UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9971
BURLINGTON RESOURCES INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1413284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5051 Westheimer, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 624-9500
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
Common Stock, par value $.01 per share,
as of June 30, 1995 126,566,031
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
1995 1994 1995 1994
(In Thousands, Except per Share Amounts)
<S> <C> <C> <C> <C>
Revenues...............................$ 211,213 $ 265,768 $ 425,782 $ 540,987
Costs and Expenses..................... 211,088 219,662 423,946 425,702
--------- --------- --------- ---------
Operating Income....................... 125 46,106 1,836 115,285
Interest Expense....................... 28,049 21,711 54,414 39,767
Other Income (Expense) - Net........... (907) 2,212 (374) (68)
--------- --------- --------- ---------
Income (Loss) Before Income Taxes...... (28,831) 26,607 (52,952) 75,450
Income Tax Benefit..................... (31,007) (6,405) (50,304) (5,282)
--------- --------- --------- ---------
Net Income (Loss)......................$ 2,176 $ 33,012 $ (2,648) $ 80,732
========= ========= ========= =========
Earnings (Loss) per Common Share.......$ .02 $ .25 $ (.02) $ .62
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 2 -
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Short-term Investments............................$ 18,058 $ 19,898
Accounts Receivable........................................ 173,632 193,825
Inventories................................................ 22,236 35,188
Other Current Assets....................................... 23,539 17,191
----------- -----------
237,465 266,102
----------- -----------
Oil & Gas Properties (Successful Efforts Method)............. 5,901,073 5,689,135
Other Properties............................................. 506,843 572,490
----------- -----------
6,407,916 6,261,625
Accumulated Depreciation, Depletion and Amortization....... 2,038,587 1,904,212
----------- -----------
Properties - Net.......................................... 4,369,329 4,357,413
----------- -----------
Other Assets................................................. 166,184 185,095
----------- -----------
Total Assets..........................................$ 4,772,978 $ 4,808,610
=========== ===========
LIABILITIES
Current Liabilities:
Accounts Payable...........................................$ 254,501 $ 193,819
Taxes Payable.............................................. 29,840 47,080
Dividends Payable.......................................... 17,400 17,434
Other Current Liabilities.................................. 1,568 3,688
----------- -----------
303,309 262,021
----------- -----------
Long-term Debt............................................... 1,360,403 1,309,137
----------- -----------
Deferred Income Taxes........................................ 414,389 480,648
----------- -----------
Other Liabilities and Deferred Credits....................... 162,636 188,763
----------- -----------
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
Common Stock, Par Value $.01 Per Share
(Authorized 325,000,000 Shares; Issued 150,000,000 Shares).. 1,500 1,500
Paid-in Capital.............................................. 2,935,892 2,936,374
Retained Earnings............................................ 513,951 551,385
----------- -----------
3,451,343 3,489,259
Cost of Treasury Stock
(1995, 23,433,969 Shares; 1994, 23,491,040 Shares)......... 919,102 921,218
----------- -----------
Common Stockholders' Equity.................................. 2,532,241 2,568,041
----------- -----------
Total Liabilities and Common Stockholders' Equity.....$ 4,772,978 $ 4,808,610
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
1995 1994
(In Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss).................................................$ (2,648) $ 80,732
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities:
Depreciation, Depletion and Amortization......................... 190,675 155,611
Deferred Income Taxes............................................ (66,243) (24,272)
Exploration Costs................................................ 21,279 17,720
Working Capital Changes:
Accounts Receivable............................................. 20,193 28,564
Inventories..................................................... 12,952 (9,085)
Other Current Assets............................................ (6,348) (3,766)
Accounts Payable................................................ 60,682 43,301
Taxes Payable................................................... (17,240) 18,726
Other Current Liabilities....................................... (2,154) (19,066)
Gain on Sales and Other.......................................... (10,082) (48,636)
--------- ---------
Net Cash Provided By Operating Activities...................... 201,066 239,829
--------- ---------
Cash Flows From Investing Activities:
Additions to Properties........................................... (302,336) (539,238)
Proceeds from Sales and Other..................................... 103,673 42,953
--------- ---------
Net Cash Used In Investing Activities.......................... (198,663) (496,285)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from Long-term Financing................................. 150,000 318,537
Reduction in Long-term Debt....................................... (97,960) -
Dividends Paid.................................................... (34,817) (35,756)
Treasury Stock Transactions - Net. ............................... 2,116 (27,341)
Other............................................................. (23,582) (1,231)
--------- ---------
Net Cash Provided By (Used In) Financing Activities............ (4,243) 254,209
--------- ---------
Decrease in Cash and Short-term Investments........................ (1,840) (2,247)
Cash and Short-term Investments:
Beginning of Year................................................. 19,898 19,784
--------- ---------
End of Period.....................................................$ 18,058 $ 17,537
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 4 -
<PAGE>
BURLINGTON RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1994 Annual Report on Form 10-K of Burlington Resources Inc. (the
"Company")includes certain definitions and a summary of significant
accounting policies and should be read in conjunction with this Quarterly
Report on Form 10-Q. The statements for the periods presented herein are
unaudited, condensed and do not contain all information required by
generally accepted accounting principles to be included in a full set of
financial statements. In the opinion of management, all material
adjustments necessary to present fairly the results of operations have been
included. All such adjustments are of a normal, recurring nature. The
results of operations for any interim period are not necessarily indicative
of the results of operations for the entire year.
Earnings per common share is based on the weighted average number of common
shares outstanding during the year. The weighted average number of common
shares outstanding was 127 million and 130 million for the first six months
of 1995 and 1994, respectively.
2. RECLASSIFICATION
The Company's 1995 revenues include amounts from the sale of NGLs, less the
actual costs incurred to gather, treat, process and transport the
hydrocarbons to market. To conform to current presentation, the Company
reclassified approximately $80 million of costs and expenses to revenues
for the first six months of 1994. The financial statements for previous
periods include certain other reclassifications that were made to conform
to current presentation. The reclassifications have no impact on
previously reported operating income, net income, or stockholders' equity.
-5-
<PAGE>
3. COMMITMENTS AND CONTINGENT LIABILITIES
On May 25, 1995, the 270th Judicial District Court of Harris County, Texas
entered an order in a lawsuit styled Caroline Altheide, et al. v. Meridian
Oil Inc., et al. which allows the suit to be maintained as a class action
on behalf of all royalty and overriding royalty interest owners in all
Meridian properties and all working interest owners in properties operated
by Meridian who have received payments from Meridian at any time from and
after December 1, 1986 based upon wellhead sales of natural gas to Meridian
Oil Trading Inc. The lawsuit involves claims for unspecified actual and
punitive damages based upon alleged breaches of duties owed to interest
owners because of the use of Meridian corporate affiliates to gather, treat
and market natural gas. The plaintiffs allege that Meridian's gas
producing affiliates have sold natural gas to marketing affiliates at low
inter-affiliate settlement prices which are then used as the basis for
accounting to interest owners. Plaintiffs also allege that Meridian's
pricing includes inappropriate deductions of inflated gathering and
transportation costs. Meridian is vigorously defending this litigation and
perfected an interlocutory appeal of the class certification order on May
30, 1995. This appeal effectively stays class action proceedings in the
trial court until the appeal is completed.
The Company and its subsidiaries are named defendants in numerous lawsuits
and named parties in numerous governmental proceedings arising in the
ordinary course of business. While the outcome of lawsuits and other
proceedings cannot be predicted with certainty, management expects these
matters, including the above-described Altheide litigation, will not have a
materially adverse effect on the consolidated financial position or results
of operations of the Company.
-6-
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
The total long-term debt to capital (total long-term debt and stockholders'
equity) ratio at June 30, 1995, and December 31, 1994, was 35 percent and 34
percent, respectively. In March 1995, the Company issued $150 million of
8.20% Debentures due March 15, 2025. The net proceeds were used for general
corporate purposes, including acquisition of oil and gas properties, repayment
of commercial paper, capital expenditures and repurchases of the Company's
common stock.
The Company's credit facilities are comprised of a $600 million revolving
credit agreement that expires in July 2000 and a $300 million revolving credit
agreement that expires July 1996. The $300 million revolving credit agreement
is renewable annually by mutual consent and was renewed on July 15, 1995. As
of June 30, 1995, there were no borrowings outstanding under the credit
facilities although borrowing capacity is reduced by outstanding commercial
paper. At June 30, 1995, the Company had outstanding commercial paper
borrowings of $162 million at an average interest rate of 6.26 percent. The
Company also has the capacity to issue $350 million of debt securities under
shelf registration statements filed with the Securities and Exchange
Commission.
Net cash provided by operating activities for the first six months of 1995 was
$201 million compared to $240 million for the first six months of 1994. The
decrease was primarily due to lower operating income partially offset by $39
million received in June 1995 from the sale of a receivable related to a claim
resulting from the breach of a take-or-pay gas contract.
The Company continued its divestiture of marginal and non-strategic properties
that began in June 1994. The Company divested 1,156 working interest wells
for approximately $21 million during the first six months of 1995. In
February 1995, the Company completed the sale of its intrastate natural gas
pipeline systems and its underground natural gas storage facility, including
gas inventory, for approximately $80 million. Effective August 1, 1995, the
Company entered into an agreement to convey its working interest in certain
coal seam gas wells. The gross proceeds from all 1995 property transactions
are expected to exceed $250 million.
The Company is routinely involved in certain environmental proceedings and
other related matters. Although it is possible that new information or future
developments could require the Company to reassess its potential exposure
related to these matters, the Company believes, based upon available
information, the resolution of these issues, individually and in the
aggregate, will not have a materially adverse effect on the consolidated
financial position or results of operations of the Company.
-7-
<PAGE>
Capital Expenditures
Capital expenditures for the first six months of 1995 totaled $302 million
compared to $539 million for the same period in 1994. Capital expenditures are
currently projected to be approximately $580 million for all of 1995 and are
expected to be primarily for the development and exploration of oil and gas
properties and reserve acquisitions. Capital expenditures will be funded from
internal cash flow supplemented, as needed, by external financing.
Dividends
On July 12, 1995, the Board of Directors declared a common stock quarterly
dividend of $0.1375 per share, payable October 2, 1995.
Results of Operations - Second Quarter 1995 Compared to Second Quarter 1994
The Company reported net income of $2 million or $.02 per share for the second
quarter of 1995 compared to net income of $33 million or $.25 per share in
1994. Operating income for the second quarter of 1995 was $125 thousand
compared to $46 million in 1994.
Revenues were $211 million for the second quarter of 1995 compared to $266
million in 1994. Natural gas sales volumes improved 11 percent to 1,149 MMCF
per day which increased revenues $18 million. Oil sales volumes improved 7
percent to 48.0 MBbls per day and average oil sales prices improved 6 percent
to $17.07 per barrel which increased revenues $5 million and $4 million,
respectively. Gas and oil sales volumes increased primarily due to continued
development of the Company's oil and gas properties and producing property
acquisitions. These revenue increases were more than offset by a 30 percent
decline in 1995 average natural gas sales prices to $1.22 per MCF which
decreased revenues $55 million. Additionally, intrastate natural gas sales
declined $22 million due to the sale of the intrastate pipeline systems in
February 1995.
Costs and expenses were $211 million for the second quarter of 1995 compared
to $220 million in 1994. The decrease was primarily due to a $19 million
reduction in intrastate natural gas purchases primarily due to the February
1995 sale of the intrastate pipeline systems. The decrease was partially
offset by an $11 million increase in production and processing related
expenses resulting from a 10 percent increase in 1995 production levels.
Interest expense was $28 million for the second quarter of 1995 compared to
$22 million in 1994. The increase was primarily due to additional debt issued
in May 1994 and March 1995 as well as higher outstanding commercial paper
balances during the second quarter of 1995.
The effective income tax rate was a benefit of 108 percent for the second
quarter of 1995 compared to a benefit of 24 percent for the second quarter of
1994. The higher beneficial tax rate is due to a pre-tax loss in 1995
compared to pre-tax income in 1994. In both 1995 and 1994, the beneficial tax
rate is due to low pre-tax income (loss) relative to the amount of non-
conventional fuel tax credits earned.
-8-
<PAGE>
Results of Operations - Six Months 1995 Compared to Six Months 1994
The Company reported a net loss of $3 million or $.02 per share for the first
six months of 1995 compared to net income of $81 million or $.62 per share in
1994. Operating income for the first six months of 1995 was $2 million
compared to $115 million in 1994.
Revenues were $426 million for the first six months of 1995 compared to $541
million in 1994. Natural gas sales volumes improved 13 percent to 1,147 MMCF
per day which increased revenues $44 million. Average oil sales prices
improved 12 percent to $16.76 per barrel and oil sales volumes improved 9
percent to 47.5 MBbls per day which increased revenues $15 million and $10
million, respectively. Gas and oil sales volumes increased primarily due to
continued development of the Company's oil and gas properties and producing
property acquisitions. These revenue increases were more than offset by a 34
percent decline in 1995 average natural gas sales prices to $1.22 per MCF
which decreased revenues $130 million. Additionally, intrastate natural gas
sales declined $45 million due to the sale of the intrastate pipeline systems
in February 1995.
Costs and expenses were $424 million for the first six months of 1995 compared
to $426 million in 1994. The decrease was primarily due to a $39 million
reduction in intrastate natural gas purchases resulting from the February
1995 sale of the intrastate pipeline systems. The decrease was partially
offset by a $34 million increase in production and processing related expenses
resulting from a 12 percent increase in 1995 production levels and a $4
million increase in exploration costs.
Interest expense was $54 million for the first six months of 1995 compared to
$40 million in 1994. The increase was primarily due to additional debt issued
in May 1994 and March 1995 as well as higher outstanding commercial paper
balances during the first six months of 1995.
The effective income tax rate was a benefit of 95 percent for the first six
months of 1995 compared to a benefit of 7 percent for 1994. The higher
beneficial tax rate is due to a pre-tax loss in 1995 compared to pre-tax
income in 1994. In both 1995 and 1994, the beneficial tax rate is due to low
pre-tax income (loss) relative to the amount of non-conventional fuel tax
credits earned.
Other Matters
In March 1995, the Financial Accounting Standards Board issued 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, which is
effective for fiscal years beginning after December 15, 1995.
SFAS No. 121 requires that long-lived assets to be held and used by an entity
be reviewed for impairment whenever events or changes indicate that the
carrying amount of the asset may not be recoverable. An impairment loss would
be recognized if the sum of expected future cash flows (undiscounted and
without interest charges) from the use of the asset is less than the carrying
amount of the asset. SFAS No. 121 also requires that long-lived assets to be
disposed of be reported at the lower of carrying amount or fair value less the
cost to sell. The Company is currently evaluating the impact SFAS No. 121
will have on its financial position or results of operations.
-9-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 3 of Notes to Consolidated Financial Statements.
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this report.
Exhibit Nature of Exhibit Page
4.1 The Company and its subsidiaries either *
have filed with the Securities and Exchange
Commission or upon request will furnish
a copy of any instrument with respect to
long-term debt of the Company.
11.1 Earnings Per Share 12
12.1 Ratio of Earnings to Fixed Charges 13
27.1 Financial Data Schedule **
* Exhibit incorporated by reference.
** Exhibit required only for filings made electronically using the Securities
and Exchange Commission's EDGAR system.
B. Reports on Form 8-K
During the quarter covered by this report there were no reports
filed on Form 8-K.
Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
-10-
<PAGE>
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.
BURLINGTON RESOURCES INC.
-------------------------
(Registrant)
By /s/ John E. Hagale
------------------
John E. Hagale
Senior Vice President and
Chief Financial Officer
By /s/ Hays R. Warden
------------------
Hays R. Warden
Vice President & Controller
Date: August 7, 1995
-11-
<PAGE>
BURLINGTON RESOURCES INC.
EARNINGS PER SHARE
EXHIBIT 11.1
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER
1995 1994
Earnings Shares Earnings Shares
(In Thousands, Except per
Share Amounts)
<S> <C> <C> <C> <C>
Primary earnings (loss) per common share:
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding................................$ 2,176 126,565 $ 33,012 129,366
Stock options assumed exercised - net............... - 492 - 781
-------- --------- -------- ---------
Total net earnings (loss) and primary
common shares.....................................$ 2,176 127,057 $ 33,012 130,147
======== ========= ======== =========
Primary earnings (loss) per common share............$ .02 $ .25
======== ========
Fully diluted earnings (loss) per common share:
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding................................$ 2,176 126,565 $ 33,012 129,366
Stock options assumed exercised - net............... - 591 - 781
-------- --------- -------- ---------
Total net earnings (loss) and fully diluted
common shares.....................................$ 2,176 127,156 $ 33,012 130,147
======== ========= ======== =========
Fully diluted earnings (loss) per common share......$ .02 $ .25
======== ========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
1995 1994
Loss Shares Earnings Shares
(In Thousands, Except per
Share Amounts)
<S> <C> <C> <C> <C>
Primary earnings (loss) per common share:
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding................................$ (2,648) 126,537 $ 80,732 129,511
Stock options assumed exercised - net............... - 513 - 751
-------- --------- -------- ---------
Total net earnings (loss) and primary
common shares.....................................$ (2,648) 127,050 $ 80,732 130,262
======== ========= ======== =========
Primary earnings (loss) per common share............$ (.02) $ .62
======== ========
Fully diluted earnings (loss) per common share:
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding................................$ (2,648) 126,537 $ 80,732 129,511
Stock options assumed exercised - net............... - 513 - 751
-------- --------- -------- ---------
Total net earnings (loss) and fully diluted
common shares.....................................$ (2,648) 127,050 $ 80,732 130,262
======== ========= ======== =========
Fully diluted earnings (loss) per common share......$ (.02) $ .62
======== ========
</TABLE>
- 12 -
BURLINGTON RESOURCES INC.
RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
(In Thousands, Except Ratio Amounts)
<S> <C> <C>
Earnings:
Income (Loss) Before Income Taxes....................$ (52,952) $ 75,450
Add:
Interest and fixed charges.......................... 54,414 39,767
Portion of rent under long-term operating
leases representative of an interest factor....... 2,216 2,249
---------- -----------
Total Earnings Available for Fixed Charges...........$ 3,678 $ 117,466
========== ===========
Fixed Charges:
Interest and fixed charges...........................$ 54,414 $ 39,767
Portion of rent under long-term operating
leases representative of an interest factor........ 2,216 2,249
Capitalized interest................................. 960 690
---------- -----------
Total Fixed Charges..................................$ 57,590 $ 42,706
========== ===========
Ratio of Earnings to Fixed Charges(1)................. .06 x 2.75 x
========== ===========
</TABLE>
(1) Earnings Available for Fixed Charges for 1995 are inadequate to cover Fixed
Charges in the amount of approximately $54 million.
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995, AND
THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTH PERIOD ENDED JUNE
30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 18,058
<SECURITIES> 0
<RECEIVABLES> 173,632
<ALLOWANCES> 0
<INVENTORY> 22,236
<CURRENT-ASSETS> 237,465
<PP&E> 6,407,916
<DEPRECIATION> 2,038,587
<TOTAL-ASSETS> 4,772,978
<CURRENT-LIABILITIES> 303,309
<BONDS> 1,360,403
<COMMON> 1,500
0
0
<OTHER-SE> 2,530,741
<TOTAL-LIABILITY-AND-EQUITY> 4,772,978
<SALES> 425,782
<TOTAL-REVENUES> 425,782
<CGS> 423,946
<TOTAL-COSTS> 423,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,414
<INCOME-PRETAX> (52,952)
<INCOME-TAX> (50,304)
<INCOME-CONTINUING> (2,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,648)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
