<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9971
BURLINGTON RESOURCES INC.
(Exact name of registrant as specified in its charter)
Delaware 91-1413284
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5051 Westheimer, Suite 1400, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 624-9500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding
----- -----------
Common Stock, par value $.01 per share,
as of June 30, 2000 215,515,868
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
--------------- -------------------
2000 1999 2000 1999
---- ---- ------ ----
(In Millions, Except per Share Amounts)
<S> <C> <C> <C> <C>
Revenues ................................. $620 $ 455 $1,272 $ 891
---- ----- ------ -----
Costs and Expenses
Production Taxes ....................... 38 25 71 44
Production and Processing .............. 125 113 243 228
Depreciation, Depletion and Amortization 171 150 351 306
Exploration Costs ...................... 46 45 141 99
Administrative ......................... 39 36 78 74
---- ----- ------ -----
Total Costs and Expenses ................. 419 369 884 751
---- ----- ------ -----
Operating Income ......................... 201 86 388 140
Interest Expense ......................... 53 52 103 105
Other Expense (Income) - Net ............. 10 (4) 10 (8)
---- ----- ------ -----
Income Before Income Taxes ............... 138 38 275 43
Income Tax Expense ....................... 44 14 104 19
---- ----- ------ -----
Net Income ............................... $ 94 $ 24 $ 171 $ 24
==== ===== ====== =====
Basic Earnings per Common Share .......... $.43 $ .11 $ .79 $ .11
==== ===== ====== =====
Diluted Earnings per Common Share ........ $.43 $ .11 $ .78 $ .11
==== ===== ====== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 3
BURLINGTON RESOURCES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
(In Millions, Except Share Data)
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents.......................................................... $ 11 $ 89
Accounts Receivable ............................................................... 500 473
Inventories ....................................................................... 52 53
Other Current Assets .............................................................. 31 26
------- --------
594 641
------- --------
Oil & Gas Properties (Successful Efforts Method) .................................... 13,061 12,834
Other Properties .................................................................... 969 935
------- --------
14,030 13,769
Accumulated Depreciation, Depletion and Amortization .............................. 7,743 7,412
------- --------
Properties - Net ................................................................ 6,287 6,357
------- --------
Deferred Income Taxes ............................................................... 8 32
------- --------
Other Assets ........................................................................ 132 135
------- --------
Total Assets.................................................................... $ 7,021 $ 7,165
======= ========
LIABILITIES
Current Liabilities
Accounts Payable.................................................................... $ 385 $ 449
Taxes Payable ..................................................................... 57 93
Accrued Interest .................................................................. 33 36
Dividends Payable ................................................................. 30 --
Other Current Liabilities ......................................................... 14 19
Current Maturities of Long-Term Debt .............................................. -- 51
------- --------
519 648
------- --------
Long-term Debt ...................................................................... 2,641 2,769
------- --------
Deferred Income Taxes ............................................................... 146 96
------- --------
Other Liabilities and Deferred Credits .............................................. 405 423
------- --------
Commitments and Contingent Liabilities
STOCKHOLDERS' EQUITY
Preferred Stock, Par Value $.01 Per Share
(Authorized 75,000,000 Shares; One Share Issued) ................................. -- --
Common Stock, Par Value $.01 Per Share
(Authorized 325,000,000 Shares; Issued 241,188,705 Shares) ....................... 2 2
Paid-in Capital ..................................................................... 3,956 3,966
Retained Earnings ................................................................... 440 328
Deferred Compensation - Restricted Stock ............................................ (7) (3)
Accumulated Other Comprehensive Loss ................................................ (64) (54)
Cost of Treasury Stock
(25,672,837 and 25,219,025 Shares for 2000 and 1999, respectively) ................. (1,017) (1,010)
------- --------
Stockholders' Equity ................................................................ 3,310 3,229
------- --------
Total Liabilities and Stockholders' Equity..................................... $ 7,021 $ 7,165
======= ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
BURLINGTON RESOURCES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
--------------------
2000 1999
----- -----
(In Millions)
<S> <C> <C>
Cash Flows From Operating Activities
Net Income ............................................... $ 171 $ 24
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities
Depreciation, Depletion and Amortization ................ 351 306
Deferred Income Taxes ................................... 74 14
Exploration Costs ....................................... 141 99
Working Capital Changes
Accounts Receivable ..................................... (7) 87
Inventories ............................................. 2 4
Other Current Assets .................................... (6) (6)
Accounts Payable ........................................ (76) (92)
Taxes Payable ........................................... (36) (3)
Accrued Interest ........................................ (3) 7
Other Current Liabilities ............................... (3) --
Other .................................................... 5 16
----- -----
Net Cash Provided By Operating Activities .............. 613 456
----- -----
Cash Flows From Investing Activities
Additions to Properties .................................. (451) (459)
Other .................................................... (37) (21)
----- -----
Net Cash Used In Investing Activities .................. (488) (480)
----- -----
Cash Flows From Financing Activities
Proceeds from Borrowings ................................. 370 493
Reduction in Borrowings .................................. (531) (411)
Dividends Paid ........................................... (30) (48)
Common Stock Purchases ................................... (59) (9)
Other .................................................... 47 (1)
----- -----
Net Cash Provided By (Used In) Financing Activities .... (203) 24
----- -----
Effect of Exchange Rate Changes on Cash and Cash Equivalents -- --
----- -----
Decrease in Cash and Cash Equivalents ...................... (78) --
Cash and Cash Equivalents
Beginning of Year ........................................ 89 --
----- -----
End of Period ............................................ $ 11 $ --
===== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
BURLINGTON RESOURCES INC.
Notes TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1999 Annual Report of Burlington Resources Inc. (the "Company"), as
amended, 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. The consolidated financial statements include
certain reclassifications that were made to conform to current presentation.
Amounts related to 1999 include the business activities of Poco Petroleums Ltd.
which was acquired in November 1999 and accounted for as a pooling of interests.
Basic earnings per common share ("EPS") is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. The weighted average number of common shares
outstanding for computing basic EPS was 216 million for the second quarter and
the first six months of 2000 and 1999, respectively. 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. The weighted average
number of common shares outstanding for computing diluted EPS, including
dilutive stock options, was 216 million and 217 million for the second quarter
of 2000 and 1999, respectively, and 217 million for the first six months of 2000
and 1999. No adjustments were made to reported net income in the computation of
EPS. EPS discussions within this document are in reference to basic EPS.
Comprehensive income consists of net income and foreign currency
translation adjustments. Foreign currency translation adjustments were a loss of
$11 million and gain of $1 million in the second quarter of 2000 and 1999,
respectively, and a loss of $10 million and a gain of $13 million for the six
months ended 2000 and 1999, respectively, resulting in comprehensive income of
$83 million and $25 million for the second quarter of 2000 and 1999,
respectively, and $161 million and $37 million for the first six months of 2000
and 1999, respectively.
2. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in several proceedings challenging the payment
of royalties for its crude oil and natural gas production.
Various administrative proceedings are pending before the Minerals
Management Service ("MMS") of the United States Department of the Interior with
respect to the proper valuation of oil and gas produced on federal and Indian
lands for purposes of paying royalties on production sold by Burlington
Resources Oil & Gas Company ("BROG") to its affiliate, Burlington Resources
Trading
5
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Inc. ("BRTI"), or gathered by its affiliate, Burlington Resources
Gathering Inc. In general, these proceedings stem from regular MMS audits of the
Company's royalty payments over various periods of time and involve the
interpretation of the relevant federal regulations.
In late February 1998, the Company and numerous other oil and gas
companies received a complaint filed in the United States District Court for the
Eastern District of Texas in Lufkin in a lawsuit styled as United States of
America ex rel. J. Benjamin Johnson, Jr., et al. v. Shell Oil Company, et al.
alleging violations of the civil False Claims Act. The United States has
intervened in this lawsuit as to some of the defendants, including the Company,
and has filed a separate complaint. This suit alleges that the Company underpaid
royalties for crude oil produced on federal and Indian lands through the use of
below-market posted prices in the sale of oil from BROG to BRTI. The suit
alleges that royalties paid by BROG based on these posted prices were lower than
the royalties allegedly required to be paid under federal regulations, and that
the forms filed by BROG with the MMS reporting the royalties paid were false,
thereby violating the civil False Claims Act.
In April 1999, the court unsealed and the Company was served with the
petition in the False Claims Act lawsuits styled United States of America ex
rel. Jack J. Grynberg v. Burlington Resources Oil & Gas Company, et al. and
United States of America ex rel. Jack J. Grynberg v. The Louisiana Land and
Exploration Company, et al., filed in the United States District Court of the
District of Wyoming (the "Grynberg lawsuits"). In both cases the United States
Department of Justice declined to intervene following its investigation,
resulting in these claims being pursued by Grynberg individually. Grynberg has
filed seventy similar suits against more than three hundred defendants. On
October 10, 1999, the Judicial Panel on Multidistrict Litigation consolidated
sixty-six of the Grynberg False Claims Act lawsuits, including the referenced
suits against the Company, and transferred all cases to the United States
District Court for the District of Wyoming. The Grynberg lawsuits generally
allege that the Company and other defendants improperly measured and otherwise
undervalued natural gas in connection with the payment of royalties on
production from federal and Indian lands. Motions to dismiss have been filed by
the Company and numerous other defendants and are pending before the Court.
On March 28, 2000, the United States District Court for the Eastern
District of Texas, Lufkin Division, ordered that the First Amended Complaint in
the case of United States ex rel. M. Glenn Osterhoudt, III v. Amerada Hess, et
al. and the Second Amended Complaint in the case of United States of America ex
rel. Harrold E. (Gene) Wright v Agip Petroleum Company, et al. be unsealed and
served upon defendants, including the Company. In these lawsuits, the plaintiffs
have alleged violations of the civil False Claims Act. Plaintiffs contend that
defendants underpaid royalties on natural gas and natural gas liquids produced
on federal and Indian lands through the use of below-market prices, improper
deductions, improper measurement techniques and transactions with affiliated
companies. The United States has filed an intervention in these cases as to some
of the defendants, including the Company. On June 13, 2000, plaintiff, Wright,
filed a motion seeking to add the State of New Mexico and John Chavez, Secretary
of the New Mexico Taxation and Revenue Department, as additional party
plaintiffs in the case of United States of America ex rel. Harrold E. (Gene)
Wright v. AGIP Petroleum Company, et al. This motion is presently pending before
the court.
In July 2000, the Court unsealed and the Company was served with the
petition in the civil False Claims Act lawsuit styled United States of America
ex rel. Mark A. Perry v. Burlington Resources, Inc., et al, filed in the United
States District Court for the District of New Mexico. The
6
<PAGE> 7
plaintiff in the lawsuit alleges that the Company understated the value of
natural gas and natural gas liquids produced on federal and Indian lands in
connection with its computation and reporting of royalty payments. The Company
is informed that the United States has elected to intervene in this case, but a
complaint has not been served upon the Company by the United States.
Based on the Company's present understanding of the various
governmental and False Claims Act proceedings described above, the Company
believes that it has substantial defenses to these claims and intends to
vigorously assert such defenses. However, in the event that the Company is found
to have violated the civil False Claims Act the Company could be subject to a
variety of sanctions, including treble damages, substantial monetary fines,
civil penalties and a temporary suspension from entering into future federal
mineral leases and other federal contracts for a defined period of time. While
the ultimate outcome and impact on the Company cannot be predicted with
certainty, management believes that the resolution of these proceedings will not
have a material adverse effect on the consolidated financial position of the
Company, although results of operations and cash flow could be significantly
impacted in the reporting periods in which such matters are resolved.
In addition to the foregoing, the Company and its subsidiaries are
named defendants in numerous other lawsuits and named parties in numerous
governmental and other proceedings arising in the ordinary course of business.
While the outcome of these other lawsuits and proceedings cannot be predicted
with certainty, management believes these matters, other than the
above-described proceedings, will not have a material adverse effect on the
consolidated financial position, results of operations or cash flows of the
Company.
3. COMMODITY HEDGING ACTIVITIES
In order to mitigate the impact of market price fluctuations, the
Company utilizes options and other financial instruments to hedge future crude
oil and natural gas production. Changes in the market value of these contracts
and premiums paid for option contracts are deferred until the gain or loss is
recognized on the hedged commodity. If the contract is not a hedge, changes in
market value are recorded currently. To qualify as a hedge, these transactions
must be designated as a hedge and changes in their fair value must correlate
with changes in the price of anticipated future production such that the
Company's exposure to the effects of commodity price changes is reduced. These
hedging instruments are measured for effectiveness on an enterprise basis both
at the inception of the contract and on an ongoing basis. If these instruments
are terminated prior to maturity, resulting gains or losses continue to be
deferred until the hedged item is recognized in income.
As of June 30, 2000, the Company had unrecognized opportunity losses
related to the market value of its oil and gas hedges of approximately $398
million for production in years 2000 through 2005. The unrecognized losses
represent the difference between hedged prices and market prices on hedged
volumes of the commodities at June 30, 2000. Gains or losses resulting from
these transactions are included in revenue as the related physical production is
delivered. Hedging activities reduced oil and gas revenues by $65 million and
$70 million in the second quarter and first six months of 2000, respectively.
7
<PAGE> 8
4. SEGMENT AND GEOGRAPHIC INFORMATION
The Company's reportable segments are North America and International.
Both segments are engaged principally in the exploration, development,
production and marketing of oil and gas. The North America segment is
responsible for the Company's operations in the U.S.A. and Canada and the
International segment is responsible for all operations outside that
geographical region. The accounting policies for the segments are the same as
those for the consolidated financial statements. There are no significant
intersegment sales or transfers.
The following tables present information about reported segment
operations.
<TABLE>
<CAPTION>
Second Quarter
------------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
North North
America International Total America International Total
-------- ------------- ----- ------- ------------- -----
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... $ 580 $ 40 $ 620 $ 419 $ 36 $ 455
Operating income (loss)................ 234 9 243 134 (10) 124
</TABLE>
<TABLE>
<CAPTION>
Six Months
------------------------------------------------------------------------
2000 1999
--------------------------------- ---------------------------------
North North
America International Total America International Total
-------- ------------- ----- ------- ------------- -----
(In Millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues............................... $1,177 $ 95 $1,272 $ 826 $ 65 $ 891
Operating income (loss)................ 441 34 475 252 (32) 220
</TABLE>
The following is a reconciliation of segment operating income to
consolidated income before income taxes.
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
(In Millions)
<S> <C> <C> <C> <C>
Total operating income for reportable
segments ................................... $243 $ 124 $475 $ 220
Corporate expenses ........................... 42 38 87 80
Interest expense ............................. 53 52 103 105
Other expense (income) - net ................. 10 (4) 10 (8)
---- ----- ---- -----
Consolidated income before income taxes ...... $138 $ 38 $275 $ 43
==== ===== ==== =====
</TABLE>
8
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The following is revenue by geographic location.
<TABLE>
<CAPTION>
Second Quarter Six Months
----------------- -------------------
2000 1999 2000 1999
---- ---- ------ ----
(In Millions)
<S> <C> <C> <C> <C>
USA ........................... $449 $333 $ 920 $649
Canada ........................ 131 86 257 177
Other international ........... 40 36 95 65
---- ---- ------ ----
Consolidated revenues ......... $620 $455 $1,272 $891
==== ==== ====== ====
</TABLE>
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 ratio at June 30, 2000 and December
31, 1999 was 44 percent and 47 percent, respectively. During the first six
months of 2000, the Company repaid $164 million of fixed-rate debt and $367
million of bank-funded floating rate debt. The Company also had commercial paper
issuances of $370 million during the first six months of 2000. Commercial paper
outstanding at June 30, 2000 was $633 million.
The Company has unused credit commitments in the form of revolving
facilities ("revolvers") as of June 30, 2000. A portion of these revolvers is
available to cover debt due within one year, therefore, commercial paper, credit
facility notes and fixed-rate debt due within one year are classified as
long-term debt. In addition, the Company has the ability to issue $1 billion of
securities under a shelf registration statement filed with the Securities and
Exchange Commission. The revolvers are comprised of agreements for $600 million,
$400 million, $338 million and $34 million. The $600 million revolver expires in
February 2003 and the $400 million and $338 million credit facilities expire in
March 2001 unless renewed by mutual consent. The $34 million credit facility is
cancelable by the creditor upon demand. The Company has the option to convert
the outstanding balance on the $338 million revolver to a one year term note at
expiration of the agreement.
In July 1998, the Company's Board of Directors approved the repurchase
of two million shares of its Common Stock. During the first six months of 2000,
the Company completed the 1998 program by repurchasing 1,315,000 shares of its
Common Stock for $39 million. In May 2000, the Company's Board of Directors
approved the repurchase of two million additional shares of its Common Stock.
During June of 2000, the Company repurchased 500,600 shares of its Common Stock
for $20 million under the 2000 program. In conjunction with the Company's stock
repurchase program, the Company sold put options ("options") during 2000. The
options entitle the holders, upon exercise on the expiration dates, to sell
shares of BR Common Stock to the Company at specified prices. Alternatively, the
Company retained the ability to settle the options in cash. During the second
quarter of 2000, all of the options expired.
Net cash provided by operating activities for the first six months of
2000 was $613 million compared to $456 million in 1999. The increase was
primarily due to higher operating income partially offset by working capital and
other changes. Operating income was higher principally as a result of higher
commodity prices.
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<PAGE> 10
The Company and its subsidiaries are named defendants in numerous
lawsuits and named parties in numerous governmental and other proceedings
arising in the ordinary course of business. While the outcome of lawsuits and
other proceedings cannot be predicted with certainty, management believes these
matters will not have a material adverse effect on the consolidated financial
position of the Company, although results of operations and cash flows could be
significantly impacted in the reporting periods in which such matters are
resolved.
The Company has certain other commitments and uncertainties related to
its normal operations. Management believes that there are no other commitments
or uncertainties that will have a material adverse effect on the consolidated
financial position, results of operations or cash flows of the Company.
Capital Expenditures
Capital expenditures for the first six months of 2000 totaled $465
million compared to $459 million in 1999. Capital expenditures, excluding proved
property acquisitions, are currently projected to be approximately $900 million
for all of 2000 and are expected to be primarily for the development and
exploration of oil and gas properties and plant and pipeline expenditures.
Capital expenditures will be funded from internal cash flows.
Commodity Risk
Substantially all of the Company's crude oil and natural gas production is
sold on the spot market or under short-term contracts at market sensitive
prices. Spot market prices for domestic crude oil and natural gas are subject to
volatile trading patterns in the commodity futures market, including among
others, the New York Mercantile Exchange ("NYMEX"). Quality differentials,
worldwide political developments and the actions of the Organization of
Petroleum Exporting Countries also affect crude oil prices.
There is also a difference between the NYMEX futures contract price for a
particular month and the actual cash price received for that month in a U.S.
producing basin or at a U.S. market hub, which is referred to as the "basis
differential."
The Company utilizes over-the-counter price and basis swaps as well as
options to hedge its production in order to decrease its price risk exposure.
The gains and losses realized as a result of these derivative transactions are
substantially offset when the hedged commodity is delivered. In order to
accommodate the needs of its customers, the Company also uses price swaps to
convert natural gas sold under fixed price contracts to market prices.
The Company uses a sensitivity analysis technique to evaluate the
hypothetical effect that changes in the market value of crude oil and natural
gas may have on the fair value of the Company's derivative instruments. At June
30, 2000, the effect has not materially changed from that disclosed in the 1999
Form 10-K, as amended.
For purposes of calculating the hypothetical change in fair value, the
relevant variables include the type of commodity, the commodity futures prices,
the volatility of commodity prices and the basis and quality differentials. The
hypothetical change in fair value is calculated by multiplying the difference
between the hypothetical price (adjusted for any basis or quality differentials)
and the contractual price by the contractual volumes.
Dividends
On July 20, 2000, the Board of Directors declared a quarterly common
stock cash dividend of $.1375 per share, payable October 2, 2000.
Results of Operations - Second Quarter 2000 Compared to Second Quarter 1999
The Company reported net income of $94 million or $.43 per share for
the second quarter of 2000 compared to $24 million or $.11 per share in 1999.
Operating income for the second quarter of 2000 was $201 million compared to $86
million in 1999.
Revenues were $620 million for the second quarter of 2000 compared to
$455 million for the second quarter of 1999. Natural gas sales prices increased
34 percent to $2.44 per MCF and gas sales volumes increased 2 percent to 1,963
MMCF per day which increased revenues $110 million and $6 million, respectively.
Average oil sales prices increased 55 percent to $24.38 per barrel and oil sales
volumes decreased 10 percent to 79.3 MBbls per day which increased revenues $63
million and decreased revenues $13 million, respectively. Oil sales volumes
decreased primarily due to natural production declines.
Costs and expenses were $419 million for the second quarter of 2000
compared to $369 million in 1999. The increase was primarily due to a $21
million increase in depreciation, depletion and amortization ("DD&A"), a $13
million increase in production taxes and a $12 million increase in production
and processing expense. DD&A increased primarily due to a higher unit rate
resulting from a change in production mix. Production taxes increased primarily
due to higher oil and gas
10
<PAGE> 11
revenues and production and processing expenses increased primarily due to
employee severance payments.
Other expense (income) - net was an expense of $10 million for the
second quarter of 2000 compared to income of $4 million in 1999, primarily due
to changes in foreign currency exchange rates and other miscellaneous expenses.
Income tax expense for the second quarter of 2000 was $44 million or a
rate of 32 percent compared to $14 million or a rate of 38 percent in 1999. The
decrease in the rate is primarily due to adjustments to tax accruals related to
previous periods offset by taxes on foreign source income in excess of U.S.
statutory rates. The Company expects its effective income tax rate to be
approximately 41 percent for the year 2000.
Results of Operations - Six Months 2000 Compared to Six Months 1999
The Company reported net income of $171 million or $.79 per basic
common share for the first six months of 2000 compared to $24 million or $.11
per share in 1999. Operating income for the first six months of 2000 was $388
million compared to $140 million in 1999.
Revenues were $1,272 million for the first six months of 2000 compared
to $891 million in 1999. Natural gas sales prices increased 30 percent to $2.38
per MCF and gas sales volumes increased 4 percent to 2,042 MMCF per day which
increased revenues $203 million and $28 million, respectively. Average oil sales
prices increased 79 percent to $23.84 per barrel and oil sales volumes decreased
7 percent to 84.9 MBbls per day which increased revenues $162 million and
decreased revenues $14 million, respectively. Gas volumes increased due to East
Irish Sea production beginning in the third quarter of 1999. Oil sales volumes
decreased primarily due to natural production declines.
Costs and expenses were $884 million for the first six months of 2000
compared to $751 million in 1999. The increase was primarily due to a $45
million increase in depreciation, depletion and amortization ("DD&A"), a $42
million increase in exploration costs, a $27 million increase in production
taxes and a $15 million increase in production and processing expenses. DD&A
increased primarily due to a higher unit rate resulting from a change in
production mix and higher production volumes. Exploration costs increased
primarily due to higher dry hole expense of $32 million, higher geological and
geophysical expenses of $6 million and higher lease impairment expense of $4
million. Production taxes increased primarily due to higher oil and gas
revenues. Production and processing expenses increased primarily due to employee
severance payments and higher lease operating expense related to higher
production volumes.
Other expense (income) - net was an expense of $10 million for the
first six months of 2000 compared to income of $8 million in 1999, primarily due
to changes in foreign currency exchange rates and other miscellaneous expenses.
Income tax expense for the first six months of 2000 was $104 million or
a rate of 38 percent compared to $19 million or a rate of 46 percent in 1999.
The decrease in the rate is primarily due to adjustments to tax accruals related
to previous periods. The Company expects its effective income tax rate to be
approximately 41 percent for the year 2000.
11
<PAGE> 12
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 1999
Form 10-K, as amended.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 2 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 April 19, 2000. 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:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
S. P. Gilbert 177,538,742 1,727,165
L. I. Grant 177,573,645 1,692,262
J. T. LaMacchia 177,527,553 1,738,354
J. F. McDonald 177,565,109 1,700,798
K. W. Orce 175,095,082 4,170,825
D. M. Roberts 177,544,677 1,721,230
J. F. Schwarz 177,548,311 1,717,596
W. Scott, Jr 177,454,805 1,811,102
B. S. Shackouls 177,472,668 1,793,239
</TABLE>
The stockholders also approved the Burlington Resources 2000 Stock
Option Plan for Non-Employee Directors at the annual meeting with
148,386,389 votes for, 29,719,440 votes against and 1,159,083
votes abstaining.
13
<PAGE> 14
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits
The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibit Nature of Exhibit Page
------- ----------------- ----
<S> <C>
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.
10.30(+) 2000 Stock Option Plan 16
for Non-Employee Directors
27.1 Financial Data Schedule **
</TABLE>
* Exhibit incorporated by reference.
** Exhibit required only for filings made electronically using the Securities
and Exchange Commission's EDGAR System.
(+) Exhibit constitutes a management contract for compensatory plan or
arrangement.
B. Reports on Form 8-K
The Company filed no reports on Form 8-K during the second quarter
of 2000.
Items 2, 3 and 5 of Part II are not applicable and have been omitted.
14
<PAGE> 15
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/ Philip W. Cook
--------------------------------------
Philip W. Cook
Vice President, Controller and
Chief Accounting Officer
Date: August 14, 2000
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Nature of Exhibit Page
------- ----------------- ----
<S> <C>
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.
10.30 2000 Stock Option Plan 16
for Non-Employee Directors
27.1 Financial Data Schedule **
</TABLE>
