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, 1996
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, Suite 1400, 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, 1996 125,358,153
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
-------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ---------- -----------
(Dollars in Millions, Except per Share Amounts)
<S> <C> <C> <C> <C>
Revenues ................................................. $ 295 $ 211 $ 551 $ 426
Costs and Expenses ....................................... 199 211 392 424
----- ----- ----- -----
Operating Income ......................................... 96 -- 159 2
Interest Expense ......................................... 28 28 57 54
Other Income (Expense) - Net ............................. 1 (1) 2 (1)
----- ----- ----- -----
Income (Loss) Before Income Taxes ........................ 69 (29) 104 (53)
Income Tax Expense (Benefit) ............................. 21 (31) 18 (50)
----- ----- ----- -----
Net Income (Loss) ........................................ $ 48 $ 2 $ 86 $ (3)
===== ===== ===== =====
Earnings (Loss) per Common Share ......................... $ .38 $ .02 $ .68 $(.02)
===== ===== ===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-2-
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
(Dollars in Millions)
<S> <C> <C>
ASSETS
Current Assets
Cash and Short-term Investments ...................................... $ 19 $ 20
Accounts Receivable .................................................. 171 210
Inventories .......................................................... 30 18
Other Current Assets ................................................. 18 17
------ ------
238 265
------ ------
Oil & Gas Properties (Successful Efforts Method) ....................... 5,893 5,870
Other Properties ....................................................... 507 499
------ ------
6,400 6,369
Accumulated Depreciation, Depletion and Amortization ............... 2,586 2,602
------ ------
Properties - Net ................................................ 3,814 3,767
------ ------
Other Assets ........................................................... 123 133
------ ------
Total Assets ................................................... $4,175 $4,165
====== ======
LIABILITIES
Current Liabilities
Accounts Payable .................................................... $ 218 $ 214
Taxes Payable ....................................................... 79 59
Accrued Interest .................................................... 23 20
Dividends Payable ................................................... 17 17
Other Current Liabilities ........................................... 34 12
------ ------
371 322
------ ------
Long-term Debt ......................................................... 1,358 1,350
------ ------
Deferred Income Taxes .................................................. 91 110
------ ------
Other Liabilities and Deferred Credits ................................. 132 163
------ ------
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
Common Stock, Par Value $.01 Per Share
(Authorized 325,000,000 shares; Issued 150,000,000
shares) ............................................................ 2 2
Paid-in Capital ........................................................ 2,934 2,935
Retained Earnings ...................................................... 253 202
------ ------
3,189 3,139
Cost of Treasury Stock
(24,641,847 and 23,425,621 shares for 1996 and 1995,
respectively) ...................................................... 966 919
------ ------
Common Stockholders' Equity ............................................ 2,223 2,220
------ ------
Total Liabilities and Common Stockholders' Equity .............. $4,175 $4,165
====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
--------------------
1996 1995
-------- --------
(Dollars in Millions)
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss).................................................. $ 86 $ (3)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities
Depreciation, Depletion and Amortization ........................ 164 191
Deferred Income Taxes ........................................... (19) (66)
Exploration Costs ............................................... 23 21
Working Capital Changes
Accounts Receivable ........................................... 39 20
Inventories ................................................... (12) 13
Other Current Assets .......................................... (1) (6)
Accounts Payable .............................................. 4 57
Taxes Payable ................................................. 20 (17)
Accrued Interest .............................................. 3 4
Other Current Liabilities ..................................... 22 (2)
Other ........................................................... (57) (11)
----- -----
Net Cash Provided By Operating Activities ................. 272 201
----- -----
Cash Flows From Investing Activities
Additions to Properties ........................................... (316) (302)
Proceeds from Sales and Other ..................................... 119 103
----- -----
Net Cash Used In Investing Activities ..................... (197) (199)
----- -----
Cash Flows From Financing Activities
Proceeds from Long-term Financing ................................. 150 150
Reduction in Long-term Debt ....................................... (141) (98)
Dividends Paid .................................................... (35) (35)
Treasury Stock Transactions - Net ................................. (47) 2
Other ............................................................. (3) (23)
----- -----
Net Cash Used In Financing Activities ..................... (76) (4)
----- -----
Decrease in Cash and Short-term Investments ......................... (1) (2)
Cash and Short-term Investments
Beginning of Year ................................................. 20 20
----- -----
End of Period ..................................................... $ 19 $ 18
===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
BURLINGTON RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1995 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 ("Quarterly Report"). The financial 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 (loss) 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 for the first six months of 1996
and 1995.
2. DIVESTITURE PROGRAM AND REORGANIZATION
On July 11, 1996, the Company announced it will accelerate its on-going
divestiture program. Since 1994, the Company has sold over 9,000 wells. Over the
next twelve months, the Company plans to sell its interest in approximately
20,000 wells thus reducing its pre-1994 well count over 50 percent. The proved
reserves associated with this prospective divestiture approximate 800 BCFE while
the related production represents about 10 percent of the Company's currently
produced volumes.
This accelerated divestiture program will allow the Company to
reorganize and reduce the number of its operating areas from five to three. The
accelerated divestiture program and reorganization will result in more than a 20
percent reduction in the Company's 1995 level of production expenses and
employee count and over a 10 percent reduction in corporate administrative
expenses. The Company plans to substantially complete the reorganization prior
to the end of the third quarter of 1996 and, accordingly, will record a charge
of approximately $30 million for severance and other related exit costs.
3. COMMITMENTS AND CONTINGENT LIABILITIES
On August 12, 1996, the 270th Judicial District Court of Harris County,
Texas gave its preliminary approval to a settlement in the previously reported
lawsuit styled Caroline Altheide, et al. v. Meridian Oil Inc., et al. The
settlement is subject to notice to class members and to final approval by the
court. If approved, the settlement will not have a materially adverse effect on
the consolidated financial position or results of operations of the Company.
-5-
<PAGE>
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.
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, 1996 and December 31, 1995 was 38
percent. In February 1996, the Company issued $150 million of 6.875% Debentures
due February 15, 2026. 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 2001 and a $300 million
revolving credit agreement that expires July 1997. The $300 million revolving
credit agreement is renewable annually by mutual consent and was renewed in July
1996. As of June 30, 1996, there were no borrowings outstanding under the credit
facilities, although borrowing capacity is reduced by outstanding commercial
paper. At June 30, 1996, the Company had outstanding commercial paper borrowings
of $11 million at an average interest rate of 5.65 percent. The Company also has
the capacity to issue $200 million of debt securities under a shelf registration
statement filed with the Securities and Exchange Commission.
During the first six months of 1996, the Company repurchased
approximately 1.4 million shares of its common stock for $52 million. Since
December 1988, the Company repurchased approximately 29 million shares under
three 10 million share repurchase authorizations. On July 10, 1996, the
Company's Board of Directors authorized the purchase of an additional 10 million
shares in the open market from time to time depending on market conditions.
Net cash provided by operating activities for the first six months of
1996 was $272 million compared to $201 million in 1995. The increase was
primarily due to higher operating income in 1996. Net cash provided by operating
activities in 1995 included the sale of a receivable related to a claim
resulting from the breach of a take-or-pay gas contract and the sale of
gas-in-storage inventory for approximately $39 million and $20 million,
respectively.
The Company continues to divest marginal and non-strategic properties
to maintain its high quality asset base. The Company divested its interest in
approximately 3,600 wells and related facilities for approximately $69 million
during the first six months of 1996. On July 11, 1996, the Company announced it
will accelerate this on-going divestiture program.
-6-
<PAGE>
The Company is 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 will not have a materially adverse
effect on the consolidated financial position or results of operations of the
Company.
Capital Expenditures
Capital expenditures for the first six months of 1996 totaled $316
million compared to $302 million in 1995. Capital expenditures are currently
projected to be approximately $585 million for all of 1996 and are expected to
be primarily for the development and exploration of oil and gas properties,
reserve acquisitions, and plant and pipeline expenditures. Capital expenditures
will be funded from internal cash flow supplemented, if needed, by external
financing.
Dividends
On July 10, 1996, the Board of Directors declared a common stock
quarterly dividend of $.1375 per share, payable October 1, 1996.
Results of Operations - Second Quarter 1996 Compared to Second Quarter 1995
The Company reported net income of $48 million or $.38 per share for
the second quarter of 1996 compared to net income of $2 million or $.02 per
share in 1995. Operating income for the second quarter of 1996 was $96 million
compared to $125 thousand in 1995.
Revenues were $295 million for the second quarter of 1996 compared to
$211 million in 1995. Natural gas sales prices improved 43 percent to $1.75 per
MCF and gas sales volumes improved 4 percent to 1,193 MMCF per day which
increased revenues $58 million and $5 million, respectively. Average oil sales
prices improved 19 percent to $20.29 per barrel and oil sales volumes improved 5
percent to 50.4 MBbls per day which increased revenues $15 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.
Costs and expenses were $199 million for the second quarter of 1996
compared to $211 million in 1995. The decrease is primarily due to the Company's
adoption of SFAS No. 121, effective September 30, 1995 which reduced
unit-of-production depletion and depreciation costs by $12 million.
The effective income tax rate was an expense of 30 percent for the
second quarter of 1996 compared to a benefit of 108 percent in 1995. The
increased tax expense in 1996 is a result of higher pretax income and a decline
in non-conventional fuel tax credits earned. The 1995 beneficial tax rate is due
to a 1995 pre-tax loss and the effect of non-conventional fuel tax credits.
-7-
<PAGE>
Results of Operations - Six Months 1996 Compared to Six Months 1995
The Company reported net income of $86 million or $.68 per share for
the first six months of 1996 compared to a net loss of $3 million or $.02 per
share in 1995. Operating income for the first six months of 1996 was $159
million compared to $2 million in 1995.
Revenues were $551 million for the first six months of 1996 compared to
$426 million in 1995. Average natural gas sales prices improved 35 percent to
$1.65 per MCF and natural gas sales volumes improved 3 percent to 1,186 MMCF per
day which increased revenues $93 million and $10 million, respectively. Average
oil sales prices improved 14 percent to $19.14 per barrel and oil sales volumes
improved 4 percent to 49.2 MBbls per day which increased revenues $21 million
and $6 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. The revenue increases were partially offset by a $5
million decrease in intrastate natural gas sales and other revenues primarily
resulting from the sale of the intrastate pipeline systems in February 1995.
Costs and expenses were $392 million for the first six months of 1996
compared to $424 million in 1995. The decrease is primarily due to the Company's
adoption of SFAS No. 121, effective September 30, 1995 which reduced
unit-of-production depletion and depreciation costs by $24 million.
Additionally, general and administrative expenses declined by $8 million and
intrastate natural gas purchases decreased $3 million. The decrease was
partially offset by a $2 million increase in production and processing related
expenses resulting from a 4 percent increase in 1996 production levels.
Interest expense was $57 million for the first six months of 1996
compared to $54 million in 1995 due to higher interest rates.
The effective income tax rate was an expense of 17 percent for the
first six months of 1996 compared to a benefit of 95 percent in 1995. The
increased tax expense in 1996 is a result of higher pretax income and a decline
in non-conventional fuel tax credits earned. The 1995 beneficial tax rate is due
to a 1995 pre-tax loss and the effect of non-conventional fuel tax credits.
Other Matters
On July 11, 1996, the Company announced it will accelerate its on-going
divestiture program. Since 1994, the Company has sold over 9,000 wells. Over the
next twelve months, the Company plans to sell its interest in approximately
20,000 wells thus reducing its pre-1994 well count over 50 percent. The proved
reserves associated with this prospective divestiture approximate 800 BCFE while
the related production represents about 10 percent of the Company's currently
produced volumes.
This accelerated divestiture program will allow the Company to
reorganize and reduce the number of its operating areas from five to three. The
accelerated divestiture program and reorganization will result in more than a 20
percent reduction in the Company's 1995 level of production expenses and
employee count and over a 10 percent reduction in corporate administrative
expenses. The Company plans to substantially complete the reorganization prior
-8-
<PAGE>
to the end of the third quarter of 1996 and, accordingly, will record a charge
of approximately $30 million for severance and other related exit costs.
Forward-looking Statements
This Quarterly Report contains projections and other forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. These projections and statements reflect the Company's current views with
respect to future events and financial performance. No assurances can be given,
however, that these events will occur or that these projections will be achieved
and actual results could differ materially from those projected as a result of
certain factors. A discussion of these factors is included in reports previously
filed with the Securities and Exchange Commission.
-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 (Loss) 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
The Company filed a Form 8-K dated June 4, 1996, which included as
an exhibit a cautionary statement relating to forward-looking
statements.
The Company filed a Form 8-K dated July 25, 1996, which included
as an exhibit a Press Release dated July 11, 1996 announcing an
accelerated divestiture program and reorganization and the
authorization to repurchase an additional 10 million shares of
common stock.
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
Executive Vice President and
Chief Financial Officer
By /s/ Hays R. Warden
-------------------------
Hays R. Warden
Senior Vice President and Controller,
and Chief Accounting Officer
Date: August 14, 1996
-11-
BURLINGTON RESOURCES INC.
EARNINGS (LOSS) PER SHARE
EXHIBIT 11.1
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER
1996 1995
--------------------------- ---------------------------
Earnings Shares Earnings Shares
--------------------------- ---------------------------
(Dollars in Millions, 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 $ 48 125,847,741 $ 2 126,564,350
Stock options assumed exercised - net - 442,959 - 492,207
---------- ----------- ---------- -----------
Total net earnings (loss) and primary common shares $ 48 126,290,700 $ 2 127,056,557
========== =========== ========== ===========
Primary earnings (loss) per common share $ .38 $ .02
========== ==========
Fully diluted earnings (loss) per common share
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding $ 48 125,847,741 $ 2 126,564,350
Stock options assumed exercised - net - 518,857 - 591,774
---------- ----------- ---------- -----------
Total net earnings (loss) and fully diluted common shares $ 48 126,366,598 $ 2 127,156,124
========== =========== ========== ===========
Fully diluted earnings (loss) per common share $ .38 $ .02
========== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
---------------------------------------------------------
1996 1995
--------------------------- ---------------------------
Earnings Shares Loss Shares
--------------------------- ---------------------------
(Dollars in Millions, 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 $ 86 126,089,794 $ (3) 126,537,339
Stock options assumed exercised - net - 464,492 - 512,395
---------- ----------- ---------- -----------
Total net earnings (loss) and primary common shares $ 86 126,554,286 $ (3) 127,049,734
========== =========== ========== ===========
Primary earnings (loss) per common share $ .68 $ (.02)
========== ==========
Fully diluted earnings (loss) per common share
Net earnings (loss) available for common stock and
weighted average number of common
shares outstanding $ 86 126,089,794 $ (3) 126,537,339
Stock options assumed exercised - net - 703,938 - 512,395
---------- ----------- ---------- -----------
Total net earnings (loss) and fully diluted common shares $ 86 126,793,732 $ (3) 127,049,734
========== =========== ========== ===========
Fully diluted earnings (loss) per common share $ .68 $ (.02)
========== ==========
</TABLE>
-12-
BURLINGTON RESOURCES INC.
RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1996 1995
-------- -------
(Dollars in Millions,
Except Ratio Amounts)
<S> <C> <C>
Earnings
Income (Loss) Before Income Taxes ......................... $104 $(53)
Add
Interest and fixed charges ............................. 57 54
Portion of rent under long-term operating
leases representative of an interest factor ......... 3 3
---- ----
Total Earnings Available for Fixed Charges ................ $164 $ 4
==== ====
Fixed Charges
Interest and fixed charges ................................ $ 57 $ 54
Portion of rent under long-term operating
leases representative of an interest factor ............ 3 3
Capitalized interest ...................................... 1 1
---- ----
Total Fixed Charges ....................................... $ 61 $ 58
==== ====
Ratio of Earnings to Fixed Charges (1) ....................... 2.69x .06x
==== ====
</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 INFORMATION EXTRACTED FROM THE BURLINGTON
RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STAEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 19
<SECURITIES> 0
<RECEIVABLES> 171
<ALLOWANCES> 0
<INVENTORY> 30
<CURRENT-ASSETS> 238
<PP&E> 6400
<DEPRECIATION> 2586
<TOTAL-ASSETS> 4175
<CURRENT-LIABILITIES> 371
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 2221
<TOTAL-LIABILITY-AND-EQUITY> 4175
<SALES> 551
<TOTAL-REVENUES> 551
<CGS> 392
<TOTAL-COSTS> 392
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 104
<INCOME-TAX> 18
<INCOME-CONTINUING> 86
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
