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Burlington goes with ‘modest’ $2B budget in ’05
Ray Tyson Petroleum News Houston Correspondent
Natural gas producer Burlington Resources, sitting on a pile of cash pocketed from the run up in commodity prices, is planning a modest 11 percent increase in capital spending next year, a portion of which is earmarked just to cover anticipated increases in oilfield service costs.
The big exploration and production independent said Dec. 8 that it intends to spend about $2 billion in 2005 vs. $1.8 billion in 2004.
“Our base capital program, adjusted for the service cost and currency exchange impacts, is up only modestly,” conceded Bobby Shackouls, Burlington’s chief executive officer. He said the rising strength of the Canadian dollar is particularly troublesome.
In part, the 2005 budget reflects Burlington’s commitment “to invest consistently throughout price cycles, which we believe is essential for maintaining our efficiency,” Shackouls said.
Burlington ended the first three quarters of 2004 with a reported $2.5 billion in discretionary cash flow, while setting a new quarterly earnings record in the third quarter. Investment focus in North America Geographically, 88 percent of next year’s capital budget will be invested in the United States and Canada, Burlington’s core producing areas.
The North American portion of the budget includes about $170 million for possible land acquisitions and drilling associated with potential unconventional resource exploration, most notably in the Bossier trend in East Texas and the Bakken Shale trend in the Williston basin, the company said.
Twelve percent of next year’s capital is allocated to the international sector.
Eighty-five percent of next year’s capital budget is allocated to development and extension projects, and 15 percent to exploration, Burlington said.
Burlington’s board of directors, for the third time since late 2000, restored a $1 billion share repurchase authorization. Since 2000, the company has repurchased 60.6 million shares, nearly 15 percent of its total shares outstanding.
“It supplements our dividend while serving as a value play for the company, since we are in effect repurchasing reserves in the ground at prices lower than the industry’s average replacement costs, and lower than the equivalent cost of acquisitions we’ve seen in the marketplace this year,” said Steve Shapiro, Burlington’s chief financial officer.
Burlington said it expects to finance both the capital investment and share repurchase programs from cash flow.
The company also estimates that during 2004 it will replace more than 115 percent of its production with new reserves. Stone Energy budgets $315M Meanwhile, Louisiana-based independent Stone Energy said its board of directors has approved a 2005 capital spending budget of $315 million, excluding any possible acquisitions.
The company said it expects to spend about 15 percent of its budget on exploratory drilling in the deepwater Gulf of Mexico, while about 50 percent is earmarked for conventional exploratory and development operations on the Gulf’s continental shelf, 20 percent for deep gas drilling on the shelf and 15 percent for the Rocky Mountains.
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