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 March 31, 1997
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 $.01 per share,
as of March 31, 1997 124,565,412
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------
1997 1996
------- --------
(In Millions, Except per Share Amounts)
<S> <C> <C>
Revenues .........................................$ 384 $ 255
Costs and Expenses ............................... 219 192
------- -------
Operating Income ................................. 165 63
Interest Expense ................................. 28 28
Other Expense .................................... 1 -
------- -------
Income Before Income Taxes ....................... 136 35
Income Tax Expense (Benefit) ..................... 26 (3)
-------- --------
Net Income .......................................$ 110 $ 38
======== ========
Earnings per Common Share ........................$ .88 $ .30
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ----------
(In Millions, Except Share Data)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents ........................................... $ 221 $ 68
Accounts Receivable ................................................. 192 338
Inventories ......................................................... 22 18
Other Current Assets ................................................ 25 18
--------- ---------
460 442
--------- ---------
Oil & Gas Properties (Successful Efforts Method) ...................... 5,883 5,843
Other Properties ...................................................... 489 485
--------- ---------
6,372 6,328
Accumulated Depreciation, Depletion and Amortization .............. 2,632 2,548
--------- ---------
Properties - Net ............................................... 3,740 3,780
--------- ---------
Other Assets .......................................................... 96 94
--------- ---------
Total Assets ................................................... $ 4,296 $ 4,316
========= =========
LIABILITIES
Current Liabilities
Accounts Payable ................................................... $ 133 $ 217
Taxes Payable ...................................................... 72 62
Accrued Interest ................................................... 34 23
Dividends Payable .................................................. 17 17
Deferred Revenue ................................................... 20 20
Other Current Liabilities .......................................... 1 29
--------- ---------
277 368
--------- ---------
Long-term Debt ........................................................ 1,347 1,347
--------- ---------
Deferred Income Taxes ................................................. 94 85
--------- ---------
Deferred Revenue ...................................................... 70 75
--------- ---------
Other Liabilities and Deferred Credits ................................ 100 108
--------- ---------
Put Options ........................................................... 22 -
--------- ---------
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 ....................................................... 2,911 2,932
Retained Earnings ..................................................... 481 388
--------- ---------
3,394 3,322
Cost of Treasury Stock
(25,434,588 and 25,081,301 Shares for 1997 and 1996, respectively) . 1,008 989
--------- ---------
Common Stockholders' Equity ........................................... 2,386 2,333
--------- ---------
Total Liabilities and Common Stockholders' Equity .............. $ 4,296 $ 4,316
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------
1997 1996
--------- ----------
(In Millions)
<S> <C> <C>
Cash Flows From Operating Activities
Net Income .......................................... $ 110 $ 38
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities
Depreciation, Depletion and Amortization .......... 91 81
Deferred Income Taxes ............................. 9 (17)
Exploration Costs ................................. 18 10
Working Capital Changes
Accounts Receivable ............................... 146 23
Inventories ....................................... (4) (9)
Other Current Assets .............................. (7) -
Accounts Payable .................................. (84) (5)
Taxes Payable ..................................... 10 9
Accrued Interest .................................. 11 15
Other Current Liabilities ......................... (28) 20
Other ............................................... (20) (34)
--------- ----------
Net Cash Provided By Operating Activities ....... 252 131
--------- ----------
Cash Flows From Investing Activities
Additions to Properties ............................. (133) (122)
Proceeds from Sales and Other ....................... 69 37
--------- ----------
Net Cash Used In Investing Activities ............ (64) (85)
--------- ----------
Cash Flows From Financing Activities
Proceeds from Long-term Financing ................... - 150
Reduction in Long-term Debt ......................... - (149)
Dividends Paid ...................................... (17) (17)
Common Stock Purchases .............................. (25) (17)
Other ............................................... 7 (11)
--------- ----------
Net Cash Used In Financing Activities ........... (35) (44)
--------- ----------
Increase in Cash and Cash Equivalents ................. 153 2
Cash and Cash Equivalents
Beginning of Year ................................... 68 20
--------- ----------
End of Period ....................................... $ 221 $ 22
========= ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
BURLINGTON RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1996 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 per common share is based on the weighted average number of common
shares outstanding during the year including common share equivalents when
dilutive. The weighted average number of common shares outstanding was 125
million and 127 million for the first quarter of 1997 and 1996, respectively.
2. DIVESTITURE PROGRAM AND REORGANIZATION
On July 11, 1996, the Company announced the acceleration of its on-going
divestiture program. The Company sold over 10,000 working interest wells from
January 1, 1994 to March 31, 1997, including its working interest in
approximately 600 wells sold during 1997. By June 30, 1997, the Company expects
to sell its working interest in approximately 8,600 additional wells, thus
reducing its pre-1994 working interest well count over 50 percent. The related
net production on the wells to be sold represented about 9 percent of the
Company's average daily produced volumes as of March 31, 1997. In April 1997,
the Company sold its working interest in approximately 6,500 wells for gross
proceeds of approximately $300 million. The Company expects to record a pretax
gain of approximately $50 million in the second quarter.
This accelerated divestiture program allowed the Company to reorganize and
reduce the number of its operating divisions from five to three. The accelerated
divestiture program and reorganization will result in a reduction of
approximately 425 employees or 20 percent of total employees. All levels of
personnel within the Company were included in the employee reduction. As a
result of the divestiture program and reorganization, the Company recorded a
pretax charge of approximately $30 million for severance and other related exit
costs in the third quarter of 1996. As of March 31, 1997, 365 employees have
been terminated under the restructuring program and approximately $4 million of
accrued unpaid benefits remain on the consolidated balance sheet. The Company
expects that substantially all benefits will be paid by June 30, 1997.
5
<PAGE>
3. COMMITMENTS AND CONTINGENT LIABILITIES
In the previously reported lawsuit styled Caroline Altheide, et al. v.
Meridian Oil Inc. (now known as Burlington Resources Oil & Gas Company), et al.,
the 270th Judicial District Court of Harris County, Texas gave final approval of
the parties' settlement agreement in its Judgment signed on November 12, 1996.
Certain class members purported to perfect an appeal of the Judgment on February
7, 1997. The Company and the Plaintiffs are vigorously defending the appeal.
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 March 31, 1997 and December 31, 1996 was 36 percent and 37
percent, respectively.
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 in July 1997. The $300 million revolving credit agreement
is renewable annually by mutual consent. As of March 31, 1997, there were no
borrowings outstanding under the credit facilities. In April 1997, the Company
increased the capacity under its shelf registration statements from $200 million
to $500 million.
During the first quarter of 1997, the Company repurchased approximately 528
thousand shares of its common stock for approximately $25 million. Since
December 1988, the Company repurchased approximately 31 million shares under
four 10 million share repurchase authorizations. In conjunction with the
Company's stock repurchase program, the Company sold put options ("options")
during the first quarter of 1997. The options entitle the holders, upon exercise
of the options on the expiration dates, to sell shares of Burlington Resources
common stock to the Company at specified prices. As of March 31, 1997, options
on 500 thousand shares were outstanding with an average strike price of $44.50
per share. An average premium of $2.63 per option was received for the option
sales. The options have various expiration dates between August 1997 and
September 1997.
Net cash provided by operating activities for the first quarter of 1997 was
$252 million compared to $131 million in 1996. The increase was primarily due to
significantly higher operating income.
In an effort to maintain its high quality asset base, the Company continues
to divest non-strategic oil and gas properties. During the first quarter of
1997, the Company divested its working interest in approximately 600 wells and
related facilities. Gross proceeds received from the Company's divestiture
program, including performance deposits on transactions closed in the second
quarter of 1997, were approximately $80 million.
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 quarter of 1997 totaled $133 million
compared to $122 million in 1996. Capital expenditures are currently projected
to be approximately $650 million for all of 1997 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 April 9, 1997, the Board of Directors declared a common stock quarterly
dividend of $.1375 per share, payable July 1, 1997.
Results of Operations - First Quarter 1997 Compared to First Quarter 1996
The Company reported net income of $110 million or $.88 per share for the
first quarter of 1997 compared to $38 million or $.30 per share in 1996.
Operating income for the first quarter of 1997 was $165 million compared to $63
million in 1996.
Revenues were $384 million for the first quarter of 1997 compared to $255
million in 1996. Natural gas sales prices improved 48 percent to $2.30 per MCF
and gas sales volumes improved 12 percent to 1,325 MMCF per day which increased
revenues $90 million and $18 million, respectively. Average oil sales prices
improved 18 percent to $21.21 per barrel and oil sales volumes improved 7
percent to 51.3 MBbls per day which increased revenues $15 million and $5
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 $219 million for the first quarter of 1997 compared
to $192 million in 1996. The increase was primarily due to an $8 million
increase in exploration costs, a $10 million increase in depreciation, depletion
and amortization, and a $9 million increase in production and processing
expenses resulting from an 11 percent increase in 1997 production levels.
The effective income tax rate was an expense of 19 percent for the first
quarter of 1997 compared to a benefit of 8 percent in 1996. The increased tax
expense in 1997 is principally a result of higher pretax income. The 1996
beneficial tax rate is due to the benefit of non-conventional fuel tax credits
being greater than tax expense at statutory rates.
7
<PAGE>
Other Matters
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, which is
effective for periods ending after December 15, 1997.
SFAS No. 128 establishes standards for computing and presenting earnings
per share ("EPS"). It simplifies the standards for computing EPS and replaces
the presentation of primary EPS with a presentation of basic EPS. Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. SFAS No. 128 also requires dual presentation of basic EPS and
diluted EPS on the face of the income statement for all entities with complex
capital structures.
On July 11, 1996, the Company announced the acceleration of its on-going
divestiture program. The Company sold over 10,000 working interest wells from
January 1, 1994 to March 31, 1997, including its working interest in
approximately 600 wells sold during 1997. By June 30, 1997, the Company expects
to sell its working interest in approximately 8,600 additional wells, thus
reducing its pre-1994 working interest well count over 50 percent. The related
net production on the wells to be sold represented about 9 percent of the
Company's average daily produced volumes as of March 31, 1997. In April 1997,
the Company sold its working interest in approximately 6,500 wells for gross
proceeds of approximately $300 million. The Company expects to record a pretax
gain of approximately $50 million in the second quarter.
This accelerated divestiture program allowed the Company to reorganize and
reduce the number of its operating divisions from five to three. The accelerated
divestiture program and reorganization will result in a reduction of
approximately 425 employees or 20 percent of total employees. All levels of
personnel within the Company were included in the employee reduction. As a
result of the divestiture program and reorganization, the Company recorded a
pretax charge of approximately $30 million for severance and other related exit
costs in the third quarter of 1996. As of March 31, 1997, 365 employees have
been terminated under the restructuring program and approximately $4 million of
accrued unpaid benefits remain on the consolidated balance sheet. The Company
expects that substantially all benefits will be paid by June 30, 1997.
8
<PAGE>
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 the Company's 1996
Annual Report on Form 10-K.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 3 of Notes to Consolidated Financial Statements.
ITEM 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on March 27, 1997. The
following were nominated and elected to serve as Directors of Burlington
Resources Inc. for a term of one year or until their successors shall have been
duly elected and qualified:
Nominee For Withheld
J. V. Byrne 107,310,353 616,191
S. P. Gilbert 106,588,265 1,338,279
L. I. Grant 107,385,950 540,594
J. T. LaMacchia 107,359,122 567,422
J. F. McDonald 107,390,035 536,509
T. H. O'Leary 107,395,693 530,851
D. M. Roberts 107,350,260 576,284
W. Scott, Jr. 107,297,438 629,106
B. S. Shackouls 107,376,752 549,792
W. E. Wall 107,331,323 595,221
Shareholder proposal to eliminate the Charitable Award Plan:
For Against Abstentions
10,234,873 85,596,099 1,737,871
10
<PAGE>
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 13
12.1 Ratio of Earnings to Fixed Charges 14
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 no reports on Form 8-K in the first quarter.
Items 2, 3 and 5 of Part II are not applicable and have been omitted.
11
<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: May 6, 1997
12
BURLINGTON RESOURCES INC.
EARNINGS PER SHARE
EXHIBIT 11.1
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
----------------------------------------------------
1997 1996
----------------------- ------------------------- ----
Earnings Shares Earnings Shares
-------- ---------- ---------- ------------
(Dollars in Millions, Except per Share Amounts)
<S> <C> <C> <C> <C>
Primary earnings per common share
Net earnings available for common stock and
weighted average number of common
shares outstanding .................................$ 110 124,750,874 $ 38 126,340,882
Stock options assumed exercised - net ................. - 534,591 - 401,011
-------- ----------- ---------- -----------
Total net earnings and primary common shares ..........$ 110 125,285,465 $ 38 126,741,893
======== =========== ========== ===========
Primary earnings per common share .....................$ .88 $ .30
======== ==========
Fully diluted earnings per common share
Net earnings available for common stock and
weighted average number of common
shares outstanding .................................$ 110 124,750,874 $ 38 126,340,882
Stock options assumed exercised - net ................. - 535,363 - 444,218
-------- ----------- --------- -----------
Total net earnings and fully diluted common shares ....$ 110 125,286,237 $ 38 126,785,100
======== =========== ========== ===========
Fully diluted earnings per common share ...............$ .88 $ .30
======== ==========
</TABLE>
13
BURLINGTON RESOURCES INC.
RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12.1
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------
1997 1996
---------- --------
(In Millions, Except Ratio Amounts)
<S> <C> <C>
Earnings
Income Before Income Taxes ..............................$ 136 $ 35
Add
Interest and fixed charges ........................... 28 28
Portion of rent under long-term operating
leases representative of an interest factor ....... 1 1
--------- ---------
Total Earnings Available for Fixed Chargers .............$ 165 $ 64
========= =========
Fixed Charges
Interest and fixed charges .............................$ 28 $ 28
Portion of rent under long-term operating
leases representative of an interest factor .......... 1 1
Capitalized interest .................................... 1 1
--------- ---------
Total Fixed Charges .....................................$ 30 $ 30
========= =========
Ratio of Earnings to Fixed Charges .......................... 5.50x 2.12x
========= =========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BURLINGTON
RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 221
<SECURITIES> 0
<RECEIVABLES> 192
<ALLOWANCES> 0
<INVENTORY> 22
<CURRENT-ASSETS> 460
<PP&E> 6,372
<DEPRECIATION> 2,632
<TOTAL-ASSETS> 4,296
<CURRENT-LIABILITIES> 277
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 2,384
<TOTAL-LIABILITY-AND-EQUITY> 4,296
<SALES> 384
<TOTAL-REVENUES> 384
<CGS> 219
<TOTAL-COSTS> 219
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 136
<INCOME-TAX> 26
<INCOME-CONTINUING> 110
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
