<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-89899
UP TO 38,500,000 SHARES
BURLINGTON RESOURCES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------------
This prospectus relates to the shares of Common Stock of Burlington
Resources Inc., a Delaware corporation, issuable upon exchange of the
exchangeable shares of Burlington Resources Canada Inc., an Alberta corporation
and a subsidiary of BR. The exchangeable shares are being issued to the former
shareholders of Poco Petroleums Ltd., including the Poco Stock Purchase Savings
Plan, which holds shares for the benefit of plan participants, in connection
with our acquisition of Poco. Each exchangeable share may be exchanged for one
share of our common stock, plus all payable and unpaid dividends on a share of
our common stock. Because the shares of our common stock offered by this
prospectus will be issued only in exchange for, or upon the redemption of, the
exchangeable shares, we will not receive any cash proceeds from this offering.
We are paying all expenses of registration incurred in connection with this
offering.
Our common stock is listed on the New York Stock Exchange under the
symbol "BR". On November 17, 1999, the last reported price for our common
stock as reported on the NYSE Composite Tape was $39 per share. Unless
otherwise indicated, all dollar references in this prospectus are to U.S.
dollars.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 1.
--------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November 18, 1999.
<PAGE> 2
TABLE OF CONTENTS
Page
Risk Factors..............................................................1
Cautionary Statement Concerning Forward-Looking Statements................3
The Company...............................................................4
Use of Proceeds...........................................................4
Unaudited Pro Forma Combined Condensed Financial Statements...............5
Plan of Distribution.....................................................12
Income Tax Considerations................................................17
Legal Matters............................................................26
Experts..................................................................27
Where You Can Find More Information......................................27
Incorporation of Certain Documents By Reference..........................27
----------------
<PAGE> 3
RISK FACTORS
You should consider carefully the following factors, in addition to
the other information contained or incorporated by reference in this
prospectus, before exchanging or redeeming your exchangeable shares for the
shares of our common stock offered by this prospectus.
THE EXCHANGE OF YOUR EXCHANGEABLE SHARES IS GENERALLY TAXABLE
Based on the tax laws as of the date of this prospectus, the exchange
or redemption of exchangeable shares is generally a taxable event in Canada
and may be a taxable event in the U.S. Your tax consequences depend on a
number of factors, including your residency and whether the shares are
exchanged or redeemed.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE LESS THAN THE MARKET PRICE
OF THE EXCHANGEABLE SHARES
Our common stock trades on the New York Stock Exchange and the exchangeable
shares have been approved to trade on the Toronto Stock Exchange. We do not plan
to list our common stock or the exchangeable shares on any other exchanges.
Although the market prices on the NYSE and TSE should reflect equivalent value,
there can be no assurances that the market price of our common stock will be
identical, or similar, to the market prices of the exchangeable shares.
OUR COMMON STOCK WILL BE FOREIGN PROPERTY FOR CANADIAN TAX PURPOSES
You may be required to limit your investment in our common stock or
risk incurring penalties under the Canadian Income Tax Act if you are:
o a trust governed by a registered pension plan;
o a registered retirement savings plan;
o a registered retirement income fund;
o a registered education savings plan;
o a deferred profit sharing plan; or
o among some other classes of tax-exempt person.
So long as the exchangeable shares are listed on a prescribed Canadian
stock exchange, which exchanges include the TSE, and BR Canada maintains a
substantial presence in Canada, the exchangeable shares will be qualified
investments for these plans or persons and will not be foreign property
under the Canadian Income Tax Act. Our common stock will, however, be
foreign property for these plans or persons. These plans or persons must
limit their investment in our common stock or risk incurring penalties
under the Canadian Income Tax Act.
1
<PAGE> 4
Our business is subject to a variety of market, operational and oil
and gas industry risks that could affect our future results.
ACQUISITION OF POCO
o The acquisition could interrupt or cause a loss of momentum in
our business activities.
o A departure of key employees could cause significant disruptions.
o We will be more dependent upon doing business in Canada than we
were prior to the acquisition.
THE OIL AND GAS MARKET
o Oil and gas prices fluctuate greatly.
o Extended periods of low prices for oil or gas could result in the
cancellation or delay of planned drilling programs, the
curtailment of production or downward adjustments to our
estimated reserves.
o Market prices for crude oil and natural gas may decrease due to
changes in regional and worldwide supply and demand, weather
related and seasonal factors, and transportation costs.
o We hedge our exposure to fluctuations in oil and gas prices with
derivative instruments. The value of these instruments may change
greatly in response to small changes in oil or gas prices.
OUR OPERATIONS
o Our future growth depends upon our ability to maintain and
increase our crude oil and natural gas reserves. Results of
future exploration, exploitation and acquisition activities may
significantly impact our reserves and our operations.
o We rely on third parties to provide most of the services and
equipment necessary to drill wells. The prices charged by these
third parties may increase significantly.
o Future price decreases may result in reductions in the carrying
value of our oil and gas properties.
o The laws and policies of the U.S. or Canada affecting the oil and
gas industry, foreign trade or taxation may harm our operations.
OIL AND GAS INDUSTRY
o Reserve estimates often differ from the quantities of oil and gas
ultimately recovered.
o The prices used to estimate future net revenues may not be
realized.
o International operations are subject to a great deal of political
and economic uncertainty.
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<PAGE> 5
o Some of our competitors may have far greater resources.
o Environmental laws and regulations may result in large penalties
or monetary obligations.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document and in
documents incorporated by reference that are subject to risks and
uncertainties. Forward-looking statements include the information in this
document and in documents incorporated by reference regarding:
o our intentions regarding the exchangeable shares;
o capital spending;
o oil and natural gas production;
o asset portfolios;
o oil and natural gas reserves;
o synergies;
o efficiencies;
o cost savings;
o revenue enhancements;
o future earnings; and
o capital productivity.
Our forward-looking statements can be identified by the use of the
future tense and by words such as "believes", "expects", "anticipates",
"intends", "estimates" or similar expressions. Statements and calculations
concerning oil and gas reserves and their present value also may be deemed
to be forward-looking statements in that they reflect the determination,
based on estimates and assumptions, that oil and gas resources may be
profitably exploited in the future. For all these statements, we claim the
protection of the safe harbor for forward-looking statements contained in
the Private Securities Litigation Reform Act of 1995, as amended.
3
<PAGE> 6
THE COMPANY
BR is a holding company engaged, through its principal subsidiaries,
Burlington Resources Oil & Gas Company and The Louisiana Land and
Exploration Company and their affiliated companies, in the exploration,
development, production and marketing of oil and gas. We are the largest
U.S. independent oil and gas company based on total proved U.S. reserves,
and second largest U.S. based independent oil and gas company based on
total proved worldwide reserves.
Our principal executive offices are located at 5051 Westheimer, Suite
1400, Houston, Texas 77056 and our telephone number is (713) 624-9500.
USE OF PROCEEDS
Because the shares of our common stock will be issued in exchange for or
upon the redemption of exchangeable shares, we will not receive any cash
proceeds upon the issuance of our common stock.
4
<PAGE> 7
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
THE FOLLOWING UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS ARE
PRESENTED TO GIVE EFFECT TO THE ACQUISITION OF POCO BY BR UNDER THE
POOLING-OF-INTERESTS METHOD OF ACCOUNTING. The balance sheet assumes that the
transaction had been consummated on September 30, 1999. The income statements
for each of the three years in the period ended December 31, 1998 and the nine
months ended September 30, 1999 assume that the transaction had been consummated
on January 1, 1996. The unaudited pro forma combined financial statements do not
reflect any cost savings or other synergies which may result from the
transaction and are not necessarily indicative of future results of operations
or financial position. Additionally, the unaudited pro forma combined statements
of income exclude non-recurring charges directly attributable to the transaction
which will be charged to operations in the quarter in which the transaction is
consummated. THESE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
ARE PRESENTED IN ACCORDANCE WITH U.S. GAAP UNDER THE SUCCESSFUL EFFORTS METHOD
OF ACCOUNTING FOR OIL AND GAS PROPERTIES. The unaudited pro forma combined
financial statements should be read in conjunction with the historical
consolidated financial statements of BR and Poco, including the notes thereto,
incorporated by reference and included in this joint proxy statement.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------------------------------
POCO PRO FORMA PRO FORMA
BR U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
------- ------------- -------------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets............................. $ 467 $ 92 $ 559
Oil and Gas and Other Properties -- Net.... 5,320 1,558 $ (379)(a) 6,499
Other Assets............................... 119 7 33 (b) 159
------- ------ ------ ------
Total Assets..................... $ 5,906 $1,657 $ (346) $7,217
======= ====== ====== ======
LIABILITIES
Current Liabilities........................ $ 448 $ 85 $ 28 (c) $ 561
Long-term Debt............................. 1,979 776 2,755
Deferred Income Taxes...................... 220 136 (169)(b) 220
33 (b)
Other Liabilities and Deferred Credits..... 251 12 263
------- ------ ------ ------
2,898 1,009 (108) 3,799
------- ------ ------ ------
STOCKHOLDERS' EQUITY
Common Stock and Paid-in Capital........... 2,994 974 3,968
Retained Earnings (Deficit)................ 1,013 (261) (243) 509
Cost of Treasury Stock..................... (999) (999)
Accumulated Other Comprehensive Loss --
Foreign Currency Translation............. (65) 5 (60)
------- ------ ------ ------
Common Stockholders' Equity................ 3,008 648 (238) 3,418
------- ------ ------ ------
Total Liabilities and Common
Stockholders' Equity........... $ 5,906 $1,657 $ (346) $7,217
======= ====== ====== ======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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<PAGE> 8
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------
POCO PRO FORMA PRO FORMA
BR U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
----- ------------- -------------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues..................................... $1,162 $ 289 $1,451
Costs and Expenses........................... 963 197 $ (2)(a) 1,158
------ ------ ---- ------
Operating Income............................. 199 92 2 293
Interest Expense............................. 123 40 163
Other (Income) Expense -- Net................ 1 (12) (11)
------ ------ ---- ------
Income Before Income Taxes................... 75 64 2 141
Income Tax Expense........................... 28 27 1 56
------ ------ ---- ------
Net Income................................... $ 47 $ 37 $ 1 $ 85
====== ====== ==== ======
Basic Earnings per Common Share.............. $ .27 .24 $ .39
====== ====== ======
Diluted Earnings per Common Share............ $ .26 .24 $ .39
====== ====== ======
Weighted Average Number of Common Shares
Outstanding................................ 177 153 216(3)
====== ====== ======
Weighted Average Number of Common Shares
Outstanding, Including Dilution............ 178 154 217(3)
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------------------
POCO PRO FORMA PRO FORMA
BR U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
------ ------------- -------------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................................... $1,637 $ 372 $2,009
Costs and Expenses.......................... 1,419 621 $ 258(a) 2,298
------ ------ ------ ------
Operating Income (Loss)..................... 218 (249) (258) (289)
Interest Expense............................ 148 44 192
Other Expense (Income) -- Net............... (25) 17 (8)
------ ------ ------ ------
Income (Loss) Before Income Taxes........... 95 (310) (258) (473)
Income Tax Expense (Benefit)................ 9 (125) (116)(a) (232)
------ ------ ------ ------
Net Income (Loss)........................... $ 86 $ (185) $ (142) $ (241)
====== ====== ====== ======
Basic Earnings (Loss) per Common Share...... $ .48 $(1.37) $(1.14)
====== ====== ======
Diluted Earnings (Loss) per Common Share.... $ .48 $(1.37) $(1.14)
====== ====== ======
Weighted Average Number of Common Shares
Outstanding............................... 177 136 211(3)
====== ====== ======
Weighted Average Number of Common Shares
Outstanding, Including Dilution........... 178 136 211(3)
====== ====== ======
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
6
<PAGE> 9
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
POCO PRO FORMA PRO FORMA
BR U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
------ ------------- -------------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.................................... $2,000 $ 375 $2,375
Costs and Expenses.......................... 1,497 249 $ 23(a) 1,769
------ ------ ------ ------
Operating Income............................ 503 126 (23) 606
Interest Expense............................ 142 32 174
Other Expense (Income) -- Net............... (50) 12 (38)
------ ------ ------ ------
Income Before Income Taxes.................. 411 82 (23) 470
Income Tax Expense.......................... 92 36 (11)(a) 117
------ ------ ------ ------
Net Income.................................. $ 319 $ 46 $ (12) $ 353
====== ====== ====== ======
Basic Earnings per Common Share............. $ 1.80 $ .36 $ 1.69
====== ====== ======
Diluted Earnings per Common Share........... $ 1.79 $ .35 $ 1.68
====== ====== ======
Weighted Average Number of Common Shares
Outstanding............................... 177 128 209(3)
====== ====== ======
Weighted Average Number of Common Shares
Outstanding, Including Dilution........... 178 130 211(3)
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
POCO PRO FORMA PRO FORMA
BR U.S. GAAP(1) ADJUSTMENTS(2) COMBINED
------ -------------- -------------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $2,200 $ 277 $2,477
Costs and Expenses......................... 1,620 189 $ 25(a) 1,834
------ ------ ------ ------
Operating Income........................... 580 88 (25) 643
Interest Expense........................... 147 24 171
------ ------ ------ ------
Income Before Income Taxes................. 433 64 (25) 472
Income Tax Expense......................... 98 33 (12)(a) 119
------ ------ ------ ------
Net Income................................. $ 335 $ 31 $ (13) $ 353
====== ====== ====== ======
Basic Earnings per Common Share............ $ 1.89 $ .27 $ 1.71
====== ====== ======
Diluted Earnings per Common Share.......... $ 1.88 $ .27 $ 1.70
====== ====== ======
Weighted Average Number of Common Shares
Outstanding.............................. 177 115 206(3)
====== ====== ======
Weighted Average Number of Common Shares
Outstanding, Including Dilution.......... 178 117 207(3)
====== ====== ======
</TABLE>
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<PAGE> 10
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. CONVERSION OF POCO TO U.S. GAAP AND U.S. DOLLARS
The historical consolidated financial statements of Poco were prepared
under Canadian GAAP and in Canadian dollars. For these unaudited pro forma
combined financial statements, the historical financial information of Poco
has been converted to U.S. GAAP using the full cost method of accounting
for oil and gas properties and converted to U.S. dollars using the
September 30, 1999 exchange rate (.6803) for the balance sheet and the
average exchange rates for the nine month periods ended September 30, 1999
(.6711), and the years ended December 31, 1998 (.6748), 1997 (.7222) and
1996 (.7333) for the statements of income. See Note 11 to Poco's historical
consolidated financial statements included in Annex K, which is included in
the Joint Management Information Circular and Proxy Statement incorporated
herein by reference, for a description of the adjustments to convert Poco's
financial statements from Canadian GAAP to U.S. GAAP using the full cost
method of accounting for oil and gas properties.
U.S. GAAP STATEMENTS OF INCOME -- POCO
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
----------------------------------------------------------
POCO
POCO HISTORICAL
HISTORICAL U.S. GAAP POCO HISTORICAL U.S. GAAP
CANADIAN GAAP ADJUSTMENTS U.S. GAAP U.S. $
------------- ----------- --------------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues -- Net of Royalties.......... C$430 C$430 $289
Costs and Expenses.................... 330 C$ (35) 295 197
----- ------ ----- ----
Operating Income...................... 100 35 135 92
Interest Expense...................... 57 3 60 40
Other Income -- Net................... (19) (19) (12)
----- ------ ----- ----
Income Before Income Taxes............ 43 51 94 64
Income Tax Expense.................... 19 21 40 27
----- ------ ----- ----
Net Income............................ C$ 24 C$ 30 C$ 54 $ 37
===== ====== ===== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------
POCO
POCO HISTORICAL
HISTORICAL U.S. GAAP POCO HISTORICAL U.S. GAAP
CANADIAN GAAP ADJUSTMENTS U.S. GAAP U.S. $
------------- ----------- --------------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues -- Net of Royalties.......... C$552 C$ 552 $ 372
Costs and Expenses.................... 390 C$ 530 920 621
----- ------ ------ -----
Operating Income...................... 162 (530) (368) (249)
Interest Expense...................... 76 (10) 66 44
Other Expense -- Net.................. 25 25 17
----- ------ ------ -----
Income (Loss) Before Income Taxes..... 86 (545) (459) (310)
Income Tax Expense (Benefit).......... 36 (220) (184) (125)
----- ------ ------ -----
Net Income (Loss)..................... C$ 50 C$(325) C$(275) $(185)
===== ====== ====== =====
</TABLE>
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<PAGE> 11
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
1. CONVERSION OF POCO TO U.S. GAAP AND U.S. DOLLARS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------
POCO
POCO POCO HISTORICAL
HISTORICAL U.S. GAAP HISTORICAL U.S. GAAP
CANADIAN GAAP ADJUSTMENTS U.S. GAAP U.S. $
------------- ----------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues -- Net of Royalties............ C$519 C$519 $375
Costs and Expenses...................... 346 346 249
----- ----- ----
Operating Income........................ 173 173 126
Interest Expense........................ 49 C$ (4) 45 32
Other Expense -- Net.................... 15 15 12
----- ----- ----- ----
Income Before Income Taxes.............. 124 (11) 113 82
Income Tax Expense...................... 51 (2) 49 36
----- ----- ----- ----
Net Income.............................. C$ 73 C$ (9) C$ 64 $ 46
===== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
POCO
POCO POCO HISTORICAL
HISTORICAL U.S. GAAP HISTORICAL U.S. GAAP
CANADIAN GAAP ADJUSTMENTS U.S. GAAP U.S. $
------------- ----------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues -- Net of Royalties............ C$378 C$378 $277
Costs and Expenses...................... 264 C$ (5) 259 189
----- ----- ----- ----
Operating Income........................ 114 5 119 88
Interest Expense........................ 34 (2) 32 24
----- ----- ----- ----
Income Before Income Taxes.............. 80 7 87 64
Income Tax Expense...................... 46 (2) 44 33
----- ----- ----- ----
Net Income.............................. C$ 34 C$ 9 C$ 43 $ 31
===== ===== ===== ====
</TABLE>
9
<PAGE> 12
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
1. CONVERSION OF POCO TO U.S. GAAP AND U.S. DOLLARS (CONTINUED)
U.S. GAAP BALANCE SHEET -- POCO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------------------------
POCO
POCO POCO HISTORICAL
HISTORICAL U.S. GAAP HISTORICAL U.S. GAAP
CANADIAN GAAP ADJUSTMENTS U.S. GAAP U.S. $
------------- ----------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets.......................... C$ 135 C$ 135 $ 92
Property, Plant and Equipment........... 2,631 C$(341) 2,290 1,558
Other Assets............................ 27 (16) 11 7
------- ------ ------- ------
C$2,793 C$(357) C$2,436 $1,657
======= ====== ======= ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts Payable and Accrued
Liabilities........................... C$ 119 C$ 6 C$ 125 $ 85
Long-Term Debt.......................... 1,065 75 1,140 776
Deferred Income Taxes................... 358 (158) 200 136
Other Liabilities....................... 18 18 12
Shareholders' Equity
Common Shares......................... 1,219 92 1,311 974
Earnings.............................. 14 (372) (358) (261)
Accumulated Other Comprehensive
Loss -- Foreign Currency
Translation........................ (65)
------- ------ ------- ------
C$2,793 C$(357) C$2,436 $1,657
======= ====== ======= ======
</TABLE>
10
<PAGE> 13
2. PRO FORMA ADJUSTMENTS
(a) The following adjustments were made to reflect the conversion from the
full cost method of accounting for oil and gas properties to the
successful efforts method of accounting.
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31
------------ -------------------
1999 1998 1997 1996
------------ ----- ---- ----
<S> <C> <C> <C> <C>
Capitalized costs expensed under the successful
efforts method of accounting........................ $(28) $ (36) $(31) $(18)
Reversal of impairment of oil and gas properties
recorded under the full cost method of accounting... 356
Impairment of oil and gas properties under the
successful efforts method of accounting in
accordance with SFAS No. 121........................ (585)
Adjustment to record depreciation, depletion and
amortization on a field level basis................. 30 7 8 (7)
Adjustment to reflect tax effect of pro forma
adjustments......................................... (1) 116 11 12
---- ----- ---- ----
Increase (decrease) net income........................ $ 1 $(142) $(12) $(13)
==== ===== ==== ====
</TABLE>
The cumulative adjustment to oil and gas properties at September 30, 1999
to reflect the conversion from the full cost method to the successful
efforts method was a $379 million reduction to oil and gas properties.
(b) To adjust deferred income taxes by $169 million at September 30, 1999 for
the tax effect of the adjustment to convert to the successful efforts
method and to reclassify the $33 million deferred tax asset of Poco to
other assets.
(c) Reflects the estimated direct costs associated with the transaction
between BR and Poco which approximate $40 million ($28 million net of
income tax). These non-recurring costs, which are subject to change, will
be charged to operations in the quarter in which the transaction is
consummated. It is expected that substantially all of the costs related to
this transaction will be paid within one year after the transaction is
consummated.
3. PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING
The pro forma weighted average number of Poco common shares outstanding
and weighted average number of common shares outstanding, including
dilution for each period has been calculated using the exchange ratio of
0.25 exchangeable shares for each Poco common share.
11
<PAGE> 14
PLAN OF DISTRIBUTION
Our common stock may be issued to you in several ways:
o You have the right to exchange or cause the redemption of your
exchangeable shares. You may require an exchange by us or
redemption by BR Canada of your exchangeable shares for our
common stock. These rights are called your:
o exchange put rights; and
o retraction rights;
o Automatic exchange or redemption. Upon the occurrence of a
specified triggering event, you will be required to exchange your
exchangeable shares for our common stock. These rights arise
automatically upon the occurrence of triggering events, and are
called:
o the automatic redemption right;
o the optional exchange right;
o the liquidation right; and
o the automatic exchange right;
o We may exercise our call rights. Our call rights permit us to
require an exchange of exchangeable shares for our common stock
if you exercise your retraction rights or in any circumstance
where BR Canada would redeem your exchangeable shares. We plan to
exercise our call rights, when available, and currently foresee
no circumstances under which we would not exercise our call
rights. We expect that you will receive our common stock only
through an exchange with us, as opposed to a redemption by BR
Canada, of your exchangeable shares for our common stock. While
the consideration received upon an exchange with us or a
redemption by BR Canada will be the same, the tax consequences
will be substantially different. These call rights are called
our:
o retraction call rights;
o liquidation call rights; and
o redemption call rights.
YOUR RIGHTS TO EXCHANGE OR REDEEM YOUR SHARES
We will grant your exchange put right described below to CIBC Mellon
Trust Company, as trustee, for the benefit of the holders of the
exchangeable shares. You also have the right to retract any or all of your
exchangeable shares.
Your exchange put right. You may require us to exchange all or any
part of your exchangeable shares for an equivalent number of shares of our
common stock, plus all of our dividends, payable and unpaid. You may
exercise your exchange put right by presenting to CIBC Mellon at its
principal offices in Calgary, Alberta or Toronto, Ontario:
12
<PAGE> 15
o written notice;
o a certificate or certificates representing the exchangeable
shares you desire to have us exchange; and
o other documents and instruments as provided in the voting and
exchange trust agreement among us, BR Canada and CIBC Mellon.
An exchange pursuant to this right will be completed not later than
the close of business on the third business day following receipt by CIBC
Mellon of the items listed above.
Your retraction rights. Subject to applicable law and our retraction
call right, you are entitled at any time to retract, or require BR Canada
to redeem, any or all of your exchangeable shares and to receive an equal
number of shares of our common stock plus the amount of all of our
dividends, payable and unpaid. You may retract by presenting to CIBC Mellon
or BR Canada:
o a certificate or certificates representing the number of
exchangeable shares you desire to retract; and
o a duly executed retraction request:
o specifying the number of exchangeable shares you desire to
retract;
o stating the retraction date on which you desire to have BR
Canada redeem your shares, which must be a business day
between five and ten days from the date of delivery of the
request; and
o acknowledging our retraction call right to purchase all but
not less than all of the retracted shares directly from you
and that the retraction request will be deemed to be a
revocable offer by you to sell the retracted shares to us in
accordance with our retraction call right on the terms and
conditions described below.
BR Canada will promptly notify us upon receipt of a retraction
request. In order to exercise our retraction call right, we must notify BR
Canada of our determination to do so within two business days of our
receipt of notification. If we deliver the call notice within two business
days, and you have not revoked your retraction request, BR Canada will not
redeem the retracted shares and we will purchase from you the retracted
shares on the retraction. If we do not timely deliver the call notice and
you have not revoked your retraction request, BR Canada will redeem the
retracted shares on the retraction date.
You may withdraw your retraction request by giving notice in writing
to BR Canada before the close of business on the business day before your
retraction date. If you withdraw your retraction request, your offer to
sell the shares to us will be deemed to have been revoked. If, as a result
of liquidity or solvency requirements or other provisions of applicable
law, BR Canada is not permitted to redeem all the exchangeable shares you
desire to retract, BR Canada will redeem only those exchangeable shares you
have tendered as would be permitted by applicable law.
Your retraction rights are subject to our retraction call rights.
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If any of your exchangeable shares are not redeemed by BR Canada as a
consequence of applicable law or purchased by us, you will be deemed to
have required us to purchase your unretracted shares in exchange for an
equal number of shares of our common stock, plus the amount of all of our
dividends, payable and unpaid, on the retraction date pursuant to your
exchange put right.
AUTOMATIC RIGHTS
The automatic redemption right. Subject to applicable law and our
redemption call rights, on an automatic redemption date, BR Canada will
redeem all but not less than all of the then outstanding exchangeable
shares in exchange for an equal number of shares of our common stock, plus
the amount of all of our dividends, payable and unpaid. Notwithstanding any
proposed redemption of the exchangeable shares, our redemption call rights
give us the overriding right to acquire on an automatic redemption date all
but not less than all of the outstanding exchangeable shares in exchange
for an equal number of shares of our common stock, plus the amount of all
of our dividends, payable and unpaid.
An automatic redemption date is the first to occur of:
o the date selected by the BR Canada board, if the selected date is
later than the fifth anniversary of the closing of our
acquisition of Poco;
o the date selected by the BR Canada board, if the selected date is
later than the third anniversary of the closing of our
acquisition of Poco and if less than 10% of the number of
exchangeable shares issuable at the closing of our acquisition of
Poco, other than exchangeable shares held by BR and entities
controlled by BR, are outstanding;
o the date on which the share purchase rights issued pursuant to
our rights agreement separate from our common stock and become
exercisable;
o the business day prior to the record date for any meeting or vote
of the BR Canada shareholders to consider any matter in which the
holders of exchangeable shares would be entitled to vote as BR
Canada shareholders, but excluding any meeting or vote as
described in the bullet immediately below; and
o the business day following the day on which the holders of
exchangeable shares fail to take the necessary action at a
meeting or other vote of holders of exchangeable shares, if and
to the extent the action is required, to approve or disapprove,
as applicable, any change to, or in the rights of the holders of,
the exchangeable shares, if the approval or disapproval, as
applicable, of the change would be required to maintain the
economic and legal equivalence of the exchangeable shares and our
common stock.
At least 45 days before an automatic redemption date or before a
possible automatic redemption date which may result from a failure of the
holders of the exchangeable shares to take a necessary action as described
above, BR Canada shall provide you with written notice of the proposed
redemption or possible redemption of the exchangeable shares by BR Canada.
In the case of a possible automatic redemption date, the notice will be
given contingently and will be withdrawn if the contingency does not occur.
The optional exchange right. Upon the occurrence and during the
continuance of a BR Canada insolvency event, you will be entitled to
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<PAGE> 17
instruct CIBC Mellon to exercise the optional exchange right, with respect
to any or all of your exchangeable shares, requiring us to acquire your
exchangeable shares. Immediately upon the occurrence of a BR Canada
insolvency event or any event which may, with the passage of time or the
giving of notice, become a BR Canada insolvency event, we and BR Canada
will give written notice to CIBC Mellon. CIBC Mellon will then promptly
notify you of the event or potential event and will advise you of your
rights with respect to the optional exchange right. The consideration for
each exchangeable share to be acquired under the optional exchange right
will be one share of our common stock, plus the amount of all of our
dividends, payable and unpaid.
A BR Canada insolvency event is:
o the institution of, or the consent of BR Canada to the
institution of, any proceeding for BR Canada to be adjudicated
bankrupt or insolvent or to be dissolved or wound-up, or the
filing of a petition, answer or consent seeking dissolution or
winding-up under bankruptcy, insolvency or analogous laws;
o the failure of BR Canada to contest in good faith any bankruptcy,
insolvency, dissolution, winding-up proceeding or analogous
proceeding commenced against it within 15 days of becoming aware
of the proceeding;
o the consent of BR Canada to the filing of any bankruptcy,
insolvency, dissolution, winding-up petition or analogous
petition or appointment of a receiver;
o the making by BR Canada of a general assignment for the benefit
of creditors, or the admission in writing of its inability to pay
its debts generally as they become due; or
o BR Canada's not being permitted, pursuant to liquidity or
solvency requirements of applicable law, to redeem any
exchangeable shares pursuant to a retraction request.
If, as a result of liquidity or solvency requirements or other
provisions of applicable law, BR Canada is not permitted to redeem all of
your exchangeable shares tendered for retraction in accordance with your
retraction call rights, you will be deemed to have exercised the optional
exchange right with respect to your unredeemed exchangeable shares, and we
will be required to purchase your unredeemed shares.
The liquidation right. Subject to our liquidation call right, in the
event of the liquidation, dissolution or winding-up of BR Canada or any
other distribution of assets of BR Canada among its shareholders for the
purpose of winding-up its affairs, you will be entitled to receive for each
exchangeable share one share of BR common stock, together with the amount
of all of our dividends, payable and unpaid.
The automatic exchange right. In the event of a BR liquidation event,
we will be deemed to have purchased each outstanding exchangeable share and
you will be deemed to have sold your exchangeable shares to us for an equal
number of shares of BR common stock, plus the equivalent amount of all BR
dividends, payable and unpaid.
A BR liquidation event is:
o any determination by our board to institute voluntary
liquidation, dissolution or winding-up proceedings of BR or to
effect any other distribution of our assets among our
shareholders for the purpose of winding-up our affairs; or
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o the earlier of receipt of notice of, and our otherwise becoming
aware of, any threatened or instituted claim or other proceeding
with respect to the involuntary liquidation, dissolution or
winding-up of BR or to effect any other distribution of our
assets among our shareholders for the purpose of winding-up our
affairs.
OUR CALL RIGHTS
In the circumstances described below, we will have overriding call
rights to acquire your exchangeable shares by delivering an equal number of
shares of our common stock, plus the amount of all of our dividends,
payable and unpaid. Different Canadian federal income tax consequences may
arise depending upon whether we exercise our call rights or whether your
exchangeable shares are redeemed by BR Canada. See "Canadian Federal Income
Tax Considerations."
Our retraction call right. If you request the redemption by BR Canada
of your exchangeable shares, you will be deemed to offer your exchangeable
shares to us, and we will have an overriding retraction call right to
acquire all, but not less than all, of the exchangeable shares that you
have requested BR Canada to redeem in exchange for an equal number of
shares of our common stock, plus the amount of all of our dividends,
payable and unpaid.
Our liquidation call right. We will be granted an overriding
liquidation call right, in the event of and notwithstanding a proposed
liquidation, dissolution or winding-up of BR Canada or any other
distribution of the assets of BR Canada among its shareholders for the
purpose of winding-up its affairs, to acquire all, but not less than all,
of the exchangeable shares then outstanding in exchange for an equal number
of shares of our common stock, plus the amount of all of our dividends,
payable and unpaid. Upon the exercise of our liquidation call right, you
will be obligated to transfer your exchangeable shares to us. Our
acquisition of all of the outstanding exchangeable shares upon the exercise
of our liquidation call right will occur on the effective date of the
voluntary or involuntary liquidation, dissolution or winding-up of BR
Canada.
Our redemption call right. We have an overriding redemption call right
to acquire on an automatic redemption date all, but not less than all, of
the exchangeable shares then outstanding in exchange for an equal number of
shares of our common stock, plus the amount of all of our dividends,
payable and unpaid, and, upon the exercise of our redemption call right,
you will be obligated to transfer your shares to us.
If we exercise one or more of our call rights, we will directly issue
our common stock to you and will become the holder of your exchangeable
shares. We will not be entitled to exercise any of the voting rights
attached to your exchangeable shares. If we decline to exercise our call
rights when available, we will be required to issue our common stock as BR
Canada directs, including to BR Canada, which will, in turn, transfer our
common stock to you in consideration for the return and cancellation of
your exchangeable shares. In the event we do not exercise our call rights
when applicable and instead deliver our common stock as BR Canada directs,
you would receive the same consideration, while the Canadian tax
consequences will be substantially different. See "Canadian Federal Income
Tax Considerations." However, we anticipate that we will exercise our call
rights, when available, and currently foresee no circumstances under which
we would not exercise our call rights. In addition, we do not anticipate
any restriction or limitation on the number of exchangeable shares we would
acquire upon the exercise of our call rights.
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INCOME TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
- ------------------------------------------
In the opinion of Bennett Jones, our Canadian counsel, the following
is a fair and adequate summary of the material Canadian federal income tax
considerations generally applicable under the Canadian Income Tax Act if
you hold exchangeable shares or acquire our common stock on the exchange of
exchangeable shares and if, for purposes of the Canadian Income Tax Act,
you deal with us at arm's length and hold your exchangeable shares and will
hold our common stock as capital property. This discussion does not apply
to you if you are a "financial institution", as defined in the Canadian
Income Tax Act, and are therefore subject to the mark-to-market provisions
of the Canadian Income Tax Act.
The exchangeable shares and our common stock will generally be
considered to be capital property to you unless the shares are held by you
in the course of carrying on a business of buying and selling similar
securities or the shares are acquired in a transaction considered to be an
adventure in the nature of trade. If you are a resident of Canada and the
exchangeable shares might not otherwise qualify as capital property, you
may be entitled to obtain this qualification by making the irrevocable
election provided under subsection 39(4) of the Canadian Income Tax Act. If
you do not hold your exchangeable shares or will not hold our common stock
as capital property, you should consult your own tax advisors for
information and advice having regard to your particular circumstances.
This summary is based on the current provisions of the Canadian Income
Tax Act and regulations, the current provisions of the Convention Between
the United States of America and Canada with Respect to Taxes on Income and
on Capital, signed September 26, 1980, as amended and our counsel's
understanding of the current published administrative practices of Revenue
Canada. This summary takes into account all specific proposals to amend the
Canadian Income Tax Act and regulations that have been publicly announced
by the Minister of Finance (Canada) prior to the date hereof and assumes
that all of these proposed amendments will be enacted in their present
form. No assurances can be given that any proposed amendments will be
enacted in the form proposed, if at all. Except for the foregoing, this
summary does not take into account or anticipate any changes in law,
whether by legislative, administrative or judicial decision or action, nor
does it take into account provincial, territorial or foreign income tax
legislation or considerations which may differ from the Canadian federal
income tax considerations described below. No advance income tax ruling has
been sought or obtained from Revenue Canada to confirm the tax consequences
of any of the transactions relating to the exchangeable shares or the
acquisition of our common stock on the exchange of exchangeable shares.
For purposes of the Canadian Income Tax Act, all amounts relating to
the acquisition, holding or disposition of our common stock, including
dividends, adjusted cost base amounts and proceeds of disposition, must be
converted into Canadian dollars based on the prevailing United States
dollar exchange rate generally at the time these amounts arise.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE,
AND SHOULD NOT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE TO YOU.
THEREFORE, YOU SHOULD CONSULT YOUR OWN TAX ADVISORS WITH RESPECT TO YOUR
PARTICULAR CIRCUMSTANCES.
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SHAREHOLDERS RESIDENT IN CANADA
The following portion of this summary will apply to you if, for the
purposes of the Canadian Income Tax Act and any applicable income tax
treaty or convention, you are resident or deemed to be resident in Canada
at all relevant times. This summary does not apply to you if we are or will
be a "foreign affiliate" of you as defined in the Canadian Income Tax Act
or if you hold or will hold more than 10% of the exchangeable shares.
Redemption of exchangeable shares. On a redemption (including a
retraction) of your exchangeable shares by BR Canada, you will be deemed to
have received a dividend equal to the amount, if any, by which the
redemption proceeds exceed the paid-up capital of the exchangeable shares
so redeemed. For these purposes, the redemption proceeds will be the fair
market value of our common stock received from BR Canada at the time of the
redemption plus the amount, if any, of all payable and unpaid dividends on
the exchangeable shares paid on the redemption. The taxation of dividends
received on the exchangeable shares is described below.
On a redemption (including a retraction) of your exchangeable shares,
you will also be considered to have disposed of your exchangeable shares,
but the amount of the deemed dividend will be excluded in computing your
proceeds of disposition for purposes of computing any capital gain or
capital loss arising on the disposition. If you are a corporation, in some
circumstances, the amount of any such deemed dividend may be treated as
proceeds of disposition and not as a dividend. The taxation of capital
gains and capital losses is described below.
Exchange of exchangeable shares with us. On an exchange of your
exchangeable shares with us for our common stock, you will generally
realize a capital gain (or a capital loss) equal to the amount by which the
proceeds of disposition of your exchangeable shares, net of any reasonable
costs of disposition, exceed (or are less than) the adjusted cost base to
you of the exchangeable shares immediately before the exchange. For these
purposes, the proceeds of disposition will be the fair market value at the
time of the exchange of our common stock which you receive plus any other
amounts received from us as part of the exchange. The taxation of capital
gains and capital losses is described below.
Dividends on exchangeable shares. If you are an individual, dividends
received or deemed to be received on the exchangeable shares will be
included in computing your income, and will be subject to the gross-up and
dividend tax credit rules normally applicable to taxable dividends received
from a corporation resident in Canada.
If you are a corporation other than a "specified financial
institution", as defined in the Canadian Income Tax Act, dividends received
or deemed to be received on the exchangeable shares normally will be
included in your income and deductible in computing your taxable income.
The exchangeable shares will be "term preferred shares", as defined in
the Canadian Income Tax Act. Consequently, if you are a "specified
financial institution", as defined in the Canadian Income Tax Act, a
dividend received or deemed to be received on the exchangeable shares will
be deductible in computing your taxable income only if:
o you did not acquire the exchangeable shares in the ordinary
course of carrying on your business; or
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o at the time the dividend is received, the exchangeable shares are
listed on a prescribed stock exchange in Canada (which currently
includes the TSE) and you, either alone or together with persons
with whom you do not deal at arm's length, do not receive (or are
not deemed to receive) dividends in respect of more than 10% of
the issued and outstanding exchangeable shares.
In addition, to the extent that a deemed dividend arises on the
redemption of the exchangeable shares by BR Canada, a portion of the
dividend may not be subject to the denial of dividend deduction applicable
in respect of term preferred shares in accordance with the exceptions
outlined above. If you are a specified financial institution, you should
consult you own tax advisors.
If you are a "private corporation", as defined in the Canadian Income
Tax Act, or any other corporation resident in Canada and controlled or
deemed to be controlled by or for the benefit of an individual or a related
group of individuals, you may be liable under Part IV of the Canadian
Income Tax Act to pay a refundable tax of 33 1/3% of any dividends received
or deemed to be received on your exchangeable shares to the extent that
these dividends are deductible in computing your taxable income.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation", as defined in the Canadian
Income Tax Act, may be liable to pay an additional refundable tax of 6 2/3%
on its "aggregate investment income" for the year which will include
dividends or deemed dividends that are not deductible in computing taxable
income.
Acquisition and disposition of our common stock. The cost of our
common stock received on a retraction, redemption or exchange of
exchangeable shares will be equal to the fair market value of these shares
at the time of that event, and will be averaged with the adjusted cost base
of any other shares of our common stock held by you at that time as capital
property. A disposition or deemed disposition of our common stock by you
will generally result in the realization of a capital gain (or a capital
loss) equal to the amount by which the proceeds of disposition, net of any
reasonable costs of disposition, exceed (or are less than) the adjusted
cost base to you of these shares immediately before the disposition. The
taxation of capital gains and capital losses is described below.
Dividends on our common stock. Dividends on our common stock will be
included in your income for the purposes of the Canadian Income Tax Act. If
you are an individual, you will not be subject to the gross-up and dividend
tax credit rules in the Canadian Income Tax Act applicable to dividends
received from corporations resident in Canada. If you are a corporation,
you will be required to include these dividends in computing your income
and generally will not be entitled to deduct the amount of these dividends
in computing your taxable income.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation", as defined in the Canadian
Income Tax Act, may be liable to pay an additional refundable tax of 6 2/3%
on its "aggregate investment income" for the year which will include these
dividends.
If there is United States non-resident withholding tax on any
dividends you receive on our common stock, you will be generally be
eligible for foreign tax credit or deduction treatment where applicable
under the Canadian Income Tax Act.
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Taxation of capital gains and capital losses. Three-quarters of any
capital gain realized on a disposition or deemed disposition of
exchangeable shares or our common stock must be included in your income for
the year of the disposition. You generally may be able to deduct
three-quarters of any capital losses against three-quarters of any capital
gains realized in the year of the disposition. Any capital losses in excess
of capital gains in the year of the disposition may generally be carried
back and deducted against net capital gains (capital gains less capital
losses) up to three taxation years or carried forward indefinitely, to the
extent and in the circumstances prescribed in the Canadian Income Tax Act.
Capital gains realized by an individual or trust, other than certain
trusts, may give rise to alternative minimum tax under the Canadian Income
Tax Act.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation", as defined in the Canadian
Income Tax Act, may be liable to pay an additional refundable tax of 6 2/3%
on its "aggregate investment income" for the year which will include an
amount in respect of taxable capital gains.
If you are a corporation, the amount of any capital losses arising
from a disposition or deemed disposition of shares may be reduced by the
amount of any dividends received or deemed to have been received by you on
these shares to the extent and under circumstances prescribed by the
Canadian Income Tax Act. Similar rules may apply where you are a
corporation and a member of a partnership or a beneficiary of a trust that
owns these shares or where a trust or partnership of which a corporation is
a beneficiary or a member is a member of a partnership or a beneficiary of
a trust that owns any of these shares. You should consult your own tax
advisors if these rules may be relevant to you.
Foreign property information reporting. With some exceptions, any
taxpayer resident in Canada in the year will be a "specified Canadian
entity", as defined in the Canadian Income Tax Act. If you are a specified
Canadian entity for a taxation year or fiscal period and the total cost
amount of "specified foreign property", which would include our common
stock, at any time in the year or fiscal period exceeds C$100,000, you will
be required to file an information return for the year or period disclosing
prescribed information, your cost amount, any dividends received in the
year, and any gains or losses realized in the year, in respect of the
specified foreign property. You should consult you own advisors about
whether you must comply with these rules with respect to the ownership of
our common stock.
SHAREHOLDERS NOT RESIDENT IN CANADA
The following portion of this summary will apply to you only if, for
purposes of the Canadian Income Tax Act and any applicable tax treaty or
convention, you will not be resident or deemed to be resident in Canada at
any time while you hold exchangeable shares or our common stock, and if you
will not use or hold the exchangeable shares or our common stock in the
course of carrying on a business (including an insurance business) in
Canada and, except as specifically discussed below, if those shares do not
constitute "taxable Canadian property" to you as defined in the Canadian
Income Tax Act.
The exchangeable shares will generally not be taxable Canadian
property to you at a particular time provided that these shares are listed
on a prescribed stock exchange (which currently includes the TSE) and you,
separately or together with persons with whom you do not deal at arm's
length, have not owned (or had under option) 25% or more of the issued
shares of any class or series of the capital stock of BR Canada at any time
within five years preceding the particular time. Our common stock will
generally not constitute taxable Canadian property to you.
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Provided the exchangeable shares or our common stock are not taxable
Canadian property to you, you will not be subject to tax under the Canadian
Income Tax Act on the exchange of exchangeable shares for our common stock
(except to the extent the exchange gives rise to a deemed dividend as
discussed below), or on the sale or other disposition of exchangeable
shares or our common stock.
Dividends paid or deemed to be paid on the exchangeable shares will be
subject to non-resident withholding tax under the Canadian Income Tax Act
at the rate of 25%, although this rate may be reduced under the provisions
of an applicable income tax treaty or convention. For example, under the
Canada-U.S. Tax Convention the rate of non-resident withholding tax is
generally reduced to 15% in respect of dividends paid to a person who is
the beneficial owner thereof and who is resident in the United States for
purposes of the convention.
A holder whose exchangeable shares are redeemed by BR Canada (either
under redemption rights or pursuant to retraction rights) will be deemed to
receive a dividend equal to the amount, if any, by which the redemption
proceeds exceed the paid-up capital of the exchangeable shares at the time
the exchangeable shares are redeemed. For these purposes, the redemption
proceeds will be the fair market value of our common stock received from BR
Canada at the time of the redemption plus the amount, if any, of all
payable and unpaid dividends on the exchangeable shares paid on the
redemption. Any deemed dividend will be subject to non-resident withholding
tax as described in the preceding paragraph. However, we anticipate that we
will exercise our call rights, when available, and currently foresee no
circumstances under which exchangeable shares would be redeemed by BR
Canada.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
- --------------------------------------
In the opinion of White & Case LLP, U.S. tax counsel to BR, the
following is a description of the material U.S. federal income tax
considerations generally applicable to holders of exchangeable shares that
hold their exchangeable shares as capital assets and that exchange those
shares for shares of BR common stock. This description is based on:
o the U.S. Internal Revenue Code of 1986, as amended;
o income tax regulations, proposed and final, issued under the U.S.
Code; and
o judicial and administrative interpretations of the U.S. Code and
regulations;
in each case as in effect and available as of the date of this prospectus.
These income tax laws, regulations and interpretations, however, may
change at any time, and any change could be retroactive to the date of this
prospectus. These income tax laws and regulations are also subject to
various interpretations, and the U.S. Internal Revenue Service or the U.S.
courts could later disagree with the explanations or conclusions contained
in this description.
For purposes of this description, a U.S. holder is a beneficial owner
of exchangeable shares or BR common stock, as the case may be, that, for
U.S. federal income tax purposes, is:
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o a citizen or resident of the U.S., including some former citizens
or residents of the U.S.;
o a partnership or corporation created or organized in or under the
laws of the U.S. or any state thereof, including the District of
Columbia;
o an estate if its income is subject to U.S. federal income
taxation regardless of its source; or
o a trust if it has validly elected to be treated as a United
States person for U.S. federal income tax purposes or if a U.S.
court can exercise primary supervision over its administration,
and one or more United States persons have the authority to
control all of its substantial decisions.
A non-U.S. holder is a beneficial owner of exchangeable shares or BR
common stock, as the case may be, other than a U.S. holder.
The tax consequences to the following parties are not addressed in
this description:
o persons that may be subject to special tax treatment such as
financial institutions, real estate investment trusts, tax-exempt
organizations, regulated investment companies, insurance
companies, and brokers and dealers or traders in securities or
currencies;
o persons who acquired exchangeable shares pursuant to an exercise
of employee stock options or rights or otherwise as compensation;
o persons having a functional currency for U.S. federal income tax
purposes other than the U.S. dollar;
o persons that hold or will hold exchangeable shares or BR common
stock, as the case may be, as part of a position in a straddle or
as part of a hedging or conversion transaction; and
o persons that own, or are deemed to own, 5% or more, by voting
power or value, of the outstanding stock of BR Canada or BR, as
the case may be.
U.S. holders who do not maintain a substantial presence, permanent
home or habitual abode in the U.S. or whose personal and economic relations
are not closer to the U.S. than to any other country (other than Canada)
may be unable to benefit from the provisions described herein of the
Canada-U.S. Tax Convention. These holders should consult their own tax
advisors concerning the availability of benefits under the Canada-U.S. Tax
Convention.
No statutory, judicial, or administrative authority exists which
directly addresses some of the U.S. federal income tax consequences of the
issuance and ownership of instruments and rights comparable to the
exchangeable shares and the related rights. Therefore, some aspects of the
U.S. federal income tax treatment of the exchange of exchangeable shares
for shares of BR common stock are not certain. No advance income tax ruling
has been sought or obtained from the IRS regarding any of the tax
consequences of the exchange of exchangeable shares for shares of BR common
stock.
This description does not address aspects of U.S. taxation other than
U.S. federal income taxation, nor does it address all aspects of U.S.
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federal income taxation that may be applicable to particular holders. In
addition, this description does not address the U.S. state or local tax
consequences or the tax consequences in jurisdictions other than the U.S.
of the exchange of exchangeable shares for shares of BR common stock.
HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE
U.S. FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES AND THE NON-U.S. TAX
CONSEQUENCES OF THE EXCHANGE OF EXCHANGEABLE SHARES FOR SHARES OF BR COMMON
STOCK AND THE OWNERSHIP OF SHARES OF BR COMMON STOCK.
UNITED STATES HOLDERS
Tax treatment of the initial exchange. White & Case LLP has opined
that, although not free from doubt, it is more likely than not that U.S.
holders of Poco common shares that exchange their Poco common shares for
exchangeable shares will not recognize gain or loss on that exchange for
U.S. federal income tax purposes. There is, however, no direct authority
addressing the proper treatment of that initial exchange for U.S. federal
income tax purposes, and, therefore, White & Case LLP's opinion regarding
the initial exchange and the conclusions contained in the discussion below
regarding the exchange of exchangeable shares for shares of BR common stock
are subject to significant uncertainty. Accordingly, there can be no
assurance that the IRS will not challenge a U.S. holder's assertion that
the initial exchange of Poco common shares for exchangeable shares gives
rise to no gain or loss for U.S. federal income tax purposes, that the
exchange of exchangeable shares for shares of BR common stock results in
the tax consequences described below, or that, if challenged, a court will
not agree with the IRS.
CONSEQUENCES IF THE INITIAL EXCHANGE OF POCO COMMON SHARES FOR
EXCHANGEABLE SHARES IS TAX-FREE
Assuming that the initial exchange of Poco common shares for
exchangeable shares does not constitute a taxable transaction for U.S.
federal income tax purposes, the following U.S. federal income tax
consequences should apply to the exchange of exchangeable shares for shares
of BR common stock. A U.S. holder that exchanges exchangeable shares for
shares of BR common stock, including an exchange upon the occurrence of an
automatic redemption date, may be justified in taking the position that no
gain or loss is recognized on the exchange on the grounds that the initial
exchange of Poco common shares for exchangeable shares was made pursuant to
a tax-free reorganization under Section 368(a)(1)(B) of the U.S. Code in
which the exchangeable shares, in substance, constituted BR common stock,
and, therefore, the exchange of the exchangeable shares for shares of BR
common stock is not a taxable event. In that case, the aggregate tax basis
of the BR common stock received pursuant to the exchange by the U.S. holder
of exchangeable shares should equal the holder's aggregate adjusted tax
basis in the exchangeable shares surrendered pursuant to the exchange, and
the holding period of the BR common stock received by the U.S. holder of
exchangeable shares pursuant to the exchange should include the holding
period of the exchangeable shares surrendered in the exchange, which, in
turn, should include the holding period of any Poco common shares exchanged
in the initial exchange, provided that the Poco common shares and
exchangeable shares have been held as capital assets immediately prior to
the initial exchange and the subsequent exchange, respectively.
If, however, the initial exchange of Poco common shares for
exchangeable shares is considered to be made pursuant to a transaction
described in Section 351(a) of the U.S. Code in which the transferee
corporation is BR Canada, then, subject to the discussion below, a U.S.
holder that exchanges exchangeable shares for shares of BR common stock,
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including an exchange upon the occurrence of an automatic redemption date,
may be required to recognize gain or loss equal to the difference between
the fair market value of the shares of BR common stock received at the time
of the exchange and the U.S. holder's aggregate adjusted tax basis in the
exchangeable shares exchanged. In that case, the gain or loss, if any, will
be capital gain or loss if the exchangeable shares are held as a capital
asset at the time of the exchange, except that, with respect to any amount
representing accrued but unpaid dividends on the exchangeable shares,
ordinary income may be recognized by the holder thereof. In the case of a
noncorporate U.S. holder of exchangeable shares that receives BR common
stock on the exchange, generally the maximum U.S. federal income tax rate
applicable to any capital gain recognized on the exchange will be lower
than the maximum U.S. federal income tax rate applicable to ordinary income
if the holder's holding period for the exchangeable shares, which should
include the holding period of any Poco common shares exchanged in the
initial exchange, provided that the Poco common shares have been held as
capital assets immediately prior to the initial exchange, exceeds one year.
The deductibility of capital losses is subject to limitations. The U.S.
holder's tax basis in the shares of BR common stock will be the fair market
value of the shares of BR common stock received by the U.S. holder in the
exchange, and the holding period will begin on the day after the exchange.
For U.S. federal income tax purposes, any gain recognized by a U.S.
holder on the exchange of exchangeable shares for shares of BR common stock
generally will be treated as U.S. source gain, except that, under the terms
of the Canada-U.S. Tax Convention, the gain may be treated as sourced in
Canada. Any Canadian tax imposed on the gain generally will be available as
a credit against U.S. federal income taxes, subject to applicable
limitations. A U.S. holder that is ineligible for a foreign tax credit with
respect to any Canadian tax paid may be entitled to deduct the Canadian tax
in computing U.S. taxable income.
In view of this possibility of recognizing gain or loss upon the
exchange of the exchangeable shares for shares of BR common stock, U.S.
holders may wish to consider delaying the exchange until the time when they
intend to dispose of the shares of BR common stock receivable in exchange
for their exchangeable shares or, as discussed below, until the time when
BR will own at least 80% of all the then issued and outstanding
exchangeable shares either at the time of or as a result of the exchange.
Assuming that the initial exchange of Poco common shares for
exchangeable shares is considered to be made pursuant to a transaction
described in Section 351(a) of the U.S. Code in which the transferee
corporation is BR Canada, the exchange by a U.S. holder of exchangeable
shares for shares of BR common stock may be characterized as a tax-free
exchange under limited circumstances. An exchange of exchangeable shares
for shares of BR common stock generally may be characterized as a tax-free
exchange if: at least 80% of the then outstanding exchangeable shares are
held by BR either at the time of or as a result of the exchange; and in the
exchange, BR, rather than BR Canada, acquires the exchangeable shares in
exchange for shares of BR common stock pursuant to the exercise of its call
rights. In any case, the exchange would not be tax-free unless some other
requirements are satisfied, which, in turn, will depend upon facts and
circumstances existing at the time of the exchange and cannot be accurately
predicted as of the date of this prospectus. If the exchange did qualify as
a tax-free exchange, a U.S. holder's aggregate tax basis in the shares of
BR common stock received would be equal to the holder's aggregate adjusted
tax basis in the exchangeable shares exchanged. The holding period of the
shares of BR common stock received by the U.S. holder should include the
holding period of the exchangeable shares exchanged, which, in turn, should
include the holding period of any Poco common shares exchanged in the
initial exchange, provided that the Poco common shares and exchangeable
shares have been held as capital assets immediately prior to the initial
exchange and the subsequent exchange, respectively.
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CONSEQUENCES IF THE INITIAL EXCHANGE OF POCO COMMON SHARES FOR
EXCHANGEABLE SHARES AND THE RELATED RIGHTS IS TAXABLE
Assuming that the initial exchange of Poco common shares for
exchangeable shares and the related rights constitutes a taxable
transaction for U.S. federal income tax purposes, the following U.S.
federal income tax consequences should apply to the exchange of
exchangeable shares and the related rights for shares of BR common stock. A
U.S. holder that exchanges exchangeable shares and the related rights for
shares of BR common stock, including an exchange upon the occurrence of an
automatic redemption date, generally will recognize gain or loss on the
receipt of the shares of BR common stock in exchange for the exchangeable
shares and the related rights. The gain or loss will be equal to the
difference between the fair market value of the shares of BR common stock
at the time of the exchange and the U.S. holder's aggregate adjusted tax
basis in the exchangeable shares and the related rights exchanged. The gain
or loss, if any, will be capital gain or loss if the exchangeable shares
are held as a capital asset at the time of the exchange, except that, with
respect to any declared but unpaid dividends on the exchangeable shares,
ordinary income may be recognized by the holder of the exchangeable shares.
In the case of a noncorporate U.S. holder, generally the maximum marginal
U.S. federal income tax rate applicable to any capital gain recognized on
the exchange will be lower than the maximum marginal U.S. federal income
tax rate applicable to ordinary income if the U.S. holder's holding period
for the exchangeable shares and the related rights exceeds one year at the
time of the exchange. A U.S. holder's tax basis in the shares of BR common
stock will equal the fair market value of the shares of BR common stock
received by the U.S. holder in the exchange and the holder's holding period
will begin on the day after the date that the U.S. holder received the
shares of BR common stock.
For U.S. federal income tax purposes, any gain recognized by a U.S.
holder on the exchange of exchangeable shares and the related rights for
shares of BR common stock generally will be treated as U.S. source gain,
except that, under the terms of the Canada-U.S. Tax Convention, the gain
may be treated as sourced in Canada. Any Canadian tax imposed on the gain
generally will be available as a credit against U.S. federal income taxes,
subject to applicable limitations. A U.S. holder that is ineligible for a
foreign tax credit with respect to any Canadian tax paid may be entitled to
deduct the Canadian tax in computing U.S. taxable income.
NON-U.S. HOLDERS
Subject to the discussion below under "Backup withholding tax and
information reporting requirements", a non-U.S. holder generally will not
be subject to U.S. federal income tax on gain, if any, recognized on the
exchange of exchangeable shares for shares of BR common stock or on the
sale of shares of BR common stock, unless the gain is effectively connected
with a U.S. trade or business of the holder or, in the case of gains
recognized by an individual, the individual is present in the U.S. for 183
days or more in the taxable year of disposition, and some other conditions
are satisfied.
Subject to the discussion below under "Backup withholding tax and
information reporting requirements", dividends, unless effectively
connected with a U.S. trade or business, received by non-U.S. holders with
respect to the BR common stock generally will be subject to U.S.
withholding tax at a rate of 30%, which rate may be subject to reduction by
an applicable income tax treaty. This reduction generally would result in a
withholding tax of 15% on dividends paid to eligible residents of Canada
under the Canada-U.S. Tax Convention.
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BACKUP WITHHOLDING TAX AND INFORMATION REPORTING REQUIREMENTS
U.S. backup withholding tax and information reporting requirements
generally apply to some payments to particular noncorporate holders of
stock. Information reporting generally will apply to payments of dividends
on, and to proceeds from the sale or redemption of, BR common stock by a
payor or middleman to a holder of BR common stock other than an exempt
recipient. Exempt recipients include corporations, payees that are not
United States persons and that provide an appropriate certification and
some other persons. A payor or middleman will be required to withhold 31%
of any payments of dividends on, and to proceeds from the sale or
redemption of, BR common stock, unless the holder is an exempt recipient,
if the holder fails to furnish its correct taxpayer identification number
or otherwise fails to comply with the backup withholding tax requirements.
However, dividends paid to non-U.S. holders outside the United States that
are subject to the 30% withholding tax or a reduced rate under a United
States income tax treaty will be exempt from backup withholding tax.
Income tax regulations issued on October 6, 1997, and an IRS notice
issued on April 29, 1999, would modify some of the rules discussed above
generally with respect to payments on BR common stock made after December
31, 2000. In particular, in the case of payments by a payor or middleman to
a foreign partnership, other than payments to a foreign partnership that
qualifies as a withholding foreign partnership within the meaning of these
income tax regulations and payments to a foreign partnership that are
effectively connected with the conduct of a trade or business in the U.S.,
the partners of the partnership will be required to provide the
certification discussed above in order to establish an exemption from
backup withholding tax and information reporting requirements. Moreover, a
payor or middleman may rely on a certification provided by a non-U.S.
holder only if the payor or middleman does not have actual knowledge or a
reason to know that any information or certification stated in the
certificate is unreliable.
THE DISCUSSION OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES SET FORTH
ABOVE IS FOR GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS THAT MAY APPLY TO A HOLDER
OF EXCHANGEABLE SHARES THAT EXCHANGES THOSE SHARES FOR SHARES OF BR COMMON
STOCK. HOLDERS OF EXCHANGEABLE SHARES ARE STRONGLY URGED TO CONSULT THEIR
OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE EXCHANGE, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE,
LOCAL, AND OTHER TAX LAWS.
LEGAL MATTERS
The validity of the shares of our common stock will be passed upon for
us by Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York. Certain U.S. federal income
tax matters have been passed upon by White & Case LLP, New York, New York,
and certain Canadian federal income tax matters have been passed upon by
Bennett Jones, Calgary, Alberta.
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EXPERTS
The financial statements of Burlington Resources Inc. incorporated in
this registration statement by reference to the Annual Report on Form 10-K
for the year ended December 31, 1998 have been so incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of Poco Petroleums Ltd., as at December 31,
1998 and 1997 and for each of the years in the three year period ended
December 31, 1998 have been included in the Definitive Proxy Statement on
Schedule 14-A filed October 13, 1999 which has been incorporated by
reference herein in reliance upon the report of KPMG LLP, independent
chartered accountants, and upon the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus does not contain all the information set forth in the
registration statement filed with the SEC, parts of which are omitted in
accordance with the rules and regulations of the SEC. For more information
on us and the securities covered by this prospectus you should see the
registration statement and the exhibits and schedules. Any statement made
in this prospectus concerning the provisions of the documents may be
incomplete, and you should refer to the copy of any documents filed as an
exhibit to the registration statement with the SEC.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. These filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may
obtain information on the operation of the SEC's public reference rooms by
calling the SEC at 1-800-SEC-0330. You may also read and copy any document
we file at these rooms located at:
o Fifth Street, N.W., Washington, DC 20549;
o 7 World Trade Center, New York, NY 10048; and
o Citicorp Center, 500 W. Madison St., Chicago, IL 60661.
You can also inspect these materials at the New York Stock Exchange at
20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is an important part of this prospectus, and information we file with the
SEC after the date of this prospectus will automatically update and
supersede this information.
We incorporate by reference the following documents and any future
filings with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act until our offering is complete:
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o our definitive Joint Proxy Statement on Schedule 14A filed October 14,
1999;
o our Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
o our Quarterly Reports on Form 10-Q for the three-month periods
ended March 3, June 30 and September 30, 1999;
o our Current Reports on Form 8-K filed with the SEC on March 3,
August 18, and August 19, 1999;
o the description of our common stock contained in our Registration
Statement on Form S-3, dated July 19, 1999; and
o the description of our rights agreement contained in our
Registration Statement on Form 8-A filed with the SEC on December
18, 1998.
On request, we will provide without charge a copy of any or all of the
above documents incorporated by reference (other than exhibits to
documents, unless the exhibits are specifically incorporated by reference
into the documents that this prospectus incorporates). Send your written or
oral requests to: Wendi S. Zerwas, Corporate Secretary, Burlington
Resources Inc., 5051 Westheimer, Suite 1400, Houston, Texas 77056,
telephone: (713) 624-9500.
You should rely only on the information we incorporate by reference or
provide in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are
not making an offer of the securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or
any prospectus supplement is accurate as of any date other than the date on
the front of those documents.
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