultural products earnings, and lower
domestic oil and gas operating and depreciation expenses.

   In the above special items table, the Other category for 1995 included
benefits of $34 million from a bankruptcy settlement with Columbia Gas
Transmission Corporation (Columbia settlement) and $18 million from a settlement
to recover lease bonus and rentals relating to Outer Continental Shelf leases
offshore Florida and Alaska (OCS Settlement).  Partially offsetting these
benefits were charges of $18 million for a deferred tax adjustment and $14
million for a receivable write-down.  For 1994, the amount included a $24
million gain from the settlement of a lawsuit against Mesa Petroleum and a $9
million benefit related to the cancellation of the lease on the Unocal
headquarters building in downtown Los Angeles.  For 1993, the amount included a
$14 million charge for the effect of the federal tax rate change on deferred
taxes and a $4 million provision for the closure of the company's credit card
center.

REVENUES

   Consolidated revenues in 1995 were $8.4 billion, up $460 million from year-
end 1994 and up $81 million from 1993. The increase from 1994 was primarily due
to higher petroleum product sales volumes, agricultural products average sales
prices and gains on sales of assets.  The decrease in 1994 from 1993 was mainly
due to lower refined product prices and volumes.

COSTS AND OTHER DEDUCTIONS

   Adjusted to exclude special items, crude oil and product purchases, operating
expense, and selling, administrative and general expense totaled $5.3 billion in
1995, compared with $5.0 billion in 1994 and $5.3 billion in 1993. The increase
in 1995 was primarily due to increased expense for crude oil and product
purchases resulting from higher average crude oil prices and increased purchases
of refined products for resale due to extended maintenance activities at the
refineries.
 
                                       19
<PAGE>

   The higher depreciation, depletion and amortization expense in 1995 was due
to an $87 million charge resulting from the adoption of Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," as described in Note
2 to the consolidated financial statements.

   The company's interest expense increased in 1995 due primarily to higher
debt.

OIL AND GAS EXPLORATION AND PRODUCTION

   This segment is engaged in the exploration for, and the production and
marketing of crude oil, condensate, natural gas and natural gas liquids.
<TABLE>
<CAPTION>
 
Millions of Dollars                         1995     1994     1993
------------------------------------------------------------------
<S>                                        <C>      <C>      <C>
Net earnings excluding special items       $ 395    $ 406    $ 422
Special items:
 Columbia and OCS settlements                 52        -        -
 Asset sales                                  35        3       23
 Impairment of long-lived assets (SFAS       (53)       -        -
  No. 121)
 Write-downs of assets                        (8)     (15)       -
 Provision for abandonment and
  remediation of the Guadalupe oil field       -      (16)       -
 Other                                         -        -       (8)
 -----------------------------------------------------------------
   Net earnings including special items    $ 421    $ 378    $ 437
                                          ========================
</TABLE>

   The 1995 earnings excluding special items reflected lower worldwide crude oil
production and lower average domestic natural gas sales prices. Worldwide crude
oil production in 1995 averaged 240,400 barrels per day, down from 259,800 in
1994 and 246,000 in 1993. The decrease was mainly due to natural production
declines and the sale of nonstrategic domestic properties. The company's average
domestic sales price for natural gas was $1.56 per thousand cubic feet, down
from $1.78 in 1994 and $1.97 in 1993.

   Positive factors in 1995 were higher average worldwide crude oil sales
prices, lower effective foreign income tax rates and lower domestic operating
expense.  Unocal's average worldwide sales price for crude oil was $15.40 per
barrel in 1995, up from $13.63 in 1994 and $14.21 in 1993.  The decrease in
domestic operating expense was primarily due to sales of nonstrategic domestic
properties and cost reductions.  In 1995, the company reduced its worldwide
average production costs per barrel of oil equivalent to $2.94, compared with
$3.00 for 1994 and $3.40 for 1993.  Domestic natural gas production averaged
1,103 million cubic feet per day in 1995, up from 1,095 in 1994 and 952 in 1993.
The accelerated development program initiated in 1993, primarily in the Gulf of
Mexico, has allowed Unocal to keep its domestic natural gas production stable
despite the continuing sales of oil and gas properties.

   Comparing the adjusted 1994 results with 1993, the decrease reflected lower
worldwide natural gas and crude oil sales prices and lower domestic crude oil
production. The decrease in production was mainly due to asset sales and natural
declines.  Positive factors in 1994 were higher natural gas production, higher
foreign crude oil production and lower domestic operating expense.  The increase
in foreign crude oil production was due to new production in Indonesia and the
Netherlands.  The 1994 results also benefited from a $38 million reduction in
depreciation and depletion expense as a result of the change in accounting
policy for recognizing the reduction in value of the company's producing
properties, as described in Note 2.  The pro forma effect of this accounting
change on 1993 results would have been an increase in net earnings of $31
million.

REFINING, MARKETING AND TRANSPORTATION -- 76 PRODUCTS COMPANY

   This business segment is principally responsible for the company's West Coast
petroleum refining operations, marketing and transportation of refined petroleum
products, and the manufacturing and marketing of petroleum coke.

                                       20
<PAGE>

<TABLE>
<CAPTION>
 
Millions of Dollars                        1995     1994     1993
-----------------------------------------------------------------
<S>                                        <C>     <C>      <C>
Net earnings excluding special items       $  10   $  37    $  92
Special items:
 Asset sales                                   1       1        -
 Write-downs of assets                         -     (20)     (10)
 Litigation                                    -      (2)       -
 Environmental remediation provision           -      (2)       -
 Federal tax rate change                       -       -       (7)
 Closing of the credit card center             -       -       (4)
 ----------------------------------------------------------------
   Net earnings including special items    $  11   $  14    $  71
                                           ======================
</TABLE>

   The lower 1995 earnings excluding special items reflected lower refined
product margins and lower refinery production volumes due to extended
maintenance and modification activities early in the year.  These negative
factors were partially offset by California business tax credits of $18 million
(net of federal tax effect) related to refinery modifications to produce
reformulated fuels and by lower operating and selling expenses.

   Petroleum product sales volumes were 269,000 barrels per day in 1995, up from
252,000 barrels per day in 1994.  Due to scheduled refinery maintenance in
1995, the increased sales volumes and lower margins were principally related to
the outside purchase and resale of refined petroleum products to other than
retail customers.

   Comparing 1994 results with 1993, the decrease was principally due to lower
margins resulting from weak selling prices for refined products, which were
partially offset by lower crude oil and product purchase costs.

GEOTHERMAL AND POWER OPERATIONS

   This segment is involved in the exploration for, and the production and sale
of geothermal resources for the generation of electricity.
<TABLE>
<CAPTION>
 
Millions of Dollars                        1995    1994     1993
----------------------------------------------------------------
<S>                                        <C>     <C>     <C>
Net earnings excluding special items       $  19   $  32   $  21
Special items:
 Asset sales                                   7       -       6
 Federal tax rate change                       -       -      (1)
---------------------------------------------------------------- 
   Net earnings including special items    $  26   $  32   $  26
                                          ======================
</TABLE>

   The decreased 1995 earnings excluding special items resulted from lower steam
production and prices at The Geysers in Northern California and lower steam
production in the Philippines primarily due to damage to the Tiwi facilities
caused by a November typhoon. The lower production at The Geysers was due to
seven months of discretionary curtailments by the public utility company that
purchases the steam to generate electricity. The curtailments were the product
of abundant supplies of inexpensive hydro-power available from record rainfall
in the western U.S. and depressed natural gas prices. These negative factors
were partially offset by increased production and prices for Indonesian
operations. The increased production resulted from a full year of supplying
steam from the Gunung Salak field to power two 55-megawatt power plants that
began commercial operation during the third quarter of 1994. The power plants
are located on the island of Java and are operated by Indonesia's state utility
company.

   Comparing the 1994 operating results with 1993, the increase reflected higher
domestic earnings, primarily due to reduced depreciation expense at The Geysers,
and the start-up of Indonesian operations.

DIVERSIFIED BUSINESSES

   Agricultural Products manufactures and markets nitrogen-based fertilizers for
wholesale markets to the western United States and to the Pacific Rim. Carbon 
and Minerals produces and markets petroleum coke (other than on the West Coast),
graphites, solvents and specialty minerals. Pipelines principally includes the 
company's equity interests in affiliated pipeline companies. Other includes the 
development and sale of real estate assets and the company's equity interest in 
The UNO-VEN Company, a refining and marketing partnership in the midwestern 
United States.

                                       21
<PAGE>

<TABLE>
<CAPTION>
Millions of Dollars                        1995    1994     1993
----------------------------------------------------------------
<S>                                        <C>     <C>     <C>
Net earnings excluding special items
  Agricultural Products                    $  70   $  27   $  19
  Carbon and Minerals                         52      42      29
  Pipelines                                   66      56      52
  Other                                        6      14      18
----------------------------------------------------------------
 Total                                     $ 194   $ 139   $ 118
Special items:
  Agricultural Products                        4       2      (1)
  Pipelines                                    -       -       2
  Other                                        1       -      (2)
----------------------------------------------------------------
 Net earnings including special items      $ 199   $ 141   $ 117
                                           =====================
</TABLE>

   In 1995, Agricultural Products continued to benefit from significant
increases in ammonia and urea product sales prices primarily due to high demand
in international markets. This was partially offset by higher raw materials
costs and higher manufacturing costs due to start-up expenses associated with an
ammonia plant located in Finley, Washington. Plant improvements were completed
and production began in December 1995. Production from the Finley plant is
targeted for domestic markets. This will allow more of the Kenai, Alaska
facility's marketable production of ammonia and urea to target international
markets.

   Comparing the 1994 Agricultural Products earnings with 1993, the increase
reflected considerably higher margins on sales of ammonia and urea products,
particularly in Asian markets.

   In 1995, Carbon and Minerals benefited from higher petroleum coke and
lanthanide earnings.  The increase in 1994 from 1993 was primarily due to higher
lanthanide earnings.
<TABLE>
<CAPTION>
 
CORPORATE AND UNALLOCATED
<S>                                        <C>      <C>      <C>
 
Millions of Dollars                         1995     1994     1993
------------------------------------------------------------------
Net earnings effect excluding special
 items
  Administrative and General expense       $ (84)   $ (70)   $ (61)
  Net interest expense                      (178)    (174)    (193)
  Environmental and Litigation expense       (29)     (48)     (43)
  Other                                      (30)     (22)     (29)
------------------------------------------------------------------
    Total                                   (321)    (314)    (326)
Special items:
  Environmental and Litigation               (63)    (138)     (36)
   provisions
  Tax adjustments (Other)                    (18)       -       (1)
  Receivable write-down (Other)              (14)       -        -
  Write-downs of assets (Other)               (2)      (9)       -
  Asset sales (Other)                         21        2       34
  Mesa settlement (Other)                      -       24        -
  Restructuring costs (A&G)                    -      (15)       -
  UOC lease termination (Other)                -        9        -
 -----------------------------------------------------------------
    Net earnings effect including special  
     items                                 $(397)   $(441)   $(329)
                                           =======================
</TABLE>

   The higher Administrative and General expense in 1995 was primarily due to
the income tax effect of allocable expenses to foreign operations for tax
purposes and lower pension income.

   Net interest expense represents interest income and expense, net of
capitalized interest. The increase in 1995 was primarily due to higher debt,
while the decrease in 1994 reflected the benefit of refinancing debt at lower
interest rates.

                                       22
<PAGE>

   The Other category includes all unallocated corporate items and miscellaneous
operations.  In addition, this category, especially in prior years, includes the
earnings effects and close-down expenses of businesses that were sold or being
phased-out, such as the company's Process, Technology and Licensing business
(sold in 1995), national auto/truckstop system (sold in 1993), Imperial Valley
geothermal operations (sold in 1993), PureGro chemical operations (sold in
1993), and Southeast marketing operations (phased-out beginning in 1992).  This
category also includes corporate items such as tax adjustments and certain
special items noted in the above table.
<TABLE>
<CAPTION>
 
FINANCIAL CONDITION
<S>                                 <C>       <C>       <C>
 
Dollars in millions                   1995      1994      1993
--------------------------------------------------------------
Current ratio                          1.2       1.2       1.3
Total debt                          $3,706    $3,466    $3,522
Equity                              $2,930    $2,815    $3,129
Capital employed                    $6,636    $6,281    $6,651
Total debt/ capital employed            56%       55%       53%
Floating-rate debt/ total debt          24%       25%       16%
--------------------------------------------------------------
</TABLE>

   Cash flow from operating activities, including working capital and other
changes, was $1,277 million in 1995, $1,299 million in 1994 and $1,100 million
in 1993.  The 1995 amount included $200 million of proceeds from the sale of
trade receivables (see Note 23 to the consolidated  financial statements), $71
million from the Columbia settlement and $34 million from the OCS settlement.
These benefits were more than offset by temporary working capital changes.  The
1994 cash flow reflected decreased working capital requirements and significant
income tax refunds received during the year.  These benefits were partially
offset by lower operational earnings.  The 1993 amount reflected significant
payments for legal and tax settlements and an adjustment for a 1992 crude oil
forward sale.

   During 1995, the company generated $204 million in pretax proceeds from sales
of assets, primarily nonstrategic oil and gas properties and the company's
Process, Technology and Licensing business.  Proceeds from sales of assets in
1994 totaled $156 million, primarily from the sale of nonstrategic oil and gas
properties.  Proceeds of $586 million in 1993 included $218 million from the
sale of the Imperial Valley and other geothermal assets, $172 million from the
sale of the company's national auto/truckstop system and $106 million from the
sale of various nonstrategic oil and gas properties.

   In 1995 and 1994, the company also generated approximately $55 million and
$54 million, respectively, in cash from the sale of its common stock, primarily
through the Dividend Reinvestment and Common Stock Purchase Plan.

   The company's total debt at year-end 1995 increased by $240 million from a
year ago to $3,706 million.  The increase was primarily due to the carrying
values of debt-related currency swaps in the amount of $137 million being
classified as long-term receivables at December 31, 1995.  As a result, the
principal amounts of the company's foreign-currency debt, when stated at the
current exchange rates, totaled $350 million, an increase of $130 million from
year-end 1994. The difference between the carrying values of the currency swaps
and the increase in the principal amounts of the related foreign-currency debt
represents the net gain that would have occurred if the currency swaps and debt
had been settled at the end of December 1995. This classification has no effect
on the consolidated cash flow statement.

   For 1996, the company expects cash generated from operational earnings and
asset sales to be adequate to meet its operating requirements, capital spending
and dividend payments. In addition, the company has substantial borrowing
capacity to meet unanticipated cash requirements. At December 31, 1995, the
company had approximately $1.5 billion of undrawn commitments under various
credit facilities with major banks.

   The company's foreign operations have limited exposures to foreign currency
risks.  In most countries, energy products are valued and sold in U.S. dollars,
and foreign currency operating cost exposures have not been significant.  In the
Philippines and Thailand, the company is paid for product deliveries in the
local currencies, but at prices indexed to U.S. dollar valuations.  Such funds,
less amounts required for local currency-denominated obligations, are converted
to U.S. dollars as soon as practicable and periodically remitted to the U.S.
parent. The company's Canadian subsidiary is paid in Canadian dollars for its
crude oil and natural gas sales. Excess Canadian funds generally have been
invested in other Unocal foreign operations rather than remitted to the U.S.
parent.

                                       23
<PAGE>

   The company has only limited involvement with derivative financial
instruments.  The majority are debt-related and are used to manage interest rate
and foreign currency exchange rate risks.  The company also uses futures
contracts to hedge its exposure to fluctuations in petroleum commodity prices.
Such contracts covered less than one percent of the company's annual oil and gas
production at year-end 1995. Authorization from the Board of Directors is needed
before the company hedges more than 15% of its production of oil and gas,
refined products, and of crude oil purchased for refinery supply.
<TABLE>
<CAPTION>
 
CAPITAL EXPENDITURES
 
                                           Estimated
 Millions of Dollars                            1996     1995     1994     1993
-------------------------------------------------------------------------------
<S>                                        <C>         <C>      <C>      <C>
Exploration and Production
 Domestic                                     $  360   $  497   $  486   $  562
 Foreign                                         525      353      310      330
------------------------------------------------------------------------------- 
   Total                                         885      850      796      892
Refining, Marketing and Transportation
 76 Products Company                             220      422      367      231
Geothermal and Power Operations                  110       51       35       48
Diversified Businesses
 Agricultural Products                            14       55        8        8
 Carbon and Minerals                              24       12        8        4
 Pipeline                                          9        5        5        4
 Other                                             3        6       12        7
Corporate and Unallocated                         35       58       41       55
                                              ---------------------------------
     Total                                    $1,300   $1,459   $1,272   $1,249
                                              =================================
</TABLE>

   Capital spending in 1995 on foreign oil and gas exploration and production
was up 14 percent compared with 1994, primarily reflecting increased
expenditures in Myanmar, Indonesia, the Netherlands and Azerbaijan.  The $422
million spent by 76 Products Company during 1995 primarily reflected refinery
upgrades to complete environmental requirements for reformulated gasoline
required by the California Air Resources Board, and the addition of refinery
units to increase production of higher value products.  Capital spending on
geothermal energy projects in 1995 primarily focused on development work at the
Salak field on the island of Java and exploration drilling on the island of
Sumatra, in Indonesia.

   The forecasted 1996 capital expenditures will focus on development of
overseas oil and gas projects, particularly in Myanmar, Thailand, Indonesia and
Azerbaijan.  This capital plan reflects Unocal's continued emphasis on energy
development projects overseas with higher potential rates of return.

   The foreign petroleum exploration and production capital spending plan is up
49 percent from the 1995 amount. A major focus of this spending will be the
Yadana field development and pipeline project offshore Myanmar. This natural gas
project is expected to be in operation by mid-1998. In Thailand, the company
plans to develop its existing fields in order to increase natural gas production
capacity, as a second pipeline from the Gulf of Thailand to shore is being
constructed by the Thai government. In Indonesia, the company plans to further
develop new oil and gas reserves offshore East Kalimantan and accelerate its
successful exploratory drilling program by drilling 15 to 25 exploratory wells
in known producing basins as the first phase of a 65-well, multi-year program.
Another important overseas project is in the Caspian Sea, offshore Azerbaijan.
Unocal is a member of an international consortium that is moving forward with a
development program to begin initial oil production by mid-1997.

   The Louisiana/Gulf of Mexico area accounts for 64 percent of the 1996
domestic capital budget, as the company moves ahead with development of key
natural gas projects.

   The capital spending plan for petroleum exploration and production includes
$230 million for worldwide exploration.  Of this, $170 million, or 74 percent,
is planned for projects near existing operations that have a high potential for
success.

                                       24
<PAGE>

   Planned capital expenditures for 76 Products Company in 1996 are down 48
percent from 1995. The allocated capital for this segment has been significantly
reduced since refinery modifications have been completed to manufacture
California-mandated reformulated gasoline. Of the 1996 amount, about $95 million
is planned for marketing operations, mostly for the addition of new profit
centers to existing locations, such as convenience stores, car washes, quick-
service restaurants and car maintenance services. Another $85 million is planned
for the company's California refineries on projects to enhance profitability and
meet environmental regulations.

   Capital expenditures for Geothermal and Power Operations are expected to more
than double in 1996, focusing on projects in Indonesia. The company expects to
accelerate development of resource production facilities at the Salak field and
conduct additional exploration at the Sarulla contract area on the island of
Sumatra. The company also expects to be a 50 percent owner in a venture that
expects to build and operate power plants at the Salak field that will utilize
its steam production.

   The decrease in Agricultural Products capital spending in 1996 reflects
reduced expenditures for the startup of the Finley, Washington, ammonia
manufacturing plant.  The planned increase in capital spending for Carbon and
Minerals reflects anticipated projects at the Mountain Pass, Chicago Carbon and
Poco Graphite facilities.

ENVIRONMENTAL MATTERS

   Unocal continues to make substantial capital and operating expenditures for
environmental protection and to comply with federal, state and local laws and
provisions regulating the discharge of materials into the environment.  In many
cases, investigatory or remedial work is now required at various sites even
though past operations followed practices and procedures that were considered
acceptable under environmental laws and regulations, if any, existing at the
time.

   In 1995, the company recorded approximately $230 million in environment-
related capital expenditures, compared with an average of approximately $160
million per year for the prior three years. Estimated 1996 capital expenditures
for environment-related costs are $90 million.  The capital expenditures for
1994 and 1995 included significant amounts for refinery modifications to
manufacture reformulated gasoline for the California market.  No significant
capital expenditures related to reformulated gasoline are anticipated in 1996.

   The amount charged to 1995 earnings for remediation costs and for operating,
maintenance and administrative costs to maintain environmental compliance was
approximately $170 million, and such costs averaged approximately $270 million
per year for the prior three years, including $370 million in 1994. The amount
charged to 1994 earnings included provisions of $187 million for certain known
future environmental remediation costs, of which $152 million was recorded in
the fourth quarter of 1994. The 1994 fourth quarter provision was primarily the
result of an extensive and ongoing review by the company of its reserves for
environmental assessment/remediation costs and its procedures for monitoring
such reserves. In 1995, the company's continuing review identified additional
future remediation costs which resulted in provisions of $45 million that were
included in the amount charged to 1995 earnings.

   At December 31, 1995, the company's reserves for environmental remediation
obligations totaled $214 million, of which $83 million was included in other
current liabilities. The total reserve amount is grouped into five categories
and discussed below.

   SUPERFUND AND SIMILAR SITES.  At year-end 1995, Unocal had received
notification from the federal Environmental Protection Agency that the company
may be a potentially responsible party (PRP) at 40 sites and may share certain
liabilities at these sites.  In addition, various state agencies and private
parties had identified 30 other similar PRP sites that may require investigation
and remediation.  Of the total, the company has denied responsibility at 2 sites
and at another 13 sites the company's liability, although unquantified, appears
to be de minimis.  The total also includes 25 sites which are under
investigation or in litigation, for which the company's potential liability is
not presently determinable.  Of the remaining 30 sites, where probable costs can
be reasonably estimated, reserves of $32 million had been established for future
remediation and settlement costs.  These 70 sites are exclusive of 44 sites
where the company's liability has been settled or where the company has no
evidence of liability and there has been no further indication of liability by
government agencies or third parties for at least a 12-month period.

                                       25
<PAGE>

   Unocal does not consider the number of sites for which it has been named a
PRP as a relevant measure of liability.  Although the liability of a PRP is
generally joint and several, the company is usually just one of several
companies designated as a PRP.  The company's ultimate share of the remediation
costs at those sites often is not determinable due to many unknown factors as
discussed in Note 18 to the consolidated financial statements.  The solvency of
other responsible parties and disputes regarding responsibilities may also
impact the company's ultimate costs.

   FORMER COMPANY-OPERATED SITES.  Reserves of $35 million had been established
for this category of sites.  Of the total, $14 million was for approximately 190
service station sites on leased properties at which operations have ceased and
which the company is obligated to remediate before returning them to the owners.
Also included was $12 million for approximately 230 service station sites that
the company previously owned or leased. The  current owners of such properties
are holding the company responsible for environmental remediation costs.

   COMPANY FACILITIES SOLD WITH RETAINED LIABILITIES.  This category had
reserves of $71 million for accrued environmental liabilities related to major
company assets that were sold in prior years.  Included are the company's former
auto/truckstop facilities, a former mine site in Wyoming, industrial chemical
and polymer sites and agricultural chemical sites. In each sale, the company
retained a contractual remediation or indemnification obligation and is
responsible only for certain environmental problems associated with its past
operations.  The reserves represent presently estimated future costs for
investigation/feasibility studies and identified remediation work as a result of
claims made by buyers of the properties.

   Also included are reserves for the remediation of certain facilities which
were transferred to The UNO-VEN Company in 1989 in connection with its
formation. The facilities included the Chicago Refinery and related product
terminals and service stations. Under the UNO-VEN Asset Purchase and
Contribution Agreement, the company retained certain environmental liabilities
that would require Unocal to either manage remediation work or reimburse UNO-VEN
for remediation costs resulting from valid environmental claims. The agreement
required all claims to be filed by November 30, 1995. The company has not
completely evaluated the additional claims made by UNO-VEN near or on the
November 30, 1995 deadline; however, it does not anticipate that any additional
material liabilities beyond the current reserves will be incurred for these
claims.

   INACTIVE OR CLOSED COMPANY FACILITIES.  Reserves of $57 million had been
established for these types of facilities.  Major sites included in this
category are the former Beaumont refinery in Texas and the shale oil project and
a chemical facility in Colorado.  Also included in this category is the Questa
molybdenum mine in New Mexico. In the second quarter of 1995, an additional $9
million was added to the reserve for the estimated costs of  investigations  and
remedial activities for the Questa site.

   This category also includes the cleanup at the Guadalupe oil field on the
central California coast of underground releases of a diesel-like additive
formerly used to produce the field's heavy crude oil. During 1995, an additional
reserve of $8 million was provided for estimated costs to complete the beach
cleanup and for assessing and investigating the inland portion of the field.  At
year-end 1995, the reserve that had been established for the above activities
had been fully utilized. The company expects to incur additional, but
indeterminate, costs for continuing assessment, investigation and remediation of
the inland portion of the field.

   Also included in this category is the Avila Beach, California site. In 1988,
petroleum hydrocarbon contamination under the Front Street section of the town
was discovered. It was determined that the source of the contamination had been
leaking pipelines that ran between a tank farm and wharf operated by the
company. The company has installed interim systems as an initial remediation
measure until a final remedial action plan is completed and implemented. The
company is currently developing a plan that will be submitted by mid-1996 to the
Regional Water Quality Control Board for approval. The plan will outline the
procedures that will be used to determine the desired  alternatives
for the site's final remediation. The future costs related to the final
remediation will not be determined until these alternatives are identified. The
year-end reserve included the estimated remaining cost for the excavation of one
section of the beach where contaminants were detected close to the surface of
the sand during the company's third quarter 1995 testing and monitoring of the
site. The company completed the cleanup of this area in January 1996 as required
by a state order.

   ACTIVE COMPANY FACILITIES. The company had provided $19 million for estimated
future costs of remedial orders, corrective actions and other investigation,
remediation and monitoring obligations at certain operating facilities and
producing oil and gas fields.  The operating facilities primarily consist of
refineries, marketing terminals and bulk plants.
 
                                       26
<PAGE>

   The total environmental remediation reserves recorded on the consolidated
balance sheet represent the company's estimate of assessment and remediation
costs based on currently available facts, existing technology, and presently
enacted laws and regulations.  The remediation cost estimates, in many cases,
are based on plans recommended to the regulatory agencies for approval and are
subject to future revisions.  The ultimate costs to be incurred will likely
exceed the total amounts reserved, since many of the sites are relatively early
in the remedial investigation or feasibility study phase.  Additional
liabilities may be accrued as the assessment work is completed and formal
remedial plans are formulated.

   The company estimated, to the extent it was able to do so, that it could
incur approximately $180 million of additional costs in excess of the $214
million accrued at December 31, 1995.  The amount of such possible additional
costs reflects, in most cases, the high end of the range of costs of feasible
alternatives identified by the company for those sites with respect to which
investigation or feasibility studies have advanced to the stage of analyzing
such alternatives.  However, such estimated possible additional costs are not an
estimate of the total remediation costs beyond the amounts reserved, since at a
large number of sites the company is not yet in a position to estimate such
possible additional costs.

   Both the amounts reserved and estimates of possible additional costs may
change in the near term, in some cases, substantially, as additional information
becomes available regarding the nature and extent of site contamination,
required or agreed upon remediation methods, and other actions by governmental
agencies and private parties.

   See Notes 17 and 18 to the consolidated financial statements for additional
information.

FUTURE ACCOUNTING CHANGE

   The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation."  The new requirements under SFAS No. 123 are generally effective
for 1996 financial statements.  Companies must either expense the value of
stock-based compensation or disclose in a footnote what the earnings and
earnings per share would be had the value been expensed.  The company expects to
adopt the disclosure method.  At adoption, the effect on earnings and earnings
per share is not expected to be material.

OUTLOOK

   Certain of the statements in this discussion, as well as other 
forward-looking statements within this document, contain estimates and 
projections of amounts of or increases in future revenues, earnings, cash flows,
capital expenditures, assets, liabilities and other financial items and of 
future levels of or increases in reserves, production, sales including related 
costs and prices, and other statistical items; plans and objectives of 
management regarding the company's future operations, products and services; and
certain assumptions underlying such estimates, projection plans and objectives.
While these forward-looking statements are made in good faith, future operating,
market, competitive, legal, economic, political, environmental, and other
conditions and events could cause actual results to differ materially from those
in the forward-looking statements.

   Crude oil prices are expected to be unstable in 1996 because of the uncertain
effect of the United Nations' seeming willingness to allow a partial resumption
of oil exports from Iraq.  However, domestic natural gas prices are expected to
remain strong in early 1996, at least until the winter selling season is over
and natural gas inventories within the industry are replenished.

   The sale of the company's California oil and gas producing properties is
expected to be completed in April 1996. The proceeds are expected to be used to
reduce debt and fund capital projects overseas. The sale includes Unocal's
interests in 68 oil and gas fields, including 11 producing platforms off the
California coast in state and federal waters. Unocal's average net daily
production from the properties in the proposed sale was 27,000 barrels of oil
and 59 million cubic feet (mmcf) of natural gas during 1995, and proven reserves
of 184 million barrels of oil equivalent at year-end 1995. For 1995, Unocal's
California oil and gas producing properties generated pretax operating earnings
and cash flow of approximately $14 million and $64 million, respectively. Unocal
has approximately 600 employees involved in its California oil and gas
operations. While many of those employees will be offered positions with the
buyer or at other Unocal operations, some layoffs are expected (see Note 25 for
additional information). The sale of these producing properties is not expected
to have a material effect on Unocal's future operating results.

                                       27
<PAGE>

   On a worldwide basis, 1996 daily natural gas production is expected to
average nearly 1.8 billion cubic feet, up slightly from 1995.  Crude oil and
condensate production is expected to average 210,000 barrels per day, down from
240,000 last year.

   The company anticipates an approximate 15 percent increase in foreign natural
gas production in 1996. This improvement is expected mainly from a significant
increase in the company's Gulf of Thailand production beginning in the second
quarter of 1996, when the Petroleum Authority of Thailand's new pipeline comes
on stream. Also, oil and gas production should continue to improve in Indonesia
as a result of successful exploration and development programs that have
revitalized operations.

   For 1996, the company expects domestic crude oil and natural gas production
to be lower, reflecting the expected completion of the sale of its California
producing oil and gas properties and continued natural production declines. The
company will continue to focus on domestic natural gas production in the
Louisiana/Gulf Coast area.

   The company is in the process of retaining an advisor to assist in the
disposal of its oil and gas interests in the Netherlands sector of the North Sea
as it continues to shift its strategic focus to Southeast Asia and other areas
that offer greater opportunities for growth. Unocal's net daily production from
its Netherlands operations in 1995 was 11,000 barrels of crude oil and
condensate and 9 mmcf of natural gas.

   In Thailand, the company expects to spend approximately $160 million on
development projects that should allow the company to sustain gross production
at 950 mmcf of natural gas per day once a second pipeline becomes operational in
1996.  The planned production for 1996 is expected to average 825 mmcf per day
(gross).  Natural gas demand in Thailand is expected to continue its active
growth over the next 10 to 15 years, providing a market for the increased
production from the Gulf of Thailand.

   Unocal is currently pursuing growth opportunities in Central and Southeast
Asia.  The main areas of oil and gas exploration and development opportunities
are in Azerbaijan, Myanmar, Turkmenistan, Pakistan, China and Vietnam.

   In Azerbaijan, Unocal is part of an international consortium participating in
the development of three oil fields in the Caspian Sea offshore Azerbaijan.
Unocal has a 9.5 percent interest in the project.  Initial production is
expected to begin in mid-1997.  This is a major, long-term commitment for
Unocal.  There are still difficult issues to resolve as to the route and
construction of permanent export pipelines for the oil.

   A major focus of 1996 capital spending will be the Yadana project offshore
Myanmar.  This natural gas project, which is to include four offshore platforms,
should be in operation by mid-1998. When fully developed, estimated gross
production in 1999 is expected to reach 650 mmcf of natural gas per day. The
majority of the production is to be sold under a 30-year gas sales contract and
a pipeline agreement calling for natural gas deliveries of 525 mmcf per day to
Thailand beginning in mid-1998. A separate sales agreement calls for 125 mmcf
per day of natural gas to be supplied to Myanmar for its domestic use. Unocal
has a 28.26 percent interest in the Yadana project.

   In March 1996, Unocal announced the discovery of a potentially significant
new gas field located about six miles south of the Yadana field in the Andaman
Sea. Further studies are under way to prove the commerciality of this new
offshore discovery. The field could be produced through the Yadana platform
complex. Unocal has the same percentage ownership and partners in this discovery
as it has in the Yadana project.

   The United States Congress is currently considering legislation that could
ban United States companies from all business activities associated with
Myanmar.  This action, if passed, would adversely effect the company's future
prospects in that country.

   The company will continue to expand its marketing operations at retail
outlets with the addition of new businesses to certain existing locations, such
as convenience stores, car washes, quick-service restaurants and car maintenance
services.  The company is also working to increase gasoline retail sales volumes
by installing credit card readers at the dispensers and reconfiguring the
service islands. In February 1996, Unocal entered into a strategic alliance with
Fleetman, Inc. to market Fuelman Fleet Cards. Also, Unocal signed a Memorandum
of Understanding with Southern Counties Oil Company/Cardlock Fuels System which
could lead to joint construction, development and operation of unattended
commercial fueling facilities throughout California. These agreements
position the company as a leader in the West Coast commercial fleet fuel
business.

                                       28
<PAGE>

   To improve the company's standing in markets outside California and Hawaii,
Unocal is actively pursuing joint ventures and alliances.  In October 1995,
Unocal and Circle K Corporation (Circle K), one of the nation's leading
convenience store operators, signed a branding/licensing agreement for more than
400 Circle K sites in the Phoenix and Tucson, Arizona markets.  In addition, the
company plans to brand and supply 20 existing Circle K sites in Las Vegas,
Nevada, and the two companies plan to co-develop new service
station/convenience store sites in the Las Vegas area. In February 1996, Tosco
Corporation, a petroleum refiner and marketer, announced that it had entered
into a merger agreement with Circle K.

   The upgrades to the company's refineries are now complete and higher valued
products are being produced along with the new reformulated gasolines that meet
California standards.  On the retail marketing side, the company foresees
improved margins on the California reformulated gasolines that must be sold at
retail sites by June 1, 1996.  In addition, the increased gasoline throughput
and returns from its reformatted service stations are meeting or exceeding the
company's forecasts.  However, the ultimate effect on product margins of the new
gasolines cannot be accurately predicted.

   In February 1994, the company was granted a United States patent for
reformulated gasolines that meet the 1996 California standards. Six refining
companies filed suit against Unocal in April 1995 to invalidate the patent or
declare it unenforceable. The company intends to aggressively defend its rights
under this patent.

   In Indonesia, the Geothermal and Power Operations segment expects to
accelerate development of resource production facilities at the Salak field on
the island of Java. The company also expects to be a 50 percent owner in a
venture that expects to build and operate new power plants at this field. Unocal
will supply steam for the power plants. The company also plans to conduct
additional exploration in the Sarulla block on the island of Sumatra, after a
discovery well indicated a highly productive geothermal resource. The company
had previously negotiated a power sales agreement that allows it to develop up
to 1,000 megawatts of generating capacity in the Sarulla block. The first of the
Unocal power plants is expected to begin operation in 1999, assuming the
commerciality of the field. The company is also pursuing other geothermal
development and power generation opportunities throughout Indonesia.

   The geothermal segment expects to benefit from improved earnings in 1996 from
operations at The Geysers in Northern California. The 1995 earnings were
adversely affected by seven months of discretionary curtailments by the public
utility that purchases the steam. Such curtailments are not expected in 1996. In
1996, the company is scheduled to begin a project to inject waste water from
municipal treatment plants to recharge the reservoir. This injection project
should increase the productivity of the field.

   In 1996, the Agricultural Products segment expects continued high sales
volumes of ammonia and urea. Approximately 200,000 additional tons per year of
ammonia is expected to be available for sale due to new production from the
Finley, Washington plant and higher production from the Kenai, Alaska facility.
The segment plans to expand sales efforts in its existing markets in South
Korea, Japan, China and Vietnam. The company also plans to develop new markets
in India.

   The Carbon and Minerals segment will continue to expand specialty graphite
products and will begin production of higher margin minerals. Also, primarily
due to increased molybdenum prices, the Questa mine is expected to resume
operations in late 1996, after being idle for approximately ten years. This mine
is expected to produce about 14 million pounds of molybdenum per year when it
reaches full production. Carbon and Minerals will continue to look for new
products and expansion opportunities in order to provide earnings growth.

                                       29
<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

<TABLE> 
<CAPTION> 
                                           Page
                                           -----
<S>                                        <C>
Report on Management's Responsibilities       31
 
Report of Independent Accountants             32
 
Financial Statements
  Consolidated Earnings                       33
  Consolidated Balance Sheet                  34
  Consolidated Cash Flows                     35
  Consolidated Stockholder's Equity           36
  Notes to Consolidated Financial          37-59
   Statements
 
Supplemental Information:
  Oil and Gas Financial Data               60-61                               
  Oil and Gas Reserve Data                 62-63
  Present Value of Future Net Cash Flow
   Relate to Proved Oil and
   Gas Reserves                            64-65
  Selected Quarterly Financial Data           66
  Selected Financial Data                     67

Supporting Financial Statement
 Schedule covered by the
 Foregoing Report of Independent
 Accountants: Schedule II -
  Valuation and Qualifying Accounts
  and Reserves                                72
 
</TABLE>

   All other financial statement schedules have been omitted as they are not
applicable, not material or the required information is included in the
financial statements or notes thereto.

                                       30
<PAGE>

                    REPORT ON  MANAGEMENT'S RESPONSIBILITIES
                    ----------------------------------------

TO THE STOCKHOLDERS OF UNOCAL CORPORATION:

   Unocal's management is responsible for the integrity and objectivity of the
financial information contained in this Annual Report.  The financial statements
included in this report have been prepared in accordance with generally accepted
accounting principles and, where necessary, reflect the informed judgments and
estimates of management.

   The financial statements have been audited by the independent accounting firm
of Coopers & Lybrand L.L.P.  Management has made available to Coopers & Lybrand
L.L.P. all the company's financial records and related data, minutes of the
company's executive and management committee meetings and directors' meetings
and all internal audit reports.  The independent accountants conduct a review of
internal accounting controls to the extent required by generally accepted
auditing standards and perform such tests and procedures as they deem necessary
to arrive at an opinion on the fairness of the financial statements presented
herein.

   Management maintains and is responsible for systems of internal accounting
controls designed to provide reasonable assurance that the company's assets are
properly safeguarded, transactions are executed in accordance with management's
authorization and the books and records of the company accurately reflect all
transactions.  The systems of internal accounting controls are supported by
written policies and procedures and by an appropriate segregation of
responsibilities and duties.  The company maintains an extensive internal
auditing program that independently assesses the effectiveness of these internal
controls with written reports and recommendations issued to the appropriate
levels of management.  Management believes that the existing systems of internal
controls are achieving the objectives discussed herein.

   Unocal assessed its internal control systems in relation to criteria for
effective internal control over financial reporting following the Treadway
Commission's Committee of Sponsoring Organizations "Internal Control -
Integrated Framework."  Based on this assessment, Unocal believes that, as of
December 31, 1995, its systems of internal controls over financial reporting met
those criteria.

   Unocal's Accounting, Auditing and Ethics Committee, consisting solely of
directors who are not employees of Unocal, is responsible for:  reviewing the
company's financial reporting, accounting and internal control practices;
recommending the selection of independent accountants (which in turn are
approved by the Board of Directors and annually ratified by the stockholders);
monitoring compliance with applicable laws and company policies; and initiating
special investigations as deemed necessary.  The independent accountants and the
internal auditors have full and free access to the Accounting, Auditing and
Ethics Committee and meet with it, with and without the presence of management,
to discuss all appropriate matters.


 
Roger C. Beach           John F. Imle, Jr.  Neal E. Schmale  Charles S. McDowell
Chief Executive          President          Chief Financial  Vice President
Officer                                     Officer          and Comptroller
                                                      

                               February 14, 1996

                                       31
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------


TO THE STOCKHOLDERS OF UNOCAL CORPORATION:

   We have audited the accompanying consolidated balance sheets of Unocal
Corporation and its subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of earnings, cash flows and stockholders' equity
for each of the three years in the period ended December 31, 1995 and the
related financial statement schedule. These financial statements are the
responsibility of Unocal Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above, which appear on
pages 33 through 61 of this Annual Report on Form 10-K, present fairly, in all
material respects, the consolidated financial position of Unocal Corporation and
its subsidiaries as of December 31, 1995 and 1994 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements, taken as a whole, presents fairly, in all material respects, the
information required to be included therein.

   As discussed in Note 2 to the consolidated financial statements, Unocal
Corporation and its subsidiaries changed their method of accounting for the
impairment of long-lived assets and long-lived assets to be disposed of in 1995;
for recognizing the reduction in value of its producing oil and gas properties
in 1994; and for postretirement benefits other than pensions and for
postemployment benefits in 1993.



Coopers & Lybrand L.L.P.
February 14, 1996, except for Note 25, 
 as to which the date is February 16, 1996
Los Angeles, California
 
                                       32
<PAGE>

CONSOLIDATED EARNINGS                           UNOCAL CORPORATION

<TABLE>
<CAPTION>
 
                                           YEARS ENDED DECEMBER 31
                                           ------------------------
DOLLARS IN MILLIONS EXCEPT PER SHARE       
 AMOUNTS                                    1995     1994      1993
--------------------------------------------------------------------
<S>                                        <C>      <C>       <C>
REVENUES
Sales and operating revenues *             $8,133   $7,797    $8,077
Interest, dividends and miscellaneous                 
 income                                        95       84        67
Equity in earnings of affiliated               
 companies                                     80       86        84       
Gain (loss) on sales of assets                117       (2)      116
--------------------------------------------------------------------
    Total revenues                          8,425    7,965     8,344
 
COSTS AND OTHER DEDUCTIONS
Crude oil and product purchases             3,198    2,875     3,160
Operating expense                           1,795    1,856     1,724
Selling, administrative and general          
 expense                                      436      501       467       
Depreciation, depletion and amortization    1,022      947       963
Dry hole costs                                 61       84        45
Exploration expense                           138      116       119
Interest expense                              291      275       304
Excise, property and other operating        
 taxes *                                    1,021    1,017       951
--------------------------------------------------------------------
    Total costs and other deductions        7,962    7,671     7,733
--------------------------------------------------------------------
Earnings before income taxes and
 cumulative effect of accounting changes      463      294       611
Income taxes                                  203      170       268
--------------------------------------------------------------------
Earnings before cumulative effect of          
 accounting changes                           260      124       343
Cumulative effect of accounting changes         -     (277)     (130)
--------------------------------------------------------------------
NET EARNINGS (LOSS)                        $  260   $ (153)   $  213
====================================================================
Dividends on preferred stock                   36       36        36
--------------------------------------------------------------------
NET EARNINGS (LOSS) APPLICABLE TO          
 COMMON STOCK                              $  224   $ (189)   $  177
====================================================================
 
Earnings (loss) per share of common
 stock:
  Before cumulative effect of               
   accounting changes                        $.91     $.36     $1.27
  Cumulative effect of accounting           
   changes                                      -    (1.14)     (.54)
--------------------------------------------------------------------
  Net earnings (loss) per share              $.91    $(.78)     $.73
====================================================================
 
* Includes consumer excise taxes of        $  898   $  893    $  816
</TABLE>

                See Notes to Consolidated Financial Statements.

                                       33
<PAGE>

CONSOLIDATED BALANCE SHEET                                    UNOCAL CORPORATION
<TABLE>
<CAPTION>
 
                                            AT DECEMBER 31
                                        -------------------
MILLIONS OF DOLLARS                         1995      1994
-----------------------------------------------------------
<S>                                        <C>       <C>
ASSETS
Current assets
  Cash and cash equivalents                $   94    $  148
  Accounts and notes receivable               920       897
  Inventories                                 360       341
  Deferred income taxes                       169       109
  Other current assets                         33        33
-----------------------------------------------------------
       Total current assets                 1,576     1,528
Investments and long-term receivables
  Affiliated companies                        461       445
  Other                                       640       450
Properties - net                            7,109     6,823
Deferred income taxes                          25        30
Other assets                                   80        61
-----------------------------------------------------------
           Total assets                    $9,891    $9,337
-----------------------------------------------------------
 
LIABILITIES
Current liabilities
  Accounts payable                         $  804    $  688
  Taxes payable                               193       226
  Interest payable                             92        87
  Other current liabilities                   227       256
-----------------------------------------------------------
       Total current liabilities            1,316     1,257
Long-term debt and capital lease            
 obligations                                3,698     3,461
Deferred income taxes                         722       643
Accrued abandonment, restoration and        
 environmental liabilities                    607       622
Other deferred credits and liabilities        618       539
-----------------------------------------------------------
         Total liabilities                  6,961     6,522
-----------------------------------------------------------
 
STOCKHOLDERS' EQUITY
Preferred stock ($0.10 par value,
 stated at liquidation value of $50 per
 share)
 Shares authorized:    100,000,000
 Shares outstanding:    10,250,000 in        
 1995 and 1994                                513       513
Common stock  ($1 par value)
 Shares authorized:    750,000,000
 Shares outstanding:  247,310,376 in          
  1995;  244,198,701 in 1994                  247       244
Capital in excess of par value                319       237
Foreign currency translation adjustment       (10)      (13)
Unearned portion of restricted stock          
 issued                                       (13)      (13)
Retained earnings                           1,874     1,847
-----------------------------------------------------------
         Total stockholders' equity         2,930     2,815
-----------------------------------------------------------
           Total liabilities and           $9,891    $9,337
            stockholders' equity
-----------------------------------------------------------
</TABLE>
   The company follows the successful efforts method of accounting for its oil
and gas activities.

                See Notes to Consolidated Financial Statements.

                                       34
<PAGE>

CONSOLIDATED CASH FLOWS                                       UNOCAL CORPORATION
<TABLE>
<CAPTION>
 
 
                                              YEARS ENDED DECEMBER 31
                                        --------------------------------
MILLIONS OF DOLLARS                          1995       1994       1993
------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)                        $   260    $  (153)   $   213
Adjustments to reconcile net earnings
 (loss) to net cash provided by 
  operating activities
  Cumulative effect of accounting          
   changes                                       -        277        130
  Depreciation, depletion and               
   amortization                              1,022        947        963
  Dry hole costs                                61         84         45
  Deferred income taxes                          9       (118)       139
  (Gain) loss on sales of assets             
   (pretax)                                   (117)         2       (116)
  Other                                          -        217         42
  Working capital and other changes
   related to operations
     Accounts and notes receivable              (5)        91         33
     Inventories                               (16)       (10)       (24)
     Accounts payable                          115        (49)        25
     Taxes payable                             (33)        18        (52)
     Other                                     (19)        (7)      (298)
 -----------------------------------------------------------------------
      Net cash provided by operating         
       activities                            1,277      1,299      1,100
 
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures (includes dry        
   hole costs)                              (1,459)    (1,272)    (1,249)
  Proceeds from sales of assets                204        156        586
------------------------------------------------------------------------ 
      Net cash used in investing            
       activities                           (1,255)    (1,116)      (663)
 
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock        55         54          6
  Long-term borrowings                         844        732        543
  Reduction of long-term debt and             (734)      (788)      (718)
   capital lease obligations
  Dividends paid on preferred stock            (36)       (36)       (36)
  Dividends paid on common stock              (197)      (193)      (175)
  Other                                         (8)        (9)        (9)
------------------------------------------------------------------------ 
      Net cash used in financing 
       activities                              (76)      (240)      (389)
 
Increase (decrease) in cash and cash           
 equivalents                                   (54)       (57)        48

Cash and cash equivalents at beginning         
 of year                                       148        205        157
------------------------------------------------------------------------
Cash and cash equivalents at end of year   $    94    $   148    $   205
------------------------------------------------------------------------
 
Supplemental disclosure of cash flow
 information:
 Cash paid during the year for:
  Interest (net of amount capitalized)     $   268    $   263    $   296
  Income taxes (net of refunds)            $   228    $   174    $   291
 
 
</TABLE>
                See Notes to Consolidated Financial Statements.

                                       35
<PAGE>

CONSOLIDATED STOCKHOLDERS' EQUITY                             UNOCAL CORPORATION
 
<TABLE> 
<CAPTION> 
 
MILLIONS OF DOLLARS                1995             1994       1993
----------------------------------------------------------------------
<S>                                <C>               <C>        <C> 
PREFERRED STOCK
   Balance at end of year          $  513            $  513     $  513
 
COMMON STOCK
   Balance at beginning of year       244               241        241
   Issuance of common stock             3                 3          -
----------------------------------------------------------------------
   Balance at end of year             247               244        241

CAPITAL IN EXCESS OF PAR VALUE
   Balance at beginning of year       237               163        149
   Issuance of common stock            82                74         14
----------------------------------------------------------------------
   Balance at end of year             319               237        163

FOREIGN CURRENCY TRANSLATION ADJUSTMENT
   Balance at beginning of year       (13)               (5)         5
   Current year adjustment              3                (8)       (10)
----------------------------------------------------------------------
   Balance at end of year             (10)              (13)        (5)
 
UNEARNED PORTION OF RESTRICTED STOCK ISSUED
   Balance at beginning of year       (13)              (13)       (11)
   Issuance of restricted stock        (3)               (4)        (5)
   Current year amortization            3                 4          3
---------------------------------------------------------------------- 
   Balance at end of year             (13)              (13)       (13)
 
RETAINED EARNINGS
   Balance at beginning of year     1,847             2,230      2,234
   Net earnings (loss) for year       260              (153)       213
   Cash dividends declared
     Preferred Stock ($3.50
       per share                      (36)              (36)       (36)
   Common Stock ($0.80 per
       share in 1995 and 1994;
       $0.75 per share in 1993)       (197)            (194)      (181)
----------------------------------------------------------------------
   Balance at end of year            1,874            1,847      2,230
-------------------------------------------------------------------------------
 
TOTAL STOCKHOLDERS' EQUITY          $2,930           $2,815     $3,129
-------------------------------------------------------------------------------
</TABLE>
                See Notes to Consolidated Financial Statements.

                                       36
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

   For the purpose of this report, Unocal Corporation (Unocal) and its
consolidated subsidiary, Union Oil Company of California (Union Oil) and its
consolidated subsidiaries, will be referred to as the company.

   The consolidated financial statements of the company include the accounts of
subsidiaries more than 50 percent owned.  Investments in affiliates owned 50
percent or less are accounted for by the equity method.  Under the equity
method, the investments are stated at cost plus the company's equity in
undistributed earnings after acquisition.  Income taxes estimated to be payable
when earnings are distributed are included in deferred income taxes.

USE OF ESTIMATES

   The consolidated financial statements are prepared in conformity with
generally accepted accounting principles, which require management to make
estimates and assumptions that affect the amounts of assets and liabilities and
the disclosures of contingent liabilities as of the financial statement date and
the amounts of revenues and expenses during the reporting period.  Actual
results could differ from those estimates.

INVENTORIES

   Inventories are valued at lower of cost or market.  The costs of crude oil,
refined products and agricultural products inventories are determined using the
last-in, first-out (LIFO) method. The costs of other inventories are determined
by using various methods. Cost elements primarily consist of raw materials and
production expenses.

IMPAIRMENT OF ASSETS

   Oil and gas producing properties are regularly assessed for possible
impairment on a field-by-field basis using the estimated undiscounted future
cash flows of each field.  Impairment loss is charged to depreciation, depletion
and amortization expense when the estimated discounted future cash flows are
less than the current net book values of the properties in a field.  See Note 2
for additional information.

   Impairment charges are also made for the write-down of other long-lived
assets when it is determined that the carrying values of the assets may not be
recoverable.  A long-lived asset is reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable.

OIL AND GAS EXPLORATION AND DEVELOPMENT COSTS

   The company follows the successful-efforts method of accounting for its oil
and gas activities.

   Acquisition costs of exploratory acreage are capitalized.  Full amortization
of such costs related to the portion of unproved properties is provided over the
shorter of the exploratory period or the lease holding period.  Costs of
successful leases are transferred to proved properties.  Exploratory drilling
costs are initially capitalized.  If exploratory wells are determined to be
commercially unsuccessful, the related costs are expensed.  Geological and
geophysical costs for exploration and leasehold rentals for unproved properties
are expensed.

   Development costs of proved properties, including unsuccessful development
wells, are capitalized.

DEPRECIATION, DEPLETION AND AMORTIZATION

   Depreciation, depletion and amortization related to proved oil and gas
properties and estimated future abandonment and removal costs for offshore
production platforms are calculated at unit-of-production rates based upon
estimated proved recoverable reserves.  Depreciation of other properties is
generally on a straight-line method using various rates based on estimated
useful lives.
 
                                       37
<PAGE>

MAINTENANCE AND REPAIRS

   Expenditures for maintenance and repairs are expensed.  In general,
improvements are charged to the respective property accounts and such accounts
are relieved of the original cost of property replaced.

RETIREMENT AND DISPOSAL OF PROPERTIES

   Upon retirement of facilities depreciated on an individual basis, remaining
book values are charged to depreciation expense.  For facilities depreciated on
a group basis, remaining book values are charged to accumulated allowances.
Gains or losses on sales of properties are included in current earnings.

INCOME TAXES

   The company uses  the liability method for reporting income taxes in which
current or deferred tax liabilities or assets are recorded in accordance with
enacted tax laws and rates.  Under this method, the amount of deferred tax
liabilities or assets at the end of each period is determined using the tax rate
expected to be in effect when taxes are actually paid or recovered.  Future tax
benefits are recognized to the extent that realization of such benefits is more
likely than not.

   Deferred income taxes are provided for the estimated income tax effect of
temporary differences between financial and tax bases in assets and liabilities.
Deferred tax assets are also provided for certain tax credit carryforwards.  A
valuation allowance to reduce deferred tax assets is established when deemed
appropriate.  See Note 9 for the principal temporary differences and unused tax
credits.

FOREIGN CURRENCY TRANSLATION

   Foreign exchange gains and losses as a result of translating a foreign
entity's financial statements from its functional currency into U.S. dollars are
included as a separate component of stockholders' equity.  The functional
currency for all foreign operations, except Canada, is the U.S. dollar.  Gains
or losses incurred on currency transactions in other than a country's functional
currency are included in net earnings.

ENVIRONMENTAL EXPENDITURES

   Environmental expenditures that create future benefits or contribute to
future revenue generation are capitalized.  Expenditures that relate to existing
conditions caused by past operations are expensed.

   Liabilities related to environmental assessment and future remediation costs
are recorded when such liabilities are probable and the amounts can be
reasonably estimated.  The company considers a site to present a probable
liability when an investigation has identified environmental remediation
requirements for which the company is responsible.  The timing of accruing for
remediation costs generally coincides with the company's completion of
investigation or feasibility work and its recommendation of a remedy or
commitment to an appropriate plan of action.

   Environmental liabilities are not discounted or reduced by possible
recoveries from third parties.  However, accrued liabilities for Superfund and
similar sites reflect anticipated allocations of liabilities among settling
participants.

   Environmental remediation expenditures required for properties held for sale
are capitalized.  A valuation allowance is established when the aggregate book
values of the properties, including capitalized remediation costs, exceed net
aggregate realizable values.

   See Notes 17 and 18 for additional information.
 
                                       38
<PAGE>

FINANCIAL INSTRUMENTS

   The company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to manage
well-defined interest rate, foreign currency exchange rate and commodity price
risks. Gains and losses arising from currency swap agreements are recognized in
income and offset the foreign exchange gains and losses on the underlying
transactions. Gains and losses arising from commodity future contracts are
deferred and included in the basis of the underlying transactions. Income or
expense associated with interest rate swap agreements is recognized on the
accrual basis over the life of the swap agreement as a component of interest
income or interest expense.

   See Note 16 for additional information.

OTHER

   Earnings per share of common stock are based on net earnings less preferred
stock dividend requirements, divided by the weighted average shares of common
stock outstanding during each period.

   Interest is capitalized on major construction and development projects as
part of the costs of the assets.

   Certain items in prior year financial statements have been reclassified to
conform to the 1995 presentation.


NOTE 2 - ACCOUNTING CHANGES

   Effective in the fourth quarter of 1995, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of."  The new accounting
standard sets guidelines to be used for determining and measuring impairment of
certain assets.  As a result, the company recorded a charge to earnings of $87
million pretax ($53 million after tax or 22 cents per common share) for the
write-down of several oil and gas producing properties where recent downward
revisions in reserve estimates indicated future net cash flows would be
insufficient to fully recover the carrying value of these properties.  The
carrying values were written down to estimated future discounted cash flows or
fully written off in the case of negative future cash flows.  The charge was
recorded in depreciation, depletion and amortization expense and reflected the
reduction in value of various properties located in the United States ($44
million), the Netherlands ($37 million) and Canada ($6 million).

   Effective January 1, 1994, the company changed its accounting policy for
recognizing the reduction in value of its producing oil and gas properties and
commenced to evaluate properties for impairment on a field-by-field basis
instead of a country-by-country basis which was previously used.  The cumulative
effect of the accounting change resulted in a charge to earnings of $447 million
pretax ($277 million after tax or $1.14 per common share) in the first quarter
of 1994.  The charge reflected the reduction in value of certain oil and gas
properties in the U.S. from which the estimated undiscounted future cash flows
were less than the current net book values of the properties.  As a result of
the property write-downs, the company's depreciation and depletion expense in
1994 was reduced by approximately $61 million ($38 million after tax).  On a pro
forma basis, net earnings for 1993 would have increased by $31 million to $244
million or 86 cents per common share as a result of the accounting change.

   Effective January 1, 1993, the company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions."  This new
accounting standard requires the company to recognize its obligation to provide
postretirement health care benefits and to accrue such costs rather than
recording them on a cash basis.  The actuarial present value of the accumulated
postretirement health care obligation existing at January 1, 1993 was recognized
in the consolidated earnings statement as a cumulative effect of an accounting
change, resulting in a charge to the first quarter 1993 earnings of $192 million
before tax ($121 million after tax or 50 cents per common share).

   The company also adopted SFAS No. 112, "Employers' Accounting For
Postemployment Benefits," effective January 1, 1993.  This statement requires
the company to recognize its obligation to provide benefits, such as workers'
compensation and disabled employees' medical care, to former or inactive
employees after employment but before retirement.  The charge to earnings for
the cumulative effect of the company's unfunded obligation prior to 1993 was $14
million before tax ($9 million after tax or 4 cents per common share).

                                       39
<PAGE>

NOTE 3 - RESTRUCTURING COSTS

   During the fourth quarter of 1994, as a result of an overhead study, the
company began a two-year program to reduce its 1,540-person corporate staff by
630 positions and to eliminate another 126 positions in the operating groups.  A
pretax charge of $25 million was recorded in administrative and general expense
for net costs associated with the staff reductions.  This charge included $34
million of estimated benefits to be paid to ex-employees over a period of time.
Partially offsetting this charge was an estimated credit of $9 million for
reduced pension obligations.  At December 31, 1995, approximately 541 employees
had been terminated as a result of the program. The amount of unpaid
benefits remaining on the consolidated balance sheet was $14 million.


NOTE 4 - WRITE-DOWNS OF ASSETS

   In 1995, prior to the adoption of SFAS No. 121 in the fourth quarter, the
company recorded a pretax charge of $13 million to write down the carrying
values of certain domestic oil and gas properties and $5 million for
miscellaneous asset write-downs.

   During 1994, the company recorded a pretax charge of $25 million to write
down the carrying value of the Guadalupe oil field due to its decision to shut
down the field for environmental reasons.  The company also closed certain
facilities used in refining and marketing operations and research activities,
which resulted in write-downs of $39 million.  Due to project modifications, the
company wrote off an additional $7 million in 1994 for costs related to the
reformulated fuels program at the company's Los Angeles Refinery.

   The 1993 earnings included a pretax charge of $19 million for the write-off
of refining projects, primarily due to the cancellation of a portion of work
associated with the reformulated fuels program at the company's Los Angeles
Refinery.


NOTE 5 - DISPOSITIONS OF ASSETS

   During 1995, the company received total proceeds from sales of assets of $204
million and recorded a pretax gain of $117 million.  Of the total, $134 million
was from the sale of nonstrategic oil and gas properties with a pretax gain of
$52 million.  In addition, the company recorded a pretax gain of $26 million on
proceeds of $32 million from the sale of its Process, Technology and Licensing
business.

   In 1994, asset sales generated total proceeds of $156 million with a pretax
loss of $2 million.  Of the total proceeds, $118 million was from the sale of
oil and gas properties.

   In 1993, the sale of the company's geothermal assets in the Imperial Valley
of California and other geothermal exploration leases resulted in a $40 million
pretax gain on proceeds of $218 million.  An $11 million pretax gain on proceeds
of $172 million was recorded from the sale of the company's national
auto/truckstop system.  In addition, various oil and gas properties were sold
which generated total proceeds of $106 million with a pretax gain of $42
million.  The company also sold its retail agricultural businesses with a pretax
loss of $1 million on proceeds of $31 million.


NOTE 6 - CASH FLOW INFORMATION

   The company considers cash equivalents to be all highly liquid investments
purchased with a maturity of three months or less.  All income taxes paid are
included in determining cash flows from operating activities.  As a result,
income taxes paid on taxable income from sales of assets are not included in
cash flows from investing activities.

   The 1995 and 1994 cash flow statements excluded $30 million and $23 million,
respectively, in non-cash transactions. These amounts primarily relate to the
purchase of Unocal common stock by the trustee of the Unocal Savings Plan (the
"Plan") from Unocal. The trustee used the company's matching contributions to
the Plan, which were expensed in the company's consolidated earnings statements,
to purchase the shares. In the consolidated cash flow statements, the issuance
of Unocal common stock and the matching contribution expense were treated as 
non-cash transactions since the resulting effect on cash flow was zero.

                                       40
<PAGE>

   In the consolidated statement of cash flows for 1994, the $217 million
adjustment to reconcile the net loss to net cash provided by operating
activities principally included non-cash charges to earnings of $170 million for
future environmental remediation costs.

   In the consolidated statement of cash flows for 1993, other changes related
to operations principally included $106 million of payments for Alaska tax and
geothermal energy sales contract settlements.  Also included was a cash flow
reduction of $125 million relating to the settlement of crude oil forward sales
contracts, for which revenue was recognized in 1993, but cash was received in
1992.


NOTE 7 - OTHER FINANCIAL INFORMATION


   CONSOLIDATED EARNINGS INCLUDE THE FOLLOWING:
<TABLE>
<CAPTION>
 
          Millions of Dollars        1995    1994    1993
----------------------------------------------------------
<S>                                  <C>     <C>     <C>
      Total interest costs           $ 326   $ 305   $ 334
      Less capitalized interest         35      30      30
----------------------------------------------------------
      Interest expense               $ 291   $ 275   $ 304
 
      Maintenance and repair costs   $ 451   $ 457   $ 442
==========================================================
</TABLE>

  The consolidated balance sheet at December 31 includes the following:

<TABLE>
<CAPTION>
 
 
   Millions of Dollars                                       1995     1994
---------------------------------------------------------------------------
<S>                                                          <C>      <C>
    Other deferred credits and liabilities:
      Postretirement medical benefits obligation              $ 214   $ 206
      Reserve for litigation and other claims                   262     204
      Other employee benefits                                    50      54
      Other                                                      92      75
   ------------------------------------------------------------------------
        Total                                                 $ 618   $ 539
 
      Allowances for doubtful accounts and notes receivable   $  28   $  15
 
      Allowances for investments and long-term receivables    $  15   $   3
   ========================================================================
</TABLE>

NOTE 8 - EXCISE, PROPERTY AND OTHER OPERATING TAXES
<TABLE>
<CAPTION>
 
 
    Millions of Dollars                          1995     1994    1993
-----------------------------------------------------------------------
<S>                                             <C>      <C>      <C>
      Consumer excise taxes                     $  898   $  893   $ 816
      Real and personal property taxes              69       68      68
      Severance and other taxes on production       38       38      47
      Other taxes and duties                        16       18      20
-----------------------------------------------------------------------
        Total                                   $1,021   $1,017   $ 951
=======================================================================
 
</TABLE>

   In addition, social security and unemployment insurance taxes, which are
charged to earnings and included with salaries and wages, totaled $45 million in
1995 and $44 million in 1994 and 1993.
 
                                       41
<PAGE>

NOTE 9 - INCOME TAXES

  Unocal files a consolidated federal income tax return that includes
essentially all U.S. subsidiaries.  The components of pretax earnings and the
provision for income taxes are as follows:

<TABLE>
<CAPTION>
 
Millions of Dollars              1995     1994     1993
--------------------------------------------------------
<S>                              <C>      <C>      <C>
 Earnings (loss) before income 
 taxes and cumulative effect 
 on accounting changes
  United States                  $  69    $(163)   $ 189
  Foreign                          394      457      422
--------------------------------------------------------
    Total                        $ 463    $ 294    $ 611
--------------------------------------------------------
 
 
 Income taxes
 Current
     Federal                     $   3    $  25    $ (73)
     State                           4       18      (19)
     Foreign                       187      245      221
 -------------------------------------------------------
     Total                         194      288      129
 
 Deferred
     Federal                        20     (120)     113
     State                         (23)      (8)      14
     Foreign                        12       10       12
--------------------------------------------------------
       Total                         9     (118)     139
 -------------------------------------------------------
         Total income taxes      $ 203    $ 170    $ 268
 -------------------------------------------------------
 
</TABLE>

  The following table is a reconciliation of income taxes at the federal
statutory income tax rates to income taxes as reported in the consolidated
earnings statement.

<TABLE>
<CAPTION>
 
 
Dollars in Millions                                   1995     1994     1993
-----------------------------------------------------------------------------
<S>                                                   <C>      <C>      <C>
   Federal statutory rate                               35%      35%      35%
   Taxes on book earnings computed at statutory rate  $ 162    $ 103    $ 214
   Foreign taxes in excess of statutory rate             59       75       66
   Dividend exclusion                                   (15)     (13)     (13)
   Deferred federal business tax credits                  -        -      (12)
   Effect of federal rate change on deferred taxes        -        -       14
   Deferred California business tax credits, net of 
    federal tax effect                                  (18)       -        -
   Other                                                 15        5       (1)
-----------------------------------------------------------------------------
     Total                                            $ 203    $ 170    $ 268
-----------------------------------------------------------------------------
</TABLE>

                                       42
<PAGE>

NOTE 9 - INCOME TAXES (CONTINUED)

   The significant components of deferred income tax assets and liabilities
included in the consolidated balance sheet at December 31, 1995 and 1994 are as
follows:

<TABLE>
<CAPTION>
 
Millions of Dollars                                   1995       1994
-----------------------------------------------------------------------
<S>                                                   <C>         <C>
Deferred tax assets (liabilities)
      Depreciation and intangible drilling costs      $(1,129)    $(986)
      Pension assets                                     (145)     (135)
      Investments in affiliates                           (80)      (82)
      Other deferred tax liabilities                     (216)     (212)
      Depletion                                           169       145
      Exploratory costs                                   140       155
      Federal alternative minimum tax credits             142       143
      Future abandonment costs                            133       126
      Postretirement benefit costs                         81        78
      Litigation/environmental costs                      108       112
      1995 federal net operating loss carryforward         94         -
      Other deferred tax assets                           175       152
-----------------------------------------------------------------------
        Total                                         $  (528)    $(504)
-----------------------------------------------------------------------
</TABLE>

   No deferred U.S. income tax liability has been recognized on the
undistributed earnings of foreign subsidiaries that have been retained for
reinvestment.  If distributed, no additional U.S. tax is expected due to the
availability of foreign tax credits.  Such undistributed earnings for tax
purposes, excluding previously taxed earnings, are estimated at $759 million as
of December 31, 1995.

   At year-end 1995, the company had $66 million of unused foreign tax credits
with various expiration dates through the year 2000.  No deferred tax asset for
these foreign tax credits is recognized for financial statement purposes.

   The federal alternative minimum tax credits are available to offset future
U.S. federal income taxes on an indefinite basis.  In addition, the company has
approximately $15 million of federal business tax credit carryforwards and $28
million of California business tax credit carryforwards that will expire between
the years 2001 and 2009.  The 1995 federal net operating loss carryforward is
expected to be fully utilized in 1996.

<TABLE>
<CAPTION>

NOTE 10 - INVENTORIES
 
Millions of Dollars                1995    1994
------------------------------------------------
<S>                               <C>     <C>

Crude oil and condensate          $  48   $  31
Refined products                    161     161
Agricultural products                40      46
Minerals                             30      16
Supplies, merchandise and other      81      87
------------------------------------------------
   Total                          $ 360   $ 341
------------------------------------------------
</TABLE>

   The current replacement cost of inventories exceeded the LIFO inventory value
included above by $149 million and $142 million at December 31, 1995 and 1994,
respectively.

                                       43
<PAGE>

NOTE 11 - PROPERTIES AND CAPITAL LEASES

   Investments in owned and capitalized leased properties at December 31, 1995
and 1994 are set forth below.  Total accumulated depreciation, depletion and
amortization was $11,431 million and $11,096 million at December 31, 1995 and
1994, respectively.

<TABLE>
<CAPTION>
 
                                            1995               1994
                                   --------------------------------------
      Millions of dollars         Gross     Net      Gross     Net
   ----------------------------------------------------------------------
<S>                                   <C>       <C>      <C>       <C>
      Owned properties (at cost)
       Petroleum operations:
        Exploration
          United States               $   113   $   45   $   167   $   54
          Foreign                         173       90       125       71
        Production
          United States                 7,994    2,676     8,101    2,803
          Foreign                       4,353    1,235     4,106    1,214
        Refining and Marketing
          76 Products Company           3,310    2,058     2,889    1,731
   ----------------------------------------------------------------------
            Total                      15,943    6,104    15,388    5,873
      Geothermal & Power Operations       995      382       967      380 
      Diversified Businesses              
        Agricultural Products             650      221       616      191
        Carbon & Minerals                 140       45       123       33
        Pipelines                         330       99       324       99
      Corporate and Unallocated           465      254       483      241
   ----------------------------------------------------------------------
        Total owned properties         18,523    7,105    17,901    6,817
      Capitalized leased properties        17        4        18        6
   ----------------------------------------------------------------------
            Total                     $18,540   $7,109   $17,919   $6,823
   ----------------------------------------------------------------------
 
</TABLE>

NOTE 12 - RETIREMENT PLANS


   The company and its subsidiaries have several non-contributory retirement
plans covering substantially all employees.  Plan benefits are primarily based
on years of service and employees' compensation near retirement.

   All U.S. plans are administered by corporate trustees.  There was no company
contribution to any of the U.S. plans during the years 1993 through 1995 as plan
assets substantially exceeded the pension obligations.  At year-end 1995, plan
assets principally consisted of equity securities, U.S. government and agency
issues, corporate bonds and cash.

   Employees of certain foreign subsidiaries of the company are covered by
separate plans.  Total obligations for all foreign plans are not material.

                                       44
<PAGE>
 
NOTE 12 - RETIREMENT PLANS (CONTINUED)

   Pension costs for the funded U.S. plans include the following components:
<TABLE>
<CAPTION>
 
Millions of Dollars                                   1995      1994      1993
------------------------------------------------------------------------------- 
<S>                                                  <C>       <C>       <C>
Service cost - benefits earned during the year       $  21     $  24     $  20
Interest cost on projected benefit obligation           52        49        48
Actual return on plan assets                          (225)        9      (125)
Net amortization and deferral                          129      (109)       20
Net gain from partial settlement of obligation 
 and curtailment of operations                          (7)       (4)       (3)
-------------------------------------------------------------------------------
    Net pension expense (income)                     $ (30)    $ (31)    $ (40)
===============================================================================
</TABLE>

   The following table sets forth the plans' funded status and amounts
recognized in the consolidated balance sheet at December 31, 1995 and 1994:

<TABLE>
<CAPTION>
 
Millions of Dollars                                             1995     1994
--------------------------------------------------------------------------------
<S>                                                           <C>       <C>
Plan assets at fair value                                     $1,053    $ 885
--------------------------------------------------------------------------------
 
Actuarial present value of benefit obligations:
  Vested benefits                                                636      484
  Nonvested benefits                                              24       18
--------------------------------------------------------------------------------
Accumulated benefit obligation                                   660      502
Effect of projected future salary increases                       78      101
--------------------------------------------------------------------------------
Projected benefit obligation                                     738      603
--------------------------------------------------------------------------------
 
Plan assets in excess of projected benefit obligation            315      282
Unrecognized net loss                                            115      152
Unrecognized net assets                                          (63)     (86)
Unrecognized prior service cost                                   24       13
--------------------------------------------------------------------------------
    Prepaid pension cost                                      $  391    $ 361
--------------------------------------------------------------------------------
</TABLE>
   The assumed rates used to measure the projected benefit obligation and the
expected earnings on plan assets were as follows:
<TABLE>
<CAPTION>
 
                                                 1995    1994     1993
                                                 -----   -----   ------
 <S>                                              <C>     <C>     <C>
      Weighted-average discount rate             7.25%   8.50%    7.25%
      Increase in future compensation levels     4.00%   5.00%    5.00%
      Expected long-term return on plan assets   9.50%   9.75%   10.50%
</TABLE>

   The amount of benefits which can be covered by the funded plans described
above are limited by the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code.  Therefore, the company has a supplemental retirement
plan designed to maintain benefits for all employees at the plan formula level.
The amounts expensed for this plan were $5 million, $5 million and $2 million in
1995, 1994 and 1993, respectively.  The accumulated obligation recognized in the
consolidated balance sheet at December 31, 1995 was $21 million.

   The company has established a grantor trust to provide funding for the
benefits payable under the supplemental retirement plan.  Total assets held in
the trust at December 31, 1995 and 1994 amounted to $14 million and $8 million,
respectively.

                                       45
<PAGE>
 
NOTE 13 - POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT PLANS


   The company's medical plan provides health care benefits for eligible
employees and retired employees.  Employees may become eligible for
postretirement benefits if they reach the normal retirement age while working
for the company.  The plan is contributory and the benefits are subject to
deductibles and co-payments.

   The following table sets forth the postretirement benefit obligation
recognized in the consolidated balance sheet at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
 
 
Millions of Dollars                                  1995    1994
---------------------------------------------------------------------
<S>                                                 <C>     <C>
Accumulated postretirement benefit obligations:
  Retirees                                          $ 134   $ 134
  Fully eligible active employees                      23      20
  Other active employees                               52      29
---------------------------------------------------------------------
    Total                                             209     183
Unrecognized gain and prior service cost                4      23
---------------------------------------------------------------------
    Accrued postretirement benefit cost             $ 213   $ 206
=====================================================================
</TABLE>

   Net periodic postretirement benefits cost is comprised of the following
components:

<TABLE>
<CAPTION>
 
Millions of Dollars          1995    1994    1993
-------------------------------------------------
<S>                         <C>     <C>     <C>
Service cost                $   4   $   6   $   5
Interest cost                  15      15      17
-------------------------------------------------
    Total                   $  19   $  21   $  22
=================================================
 
</TABLE>

   The accumulated postretirement benefit obligation at December 31, 1995 was
determined using a discount rate of 7.25 percent.  The health care cost trend
rates used in measuring the 1995 benefit obligations were 7.0 percent for under
age 65 and 6.2 percent for age 65 and over, gradually decreasing to 5.0 percent
by the year 2001 and remaining at that level thereafter.  The rates are subject
to change in the future.  The health care cost trend rate assumption has a
significant effect on the amounts reported.  For example, an increase in the
assumed health care cost trend rate of one percentage point in each year would
increase the accumulated postretirement benefit obligation as of December 31,
1995 by $24 million and net periodic benefits cost by $3 million.

   The company also provides benefits such as workers' compensation and disabled
employees' medical care to former or inactive employees after employment but
before retirement.  The accumulated postemployment benefit obligation was $16
million as of December 31, 1995 and $17 million as of December 31, 1994.

                                       46
<PAGE>
 
NOTE 14 - LONG-TERM DEBT AND CREDIT AGREEMENTS

   The following table summarizes the company's long-term debt:

<TABLE>
<CAPTION>
                                                    At December 31
                                                   ---------------
Millions of Dollars                                 1995      1994
------------------------------------------------------------------
<S>                                               <C>       <C>
Bonds and debentures
  9-1/4% Debentures due 2003                      $  250    $  250
  9-1/8% Debentures due 2006                         200       200
  6-1/8% to 7-7/8% Industrial Development 
    Revenue Bonds due 1998 to 2008                    71        74
  Swiss Franc Bonds due 1996 (5.25%)                 175       110
  Deutsche Mark Bonds due 1998 (6.125%)              175       110
Notes
  Commercial paper (6.02%) *                         650       456
  Medium-term notes due 1996 to 2011 (8.17%) *     1,075       754
  Bank Credit Agreement (6.08%) *                    105       250
  Revolving credit facilities (6.31%) *              130       135
  9-5/8% Notes due 1995                                -       250
  9-3/4% Notes due 2000                              250       250
  Eurodollar Notes due 1996, effective rate 9.77%      -       200
  8-3/4% Notes due 2001                              200       200
  6-3/8% Notes due 2004                              200       200
  7.20%  Notes due 2005                              200         -
Other miscellaneous debt                              15        15
------------------------------------------------------------------
    Total                                          3,696     3,454
    Less current portion of long-term debt             4         2
------------------------------------------------------------------
    Total long-term debt                          $3,692    $3,452
==================================================================
  *  Weighted average interest rate at December 31, 1995
</TABLE> 

   At December 31, 1995, the commercial paper, the Swiss Franc Bonds, $5 million
of medium-term notes due in 1996 and short-term borrowings under various credit
facilities due in 1996 were classified as long-term debt and included with the
maturity amount due in the year 2000, listed below.  The company has the intent
to refinance these borrowings on a long-term basis and has the ability to do so,
if necessary, through existing lines of credit extending to the year 2000.  The
amounts of long-term debt maturing in 1997, 1998, 1999 and 2000 are $118
million, $415 million, $171 million and $1,336 million, respectively.

   In 1995, the company's new borrowings consisted of: (1) $350 million in
medium-term notes with interest rates ranging from 6.70% to 8.15% and maturity
dates ranging from March 2002 to April 2015; (2) $200 million of 7.20% Notes due
2005; (3) and $50 million under a $50 million revolving credit facility.  The
proceeds were used principally to retire the Eurodollar Notes and refinance
other maturing debt.

   The company also borrowed an additional $50 million under a $250 million
revolving credit facility that was established in 1993 for the purpose of
funding its oil and gas development program in Thailand.  This credit facility,
which had $80 million outstanding at December 31, 1995, terminates December 15,
2000.  For the same purpose, the company has a $45 million revolving credit
facility through April 19, 2000 in the Netherlands.  The entire commitment
amount was unborrowed at year-end 1995.  During 1994, the company arranged an
$85 million revolving credit facility with a Canadian Bank.  This facility,
which has a perpetual 364-day maturity date, was reduced to $25 million in 1995.
The entire amount was available at year-end 1995.  During 1995, the company
arranged a $200 million 364-day credit facility, which matures March 1997 and is
subject to annual renewal.  The entire commitment amount was undrawn at year-end
1995.  Borrowings under these four credit facilities bear interest at different
margins above London Interbank Offered Rates (LIBOR) and the agreements call for
facility fees on either the total or undrawn commitment.

   The Bank Credit Agreement provides a revolving credit of $1.2 billion through
June of the year 2000 at interest rates based on LIBOR and requires a facility
fee on the total commitments.  Of the total, $105 million had been drawn at
December 31, 1995.  This agreement is available for general corporate purposes,
including the support of commercial paper.  The company has other undrawn
letters of credit for approximately $183 million.  The majority are maintained
for operational needs.

                                       47
<PAGE>
 
NOTE 14 - LONG-TERM DEBT AND CREDIT AGREEMENTS (CONTINUED)

   The Bank Credit Agreement and certain of the other revolving credit
facilities described above provide for the termination of the commitments and
require the prepayment of all outstanding borrowings in the event (a) any person
or group becomes the beneficial owner of more than 30 percent of the then
outstanding voting stock of Unocal, otherwise than in a transaction having the
approval of the Board of Directors of Unocal (the Board), at least a majority of
which are continuing directors (as defined therein), or (b) continuing directors
shall cease to constitute at least a majority of the Board.


NOTE 15 - LEASE RENTAL OBLIGATIONS

   Future minimum rental payments for operating leases having initial or
remaining noncancelable lease terms in excess of one year are as follows:
<TABLE>
<CAPTION>
 
Millions of Dollars
-----------------------------------------
<S>                                  <C>
1996                                 $ 77
1997                                   57
1998                                   48
1999                                   37
2000                                   33
Balance                               155
-----------------------------------------
  Total minimum lease payments       $407
=========================================
</TABLE>

   Net operating rental expense included in consolidated earnings is as follows:

<TABLE>
<CAPTION>
 
Millions of Dollars                                      1995     1994     1993
--------------------------------------------------------------------------------
<S>                                                     <C>      <C>      <C>
Fixed rentals                                           $ 101    $ 118    $ 129
Contingent rentals (based primarily on sales and usage)    22       32       37
Sublease rental income                                    (49)     (49)     (51)
--------------------------------------------------------------------------------
Net expense                                             $  74    $ 101    $ 115
================================================================================
</TABLE>

NOTE 16 - FINANCIAL INSTRUMENTS

   Unocal does not hold or issue financial instruments for trading purposes.

   Notional amounts are not included in the consolidated balance sheet and
generally exceed the future cash requirements relating to the instruments.

   The counterparties to the company's financial instruments are regulated
exchanges or major international financial institutions with high credit
ratings.  Even though the company may be exposed to losses in the event of non-
performance by these counterparties, it does not anticipate losses due to non-
performance by the counterparties.  In the opinion of management, the off-
balance-sheet risk associated with these instruments is minimal and immaterial.

 FOREIGN CURRENCY FORWARD AND SWAP CONTRACTS

   Unocal enters into various foreign currency forward and swap contracts to
manage its exposures to adverse impacts of foreign currency fluctuations under
both debt and other obligations.  Foreign currency gains or losses on the
outstanding contracts essentially offset the foreign currency gains or losses of
the underlying obligations.

                                       48
<PAGE>
 
NOTE 16 - FINANCIAL INSTRUMENTS (CONTINUED)

   During 1986, the company entered into two currency swap agreements to hedge
foreign currency exchange exposures related to the interest and principal
payments on the company's Swiss Franc bonds due in 1996 and Deutsche Mark bonds
due in 1998. These instruments have the same maturities as the related
underlying debt. At year-end 1995 and 1994, the aggregate notional principal
amounts of these agreements were $220 million. At year-end 1995, these currency
swap agreements had an aggregate fair value of approximately $137 million, based
on dealer quotes, which is included in long-term receivables on the consolidated
balance sheet.

   In addition, the company had two currency swap agreements outstanding on
borrowings of its Canadian subsidiary, with notional amounts totaling $250
million at year end 1995, and three currency swap agreements outstanding with
national amounts totaling $310 million at year-end 1994. The agreements, entered
into by the subsidiary, have the effect of changing the subsidiary's U.S. dollar
denominated borrowings into its functional Canadian currency. The objective of
these agreements is to limit the subsidiary's exposure to currency exchange
gains and losses. The parent company also has two currency swap agreements to
offset the subsidiary's currency swaps with the objective of maintaining the
underlying debt in U.S. dollars for reporting in the consolidated financial
statements. The maturities of the agreements range from 1996 to 1999, which
generally correspond to the related debt obligations. The net fair value of the
currency swap agreements at year-end 1995 and 1994, based on dealer quotes, was
approximately zero.

   As of December 31, 1995, the company had 20 currency forward contracts
outstanding to purchase 32 million Pounds Sterling for $48 million. At December
31, 1994, the company had eight currency forward contracts outstanding to
purchase 17 million Pounds Sterling for $25 million. The objective is to hedge
a series of known obligations denominated in Pounds Sterling which will come due
during the period from January 1996 to July 2000. The fair value of these
currency forward contracts at December 31, 1995 and 1994, based upon quoted
market prices of comparable instruments, was approximately $0.4 million and $1.4
million, respectively, in assets.

INTEREST RATE SWAPS

   Unocal enters into interest rate swap agreements to manage its debt with the
objective of minimizing the company's borrowing costs.  Net payments or receipts
under the agreements are recorded in interest expense on a current basis.  The
related amounts payable to, or receivable from, the counterparties are included
in interest payable on the balance sheet.  At year-end 1995 and 1994, the
interest rate swap agreements had aggregate fair values of approximately $12
million and $15 million, respectively, in liabilities, based on quoted market
prices of comparable instruments.

   In 1986, the company entered into a 10-year interest rate swap agreement with
a notional amount of $200 million. This swap was entered into to hedge $200
million floating-rate Eurodollar notes, which were redeemed early in March 1995.
From March 1995 until its termination in March 1996, the agreement was used to
hedge floating-rate debt consisting of $150 million of outstanding commercial
paper and borrowing under the $50 million credit facility as discussed in Note
14. The company paid interest at a fixed rate of 9.28 percent and received
interest at a floating rate based on LIBOR. At year-end 1995 and 1994, the
floating-interest rates were 5.8 percent and 5.6 percent, respectively.

   In 1994, the company entered into a three-year interest rate swap with a
notional amount of $25 million.  This swap was entered into to hedge $25 million
in medium-term notes.  The company pays interest at a floating rate based on
LIBOR and receives interest at a fixed rate of 6.7 percent.  At year-end 1995
and 1994, the floating interest rates were 5.8 percent and 6.0 percent,
respectively.

OTHER

   The company uses commodity futures  contracts with maturities of one year or
less to hedge the impact of fluctuations in prices of crude oil, natural gas and
refined products.  Realized and unrealized changes in the market value of
futures contracts are deferred until the hedged transaction is recognized.  At
December 31, 1995, contracts covering 225 thousand barrels of crude oil, 4.2
million gallons of heating oil and 1.02 billion cubic feet of natural gas with
notional amounts totaling $4 million for crude oil, $3 million for heating oil
and $2 million for natural gas were outstanding.  At December 31, 1994, the
company had outstanding contracts covering 419 thousand barrels of crude oil and
9 billion cubic feet of natural gas with notional amounts totaling $7 million
for crude oil and $16 million for natural gas.  The fair values of the
contracts, based on quoted market prices, were insignificant at year-end 1995
and 1994.

                                       49
<PAGE>
 
NOTE 16 - FINANCIAL INSTRUMENTS (CONTINUED)

   As of December 31, 1995 and 1994, the carrying amounts of certain financial
instruments employed by the company, including cash, cash equivalents, and trade
receivables and payables are representative of fair value because of the short-
term maturity of these instruments.

   The estimated fair value of the company's long-term debt was $3,983 million
and $3,541 million at year-end 1995 and 1994, respectively.  The fair values of
debt instruments were based on the discounted amount of future cash outflows
using the rates offered to the company for debt of the same remaining
maturities.

CONCENTRATIONS OF CREDIT RISK

   Financial instruments that potentially subject the company to concentrations
of credit risk consist primarily of temporary cash investments and trade
receivables.  The company places its temporary cash investments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.  Concentrations of credit risk with
respect to trade receivables are limited because there is a large number of
customers in the company's customer base spread across many industries and
geographic areas.  As of December 31, 1995 and 1994, the company had no
significant concentrations of credit risk.

NOTE 17 - ACCRUED ABANDONMENT, RESTORATION AND ENVIRONMENTAL LIABILITIES

   At December 31, 1995, the company had accrued $476 million for the estimated
future costs to abandon and remove wells and production facilities, primarily
related to worldwide offshore operations.  The total costs for abandonments are
estimated to be $640 million to $780 million, of which the lower end of the
range is used to calculate the amount to be amortized.  These estimates are
lower than those reported last year as a result of recent abandonment cost
studies performed by an outside firm.

   At December 31, 1995, the company's reserves for environmental remediation
obligations totaled $214 million, of which $83 million was included in other
current liabilities.  The reserve includes estimated probable future costs of
$32 million for federal Superfund and comparable state-managed multiparty
disposal sites; $35 million for formerly-operated sites for which the company
has remediation obligations; $71 million for sites related to businesses or
operations that have been sold with contractual remediation or indemnification
obligations; $57 million for company-owned or controlled sites where facilities
have been closed or operations shut down; and $19 million for sites owned and/or
controlled by the company and utilized in its ongoing operations.

NOTE 18 - CONTINGENT LIABILITIES

   The company has certain contingent liabilities with respect to material
existing or potential claims, lawsuits and other proceedings, including those
involving environmental, tax and other matters, certain of which are discussed
more specifically below.  The company accrues liabilities when it is probable
that future costs will be incurred and such costs can be reasonably estimated.
Such accruals are based on developments to date, the company's estimates of the
outcomes of these matters and its experience in contesting, litigating and
settling other matters.  As the scope of the liabilities becomes better defined,
there will be changes in the estimates of future costs, which could have a
material effect on the company's future results of operations and financial
condition or liquidity.

ENVIRONMENTAL MATTERS

   The company is subject to loss contingencies pursuant to federal, state and
local environmental laws and regulations.  These include existing and possible
future obligations to investigate the effects of the release or disposal of
certain petroleum, chemical and mineral substances at various sites; to
remediate or restore these sites; to compensate others for damage to property
and natural resources, for remediation and restoration costs and for personal
injuries; and to pay civil penalties and, in some cases, criminal penalties and
punitive damages.  These obligations relate to sites owned by the company or
others and associated with past and present operations, including sites at which
the company has been identified as a potentially responsible party (PRP) under
the federal Superfund laws and comparable state laws.  Liabilities are accrued
when it is probable that future costs will be incurred and such costs can be
reasonably estimated.  However, in many cases, investigations are not yet at a
stage where the company is able to determine whether it is liable or, if
liability is probable, to quantify the liability or estimate a range of possible
exposure.  In such cases, the amounts of the company's liabilities are
indeterminate due to the potentially large number of claimants for any given
site or exposure, the unknown 

                                       50
<PAGE>
 
magnitude of possible contamination, the imprecise and conflicting engineering
evaluations and estimates of proper cleanup methods and costs, the unknown
timing and extent of the corrective actions that may be required, the
uncertainty attendant to the possible award of punitive damages, the recent
judicial recognition of new causes of action, the present state of the law,
which often imposes joint and several and retroactive liabilities on PRPs, and
the fact that the company is usually just one of a number of companies
identified as a PRP.

   As disclosed in Note 17, at year-end 1995 the company had accrued $214
million for estimated future environmental assessment and remediation costs at
various sites where liabilities for such costs are probable.  At those sites
where investigations or feasibility studies have advanced to the stage of
analyzing feasible alternative remedies and/or ranges of costs, the company
estimates that it could incur additional remediation costs aggregating
approximately $180 million.

   Between August 22 and September 6, 1994, a chemical known as "Catacarb" was
released into the environment at the company's San Francisco Refinery near
Rodeo, California.  Persons in the surrounding area have claimed that they were
exposed to the chemical in varying degrees.  Since September 22, 1994, forty two
lawsuits have been filed by or on behalf of all persons, alleged to be several
thousand, claiming that they or their property were adversely affected by the
releases.  Thirty nine of the lawsuits have been consolidated in the Superior
Court for Contra Costa County.  The First Amended Model Complaint in this
consolidated action, filed on February 1, 1995, on behalf of individual
plaintiffs and purported classes of plaintiffs, alleges personal injury,
emotional distress and increased risk of future illness on behalf of the named
plaintiffs and all persons present in and around or downwind from the San
Francisco Refinery, and property damage and loss or diminution of property value
on behalf of all owners of real and personal property in the vicinity of the
Refinery, resulting from the release of Catacarb by the Refinery. Certain
individual plaintiffs allege injury from alleged subsequent releases at the
Refinery of hydrogen sulfide and other chemicals. The Model Complaint seeks
compensatory and punitive damages in unspecified amounts, equitable relief
including the creation of a fund for medical monitoring and treatment of
plaintiffs and members of the purported classes, statutory penalties and other
relief.

TAX MATTERS

   In December 1994, the company received a Notice of Proposed Deficiency from
the Internal Revenue Service (IRS) related to the years 1985 through 1987.  In
February 1995, the company filed a protest of the proposed tax deficiency with
the appeals section of the IRS.  Discussions with the Appeals Officer are
ongoing, but it appears that two substantial issues will proceed to litigation.

   The most significant issue relates to an IRS challenge of a $341 million
deduction taken by the company in its 1985 tax return for amounts paid under a
settlement agreement with Mesa Petroleum, T. Boone Pickens and Drexel Burnham
Lambert, Incorporated and certain others which ended a hostile takeover attempt
by that group.  The IRS contends that the deduction is not allowable because the
payment was related solely to the purchase of the company's common stock.
Although the company did purchase shares under the settlement agreement, it
properly reflected the purchase in its records at the fair market value of the
shares purchased.  The deduction at issue relates to that portion of the payment
made under the settlement agreement that exceeded the value of the shares
purchased.  The company intends to vigorously dispute the IRS' assertions in
court.  If the IRS were ultimately to prevail, the company would owe $157
million of tax for 1985 plus tax deductible interest estimated at $235 million
as of December 31, 1995.  As this matter is not yet before a court, final
resolution of this matter is likely to be several years away.

   The second issue relates to an IRS challenge of a continued deferral of
intercompany gains which arose from sales of property between subsidiaries in
1982 and 1983.  The IRS contends that the $201 million balance of deferred gain
must be recognized in the company's taxable income for 1985 when the
subsidiaries contributed the property to a wholly owned master limited
partnership.  The company intends to vigorously dispute the IRS' assertions in
court.  If the IRS were ultimately to prevail, the company would owe $92 million
in tax for 1985, but would receive credits or refunds for offsetting deductions
in later years.  For 1986 and 1987 the credits or refunds would total $35
million. In addition to tax, the company would owe tax deductible interest
estimated at $96 million as of December 31, 1995.  As this matter is not yet
before a court, final resolution of this matter is likely to be several years
away.

   The company believes it has adequately provided in its accounts for items and
issues not yet resolved.  In the opinion of management, a successful outcome of
the litigation is reasonably likely. However, substantial adverse

                                       51
<PAGE>
 
decisions could have a material effect on the company's financial condition,
operating results and liquidity in a given quarter and year when such matters
are resolved.

OTHER MATTERS

   The company also has certain other contingent liabilities with respect to
litigation, claims and contractual agreements arising in the ordinary course of
business.  Although these contingencies could result in expenses or judgments
that could be material to the company's results of operations for a given
reporting period, on the basis of management's best assessment of the ultimate
amount and timing of these events, such expenses or judgments are not expected
to have a material adverse effect on the company's consolidated financial
condition or liquidity.
 
NOTE 19 - CAPITAL STOCK
<TABLE>
<CAPTION>
 
 COMMON STOCK
                                                      1995       1994       1993
                                                   -----------------------------
   Authorized -  750,000,000 shares                    Thousands of Shares
   -----------------------------------------------------------------------------
   <S>                                            <C>        <C>        <C>
   Outstanding at beginning of year                244,199    241,324    240,671
   Issuance of common stock                          3,111      2,875        653
   -----------------------------------------------------------------------------
   Outstanding at end of year                      247,310    244,199    241,324
   -----------------------------------------------------------------------------
   Par value per authorized share                 $   1.00   $   1.00   $   1.00
   =============================================================================
</TABLE>

   At December 31, 1995, there were approximately 16.7 million shares reserved
for the conversion of preferred stock, 14.2 million shares for the company's
employee benefit plans and Directors' Restricted Stock Plan and 5.7 million
shares for the company's Dividend Reinvestment and Common Stock Purchase Plan.

 PREFERRED STOCK

   The company has authorized 100,000,000 shares of preferred stock with a par
value of $0.10 per share.  In July 1992, the company issued 10,250,000 shares of
$3.50 convertible preferred stock.  The convertible preferred stock is
redeemable on and after July 15, 1996, in whole or in part, at the option of the
company, at a redemption price of $52.10 per share declining to $50 per share on
and after July 15, 2002, together with accumulated but unpaid dividends.  The
convertible preferred stock has a liquidation value of $50 per share and is
convertible at the option of the holder into common stock of the company at a
conversion price of $30.75 per share, subject to adjustment in certain events.
Dividends on the preferred stock at an annual rate of $3.50 per share are
cumulative and are payable quarterly in arrears, when and as declared by
Unocal's Board of Directors (the Board). Holders of the preferred stock have no
voting rights. However, there are certain exceptions including the right to
elect two additional directors if the equivalent of six quarterly dividends
payable on the preferred stock are in default.

 STOCKHOLDER RIGHTS PLAN

   In January 1990, the Board adopted a stockholder rights plan (Rights Plan)
and declared a dividend of one preferred stock purchase right (Right) for each
share of common stock outstanding.  The Board also authorized the issuance of
one Right for each common share issued after February 12, 1990, and prior to the
earlier of the date on which the rights become exercisable, the redemption date,
or the expiration date.

   The Board has designated 3,000,000 shares of preferred stock as Series A
Junior Participating Cumulative Preferred Stock (Series A Preferred Stock) in
connection with the Rights Plan.  The Rights Plan provides that in the event any
person, or group of affiliated persons, becomes, or commences a tender offer or
exchange offer pursuant to which such person or group would become, the
beneficial owner of 15 percent or more of the outstanding common shares, each
Right (other than Rights held by the 15 percent stockholder) will be
exercisable, on and after the close of business on the tenth business day
following such event, unless the Rights are redeemed by the Board of Directors
of the company, to purchase units of Series A Preferred Stock (each consisting
of one one-hundredth of a share) having a market value equal to two times the
then-current exercise price (initially $75).  The Rights Plan further provides
that if, on or after the occurrence of such event, the company is merged into
any other corporation or 50 percent or more of the company's assets or earning
power are sold, each Right (other than 

                                       52
<PAGE>
 
Rights held by the 15 percent stockholder) will be exercised to purchase shares
of the acquiring corporation having a market value equal to two times the
exercise price.

   The Rights expire on January 29, 2000, unless previously redeemed by the
Board.  The Rights do not have voting or dividend rights and, until they become
exercisable, have no diluting effect on the earnings of the company.  As of
December 31, 1995, none of the Series A Preferred Stock had been issued nor had
the Rights become exercisable.

NOTE 20 - STOCK OPTION PLANS

   Under the company's Long-Term Incentive Plans of 1991 and 1985, stock options
are granted to executives and key employees to purchase shares of the company's
common stock.  The option price per share will not be less than the fair market
value of a share of common stock on the date granted.  No options will be
exercisable more than 10 years after the date of grant.  Restrictions may be
imposed for a period of five years on certain shares acquired through exercise
of options granted after 1990.

    The following is a summary of stock option transactions for 1993, 1994 and
1995:
<TABLE>
<CAPTION>
 
                                                               Weighted Average
1985 Plan                               Shares Under Option    Price per Share
-------------------------------------------------------------------------------
 
<S>                                     <C>                    <C>
Outstanding, January 1, 1993                 2,230,291              $24.12
  Exercised                                   (266,693)              19.20
  Canceled                                    (119,428)              24.41
-------------------------------------------------------------------------------
 
Outstanding, December 31, 1993               1,844,170               24.82
  Exercised                                    (95,505)              20.10
  Canceled                                     (33,735)              30.07
-------------------------------------------------------------------------------
 
Outstanding, December 31, 1994               1,714,930               24.98
  Exercised                                   (198,720)              21.13
  Canceled                                    (108,996)              29.55
-------------------------------------------------------------------------------
Outstanding, December 31, 1995               1,407,214               25.16
Exercisable, December 31, 1995               1,407,214               25.16
===============================================================================

<CAPTION>  
                                                               Weighted Average
1991 Plan                               Shares Under Option    Price per Share
-------------------------------------------------------------------------------
<S>                                     <C>                    <C>
 
Outstanding, January 1, 1993                   998,563              $20.94
  Granted                                      762,528               29.69
  Exercised                                    (80,099)              20.94
  Canceled                                     (44,723)              21.68
-------------------------------------------------------------------------------
 
Outstanding, December 31, 1993               1,636,269               25.00
  Granted                                      819,628               26.38
  Exercised                                    (28,384)              20.94
  Canceled                                     (98,226)              26.02
-------------------------------------------------------------------------------
 
Outstanding, December 31, 1994               2,329,287               25.49
  Granted                                      856,189               28.50
  Exercised                                    (49,906)              21.05
  Canceled                                     (66,341)              25.33
-------------------------------------------------------------------------------

Outstanding, December 31, 1995               3,069,229               26.40
Exercisable, December 31, 1995               1,863,625               25.39
</TABLE>

   Under the Long-Term Incentive Plan of 1991, there were 5,303,044 shares
available at year-end 1995 for stock option awards as well as other awards.  No
additional shares will be granted under the 1985 Plan.

                                       53
<PAGE>
 
NOTE 21 - SUMMARIZED FINANCIAL DATA OF UNION OIL

   Unocal Corporation is the parent of Union Oil Company of California, a fully
integrated energy resources company.  Virtually all operations are conducted by
Union Oil and its subsidiaries.  Summarized financial information for Union Oil
and its consolidated subsidiaries is presented below:
<TABLE>
<CAPTION>
 
                                                          For Years Ended
                                                   ----------------------------
Millions of Dollars                                  1995     1994      1993
-------------------------------------------------------------------------------
<S>                                                   <C>      <C>       <C>
Total revenues                                        $8,425   $7,965    $8,344
Total costs and other deductions, including income
  taxes                                                8,163    7,840     8,000
Earnings before cumulative effect of accounting
  changes                                                262      125       344
Cumulative effect of accounting changes                    -     (277)     (130)
Net earnings (loss)                                      262     (152)      214
===============================================================================
<CAPTION>  
                                                                At December 31
                                                             -------------------
Millions of Dollars                                             1995      1994
--------------------------------------------------------------------------------
Current assets                                                 $1,576    $1,528
Noncurrent assets                                               8,328     7,822
Current liabilities                                             1,309     1,275
Noncurrent liabilities                                          5,645     5,264
Shareholder's equity                                            2,950     2,811
================================================================================
</TABLE>

NOTE 22 - INVESTMENTS IN AFFILIATES

   Investments in affiliated companies accounted for by the equity method were
$407 million, $391 million and $389 million at December 31, 1995, 1994 and 1993,
respectively.  Dividends or cash distributions received from these affiliates
were $92 million, $88 million and $80 million for the same years, respectively.
These affiliated companies are primarily engaged in pipeline ventures, refining
and marketing operations, and the manufacture of needle coke.

   The excess of the company's investments in Colonial Pipeline Company and West
Texas Gulf Pipeline Company over its share in the related underlying equity in
net assets is being amortized on a straight-line basis over a period of 40
years.  The remaining unamortized balance at December 31, 1995 was $107 million.

   The company has a 50% interest in The UNO-VEN Company (UNO-VEN), a refining
and marketing partnership in the midwestern United States.  The company's share
of the underlying equity in the net assets of UNO-VEN over the carrying value of
its investment is being amortized on a straight-line basis over a period of 25
years.  The remaining unamortized balance at December 31, 1995 was $57 million.

   Summarized financial information for these equity investees is shown below.
<TABLE>
<CAPTION>
                                         1995                1994                1993
                                ------------------------------------------------------------
                                            Unocal's            Unocal's            Unocal's
    Millions of Dollars             Total      Share    Total      Share    Total      Share
   -----------------------------------------------------------------------------------------
    <S>                            <C>      <C>        <C>      <C>        <C>      <C>
    Revenues                       $2,441       $951   $2,144       $829   $2,257       $857
    Costs and other deductions      2,080        870    1,809        743    1,903        773
    Net earnings                      361         81      335         86      354         84
   =========================================================================================
    Current assets                 $  631       $245   $  440       $178   $  452       $178
    Noncurrent assets               2,095        588    2,121        597    2,081        564
    Current liabilities               568        212      383        152      317        111
    Noncurrent liabilities          1,012        273    1,038        291    1,068        301
    Net equity                      1,146        348    1,140        332    1,148        330
   =========================================================================================
</TABLE>

                                       54
<PAGE>
 
NOTE 23 - SALE OF ACCOUNTS RECEIVABLE

   On December 15, 1995, the company entered into an agreement to sell, on a
revolving basis, an undivided interest in a defined pool of the company's trade
receivables.  As collections reduce the amount of receivables included in the
pool, the company sells new receivables to bring the amount sold up to the $200
million maximum permitted by the agreement. Under the terms of the agreement,
the company retains the risk of credit loss and the collection and 
administrative responsibilities for the receivables sold.

   The $200 million proceeds from the sale were used to reduce borrowings and is
reflected as a reduction of accounts receivable in the consolidated balance
sheet and as operating cash flows in the consolidated statement of cash flows.
The total cost of the program from December 15, 1995 through the end of the year
was $0.8 million, which included a one-time charge of $0.3 million.  The total
amount was included in operating expense in the consolidated earnings statement.

NOTE 24 - SEGMENT AND GEOGRAPHIC DATA

   The company's businesses include petroleum, geothermal, agricultural
products, carbon and minerals.  Petroleum involves the exploration for, and the
production, transportation, purchase and sale of, crude oil and natural gas; and
the manufacture, purchase, transportation and marketing of petroleum products
and the manufacturing and marketing of petroleum coke. Geothermal involves the
exploration for, and the production and sale of, geothermal resources and the
construction and eventual operation of electrical generating plants served by
the resources. Agricultural Products involves the manufacture, transportation
and marketing of nitrogen-based fertilizers for agricultural uses. Carbon and
Minerals operations involves the production and marketing of petroleum coke,
graphites, solvents and specialty minerals. The company is also involved in
other miscellaneous businesses.

   Unocal has domestic oil and gas operations in the Louisiana/Gulf, California,
Alaska and Central U.S. regions.  The sale of California oil and gas producing
properties is expected to be completed in April 1996 (see Note 25 for additional
information).  Most of the company's crude oil produced in the United States is
sold to third parties.  A substantial portion of the natural gas produced
domestically is sold to third parties under contracts having terms of less than
two years.  The remainder is sold to third parties in the spot market, used in
the company's agricultural products operations or as fuel in its refineries.

   Unocal has oil and gas production in six foreign countries: Thailand,
Indonesia, Canada, the Netherlands, United Kingdom and Zaire.  The company
sells most of its foreign natural gas production overseas to third parties under
long-term contracts. The crude oil and condensate produced overseas are
primarily sold to third parties at spot market prices.

   Unocal pursues exploration opportunities and business development projects
worldwide to sustain the long-term growth of the company.  Currently, the main
areas of oil and gas exploration and development opportunities are in
Azerbaijan, Myanmar, Turkmenistan, Pakistan, China and Vietnam.

   The company owns three refineries in California that are operated by the 76
Products Company business segment, which carries out the company's refining and
marketing activities.  The company manufactures a complete line of high-quality
petroleum products, including automotive gasoline, jet and turbine fuels,
kerosene, diesel oils, automotive and industrial lubricating oils and petroleum
coke.

   The company principally markets gasoline and other refined petroleum products
in the western United States under the "Unocal 76" trade name.  Gasoline is
marketed to consumers at retail service stations, while jet fuels, diesel fuel,
lube oil, and heavy fuel oil are marketed to commercial users.

   The Geothermal and Power Operations segment supplies geothermal steam for
power generation, with major operations in California, the Philippines and
Indonesia.  This segment is constructing power plants in Indonesia to be served
by the geothermal resources it provides.

                                       55
<PAGE>
 
   Agricultural Products manufactures and markets nitrogen-based fertilizers for
wholesale markets to the western United States and to the Pacific Rim. Carbon 
and Minerals produces and markets petroleum coke (other than on the West Coast),
graphites, solvents and specialty minerals. Pipelines principally includes the 
company's equity interests in affiliated pipeline companies. Other includes the 
development and sale of real estate assets and the company's equity interest in 
UNO-VEN.

   The Corporate and Unallocated category includes all unallocated corporate
items and miscellaneous operations. In addition, this category, especially in
prior years, includes the financial data related to businesses that were sold or
being phased-out.

   Financial data by business segments and geographic areas of operation are
shown below.  Intersegment revenue eliminations in business segment data are
mainly transfers from exploration and production operations to refining,
marketing and transportation operations, and in geographic areas of operations
essentially represent transfers from foreign countries to the United States.
Intersegment sales prices approximate market prices.

BUSINESS SEGMENT DATA
<TABLE>
<CAPTION>
 
Millions of Dollars                          1995      1994      1993       1992       1991
-------------------------------------------------------------------------------------------
<S>                                        <C>       <C>       <C>       <C>        <C>
Revenues:
 Petroleum
   Exploration and Production
     United States (a)                     $2,477    $2,501    $2,703    $ 2,824    $ 3,013
     Foreign       (b)                      1,345     1,258     1,146      1,365      1,248
   Refining, Marketing and
    Transportation
     76 Products Company                    4,036     3,693     3,614      3,814      3,666
 Geothermal and Power Operations              133       139       142        134        133
 Diversified Businesses
   Agricultural Products                      509       378       331        324        285
   Carbon and Minerals                        271       241       220        220        160
   Pipelines                                  120        92        90         84         74
   Other                                       23        45        33         33         18
 Corporate and Unallocated                     79       123       585      1,906      2,957
 Intersegment Eliminations                   (568)     (505)     (520)      (643)      (659)
-------------------------------------------------------------------------------------------
     Total                                 $8,425    $7,965    $8,344    $10,061    $10,895
 
 (a) Includes marketing related sales of   $  789    $  918    $  974    $ 1,056    $ 1,162
 (b) Includes marketing related sales of   $  370    $  200    $  136    $   268    $   145
</TABLE>

                                       56
<PAGE>
 
BUSINESS SEGMENT DATA (continued)
<TABLE>
<CAPTION>
 
 
Millions of Dollars                           1995         1994         1993         1992         1991
--------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>          <C>          <C>
Earnings:
 Petroleum
   Exploration and Production
     United States                            $  386       $  289       $  376       $  346      $   333
     Foreign                                     330          407          390          377          403
   Refining, Marketing and
    Transportation
     76 Products Company (a)                     (12)          23          126           44         (107)
 Geothermal and Power Operations                  47           57           51           34           36
 Diversified Businesses
   Agricultural Products                         113           43           27           24           (6)
   Carbon and Minerals                            72           62           45           21           16
   Pipelines                                      82           70           67           64           58
   Other                                          12           22           25           31           12
 Corporate and Unallocated
   Administrative and General expense           (127)        (137)         (98)        (102)         (68)
   Net interest expense                         (257)        (255)        (279)        (356)        (357)
   Environmental and Litigation expense (b)     (148)        (293)        (130)         (98)         (80)
   Other                                         (35)           6           11          (36)         (28)
--------------------------------------------------------------------------------------------------------
 Pretax earnings before cumulative
  effect of accounting changes                   463          294          611          349          212
Income taxes                                    (203)        (170)        (268)        (153)        (139)
Cumulative effect of accounting changes            -         (277)        (130)          24            -
--------------------------------------------------------------------------------------------------------
       Net earnings (loss)                    $  260       $ (153)      $  213       $  220      $    73
 
 
 
Assets - December 31:
 Petroleum
   Exploration and Production (c)
     United States                            $3,071       $3,214       $3,815       $3,774      $ 3,906
     Foreign                                   1,648        1,509        1,528        1,563        1,595
   Refining, Marketing and
    Transportation
     76 Products Company                       2,604        2,322        2,032        1,979        1,752
 Geothermal and Power Operations                 481          456          436          461          469
 Diversified Businesses
   Agricultural Products                         309          284          281          292          227
   Carbon and Minerals                           229          204          201          211          246
   Pipelines                                     261          262          264          270          255
   Other                                         230          193          179          156          131
 Corporate and Unallocated                     1,058          893          970        1,186        1,764
--------------------------------------------------------------------------------------------------------
     Total                                    $9,891       $9,337       $9,706       $9,892      $10,345
</TABLE>
 
 (a) 1991 includes the write-down of the Los Angeles Refinery for $73 million.
 (b) 1994 includes a $161 million provision for environmental remediation costs.
 (c) The decline in 1994 is primarily due to the write-down of impaired
     producing oil and gas properties as discussed in Note 2.

                                       57
<PAGE>
 
BUSINESS SEGMENT DATA  (continued)
<TABLE>
<CAPTION>
 
Millions of Dollars                         1995      1994      1993     1992     1991
----------------------------------------------------------------------------------------
<S>                                        <C>       <C>       <C>       <C>     <C>
 
Capital expenditures:
 Petroleum
   Exploration and Production
     United States                          $  497    $  486    $  562   $ 364    $  488
     Foreign                                   353       310       330     275       369
   Refining, Marketing and
    Transportation
     76 Products Company                       422       367       231     194       463
 Geothermal and Power Operations                51        35        48      33        19
 Diversified Businesses
   Agricultural Products                        55         8         8      54        37
   Carbon and Minerals                          12         8         4       7         6
   Pipelines                                     5         5         4       4         8
   Other                                         6        12         7       4         -
 Corporate and Unallocated                      58        41        55      24        80
----------------------------------------------------------------------------------------
     Total                                  $1,459    $1,272    $1,249   $ 959    $1,470

 
Depreciation, depletion and
 amortization:
  Petroleum
   Exploration and Production
     United States                          $  537    $  476    $  507   $ 538    $  493
     Foreign                                   290       240       245     211       210
   Refining, Marketing and
    Transportation
     76 Products Company                       111       135       107      95       154
 Geothermal and Power Operations                28        28        49      45        46
 Diversified Businesses
   Agricultural Products                        28        20        18      17        42
   Carbon and Minerals                           6         6         6      12         9
   Pipelines                                     6         6         7       7         7
 Corporate and Unallocated                      16        36        24      39        44
----------------------------------------------------------------------------------------
     Total                                  $1,022    $  947    $  963   $ 964    $1,005
========================================================================================
</TABLE>

                                       58
<PAGE>
 
GEOGRAPHIC AREAS OF OPERATIONS
<TABLE>
<CAPTION>
 
MILLIONS OF DOLLARS                          1995       1994       1993       1992       1991
----------------------------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>        <C>        <C>
 
Revenues:
 United States                              $6,883     $6,500     $6,541    $ 6,712    $ 6,590
 Foreign                                     1,463      1,342      1,241      1,457      1,449
 Corporate and Unallocated                      79        123        585      1,906      2,957
 Intersegment Eliminations                       -          -        (23)       (14)      (101)
----------------------------------------------------------------------------------------------
   Total                                    $8,425     $7,965     $8,344    $10,061    $10,895
 
 
Earnings:
 United States                              $  636     $  679     $  729    $   536    $   400
 Foreign                                       394        457        422        425        469
 Corporate and Unallocated                    (567)      (842)      (540)      (612)      (657)
----------------------------------------------------------------------------------------------
 Pretax earnings before cumulative
  Effect of accounting changes                 463        294        611        349        212
Income taxes                                  (203)      (170)      (268)      (153)      (139)
Cumulative effect of accounting changes          -       (277)      (130)        24          -
----------------------------------------------------------------------------------------------
     Net earnings (loss)                    $  260     $ (153)    $  213    $   220    $    73
 
Assets - December 31:
 United States                              $6,905     $6,700     $7,009    $ 6,958    $ 6,806
 Foreign                                     1,928      1,744      1,727      1,748      1,775
 Corporate and Unallocated                   1,058        893        970      1,186      1,764 
----------------------------------------------------------------------------------------------
   Total                                    $9,891     $9,337     $9,706    $ 9,892    $10,345
</TABLE>

NOTE 25 - SUBSEQUENT EVENT

  On February 16, 1996, Unocal and Nuevo Energy Company (Nuevo) signed an asset
purchase agreement for the sale of nearly all of Unocal's crude oil and natural
gas producing properties in California.  Torch Energy Advisors, Inc. (Torch)
negotiated the sale and will operate the properties on behalf of Nuevo, a
company Torch formed in 1990.  The sales agreement is subject to certain
regulatory consents, approvals and waiting periods.

  Under the terms of the agreement, Unocal will receive approximately $500
million from the sale of the properties.  The final cash settlement will be set
at the closing, which is expected in April 1996.  In addition, beginning in
1998, the company could receive further payments that are contingent upon the
price per barrel from the properties' future oil production.  The company 
expects to use the proceeds from the sale to reduce debt and fund projects in
Central and Southeast Asia.

                                       59
<PAGE>
 
SUPPLEMENTAL INFORMATION ON OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES

Results of Operations

   Results of operations of oil and gas exploration and production activities
are shown below. Sales revenues are net of royalty payments, net profits
interests and marketing related purchases. Other revenues primarily include
gains or losses on sales of oil and gas properties and miscellaneous rental
income.

   Production costs include lifting costs and taxes other than income.
Exploration expenses consist of geological and geophysical costs, leasehold
rentals and dry hole costs.  Other operating expenses primarily include
administrative and general expense.  Income tax expense is based on the tax
effects arising from the operations.  Results of operations do not include
general corporate overhead and interest costs.
<TABLE>
<CAPTION>
                                           United    Far     Other
Millions of Dollars                        States   East    Foreign     Total
------------------------------------------------------------------------------
<S>                                        <C>      <C>     <C>        <C>
YEAR 1995
 Sales
   To public                               $  580    $514      $176     $1,270
   Intercompany                               772     249        18      1,039
 Other revenues                               164       5        29        198
------------------------------------------------------------------------------
     Total                                  1,516     768       223      2,507
 Production costs                             394     102        79        575
 Exploration expenses                          75      64        54        193
 Depreciation, depletion and                  537     192        98        827
  amortization
 Other operating expenses                     124      46        26        196
------------------------------------------------------------------------------
       Net                                    386     364       (34)       716
       Income taxes                           146     170       (21)       295
------------------------------------------------------------------------------
         Results of operations             $  240    $194      $(13)    $  421
YEAR 1994
 Sales
   To public                               $  639    $495      $198     $1,332
   Intercompany                               749     263        14      1,026
 Other revenues                                17       -        41         58
------------------------------------------------------------------------------
     Total                                  1,405     758       253      2,416
 Production costs                             420     108        76        604
 Exploration expenses                          69      67        56        192
 Depreciation, depletion and                  476     165        75        716
  amortization
 Other operating expenses                     151      39        18        208
------------------------------------------------------------------------------
       Net                                    289     379        28        696
       Income taxes                           109     194        15        318
------------------------------------------------------------------------------
         Results of operations             $  180    $185      $ 13     $  378
YEAR 1993
 Sales
   To public                               $  624    $517      $187     $1,328
   Intercompany                               839     198        12      1,049
 Other revenues                                66       -        51        117
------------------------------------------------------------------------------
     Total                                  1,529     715       250      2,494
 Production costs                             448     108        78        634
 Exploration expenses                          75      28        63        166
 Depreciation, depletion and                  507     174        71        752
  amortization
 Other operating expenses                     122      42        12        176
------------------------------------------------------------------------------
       Net                                    377     363        26        766
       Income taxes                           149     168        12        329
------------------------------------------------------------------------------
         Results of operations             $  228    $195      $ 14     $  437
</TABLE>

                                       60
<PAGE>
 
COSTS INCURRED

   Costs incurred in oil and gas property acquisition, exploration and
development activities, either capitalized or charged to expense, are shown
below.  Data for the company's capitalized costs related to petroleum production
and exploration activities are presented in Note 11.
<TABLE>
<CAPTION>
 
 
                           United   Far     Other
Millions of Dollars        States   East   Foreign   Total
----------------------------------------------------------
<S>                        <C>      <C>    <C>       <C>
1995
 Property acquisition
   Proved                    $  7   $  -       $ 6    $ 13
   Unproved                    13      2         5      20
 Exploration                  138    117        62     317
 Development                  383    181        91     655
----------------------------------------------------------
1994
 Property acquisition
   Proved                    $  5   $  -       $ -    $  5
   Unproved                     4      -         7      11
 Exploration                  115     94        58     267
 Development                  398    189        62     649
----------------------------------------------------------
1993
 Property acquisition
   Proved                    $ 32   $  -       $ 2    $ 34
   Unproved                     8      -        14      22
 Exploration                  121     40        61     222
 Development                  469    203        94     766
----------------------------------------------------------
</TABLE>

AVERAGE SALES PRICE AND PRODUCTION COSTS PER UNIT (UNAUDITED)

   The average sales price is based on sales revenues and volumes attributable
to net working interest production.  The average production costs per barrel
presented below are based on equivalent petroleum barrels, including natural gas
converted at a ratio of 6.0 MCF to one barrel of oil which represents the energy
content of the wet gas.

<TABLE>
<CAPTION>
                                           United    Far      Other
                                           States    East    Foreign   Total
-----------------------------------------------------------------------------
<S>                                        <C>      <C>      <C>       <C>
1995
Average sales price:
 Crude oil and condensate - per barrel     $15.03   $16.09    $15.69   $15.40
 Natural gas - per MCF                       1.56     2.04      1.39     1.72
 Natural gas liquids - per barrel           11.57    12.99      9.02    11.73
Average production costs per barrel          3.49     1.50      5.40     2.94
=============================================================================
1994
Average sales price:
 Crude oil and condensate - per barrel     $13.06   $14.55    $14.36   $13.63
 Natural gas - per MCF                       1.78     2.01      1.76     1.86
 Natural gas liquids - per barrel           11.38     8.32      8.31    10.60
Average production costs per barrel          3.60     1.54      5.15     3.00
-----------------------------------------------------------------------------
1993
Average sales price:
 Crude oil and condensate - per barrel     $13.68   $15.50    $14.88   $14.21
 Natural gas - per MCF                       1.97     2.11      1.79     2.01
 Natural gas liquids - per barrel           13.65     8.06      9.51    12.51
Average production costs per barrel          4.02     1.77      5.53     3.40
-----------------------------------------------------------------------------
</TABLE>

                                       61
<PAGE>
 
OIL AND GAS RESERVE DATA (UNAUDITED)

   Estimates of physical quantities of oil and gas reserves, determined by
company engineers, for the years 1995, 1994 and 1993 are shown below.  As
defined by the Securities and Exchange Commission, proved oil and gas reserves
are the estimated quantities of crude oil, natural gas and natural gas liquids
that geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing economic and
operating conditions.  Accordingly, these estimates do not include probable or
possible reserves.  Estimated oil and gas reserves are based on available
reservoir data and are subject to future revision. Proved reserve quantities
exclude royalties owned by others, however, foreign reserves held under certain
production sharing agreements, principally with Indonesia, are reported on a
gross basis.  The gross basis includes the company's net working interest and
host country's interest.  Unocal's estimated net worldwide reserves, excluding
the host country's share under these production sharing agreements, would have
been 596 million barrels of crude oil and 6,308 billion cubic feet of natural
gas at December 31, 1995.

   Natural gas reserves are reported on a wet-gas basis, which include natural
gas liquids reserves.  For informational purposes, natural gas liquids reserves
in the U.S. were 83, 91 and 95 million barrels at December 31, 1995, 1994 and
1993, respectively.  They are derived from the natural gas reserves by applying
a national average shrinkage factor obtained from the Department of Energy
published statistics.  Foreign natural gas liquids reserves were insignificant
for the above periods.
 
ESTIMATED PROVED RESERVES OF CRUDE OIL AND CONDENSATE
<TABLE>
<CAPTION>
                                                      United      Far     Other
MILLIONS OF BARRELS                                   States      East    Foreign    Total
------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>      <C>        <C>
DEVELOPED AND UNDEVELOPED AS OF JANUARY 1, 1993        506         189         99      794
 Revisions of estimates                                 (6)          -          2       (4)
 Improved recovery                                       6           -          -        6
 Discoveries and extensions                             27           5         25       57
 Purchases                                               4           -          -        4
 Sales                                                  (6)          -         (3)      (9)
 Production                                            (48) (a)    (25)       (11)     (84)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1993                                483         169        112      764
 Revisions of estimates                                 (7)          6          3        2
 Improved recovery                                       2           -          -        2
 Discoveries and extensions                              9          28          7       44
 Sales                                                 (18)          -         (2)     (20)
 Production                                            (50)        (32)       (13)     (95)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1994                                419         171        107      697
 Revisions of estimates                                  9           8        (11)       6
 Improved recovery                                      19           -          -       19
 Discoveries and extensions                              4          21          7       32
 Purchases                                               -           -         20       20
 Sales                                                 (18)          -         (1)     (19)
 Production                                            (46)        (31)       (11)     (88)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1995                                387         169        111      667
==========================================================================================
PROVED DEVELOPED RESERVES
 December 31, 1992                                     388         107         57      552
 December 31, 1993                                     360          98         78      536
 December 31, 1994                                     318         103         69      490
 December 31, 1995                                     298          96         64      458
 
</TABLE>
 
(a) Excludes 7 million barrels produced in 1993 but sold under forward
    contracts in 1992.

                                       62
<PAGE>
 
OIL AND GAS RESERVE DATA (UNAUDITED) (CONTINUED)
 
ESTIMATED PROVED RESERVES OF NATURAL GAS
<TABLE>
<CAPTION>
                                                      United      Far     Other
BILLIONS OF CUBIC FEET                                States      East    Foreign    Total
------------------------------------------------------------------------------------------
<S>                                                   <C>        <C>      <C>        <C>
DEVELOPED AND UNDEVELOPED AS OF JANUARY 1, 1993         3,831    2,596        310    6,737
 Revisions of estimates                                   (94)      49        (20)     (65)
 Discoveries and extensions                               348      261         19      628
 Purchases                                                 26        -         23       49
 Sales                                                    (19)       -        (75)     (94)
 Production                                              (365)    (237)       (21)    (623)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1993                                 3,727    2,669        236    6,632
 Revisions of estimates                                     3       (2)       (16)     (15)
 Discoveries and extensions                               282      624         88      994
 Purchases                                                117  (a)   -          -      117
 Sales                                                   (128) (b)   -         (3)    (131)
 Production                                              (421)    (243)       (22)    (686)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1994                                 3,580    3,048        283    6,911
 Revisions of estimates                                   (55)      40        (20)     (35)
 Discoveries and extensions                               209      408          -      617
 Purchases                                                  -        -          7        7
 Sales                                                    (54)       -          -      (54)
 Production                                              (419)    (241)       (21)    (681)
------------------------------------------------------------------------------------------
AS OF DECEMBER 31, 1995                                 3,261    3,255        249    6,765
==========================================================================================
 
PROVED DEVELOPED RESERVES
 December 31, 1992                                      2,460    1,587        225    4,272
 December 31, 1993                                      2,520    1,601        147    4,268
 December 31, 1994                                      2,437    1,768        127    4,332
 December 31, 1995                                      2,194    1,807        188    4,189
 
</TABLE>
(a)  Includes 115 billion cubic feet due to property exchanges.
(b)  Includes 105 billion cubic feet due to property exchanges.

                                       63
<PAGE>
 
PRESENT VALUE OF FUTURE NET CASH FLOW (UNAUDITED)

   The present value of future net cash flows from proved oil and gas reserves
for the years 1995, 1994 and 1993 are presented below.  Revenues are based on
estimated production of proved reserves from existing and planned facilities and
on average prices of oil and gas at year-end.  Development and production costs
related to future production are based on year-end cost levels and assume
continuation of existing economic conditions.  Income tax expense is computed by
applying the appropriate year-end statutory tax rates to pretax future cash
flows less recovery of the tax basis of proved properties, and reduced by
applicable tax credits.

   The company cautions readers that the data on the present value of future net
cash flow of oil and gas reserves are based on many subjective judgments and
assumptions.  Different, but equally valid, assumptions and judgments could lead
to significantly different results.  Additionally, estimates of physical
quantities of oil and gas reserves, future rates of production and related
prices and costs for such production are subject to extensive revisions and a
high degree of variability as a result of economic and political changes.  Any
subsequent price changes will alter the results and the indicated present value
of oil and gas reserves.  It is the opinion of the company that this data can be
highly misleading and may not be indicative of the value of underground oil and
gas reserves.
<TABLE>
<CAPTION>
 
                                            United      Far      Other
Millions of Dollars                         States     East     Foreign    Total
----------------------------------------------------------------------------------
<S>                                        <C>        <C>       <C>       <C>
1995
Revenues (a)                                $12,395    $7,617    $1,939    $21,951
Production costs                              4,532     1,423     1,013      6,968
Development costs (b)                         1,696     1,025       253      2,974
Income tax expense                            1,824     2,176       298      4,298
----------------------------------------------------------------------------------
Future net cash flow                          4,343     2,993       375      7,711
10% annual discount                           1,496     1,129       117      2,742
----------------------------------------------------------------------------------
Present value of future net cash flow       $ 2,847    $1,864    $  258    $ 4,969
==================================================================================
1994
Revenues (a)                                $11,291    $6,610    $1,798    $19,699
Production costs                              4,829     1,321       890      7,040
Development costs (b)                         1,835     1,122       217      3,174
Income tax expense                            1,189     1,729       290      3,208
----------------------------------------------------------------------------------
Future net cash flow                          3,438     2,438       401      6,277
10% annual discount                           1,141       858       128      2,127
----------------------------------------------------------------------------------
Present value of future net cash flow       $ 2,297    $1,580    $  273    $ 4,150
==================================================================================
1993
Revenues (a)                                $12,260    $6,049    $1,467    $19,776
Production costs                              5,114     1,192       640      6,946
Development costs (b)                         1,980     1,006       201      3,187
Income tax expense                            1,172     1,788       263      3,223
----------------------------------------------------------------------------------
Future net cash flow                          3,994     2,063       363      6,420
10% annual discount                           1,333       546       124      2,003
----------------------------------------------------------------------------------
Present value of future net cash flow       $ 2,661    $1,517    $  239    $ 4,417
==================================================================================
(a) Average prices at year end used in this calculation are as follows:

  Crude oil per barrel
     1995                                   $ 15.44    $17.14    $15.20
     1994                                     13.26     16.84     14.81
     1993                                     10.08     14.96     11.78
  Natural gas per mcf
     1995                                   $  1.98    $ 2.18    $ 1.58
     1994                                      1.62      1.88      1.28
     1993                                      2.05      1.99      1.62
 
</TABLE>
 
(b) Includes dismantlement and abandonment costs.

                                       64
<PAGE>
 
CHANGES IN PRESENT VALUE OF FUTURE NET CASH FLOW (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
 
Millions of Dollars                              1995         1994          1993
--------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>
Present value at beginning of year             $ 4,150      $ 4,417      $ 5,425
Discoveries and extensions, net of
 estimated future costs                            743          602          626
Net purchases and sales of proved 
 reserves (a)                                      (51)         (22)         (52)
Revisions to prior estimates:
   Prices net of estimated changes in
    production costs                             2,321           83       (2,026)
   Future development costs                       (516)        (164)          92
   Quantity estimates                              (58)         (88)        (403)
   Production schedules and other                 (548)          39           91
Accretion of discount                              636          543          741
Development costs related to beginning 
 of year reserves                                  635          646          764
Sales of oil and gas, net of production
 costs of $575 million in 1995, $604 million 
 in 1994 and $634 million in 1993               (1,734)      (1,754)      (1,653)(b)
Net change in income taxes                        (609)        (152)         812
--------------------------------------------------------------------------------
Present value at end of year                   $ 4,969      $ 4,150      $ 4,417
================================================================================
</TABLE>
(a) Purchases of reserves were valued at $23 million, $26 million and $39
    million in 1995, 1994 and 1993, respectively. Sales of reserves, including
    the sale of future production, were valued at $74 million, $48 million and
    $91 million for the same years, respectively.
    
(b) Excludes the 1992 sale of future production for which income was recognized
    in 1993 but cash was received in 1992.
 

                                       65
<PAGE>
 
QUARTERLY FINANCIAL AND MARKET PRICE DATA (Unaudited)
-----------------------------------------------------
<TABLE>
<CAPTION>
                                                                                          1995 QUARTERS
                                                           ---------------------------------------------------------------------
Dollars in millions except per share amounts                     1st                 2nd                3rd                 4th
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>                <C>                 <C>
Total revenues (a)                                             $1,906              $2,290             $2,005              $2,224
Total costs and other deductions, including income
  taxes (b)                                                     1,832               2,212              1,946               2,175
--------------------------------------------------------------------------------------------------------------------------------
Net earnings                                                   $   74              $   78             $   59              $   49
--------------------------------------------------------------------------------------------------------------------------------
 Net earnings per common share                                 $  .27              $  .28             $  .20              $  .16
--------------------------------------------------------------------------------------------------------------------------------
Gross margin (c)                                               $  147              $  176             $  139              $  122
--------------------------------------------------------------------------------------------------------------------------------
(a) Includes sales and operating revenues of                   $1,826              $2,238             $1,933              $2,136
(b) Includes special items of                                  $   15              $   50             $   10              $  148
(c) Gross margin equals sales and operating revenues less crude oil and product purchases, operating and selling expenses, 
    depreciation, depletion and amortization, dry hole costs, exploration expense, consumer excise taxes and other operating taxes.

                                                                                          1994 QUARTERS
                                                           ---------------------------------------------------------------------
Dollars in millions except per share amounts                     1st                 2nd                3rd                 4th
--------------------------------------------------------------------------------------------------------------------------------
Total revenues (a)                                             $1,916              $2,045             $2,020              $1,984
Total costs and other deductions, including income
  taxes (b)                                                     1,853               1,986              1,950               2,052
--------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) before cumulative effect
  of accounting change                                             63                  59                 70                 (68)
Cumulative effect of accounting change                           (277)                  -                  -                   -
--------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                            $ (214)             $   59             $   70              $  (68)
--------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
  Before cumulative effect of accounting change                $  .22              $  .21             $  .25              $ (.32)
  Cumulative effect of accounting change                        (1.14)                  -                  -                   -
--------------------------------------------------------------------------------------------------------------------------------
  Net earnings (loss) per common share                         $ (.92)             $  .21             $  .25              $ (.32)
--------------------------------------------------------------------------------------------------------------------------------
Gross margin (c)                                               $  132              $  188             $  203              $   16
--------------------------------------------------------------------------------------------------------------------------------
(a) Includes sales and operating revenues of                   $1,829              $2,023             $1,989              $1,956
(b) Includes special items of                                  $   58              $   13             $   17              $  229
(c) Gross margin equals sales and operating revenues less crude oil and product purchases, operating and selling expenses, 
    depreciation, depletion and amortization, dry hole costs, exploration expense, consumer excise taxes and other operating taxes.
</TABLE>

   The net loss for the fourth quarter of 1994 included charges of $94 million
($152 million pretax) for environmental remediation costs, $22 million ($35
million pretax) for litigation expenses, $22 million ($35 million pretax) for
asset write-downs and $15 million ($25 million pretax) for restructuring costs.
Fourth quarter charges for environmental remediation and litigation are
principally due to changes in estimates.  Included in the $94 million for
environmental remediation costs was $16 million ($26 million pretax) which
relates to incremental obligations incurred over a number of prior periods but
which would not have been material to any such period.

                                       66
<PAGE>
 
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
 
Dollars in millions except per share amounts           1995        1994        1993        1992        1991
------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>         <C>         <C>         <C>
SALES AND EARNINGS DATA
Sales revenues
  Petroleum products                                $  2,768    $  2,457    $  2,895    $  3,710    $  3,759
  Crude oil and condensate                             2,303       2,314       2,264       2,754       3,027
  Agricultural products                                  486         373         319         292         256
  Natural gas                                          1,031       1,109       1,104       1,033         954
  Geothermal                                             120         135         145         197         204
  Natural gas liquids                                     97          96         101         116         117
  Minerals                                                95          79          62          80          92
  Other                                                   74         119         149         457         967
  Consumer excise taxes                                  898         893         816         992       1,050
------------------------------------------------------------------------------------------------------------
     Total                                             7,872       7,575       7,854       9,631      10,426
Operating revenues                                       261         222         223         256         309
Other revenues                                           292         168         267         174         160
------------------------------------------------------------------------------------------------------------
       Total revenues                                  8,425       7,965       8,344      10,061      10,895
Earnings before cumulative effect of
 accounting changes                                      260         124         343         196          73
  Per common share                                       .91         .36        1.27         .75         .31
Net earnings (loss) (a)                                  260        (153)        213         220          73
  Per common share                                       .91        (.78)        .73         .85         .31
------------------------------------------------------------------------------------------------------------
 
SHARE DATA
Cash dividends declared on preferred  stock         $     36    $     36    $     36    $     17    $      -
  Per share                                             3.50        3.50        3.50        1.62           -
Cash dividends declared on common stock                  197         194         181         167         164
  Per share                                              .80         .80         .75         .70         .70
Number of common stockholders of record   
 at year end                                          33,028      37,622      41,682      44,870      43,591
Weighted average common shares - thousands           246,112     242,640     241,114     238,278     234,594
------------------------------------------------------------------------------------------------------------
 
BALANCE SHEET DATA
Current assets                                      $  1,576    $  1,528    $  1,578    $  1,660    $  1,978
Current liabilities                                    1,316       1,257       1,196       1,436       1,524
Working capital                                          260         271         382         224         454
Ratio of current assets to current liabilities         1.2:1       1.2:1       1.3:1       1.2:1       1.3:1
Total assets                                           9,891       9,337       9,706       9,892      10,345
Long-term debt                                         3,692       3,452       3,455       3,530       4,543
Total stockholders' equity                             2,930       2,815       3,129       3,131       2,464
  Per common share                                      9.87        9.54       10.90       10.93       10.50
  Return on average stockholders' equity                9.1%      (5.1)%        6.8%        7.9%        2.9%
------------------------------------------------------------------------------------------------------------
 
GENERAL DATA
Salaries, wages and employee benefits (b)           $    797    $    811    $    744    $    817    $    843
Number of regular employees at year end               12,509      13,127      13,613      14,687      17,248
------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Net earnings (loss) included the cumulative effect of accounting changes
    which consisted of a charge of $277 million ($1.14 per common share) in
    1994, a charge of $130 million ($.54 per common share) in 1993 and a gain of
    $24 million ($.10 per common share) in 1992.

(b) Employee benefits are net of pension income recognized in accordance with
    current accounting standards for pension costs.  For years 1995, 1994 and
    1993, such benefits also include the accrued postretirement medical benefits
    cost.

                                       67
<PAGE>
 
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE:  None.

                               -----------------

                                    PART III

   The information required by Items 10 through 12 (except for information
regarding the company's executive officers) is incorporated by reference to
Unocal's Proxy Statement for its 1996 Annual Meeting of Stockholders (the "1996
Proxy Statement") (File No. 1-8483), as indicated below. The 1996 Proxy
Statement is expected to be filed with the Securities and Exchange Commission on
or about April 22, 1996.

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   See the information regarding Unocal's directors and nominees for election as
directors to appear under the caption "Item 1. Election of Directors" in the
1996 Proxy Statement.  Also, see the list of Unocal's executive officers and
related information under the caption "Executive Officers of the Registrant" in
Part I of this report on page 17.

ITEM 11 - EXECUTIVE COMPENSATION

   See the 1996 Proxy Statement for information regarding executive compensation
to appear under the captions "Summary Compensation Table," "Option Grants in
1995," "Aggregated Option/SAR Exercises in 1995 and December 31, 1995 Option
Values," "Long-Term Incentive Plans - Awards in 1995," "Pension Plan Benefits -
Estimated Annual Retirement Benefits," "Employment and Change of Control
Agreements" and for information regarding directors' compensation to appear
under the caption "Directors' Compensation."

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   See the 1996 Proxy Statement for information regarding security ownership to
appear under the captions "Security Ownership of Certain Beneficial Owners" and
"Security Ownership of Management."

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:  Not required.

                               -----------------

                                    PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

   (a) Financial statements, financial statement schedules and exhibits filed as
       part of this annual report:

         (1) Financial Statements: See the Index to Consolidated Financial
             Statements and Financial Statement Schedules under Item 8 on page
             30 of this report.

         (2) Financial Statement Schedules: See the Index to Consolidated
             Financial Statements and Financial Statement Schedules under Item 8
             on page 30 of this report.

         (3) Exhibits: The Exhibit Index on pages 73 and 74 of this report lists
             the exhibits that are filed as part of this report.

                                       68
<PAGE>
 
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
          (continued)

   (b) Reports filed on Form 8-K:

         During the fourth quarter of 1995:

         (1) Current Report on Form 8-K dated and filed October 26, 1995, for
             the purpose of reporting, under item 5, third quarter and 
             year-to-date earnings.

         During the first quarter of 1996 to the date hereof:

         (1) Current Report on Form 8-K dated and filed January 25, 1996, for
             the purpose of reporting, under item 5, the company's fourth 
             quarter and full-year 1995 earnings.

         (2) Current Report on Form 8-K dated and filed February 20, 1996 for
             the purpose of reporting, under item 5, the company's sale of its 
             California oil and gas producing properties.

         (3) Current Report on Form 8-K dated and filed February 23, 1996 for
             the purpose of reporting, under item 5, the company's crude oil 
             and natural gas reserve data.

                                       69
<PAGE>
 
                                   SIGNATURES



  Pursuant to the requirements of Section 13 or 15(d) 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:  March 25, 1996              By  /s/     NEAL E. SCHMALE
                                     ----------------------------------
                                               Neal E. Schmale
                                           Chief Financial Officer
 
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1996.
 
<TABLE>
<CAPTION>
 
         SIGNATURE                                 TITLE
-----------------------------   --------------------------------------------
<S>                             <C> 
 
                               
/s/ ROGER C. BEACH              Chairman of the Board of Directors and Chief 
-----------------------------   Executive Officer
Roger C. Beach                 
 
 
 
/s/ JOHN F. IMLE, JR.           Director and President
-----------------------------
John F. Imle, Jr.
 
 
 
/s/ NEAL E. SCHMALE             Director and Chief Financial
-----------------------------   Officer 
Neal E. Schmale                
 
 
 
/s/ CHARLES S. MCDOWELL         Vice President and Comptroller
-----------------------------   (Principal Accounting Officer) 
Charles S. McDowell            
</TABLE>

                                       70
<PAGE>
 
<TABLE>
<CAPTION>
 
         SIGNATURE                                 TITLE
-----------------------------   --------------------------------------------
<S>                             <C> 
 
 
 
/s/ JOHN W. AMERMAN             Director
-----------------------------
John W. Amerman
 
 
 
/s/ MACDONALD G. BECKET         Director
-----------------------------
MacDonald G. Becket
 
 
 
/s/ JOHN W. CREIGHTON, JR.      Director
-----------------------------
John W. Creighton, Jr.
 
 
 
/s/ MALCOLM R. CURRIE           Director
-----------------------------
Malcolm R. Currie
 
 
 
/s/ FRANK C. HERRINGER          Director
-----------------------------
Frank C. Herringer
 
 
 
/s/ DONALD P. JACOBS            Director
-----------------------------
Donald P. Jacobs
 
 
 
/s/ RICHARD J. STEGEMEIER       Director
-----------------------------
Richard J. Stegemeier
 
 
 
/s/ CHARLES R. WEAVER           Director
-----------------------------
Charles R. Weaver
 
 
 
/s/ J. STEVEN WHISLER           Director
-----------------------------
J. Steven Whisler
 
 
 
                                Director
-----------------------------
Marina v.N. Whitman
 
</TABLE>

                                       71
<PAGE>
 
                UNOCAL CORPORATION AND CONSOLIDATED SUBSIDIARIES

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
 
                                                                ADDITIONS
                                                       -------------------------
<S>                                        <C>          <C>           <C>           <C>            <C>
                                                        CHARGED OR    CHARGED OR
                                           BALANCE AT   (CREDITED)    (CREDITED)    DEDUCTIONS      BALANCE
                                           BEGINNING    TO COSTS &     TO OTHER        FROM         AT END
DESCRIPTION                                OF PERIOD     EXPENSES      ACCOUNTS      RESERVES (A)  OF PERIOD
------------------------------------------------------------------------------------------------------------
 
YEAR 1995
 
Amounts deducted from
  applicable assets:
 
Accounts and notes receivable                 $15          $22           $  -          $ (9)         $28
 
Investments and long-term receivables         $ 3            -           $12              -          $15
 
 
YEAR 1994
 
Amounts deducted from
  applicable assets:
 
Accounts and notes receivable                 $16          $10           $ 1           $(12)         $15
 
Investments and long-term receivables         $ 4          $(1)          $ -           $  -          $ 3
 
 
 
YEAR 1993
 
Amounts deducted from
  applicable assets:
 
Accounts and notes receivable                 $18          $11           $(2)          $(11)         $16
 
Investments and long-term receivables         $ 5          $ 2           $(2)          $ (1)         $ 4
------------------- 
</TABLE>
(a)  Represents receivables written off, net of recoveries, reinstatements, and
     losses sustained.

                                       72
<PAGE>
 
                               UNOCAL CORPORATION

                                 EXHIBIT INDEX
<TABLE> 
<C>              <S> 
Exhibit 3.1      Certificate of Incorporation of Unocal, as amended through July
                 23, 1992, and currently in effect (incorporated by reference to
                 Exhibit 3.1 to Amendment No. 2 on Form 10-K/A to Unocal's
                 Annual Report on Form 10-K for the year ended December 31,
                 1993, File No. 1-8483).

Exhibit 3.2      Bylaws of Unocal, as amended though May 22, 1995, and currently
                 in effect (incorporated by reference to Exhibit 3 to Unocal's
                 Quarterly Report on Form 10-Q for the quarter ended March 31,
                 1995, File No. 1-8483).

Exhibit 3.3      Bylaws of Unocal, as amended effective June 3, 1996.

Exhibit 4.1      Standard Multiple-Series Indenture Provisions, January 1991,
                 dated as of January 2, 1991 (incorporated by reference to
                 Exhibit 4.1 to the Registration Statement on Form S-3 of Union
                 Oil Company of California and Unocal (File Nos. 33-38505 and
                 33-38505-01)).

Exhibit 4.2      Form of Indenture, dated as of January 30, 1991 among Union Oil
                 Company of California, Unocal and The Bank of New York
                 (incorporated by reference to Exhibit 4.2 to the Registration
                 Statement on Form S-3 of Union Oil Company of California and
                 Unocal (File Nos. 33-38505 and 33-38505-01)).

Exhibit 4.3      Form of Indenture, dated as of February 3, 1995, among Union
                 Oil Company of California, Unocal and Chemical Trust Company of
                 California (incorporated by reference to Exhibit 4.6 to the
                 Registration Statement on Form S-3 of Union Oil Company of
                 California and Unocal (File Nos. 33-54861 and 33-54861-01)).

                 Other instruments defining the rights of holders of long term
                 debt of Unocal and its subsidiaries are not being filed since
                 the total amount of securities authorized under each of such
                 instruments does not exceed 10 percent of the total assets of
                 the company and its subsidiaries on a consolidated basis.
                 Unocal agrees to furnish a copy of any such instrument to the
                 Securities and Exchange Commission (Commission) upon request.

Exhibit 10.1     Rights Agreement, dated as of January 29, 1990, between the
                 Unocal and Chemical Trust Company of California, as Rights
                 Agent (incorporated by reference to Exhibit 1 to Unocal's
                 Current Report on Form 8-K dated January 29, 1990, File No.
                 1-8483).

The following Exhibits 10.2 through 10.9 are management contracts or
compensatory plans, contracts or arrangements required to be filed by Item 601
(b) (10) (iii) (A) of Regulation S-K.
 
Exhibit 10.2     Management Incentive Program (incorporated by reference to
                 Exhibit A to Unocal's Proxy Statement dated March 18, 1991 for
                 its 1991 Annual Meeting of Stockholders, File No. 1-8483).

Exhibit 10.3     Long-Term Incentive Plan of 1985 (incorporated by reference to
                 Unocal's Proxy Statement dated March 24, 1984 for its 1984
                 Annual Meeting of Stockholders, File No. 1-8483).

Exhibit 10.4     Supplemental Retirement Plan for Key Management Personnel, as
                 amended and effective January 1, 1989 (incorporated by
                 reference to Exhibit 10.3 to Unocal's Annual Report on Form 
                 10-K for the year ended December 31, 1990, File No. 1-8483).

Exhibit 10.5     Other Compensatory Arrangements (incorporated by reference to
                 Exhibit 10.4 to Unocal's Annual Report on Form 10-K for the
                 year ended December 31, 1990, File No. 1-8483).

Exhibit 10.6     Directors' Restricted Stock Plan of 1991 (incorporated by
                 reference to Exhibit B to Unocal's Proxy Statement dated March
                 18, 1991 for its 1991 Annual Meeting of Stockholders, File No.
                 1-8483).

Exhibit 10.7     Admendments to Directors Restricted Stock Plan effective 
                 February 8, 1996.

Exhibit 10.8     Form of Indemnity Agreement between Unocal and each of its
                 directors (incorporated by reference to Exhibit A to Unocal's
                 Proxy Statement dated March 20, 1987 for its 1987 Annual
                 Meeting of Stockholders, File No. 1-8483).

Exhibit 10.9     Employment Agreement, effective July 1, 1994, between Union Oil
                 Company of California and Lawrence M. Higby (incorporated by
                 reference to Exhibit 10 to Unocal's Quarterly Report on Form 
                 10-Q for the quarter ended June 30, 1994, File No. 1-8483).

Exhibit 11       Statement regarding computation of earnings per common share
                 for the five years ended December 31, 1995.
</TABLE>

                                       73
<PAGE>
 
                               UNOCAL CORPORATION

                           EXHIBIT INDEX (CONTINUED)

<TABLE>
<CAPTION>
 
 
<S>              <C>

Exhibit 12.1     Statement regarding computation of ratio of earnings to fixed
                 charges of Unocal for the five years ended December 31, 1995.

Exhibit 12.2     Statement regarding computation of ratio of earnings to
                 combined fixed charges and preferred stock dividends of Unocal
                 for the five years ended December 31, 1995.

Exhibit 12.3     Statement regarding computation of ratio of earnings to fixed
                 charges of Union Oil Company of California for the five years
                 ended December 31, 1995.

Exhibit 21       Subsidiaries of Unocal Corporation.

Exhibit 23       Consent of Coopers & Lybrand L.L.P.

Exhibit 27       Financial data schedule for the year ended December 31, 1995
                 (included only in the copy of this report filed electronically
                 with the Commission).

</TABLE>
                                      74