Burlington in shopping mode

Independent beats Wall Street expectations on fourth quarter earnings, with acquisitions expects to be at upper range of production

Petroleum News

Big Houston independent Burlington Resources, which handily beat Wall Street expectations on 2003 fourth-quarter earnings, said it wants to do more deals this year like its recently announced $71.5 million acquisition of ChevronTexaco properties in South Louisiana.

However, Burlington intends to exercise capital discipline and fully intends to stay within its $1.5 billion capital program this year, which is roughly flat with last year’s spending, Steve Shapiro, Burlington’s chief financial officer, told analysts in a Jan. 22 conference call.

“We love to do transactions, but we don’t depend on them for the short term,” he said. “But we would like to do more of these kinds of deals.”

The oil and gas properties being acquired from ChevronTexaco are situated near a major Burlington core area in South Louisiana. In fact, Burlington already holds acreage positions in four of the 10 acquired fields and will gain an immediate production of 15 million cubic feet gas equivalent per day along with upside potential.

The ChevronTexaco properties are in an area where Burlington’s production is on the rise. Burlington also holds title to 660,000 acres of mineral fee lands and numerous state leases in the vicinity.

Burlington said that because of acquisitions, developments and international projects, the company expects to reach the upper end of its 3 to 8 percent production growth target in 2004. Company acquisitions last year in the San Juan and Fort Worth basins and elsewhere totaled $228 million and added proved reserves amounting to 228 billion cubic feet of gas equivalent. All acquisitions were in Burlington core areas.

In the fourth quarter of 2003, Burlington said it increased overall daily production by 11 percent to 2.723 billion cubic feet of gas equivalent from 2.464 bcf in the year-ago period. Natural gas output was up nearly 4 percent to 1.9 bcf, while natural gas liquids increased 16.1 percent to 69,200 barrels per day and oil 56.5 percent to 58,500 bpd. The company is about 90 percent weighted to natural gas.

Adjusted for property divestitures, Burlington’s production last year increased 10 percent from 2002, which included increases of 8 percent in Canada and 5 percent in the United States in the 2003 fourth quarter. International production increased 13 percent from the prior quarter, an all time high for the company.

Reported reserves at year-end 2003 were 11.8 trillion cubic feet of gas equivalent, up about 3 percent from 11.4 tcf of equivalent for the previous year. The company said it also replaced 142 percent of it worldwide production in 2003.

Burlington posts $404 million profit

Burlington’s total debt-to-capitalization ratio last year declined to 41 percent from 51 percent the previous year. The company reported $3.8 billion in debt, as well as $757 million in cash and cash equivalents at year-end 2003, compared to $443 million at the end of 2002.

“Our objectives for 2004 include a continued focus on profitability, while turning our attention to longer-term growth initiatives for 2005 and the years beyond,” said Bobby Shackouls, Burlington’s chief executive officer. He said the company was able to achieve its financial goals last year through cost controls and increasing volumes from “high-quality asset positions.”